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nnualA REPORT

2008

Hotel RoyalSingapore

Hotel Royal @ QueensSingapore

Hotel Royal Penang

Proposed Redevelopmentof Star Mansions

Hotel Royal Limited

BOARD OF DIRECTORSDr Lee Keng Thon, Non-Executive Group ChairmanCol (Ret) Rodney How Seen Shing, Independent Non-Executive DirectorMr Ng Kok Lip, Independent Non-Executive DirectorMr Goh Kok Yeow, Independent Non-Executive DirectorMr Lee Khin Tien, Non-Executive DirectorMr Lee Kin Hong, Non-Executive Director

AUDIT COMMITTEECol (Ret) Rodney How Seen Shing (Chairman)Mr Ng Kok Lip Mr Goh Kok YeowMr Lee Khin Tien

REMUNERATION COMMITTEEMr Ng Kok Lip (Chairman) Col (Ret) Rodney How Seen ShingMr Goh Kok YeowMr Lee Khin Tien

NOMINATING COMMITTEEMr Goh Kok Yeow (Chairman) Col (Ret) Rodney How Seen Shing Mr Ng Kok Lip Mr Lee Khin Tien

COMPANY SECRETARYSin Chee Mei, ACIS (Ms)Wong Siew Choo (Mrs)

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

REGISTERED OFFICE36 Newton RoadSingapore 307964Tel : (65) 6426 0168Fax : (65) 6256 2710Email : [email protected]

AUDITORSDeloitte & Touche LLPCertified Public Accountants Singapore 6 Shenton Way #32-00DBS Building Tower Two Singapore 068809Tel : (65) 6224 8288Fax : (65) 6538 6166

Audit Partner-in-ChargeKee Cheng Kong, MichaelAppointed on 11 August 2007

PRINCIPAL BANKERSOversea-Chinese Banking Corporation LimitedUnited Overseas Bank LimitedDBS Bank LimitedBank of New Zealand LimitedCredit Suisse Company Reg. No: 196800289G

Chairman’s Message 2

Board of Directors 4

Senior Management 6

Report of the Directors 7

Report on Corporate Governance 10

Risk Factors and Risk Management 21

Independent Auditors’ Report 23

Balance Sheets 24

Consolidated Profit and Loss Statement 26

Statements of Changes in Equity 27

Consolidated Cash Flow Statement 29

Notes to Financial Statements 31

Statement of Directors 67

Schedule of the Group’s Major Properties 69

Statistics of Shareholdings 70

Five Year Group Financial Statistics 73

Notice of Annual General Meeting 74

Proxy Form

Contents

Dear Shareholders,

I am pleased to report to you the financial performance of the Hotel Royal Limited’s Group of companies.

Performance in 2008

The Group’s revenue for 2008 improved by about 19% or S$5.9 million due primarily to the stronger contribution by the Group’s hotel operations. The increase in Group’s revenue was partially offset by the weaker rental income from Grand Complex in New Zealand.

Profit after income tax for 2008 decreased by 71% from S$37.7 million in 2007 to S$10.9 million in 2008.

In 2008, an exceptional gain of S$4.8 million was recognised from the acquisition of a wholly-owned subsidiary in Malaysia, representing the excess of the fair values of the net identifiable assets of the businesses acquired over the costs of acquisition. In 2007, an exceptional gain of S$31.0 million was recognised from the disposal of Dapenso Building.

Excluding these exceptional items, the Group’s profit before the exceptional items and after income tax for 2008 decreased by about 9% or S$0.6 million from S$6.7 million in 2007 to S$6.1 million in 2008.

Outlook for 2009

Tourist arrivals in Singapore are projected to fall further and room inventory is expected to increase with new hotels coming on stream in 2009. This will exert downward pressure on room occupancy and average room rate. We expect 2009 to be a very challenging year for the hospitality industry.

Our investment property in Grand Complex, New Zealand, is presently enjoying a healthy occupancy rate of about 84%. However, a major tenancy, which occupies about 52% of the current occupancy, is due to expire on 30 September 2009. In the current recessionary period in New Zealand, it is a challenge to fill up all the vacant space. Nevertheless, we are endeavoring to lease out the vacant space.

In addition to the above, the Group’s profitability will continue to be influenced by the performance of the NZD, USD and MYR against the SGD, the changes in the market value of our investment trading portfolio and the investment income from our total investment portfolio.

Expanding Our Horizon

We started to manage Hotel Royal Penang under the Hotel Royal’s brand name on 1 January 2009 and the hotel was officially opened on 7 March 2009. With the current global tourism slowdown, we will need to work harder to turn the property profitable.

We have engaged an architect in Penang to draw up plans for a major upgrading of Penang Plaza, which is situated next to Hotel Royal Penang, to unlock the value of this shopping mall.

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Chairman’s Message

As at 31 December 2008, the total value of both properties was at RM68 million which is an increase of about RM11 million or 19% increase from their initial purchase price.

We have not been able to convince URA to allow Star Mansions, which we bought in 2007, to be amalgamated with Hotel Royal’s site to build an hotel extension. As such, we will be building an apartment block with 10 units of about 1,606 square feet each, a double-storey penthouse of about 2,782 square feet, a sky terrace, swimming pool and a basement car park. Provisional planning permission has been obtained from URA and we are monitoring the construction costs. When construction costs have declined to a reasonable level, we would embark on the redevelopment of Star Mansions as a long-term holding. As we own only 87.5% of Star Mansions, we will develop this project jointly with a related company, Melodies Limited, which owns the remaining 12.5%.

In my last message to you, I have indicated that the Group is looking forward to redevelop 22 to 42 Willis Street in Wellington, New Zealand, in two phases. Phase one would consist of a retail mall and phase two, an office tower. Bearing in mind the global economic downturn, we will develop the retail mail when we have enough commitments from retailers and when construction costs have declined to a satisfactory level.

The Group is financially strong and is actively looking for investment opportunities both in and out of Singapore.

Net Tangible Asset Per Share

Based on directors’ estimate, the total value of the Group’s hotel and investment properties as at 31 December 2008 was about S$388 million as compared to the net book value of S$277 million. This translated to a revaluation surplus of about S$111 million. Had this revaluation surplus (net of tax effect) been included in the net asset value, the net asset value (after revaluation) would have increased from S$3.90 to S$5.48 per share as at 31 December 2008.

Proposed Dividend

The Board of Directors recommends that the first and final dividend be maintained at five cents per share. The proposed dividend will be one-tier tax exempt amounting to S$3 million.

A Word of Appreciation

I wish to thank all our shareholders for their strong support for the Company. In spite of the challenging time, our customers have continued to support us strongly in 2008. A great thank you to our staff for their excellent service to our guests and to my fellow directors for their continued guidance and wise counsel during the year.

Dr Lee Keng ThonChairman

12 March 2009

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Chairman’s Message

Dr. Lee Keng Thon

Dr. Lee Keng Thon, aged 65, was appointed to the Board of Directors on 8 September 1971. He was last re-elected as a director on 28 April 2007 and was appointed the Chairman of the Company on 29 April 2006.

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

Col (Ret) How Seen Shing

Col (Ret) Rodney How, aged 66, was appointed to the Board of Directors on 26 February 1986 and is the Chairman of the Audit Committee and a member of the Nominating and Remuneration Committees. He was last re-elected as a director on 29 April 2006.

He graduated from Sydney University with a Bachelor or Arts (Public Administration). Before joining the Group, Col (Ret) Rodney How was with the Singapore Armed Forces for 15 years where he held the positions of commander (Central Manpower Base), Director (Employment Department of MINDEF) and Assistant Chief of the General Staff (Intelligence).

He was also previously a member of the Board of the International Ship Suppliers Association (ISSA), and President of the Singapore Association of Ship Suppliers (SASS).

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Board of Directors

From left to right - Back : Mr Lee Kin Hong, Mr Goh Kok Yeow, Mr Lee Khin Tien Front : Mr Ng Kok Lip, Dr. Lee Keng Thon, Col (Ret) Rodney How Seen Shing

Ng Kok Lip

Ng Kok Lip, aged 67, was appointed to the Board of Directors on 1 January 2003 and is the Chairman of the

Remuneration Committee and a member of the Audit and Nominating Committees. He was last re-elected as a

director on 29 April 2006.

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

He graduated from the University of California, Berkeley with a M.A. and from the University of Singapore with a

Bachelor of Science (Hons). Before joining the Group, Mr. Ng was with the University of Singapore as a lecturer

and was the Managing Director of National Kap Ltd from 1970-1999.

Goh Kok Yeow

Goh Kok Yeow, aged 47, was appointed to the Board of Directors on 21 June 2002. He is a practising lawyer and

currently a partner in a local law firm, De Souza Lim & Goh LLP. He was last re-elected as a director on 26 April 2008

and is the Chairman of the Nominating Committee and a member of the Audit and Remuneration Committees.

He graduated from University of Manchester, UK with a LLB (Hons) and is also a Barrister-at-law. Mr. Goh practices

in the areas of commercial litigation, corporate law, banking and securities and intellectual property law. Mr.

Goh is a member of the Law Society of Singapore, the Singapore Academy of Law and the Singapore Institute of

Arbitrators. He is also a member of the Inquiry Panel appointed by the Honourable the Chief Justice under the

Legal Profession Act.

Lee Khin Tien

Lee Khin Tien, aged 57, was appointed to the Board of Directors on 31 December 1996 as a non-executive director.

He is a member of the Audit, Nominating and Remuneration Committees. He was last re-elected as a director on

28 April 2007.

Lee Khin Tien is a director of Aik Siew Tong Limited, Melodies Limited and Singapore-Johore Express (Private)

Limited with businesses ranging from real estate, bus transportation and plantation. He has more than 20 years

of experience in real estate and plantation business. He graduated from Nanyang University with a Bachelor of

Science (Biology).

Lee Kin Hong

Lee Kin Hong, aged 55, was appointed to the Board of Directors on 21 June 2002 as a non-executive director. He

was last re-elected as a director on 26 April 2008.

He is currently the Managing Director of Singapore-Johore Express (Private) Limited and has more than 20 years

of experience in managing commercial, industrial and residential projects.

He graduated from the National University of Singapore with a Bachelor of Science (Building) and Master of Science

(Project Management). He is also a member of the Singapore Institute of Building.

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Board of Directors

Lee Chin Chuan – Adviser

Lee Chin Chuan, aged 77, was appointed to the Board of Directors on 10 July 1968 and had held the position of

Managing Director, Chairman and Executive Chairman of the Group until his retirement as a director on 29 April

2006. He was appointed as the Group Adviser on 29 April 2006. Lee Chin Chuan PBM is also the founder of the

Company and sits on the board of many companies including Aik Siew Tong Limited, Melodies Limited, Man Won

Co. Ltd. (Hong Kong) and Singapore-Johore Express (Private) Limited with businesses ranging from real estate,

plantation and bus transportation. He has been in the real estate business since 1954 and has been appointed as

the Hon. Patron of Real Estate Developers Association of Singapore. He is also currently the Hon. Council Member

of Singapore Chinese Chamber of Commerce and Industry and Hon. Chairman of Singapore Lee Clan Association

and Singapore Hin Ann Huay Kuan.

Lee Chou Hock – Chief Executive Officer

Lee Chou Hock joined Hotel Royal Ltd in 1985 is presently the Chief Executive Officer of the Company. He is

responsible for the management of the day to day operations of the Company and its investments in the subsidiaries.

Prior to joining Hotel Royal, he was with a public accounting firm in Singapore. He holds a Bachelor of Accountancy

from the University of Singapore and a Master of Business Administration (Hospitality & Tourism Management)

from Nanyang Technological University.

George Lee Chou Hor – General Manager of Group’s Key Subsidiaries

George Lee Chou Hor joined the Group in 1993 and is the General Manager/Director of the Group’s key subsidiaries,

namely Royal Properties Investment Pte Ltd, Royal Capital Pte Ltd, Castle Mall Properties Pte Ltd and Grand

Complex Properties Ltd (New Zealand). His primary responsibilities are real estate and capital market investments

evaluation and acquisition, and asset planning and management for the Group. His prior working experiences

included the Singapore Airlines Group and the Housing and Development Board. He holds a Bachelor of Business

Administration (Hons) and Master of Business Administration from Schulich School of Business (York University,

Toronto, Canada), a Master of Science (Real Estate) from the National University of Singapore and a Master of

Professional Accounting from the Singapore Management University.

Tay Kok Liang – Group Financial Controller

Tay Kok Liang is responsible for the Group’s accounting and taxation functions. She joined the Group in 1975. She

holds a Bachelor of Accountancy from the University of Singapore and is a member of the Institute of Certified

Public Accountants of Singapore.

Wong Siew Choo – Group Revenue Controller

Wong Siew Choo is responsible for the treasury functions and credit control of the Group. She joined the Group in

1973. Prior to joining the Group, she had accumulated experiences in accounting and purchasing.

Lee Chu Bing – General Manager

Lee Chu Bing joined the Group in 2004 in the Sales & Marketing Department and also assisted in the leasing of the

Group’s investment properties. He was appointed the General Manager of Hotel Royal @ Queens (Singapore) Pte

Ltd in April 2007. He holds a Bachelor of Arts from the National University of Singapore.

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Senior Management

The directors present their report together with the audited consolidated financial statements of the

Group and balance sheet and statement of changes in equity of the Company for the financial year ended

31 December 2008.

1 DIRECTORS

The directors of the Company in office at the date of this report are:

Dr Lee Keng Thon

Col (Ret) Rodney How Seen Shing

Ng Kok Lip

Goh Kok Yeow

Lee Khin Tien

Lee Kin Hong

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

ACQUISITION OF SHARES AND DEBENTURES

Neither at the end of the financial year nor at any time during the financial year did there subsist any

arrangement whose object is to enable the directors of the Company to acquire benefits by means of the

acquisition of shares or debentures in the Company or any other body corporate.

3 DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES

The directors of the Company holding office at the end of the financial year had no interests in the share

capital and debentures of the Company and related corporations as recorded in the register of directors’

shareholdings kept by the Company under Section 164 of the Singapore Companies Act except as follows:

Shareholdings Name of directors and companies Shareholdings registered in which directors are in which interests are held in name of directors deemed to have an interest At beginning At end At beginning At end of year of year of year of year

The Company Ordinary shares Ordinary shares

Dr Lee Keng Thon 340,000 357,000 - -

Lee Khin Tien 168,000 168,000 - -

Lee Kin Hong 55,200 55,200 240,000 240,000

The directors’ interests as disclosed above remained unchanged at 21 January 2009.

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Report of the Directors

4 DIRECTORS’ RECEIPT AND ENTITLEMENT TO CONTRACTUAL BENEFITS

Since the beginning of the financial year, no director has received or become entitled to receive a benefit

which is required to be disclosed under Section 201(8) of the Singapore Companies Act, by reason of a

contract made by the Company or a related corporation with the director or with a firm of which he is a

member, or with a Company in which he has a substantial financial interest except for salaries, bonuses and

other benefits as disclosed in the financial statements. Certain directors received remuneration from related

corporations in their capacity as directors and/or executives of those related corporations and as disclosed

in the financial statements.

5 SHARE OPTIONS

(a) Options to take up unissued shares

During the financial year, no option to take up unissued shares of the Company or any corporation in

the Group was granted.

(b) Options exercised

During the financial year, there were no shares of the Company or any corporation in the Group issued

by virtue of the exercise of an option to take up unissued shares.

(c) Unissued shares under option

At the end of the financial year, there were no unissued shares of the Company or any corporation

in the Group under option.

6 AUDIT COMMITTEE

Members of the Audit Committee comprise four directors, namely Col (Ret) Rodney How Seen Shing

(Chairman of the Audit Committee), Ng Kok Lip, Lee Khin Tien and Goh Kok Yeow.

The Audit Committee held four meetings during the financial year ended 31 December 2008 and performed

the following functions:

(a) Reviewed with management and the external auditors on audit plans and the areas to be audited on

pertaining to external audit, financial and operating results, internal controls, accounting policies as

well as other significant matters;

(b) Reviewed the assistance rendered to the external auditors by the Company’s officers;

(c) Reviewed the quarterly and annual financial statements, inclusive of announcements to shareholders

and SGX-ST prior to submission to the Board of Directors for approval;

(d) Performed annual review of the independence and objectivity of the external auditors and nominate

external auditors for re-appointment;

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(e) Recommended the appointment or re-appointment of external and internal auditors and remuneration

of the external and internal auditors;

(f) Reviewed the scope and extent of non-audit services performed by external auditors;

(g) Held meetings annually with both external and internal auditors without the presence of

management;

(h) Reviewed the adequacy of the Company’s internal controls;

(i) Reviewed the efficiency and effectiveness of internal audit function; and

(j) Reviewed interested person transactions, if any.

The Audit Committee has full access to and co-operation of management and has been given the resources

required for it to discharge its function properly. It also has full discretion to invite any director and executive

officer to attend its meetings. The external auditors have unrestricted access to the Audit Committee.

The Company’s internal audit function has been outsourced to Philip Liew & Co. Both the external auditors

and the internal auditors report directly to the Audit Committee their findings and recommendations.

The Audit Committee, having reviewed the scope and value of non-audit services provided to the Company

and Group by the external auditors, are satisfied that the nature and extent of such services will not prejudice

the independence and objectivity of the external auditors.

The Audit Committee has recommended to the directors the nomination of Deloitte & Touche LLP for

re-appointment as external auditors of the Company at the forthcoming annual general meeting.

7 AUDITORS

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

ON BEHALF OF THE DIRECTORS

Dr Lee Keng Thon

Lee Khin Tien

12 March 2009

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Report on Corporate Governance

Preamble

The Board of Directors of Hotel Royal Limited has adopted the following corporate principles and guidelines tailored to the specific needs of the Company set out in the Code of Corporate Governance 2005 (the “Code”). These principles and guidelines reflect the Board’s commitment in having effective self-regulatory corporate practices to safeguard the interests of its shareholders and maximising long-term shareholders’ value. The Board believes that these guidelines should be an evolving set of corporate governance principles, subject to the specific needs of the Company and subject to modification as circumstances may warrant.

1. BOARD MATTERS

1.1 The Board’s Conduct of its Affairs

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

The primary responsibilities of the Board of Directors encompass the following:

● To provide strategic direction and decision-making pertaining to the Group’s activities that are of significant nature and approve periodic plans as well as major investments and divestments;

● To oversee the business and affairs of the Company, and working with management, establish strategic directions and financial goals to be implemented by management as well as monitoring the performance of management;

● To oversee the evaluation of the adequacy of internal controls, risks management, financial reporting and compliance, and satisfy itself as to the sufficiency of such processes; and

● To be responsible for the overall corporate governance of the Group.

The Company requires the approval from the Board for material new investments or increase in investments in businesses of subsidiaries, projects or fixed assets and any divestments or sales by any company in the Group.

Other aspects which require the approval of the Board include all material commitments to term loans and lines of credit from banks and financial institutions by the Company.

Each Board member exercises equal responsibility in overseeing the business and affairs of the Company.

The Board meets quarterly and as and when deem necessary. To cater to urgent substantial matters, however, the Board may convene on an ad-hoc basis. The Board of Directors held four meetings in total for the financial year ended 31 December 2008.

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The directors’ attendance at those meetings are as follows:

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%

Goh Kok Yeow 4 4 100%

Lee Khin Tien 4 4 100%

Lee Kin Hong 4 4 100%

During 2008, the Audit Committee held four meetings:

(a) (b) Percentage (%)


Ng Kok Lip 4 4 100%



During 2008, the Nominating Committee held two meetings:




Ng Kok Lip 2 2 100%


During 2008, the Remuneration Committee held one meeting:


Ng Kok Lip 1 1 100%




Notes:

(a) Number of meetings held in 2008

(b) Number of meetings attended


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1.2 Board Composition and Guidance

Principle 2: There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management. No individual or small group of individuals should be allowed to dominate the Board’s decision making.

The Board believes that it should generally have at least 5 members and not more than 9 directors. This range permits a good mix of experiences without hindering effective deliberation.

The composition of the Board and independence of each non-executive director will be reviewed annually by the Nominating Committee.

At present, the Board comprises six directors of whom three are considered independent by the Nominating Committee in accordance with the definition of independence in the Code. The details are as follows:

Dr Lee Keng Thon Non-Executive Chairman

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

Ng Kok Lip Independent & Non-Executive Member Member Chairman

Goh Kok Yeow Independent & Non-Executive Member Chairman Member

Lee Khin Tien Non-Executive Member Member Member

Lee Kin Hong Non-Executive

The Board collectively possess the core competencies, appropriate mix of expertise and experience for effective functioning and decision.

1.3 Chairman and Chief Executive Officer

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

The Non-Executive Chairman and the Chief Executive Officer (“CEO”) are separate appointments. The CEO, Lee Chou Hock, is the nephew of the Non-Executive Chairman, Dr Lee Keng Thon.

The Non-Executive Chairman’s roles in relation to Board matters are as follows:

(a) To schedule meetings that enable the Board to perform its duties responsibly while not interfering with the flow of the Company’s operations;

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

(c) To exercise control over quality, quantity and timeliness of the flow of information between Management and the Board; and

(d) To assist in ensuring compliance with Company’s guidelines on corporate governance.


Director Board MembershipCommittee Membership

Audit Nominating Remuneration

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1.4 Board Membership

Principle 4: There should be a formal and transparent process for the appointment of new directors to the Board.

Directors will present themselves for re-nomination and re-election at regular intervals of at least once every three years. Pursuant to Article 117 of the Company’s Articles of Association, one-third of the directors retires from office at the Company’s Annual General Meeting. The year of initial appointment and last re-election of the directors are as appended below:

Dr Lee Keng Thon 65 Non-Executive Chairman 08.09.1971 28.04.2007

Col (Ret) Rodney How Seen Shing 66 Director 26.02.1986 29.04.2006

Ng Kok Lip 67 Director 01.01.2003 29.04.2006

Goh Kok Yeow 47 Director 21.06.2002 26.04.2008

Lee Khin Tien 57 Director 31.12.1996 28.04.2007

Lee Kin Hong 55 Director 21.06.2002 26.04.2008

The Nominating Committee

The Nominating Committee consists of four directors; namely, Goh Kok Yeow, (Chairman of the Nominating Committee), Col (Ret) Rodney How Seen Shing, Ng Kok Lip and Lee Khin Tien. The terms of reference of the Nominating Committee are as follows:

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

(b) To review the proficiency or expertise required by the Board annually and the size of the Board;

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

(d) To assess the capabilities of the director in the execution of his work if he has multiple board representation;

(e) To establish measures for evaluating the performance of the Board;

(f) To conduct annual assessment on the effectiveness of the Board; and

(g) To report to the Board.

The Board will engage in annual self-evaluation as a collective body. The evaluation process will be administered by the Nominating Committee and the results of this evaluation will be deliberated with the full Board.

The Nominating Committee held two meetings during the financial year ended 31 December 2008.

Date of Initial Appointment

Date of Lastre-election


Name Age Position

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1.5 Board Performance

Principle 5: There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board.

We believe that the Board’s performance is ultimately reflected in the performance of the Group. The Board should ensure compliance with applicable laws and Board members should act in good faith, with due diligence and care in the best interests of the Company and its shareholders. In addition to these fiduciary duties, the Board is charged with two key responsibilities: setting strategic directions and ensuring that the Company is ably led. The measure of a Board’s performance is also tested through its ability to lend support to management especially in time of crisis and to steer the Group in the right direction.

The financial indicators set out in the Code as guides for the evaluation of directors are, in our opinion, more of a measure of management’s performance and hence are less applicable to directors. In any case, such financial indicators provide a snapshot of a company’s performance, and do not fully measure the sustainable long-term wealth and value creation of the Company.

The Board through the delegation of its authority to the Nominating Committee, has used its best efforts to ensure that directors appointed to our Board possess the background, experience and knowledge in technology, business, finance and management skills critical to the Company’s business and that each director with his special contributions brings to the Board an independent and objective perspective to enable balanced and well-considered decisions to be made.

Informal reviews of the Board’s performance are undertaken on a continual basis by the Nominating Committee with inputs from the other Board members and CEO. Renewals or replacement of Board members do not necessarily reflect their contributions to date, but may be driven by the need to position and shape the Board in line with the medium term needs of the Company and its business.

1.6 Access to Information

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

The Company recognises the importance of continual dissemination of relevant information which are explicit, accurate, timely and vital to the Board in carrying its duties. As such, the Board expects management to report the Company’s progress and drawbacks in meeting its strategic business objectives or financial targets and other information relevant to the strategic issues encountered by the Company in a timely and accurate manner.

In exercising their duties, the directors have unrestricted access to the Company’s management and independent auditors.

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

All new directors are oriented by senior management with the Company’s operations, its significant financial, accounting and risk management issues, its principal officers and its independent auditors. All directors are also encouraged to attend, at Company’s expense, directors continuing education programs offered by various organisations.

Professional advices are sought by the Board when necessary to enable the Board or its independent directors to carry out their roles effectively. Individual directors may obtain professional advice to assist them in the execution of their tasks subject to the approval from the Chairman, at the Company’s expense.


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2. REMUNERATION MATTERS

2.1 Procedures for Developing Remuneration Policies

Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.

The Remuneration Committee comprises four directors; namely Ng Kok Lip, (Chairman of the Remuneration Committee), Col (Ret) Rodney How Seen Shing, Goh Kok Yeow and Lee Khin Tien. Where necessary, the Committee can engage professional help from external consultants in areas of executive compensation.

The Remuneration Committee held one meeting during the financial year ended 31 December 2008 and executed the following in consultation with the Chairman:

(a) Made recommendations to the Board a framework of remuneration for the Board members as well as key executives;

(b) Determined specific remuneration packages for each non-executive director and the Chief Executive Officer; and

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

The Remuneration Committee’s objective is to motivate and retain proficient executives and ensure that the Company is able to attract competent staff in the market to maximise shareholders’ value.

The review covers all areas of remuneration, including but not limited to director’s salaries, fees, bonuses, allowances and benefits-in-kind. No director is involved in deciding his own remuneration.

2.2 Level and Mix of Remuneration

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

The Remuneration Committee has recommended a framework of remuneration for the Board members and key management executives. The details are as follows:

Board members

The directors’ fees paid to the directors are based on the number of meetings attended during the year, subject to a minimum sum. The Chairman of the Board and the sub-committees will receive an additional Chairman’s allowance of 100% of the directors’ fees of the main Board and 50% of the directors’ fees of the sub-committees respectively. The directors’ fees are recommended by the Board for approval at the Company’s Annual General Meeting.


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Senior Executives

Senior executive remuneration consists of three parts:

1. Base or fixed remuneration

This element reflects the scope of the job and the level of skill and experience of the individuals.

2. Variable for performance related income/bonuses

This is paid depending on the annual performance of the Company and its subsidiaries. It usually takes the form of an end of the year ex-gratia payment.

3. Directors’ fees in subsidiaries

Some of the executives are directors of the subsidiaries and receive directors’ fees.

2.3 Disclosure on Remuneration

Principle 9: Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedure for setting remuneration, in the company’s annual report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key executives, and performance.

The breakdown of remuneration of the directors of the Company for the financial year ended 31 December 2008 is as follows:

Annual Remuneration Report

Remuneration of directors for the year ended 31 December 2008

Variable for Director’s Fees Remuneration Band & Base/Fixed performance related (including Name of Director salary income/bonuses subsidiaries)

Below S$250,000

Dr Lee Keng Thon - - 100% Col (Ret) Rodney How Seen Shing - - 100% Ng Kok Lip - - 100% Goh Kok Yeow - - 100% Lee Khin Tien 16%* - 84% Lee Kin Hong - - 100% * This was from Prestige Properties Sdn. Bhd., a wholly-owned subsidiary, amounting to RM13,650.


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Details of remuneration paid to key executives of the Group (who are not directors of the Company) for the financial year ended 31 December 2008 are set out below: Variable for Director’s Fees Remuneration Band & Base/Fixed performance related (including Name of Executive salary income/bonuses subsidiaries)

S$250,000 to below S$500,000

Lee Chou Hock 81% 16% 3% George Lee Chou Hor 79% 18% 3%

Below S$250,000

Lee Chin Chuan 75% 25% - Tay Kok Liang 94% 6% - Wong Siew Choo 100% - - Lee Chu Bing 86% 14% -

Lee Chou Hock (Chief Executive Officer) and George Lee Chou Hor (General Manager, Subsidiaries) are the nephews of the Non-Executive Chairman, Dr Lee Keng Thon and Non-Executive Directors, Lee Khin Tien and Lee Kin Hong. Their annual remuneration exceeded S$300,000 and S$250,000 respectively during the year.

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

Lee Chin Chuan, Lee Khin Tien and Lee Kin Hong are brothers of the Non-Executive Chairman, Dr Lee Keng Thon.

3. ACCOUNTABILITY AND AUDIT

3.1 Accountability

Principle 10: The Board should present a balanced and understandable assessment of the company’s performance, position and prospects.

The Board believes that it should conduct itself in ways that deliver maximum sustainable value to its shareholders. Prompt fulfillment of statutory requirements is one of the ways to maintain shareholders’ confidence and trust in the Board’s capability and integrity.

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

The Management will provide the Board with detailed management accounts which present a balanced and understandable assessment of the Group’s performance, position and prospects on a quarterly basis.

The Management also presents to the Board quarterly, and full year financial results of the Group and the Audit Committee reports to the Board on the results for review and approval. The Board approved the results after review and authorised the release of the quarterly and full year financial results of the Group to the SGX-ST and the public via SGXNET.

Annual general meetings are held every year to obtain shareholders’ approval to routine business, as well as the election of directors.

In addition to its statutory responsibilities, the Board also ensures that the principal risks of the Company’s business are identified and appropriately managed.


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3.2 Audit Committee

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

Members of the Audit Committee comprise four directors; namely Col (Ret) Rodney How Seen Shing (Chairman of the Audit Committee), Ng Kok Lip, Goh Kok Yeow and Lee Khin Tien.

The Audit Committee held four meetings during the financial year ended 31 December 2008 and performed the following functions:

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

(b) Reviewed the assistance rendered to the external auditors by the Company’s officers;

(c) Reviewed the quarterly and annual financial statements, inclusive of announcements to shareholders and SGX-ST prior to submission to the Board of Directors for approval;

(d) Performed annual review of the independence and objectivity of the external auditors and nominate external auditors for re-appointment;

(e) Recommended the appointment or re-appointment of external and internal auditors and remuneration of the external and internal auditors;

(f) Reviewed the scope and extent of non-audit services performed by external auditors;

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

(h) Reviewed the adequacy of the Company’s internal controls;

(i) Reviewed the efficiency and effectiveness of internal audit function; and

(j) Reviewed interested person transactions, if any.

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

The Company’s internal audit function has been outsourced to Philip Liew & Co. Both the external and internal auditors report directly to the Audit Committee their findings and recommendations.

The Audit Committee, having reviewed the scope and value of non-audit services provided to the Company and Group by the external auditors, are satisfied that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors.

The Audit Committee has recommended to the directors the nomination of Deloitte & Touche LLP for re-appointment as external auditors of the Company at the forthcoming annual general meeting.

The Audit Committee has established the whistle-blowing policy in which serious matters relating to financial reporting, illegal or unethical conduct can be reported directly to the Chairman of the Audit Committee for appropriate actions.


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3.3 Internal Control

Principle 12: The Board should ensure that the Management maintains a sound system of internal controls to safeguard the shareholders’ investments and the company’s assets.

The Board is satisfied that the Group has in place internal controls and systems designed to provide reasonable assurance in safeguarding assets and that proper accounting records are maintained, and in ensuring financial information used with the business and for publication is reliable.

3.4 Internal Audit

Principle 13: The company should establish an internal audit function that is independent of the activities it audits.

The Company has engaged a public accounting company, Philip Liew & Co., to perform the internal audit function. The internal auditors adopt the Standards for the Professional Practice of Internal Auditing set by the Institute of Internal Auditors. The internal auditors report directly to the Audit Committee, with full and direct access to the members of the Audit Committee at all times. Their duties encompass reviewing the Group’s material internal controls consisting of financial, operational and compliance controls as well as risk management. The internal audit comprises all areas of operations.

4. COMMUNICATION WITH SHAREHOLDERS

4.1 Communication with shareholders

Principle 14: Companies should engage in regular, effective and fair communication with shareholders.

In line with the continuous disclosure obligations of the Company pursuant to the Singapore Exchange Listing Rules and the Singapore Companies Act, it is the Board’s policy to ensure that all shareholders are informed regularly and on a timely basis of every significant development that impact on the Group.

Pertinent information is communicated to shareholders on a regular and timely basis through the following means:

● The Company’s annual reports;

● Notices of and explanatory memoranda for annual general meetings and extraordinary general meetings;

● Announcements of quarterly and full-year financial statements containing a summary of the financial information and affairs of the Group for the period. These are disclosed on SGXNET;

● Other announcements, where appropriate;

● Press releases regarding major developments of the Group; and

● Disclosures to the Singapore Exchange Securities Trading Limited.

4.2 Greater Shareholder Participation

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


20

Shareholders are encouraged to be present at annual general meeting in person so that face-to-face communication can best be achieved. The annual general meeting is the principal forum for dialogue with shareholders. Thus, with greater shareholders participation, it will ensure that they will be kept up to date as to the Group’s long-term strategies and goals.

In addition, the Chairmen of the Board Committees as well as the external auditors are also present in the meeting to assist in addressing any appropriate queries from the shareholders.

The Board will ensure that there should be separate resolutions at general meetings on each substantially separate issue and adhere to the Code’s principle with regards to the “bundling” of resolutions. In the event that “bundled” resolutions cannot be avoided whereby such resolutions are interdependent and linked so as to form one significant proposal, the Board will provide reasons and material implications.

ADDITIONAL INFORMATION

5. DEALING IN SECURITIES

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

6. MATERIAL CONTRACTS

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

7. INTERESTED PERSON TRANSACTIONS

The Company has established procedures to ensure that all transactions with interested persons are reported in a timely manner to the Audit Committee and that transactions are conducted on an arm’s length basis and are not prejudicial to the interests of the shareholders. The Company’s disclosure in accordance with Rule 907 of the Listing Manual of the SGX-ST in respect of the interested person transaction for the financial year ended 31 December 2008 is set out on page 48 of this Annual Report.


21

Financial risks

The Group’s activities expose it to a variety of financial risks, including the effects of changes in debt and equity market prices, foreign currency exchange rates and interest rates. The Group uses derivative financial instruments such as interest rate swap to hedge certain exposures. The Group does not hold or issue derivative financial instruments for speculative purposes.

1. Credit risk

The Group’s credit risk is primarily attributable to its cash and bank balances, trade and other receivables and investments. Cash and fixed deposits are placed with creditworthy financial institutions. The trade and other receivables presented in the balance sheets are net of allowances for doubtful receivables, estimated by directors based on prior experience and the current economic condition. Investments are also subject to credit risk, which have been factored in the determination of their fair values.

The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.

The carrying amounts of financial assets recorded in the financial statements, net of any allowances for losses represents the Group’s maximum exposure to credit risk.

2. Interest rate risk

The Group is exposed to interest rate risk through the impact of rate changes on interest rate bearing liabilities and assets. Those exposures are managed mainly by using natural hedges that arise from offsetting interest rate sensitive assets and liabilities.

Further information related to interest rate and maturities of bank loans is disclosed in Notes 14 and 17.

3. Foreign currency risk

The Group’s foreign currency exposures arose mainly from the exchange rate movements of the United States dollar, the Euro, the Australian dollar, the Great Britain pound, the Malaysian ringgit and the Swiss franc vis-à-vis the functional currencies of the Group entities.

The Group has investments in funds under management of certain banks, bank loans and cash deposits which are exposed to foreign exchange risk. In addition, the Group is exposed to currency translation risk as it has significant subsidiaries operating in New Zealand and Malaysia. For the year ended 31 December 2008, approximately 14% (2007 : 23%) of the Group’s net assets is denominated in New Zealand dollar and approximately 13% (2007 : 1%) is denominated in Malaysian ringgit.

4. Price risk

The Group is exposed to price risks arising from its investments classified as held-for-trading and available-for-sale. These investments include equity shares, and instruments whose fair values are subject to volatility in equity prices, commodity prices or real estate prices.

Further details of these investments can be found in Notes 7 and 8 to the financial statements.

Risk Factors and Risk Management

22

5. Liquidity risk

Liquidity risk reflects the risk that the Group will have insufficient resources to meet its financial liabilities as they fall due. The global financial and capital markets have experienced severe credit crunch and volatility, and have resulted in a general economic downturn. The Group’s profitability will be dependent to a large extent on the effectiveness of the fiscal measures and other actions, beyond their control, undertaken to achieve economic recovery. Nevertheless, the Group maintains sufficient cash and cash flows to finance their activities and adequate lines of credit are maintained to ensure necessary liquidity.

As at 31 December 2008, total current liabilities exceeded total current assets by $21.5 million (2007 : $24.6 million) for the Group, and by $31.8 million (2007 : $11.0 million) for the Company.

This is mainly due to some of the Group’s and Company’s bank loans being arranged on short-term revolving basis, as the interest rates are more favourable.

Management assesses the availability of credit facilities on an on-going basis and no matters have been drawn to its attention that the roll-over of the short-term financing may not be forthcoming. The Group and the Company have unutilised credit facilities totalling $67.6 million (2007 : $90.7 million) and $52.1 million (2007 : $67.6 million) respectively.

6. Capital risk

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

The capital structure of the Group consists of debt, which includes the bank borrowings disclosed in Notes 14

and 17 to the financial statements, and equity comprising share capital disclosed in Note 19 to the financial statements, reserves and retained earnings.

The directors review the capital structure on an annual basis. As a part of this review, the directors consider the cost of capital and the risks associated with each class of capital. The Group seeks to balance its overall capital structure through the payment of dividends, new share issues and share buy-backs as well as the issue of new debt or the redemption of existing debt.

The Group’s overall strategy remains unchanged from 2007.

General business risks

The Group’s businesses are subject to general business risks. They are as follows:

a. War and terrorism, and its adverse effect on business;

b. The spread of contagious diseases and their adverse effect on tourist arrivals;

c. Global recession and its effect on the performance of the local economy; and

d. Changes in government regulations that burden the Group’s operating costs or restrict business.

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

Risk Factors and Risk Management

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We have audited the consolidated financial statements of Hotel Royal Limited (the “Company”) and its subsidiaries (the “Group”) which comprise the balance sheets of the Group and of the Company as at 31 December 2008, the profit and loss statement, statement of changes in equity and cash flow statement of the Group and the statement of changes in equity of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 24 to 66.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes: devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

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

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

In our opinion,

a) the consolidated financial statements of the Group and the 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 31 December 2008 and the results, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date; and

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

Deloitte & Touche LLPPublic Accountants andCertified Public Accountants

Kee Cheng Kong, MichaelPartnerAppointed on 11 August 2007

Singapore12 March 2009

To The Members of Hotel Royal LimitedINDEPENDENT AUDITORS’ REPORT

The Group The Company Note 2008 2007 2008 2007 $’000 $’000 $’000 $’000

ASSETS

Current assets

Cash and bank balances 6 9,183 9,481 2,250 1,561

Held-for-trading investments 7 5,294 8,430 320 1,041

Available-for-sale investments 8 2,450 4,920 295 1,029

Trade receivables 9 3,322 2,638 1,645 1,566

Other receivables, deposits

and prepaid expenses 10 1,319 871 560 176

Inventories 245 186 92 86

Total current assets 21,813 26,526 5,162 5,459

Non-current assets

Subsidiaries 11 - - 64,213 38,998

Available-for-sale investments 8 2,048 3,126 816 912

Other receivable 10 400 400 - -

Property, plant and equipment 12 234,967 221,318 130,035 136,201

Investment properties 13 52,551 56,936 - -

Total non-current assets 289,966 281,780 195,064 176,111

Total assets 311,779 308,306 200,226 181,570

LIABILITIES AND EQUITY

Current liabilities

Bank loans 14 34,765 46,053 32,699 13,600

Trade payables 3,629 2,818 2,161 1,818

Other payables 15 2,161 824 25 34

Income tax payable 2,755 1,429 2,122 1,035

Total current liabilities 43,310 51,124 37,007 16,487

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BALANCE SHEETS 31 December 2008

The Group The Company Note 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Non-current liabilities

Retirement benefit obligations 16 521 - - -

Long-term bank loans 17 26,433 - - -

Deferred income tax 18 7,689 8,903 522 323

Total non-current liabilities 34,643 8,903 522 323

Capital and reserves

Share capital 19 64,569 64,569 64,569 64,569

Asset revaluation reserve 113,177 122,470 88,108 93,608

Fair value reserve 212 1,536 39 213

Translation reserve (7,516) 4,173 - -

Retained earnings 63,384 55,531 9,981 6,370

Total equity 233,826 248,279 162,697 164,760

Total liabilities and equity 311,779 308,306 200,226 181,570

See accompanying notes to financial statements.

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BALANCE SHEETS31 December 2008

The Group Note 2008 2007 $’000 $’000

Revenue 20 36,909 30,961

Cost of sales (15,700) (14,071)

Gross profit 21,209 16,890

Gain on disposal of investment property - 30,978

Other income 21 4,978 412

Distribution costs (161) (158)

Administrative expenses (5,902) (5,344)

Other expenses (5,038) (592)

Finance cost 22 (1,383) (2,112)

Profit before income tax 23 13,703 40,074

Income tax expense 24 (2,850) (2,347)

Profit for the year attributable to

equity holders of the Company 10,853 37,727

Basic earnings per share (cents) 25 18.09 cents 62.88 cents

Diluted earnings per share (cents) 25 18.09 cents 62.88 cents

26

CONSOLIDATED PROFIT AND LOSS STATEMENT Year ended 31 December 2008


27

Year ended 31 December 2008 STATEMENTS OF CHANGES IN EQUITY

Asset Share Revaluation Fair value Translation Retained capital reserve reserve reserve earnings Total $’000 $’000 $’000 $’000 $’000 $’000The Group

Balance at 1 January 2007 64,569 59,108 1,158 2,970 20,264 148,069 Fair value gain on available-for-sale investments - - 410 - - 410

Revaluation increase of freehold land - hotels - 63,362 - - - 63,362

Currency translation difference - - - 1,203 - 1,203 Income recognised directly in equity - 63,362 410 1,203 - 64,975

Transfer to profit and loss statement on disposal of available-for-sale investments - - (32) - - (32)

Profit for the year - - - - 37,727 37,727

Total recognised income and expense for the year - 63,362 378 1,203 37,727 102,670

Final dividends (Note 31) - - - - (2,460) (2,460)

Balance at 31 December 2007 64,569 122,470 1,536 4,173 55,531 248,279

Fair value loss on available-for-sale investments - - (3,059) - - (3,059)

Revaluation decrease of freehold land-hotels - (9,293) - - - (9,293)

Currency translation difference - - - (11,689) - (11,689)

Loss recognised directly in equity - (9,293) (3,059) (11,689) - (24,041)

Transfer to profit and loss statement on disposal of available-for-sale investments - - 232 - - 232

Transfer to profit and loss statement arising from impairment of available-for-sale investments - - 1,503 - - 1,503

Profit for the year - - - - 10,853 10,853

Total recognised income and expense for the year - (9,293) (1,324) (11,689) 10,853 (11,453)

Final dividends (Note 31) - - - - (3,000) (3,000)

Balance at 31 December 2008 64,569 113,177 212 (7,516) 63,384 233,826

Asset Share Revaluation Fair value Retained capital reserve reserve earnings Total $’000 $’000 $’000 $’000 $’000The Company

Balance at 1 January 2007 64,569 59,108 211 3,600 127,488

Revaluation increase of freehold land - hotel - 34,500 - - 34,500

Fair value gain on available-for-sale investments - - 40 - 40

Income recognised directly in equity - 34,500 40 - 34,540

Transfer to profit and loss statement on disposal of available-for-sale investments - - (38) - (38)

Profit for the year - - - 5,230 5,230

Total recognised income and expense for the year - 34,500 2 5,230 39,732

Final dividends (Note 31) - - - (2,460) (2,460)

Balance at 31 December 2007 64,569 93,608 213 6,370 164,760

Revaluation decrease of freehold land - hotel - (5,500) - - (5,500)

Fair value loss on available-for-sale investments - - (329) - (329)

Loss recognised directly in equity - (5,500) (329) - (5,829)

Transfer to profit and loss statement on disposal of available-for-sale investments - - 42 - 42

Transfer to profit and loss statement arising from impairment of available-for-sale investments - - 113 - 113

Profit for the year - - - 6,611 6,611

Total recognised income and expense for the year - (5,500) (174) 6,611 937

Final dividends (Note 31) - - - (3,000) (3,000)

Balance at 31 December 2008 64,569 88,108 39 9,981 162,697


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Year ended 31 December 2008STATEMENTS OF CHANGES IN EQUITY

The Group 2008 2007 $’000 $’000

Operating activities

Profit before income tax 13,703 40,074

Adjustments for:

Depreciation expense 2,477 2,316

Impairment loss on available-for-sale investments 1,503 -

Dividend income (177) (234)

Interest income (335) (511)

Allowance for doubtful debts 123 86

Write-back of allowance for doubtful debts (24) (18)

Excess of fair value of net identifiable assets

acquired over cost of combination (4,826) -

Interest expense 1,383 2,112

Gain on disposal of held-for-trading investments - (39)

Loss on disposal of available-for-sale investments 177 -

Loss (Gain) on disposal of property, plant and equipment 1 (6)

Gain on disposal of investment property - (30,978)

Fair value loss on interest rate swap - 12

Fair value loss on held-for-trading investments 2,895 244

Operating cash flows before movements in working capital 16,900 13,058

Available-for-sale investments (current assets) 553 (3,369)

Held-for-trading investments 241 (3,925)

Trade and other receivables 937 (993)

Inventories 19 (1)

Trade and other payables 723 (1,296)

Cash generated from operations 19,373 3,474

Interest paid (1,383) (2,112)

Interest received 335 511

Dividend received 177 234

Income tax paid – net of refund (1,049) (729)

Net cash from operating activities 17,453 1,378

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CONSOLIDATED CASH FLOW STATEMENTYear ended 31 December 2008

The Group 2008 2007 $’000 $’000

Investing activities

Increase in other receivable (non-current assets) - (400)

Purchase of available-for-sale investments (non-current assets) (9) -

Proceeds from disposal of investment property - 58,237

Proceeds from disposal of property, plant and equipment - 37

Additions to property, plant and equipment (5,829) (17,525)

Acquisition of a subsidiary (Note 27) (24,117) -

Additions to investment properties (789) (2,679)

Net cash (used in) from investing activities (30,744) 37,670

Financing activities

Finance leases - (30)

Proceeds from bank loans 53,098 17,434

Repayment of bank loans (37,953) (50,711)

Dividends paid (3,000) (2,460)

Net cash from (used in) financing activities 12,145 (35,767)

Net (decrease) increase in cash and cash equivalents (1,146) 3,281

Cash and cash equivalents at beginning of year 9,481 6,416

Effect of currency exchange adjustment 848 (216)

Cash and cash equivalents at end of year 9,183 9,481

The Group 2008 2007 $’000 $’000

Cash and cash equivalents consist of:

Cash on hand 123 132

Cash at bank 3,536 3,002

Fixed deposits 5,524 6,347

Total 9,183 9,481

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CONSOLIDATED CASH FLOW STATEMENT Year ended 31 December 2008


1 GENERAL

The Company (Registration No. 196800298G) is incorporated in Singapore with its registered office and its principal place of business at 36 Newton Road, Singapore 307964. The financial statements are expressed in Singapore dollars, which is the functional currency of the Company.

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

On 2 December 1968, the Company was listed on the Main Board of Singapore Exchange Securities Trading Limited (“SGX-ST”).

The financial statements of the Group and the balance sheet and statement of changes in equity of the Company for the year ended 31 December 2008 were authorised for issue by the board of directors on 12 March 2009.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF ACCOUNTING - The financial statements have been prepared in accordance with the historical cost convention, modified to include the revaluation of certain property, plant and equipment and investments and are drawn up in accordance with the provisions of the Singapore Companies Act and Singapore Financial Reporting Standards (“FRS”).

ADOPTION OF NEW AND REVISED STANDARDS - In the current financial year, the Group has adopted all the new and revised FRSs and Interpretations of FRS (“INT FRS”) that are relevant to its operations and effective for annual periods beginning on or after 1 January 2008. The adoption of these new/revised FRSs and INT FRSs does not result in changes to the Group’s accounting policies and has no material effect on the amounts reported for the current or prior years.

At the date of authorisation of these financial 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 1 - Presentation of Financial Statements (Revised) 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 management anticipates that the adoption of the above FRSs and amendments to FRS in future periods will not have a material impact on the financial statements of the Group and of the Company in the period of their initial adoption except for the following:

FRS 1 – Presentation of Financial Statements (Revised)

FRS 1 (Revised) will be effective for annual periods beginning on or after 1 January 2009, and will change the basis for presentation and structure of the financial statements. It does not change the recognition, measurement or disclosure of specific transactions and other events required by other FRSs.

FRS 23 – Borrowing Costs (Revised)

FRS 23 (Revised) will be effective for annual periods beginning on or after 1 January 2009 and eliminates the option available under the previous version of FRS 23 to recognise all borrowing costs immediately as an expense. An entity shall capitalise borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. As the change in accounting policy is to be applied prospectively, there will be no impact on amounts reported for 2008 and prior periods.

31

NOTES TO FINANCIAL STATEMENTS31 December 2008

FRS 108 – Operating Segments

FRS 108 will be effective for annual financial statements beginning on or after 1 January 2009 and supersedes FRS 14 – Segment Reporting. FRS 108 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. In contrast, FRS 14 requires an entity to identify two sets of segments (business and geographical), using a risks and rewards approach, with the entity’s ‘system of internal financial reporting to key management personnel’ serving only as the starting point for the identification of such segments. As a result, following the adoption of FRS 108, the identification of the Group’s reportable segments may change.

BASIS OF CONSOLIDATION – The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee enterprise so as to obtain benefits from its activities.

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

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by other members of the Group.

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

In the Company’s financial statements, investments in subsidiaries are carried at cost less any impairment in net recoverable value that has been recognised in the profit and loss statement.

BUSINESS COMBINATIONS - The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under FRS 103 Business Combinations are recognised at their fair values at the acquisition date.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Company’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Company’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the consolidated profit and loss statement.

FINANCIAL INSTRUMENTS - Financial assets and financial 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 financial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument, or where appropriate, a shorter period. Income and expense is recognised on an effective interest rate basis for debt instruments other than those financial instruments “at fair value through profit or loss”.

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NOTES TO FINANCIAL STATEMENTS 31 December 2008

Financial assets

Investments are recognised and de-recognised on a trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as at fair value through profit or loss which are initially measured at fair value.

Other financial assets are classified into the following specified categories: financial assets “at fair value through profit or loss”, “available-for-sale” financial assets and “loans and receivables”. The classification depends on the nature and purpose of financial assets and is determined at the time of initial recognition.

Financial assets at fair value through profit or loss (FVTPL)

Financial assets are classified as at FVTPL where the financial asset is either held-for-trading or it is designated as at FVTPL.

A financial asset is classified as held-for-trading if:

• ithasbeenacquiredprincipallyforthepurposeofsellinginthenearfuture;or

• itisapartofanidentifiedportfoliooffinancialinstrumentsthattheCompanymanagestogetherandhas a recent actual pattern of short-term profit-taking; or

• itisaderivativethatisnotdesignatedandeffectiveasahedginginstrument.

A financial asset other than a financial asset held-for-trading may be designated as at FVTPL upon initial recognition if:

• suchdesignationeliminatesorsignificantlyreducesameasurementorrecognitioninconsistencythatwould otherwise arise; or

• thefinancialassetformspartofagroupoffinancialassetsorfinancialliabilitiesorboth,whichismanaged and its performance is evaluated on a fair value basis, in accordance with the Company’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• itformspartofacontractcontainingoneormoreembeddedderivatives,andFRS39permitstheentire combined contract (asset or liability) to be designated as at FVTPL.

Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset. Fair value is determined in the manner described in Note 4.

Available-for-sale financial assets

Certain shares and debt securities held by the Group are classified as being available-for-sale and are stated at fair value. Fair value is determined in the manner described in Note 4. Gains and losses arising from changes in fair value are recognised directly in the fair value reserve with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets which are recognised directly in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the revaluation reserve is included in profit or loss for the period. Dividends on available-for-sale equity instruments are recognised in profit or loss when the Group’s right to receive payments is established. The fair value of available-for-sale monetary assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at reporting date. The change in fair value attributable to translation differences that result from a change in amortised cost of the asset is recognised in profit or loss, and other changes are recognised in equity.

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Loans and receivables

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

Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at 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 financial asset, the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

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

With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

In respect of available-for-sale equity instruments, any subsequent increase in fair value after an impairment loss, is recognised directly in equity.

Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risk and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the assets and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, bank overdrafts, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Financial liabilities and equity instruments

Classification as debt or equity

Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

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Equity instruments

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

Financial liabilities

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

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

Financial guarantee contract liabilities are measured initially at their fair values and subsequently at the higher of the amount recognised as a provision and the amount initially recognised less cumulative amortisation in accordance with the revenue recognition policies described below.

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.

Derivative financial instruments

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

Embedded derivatives

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value with changes in fair value recognised in profit or loss.

INVENTORIES - Inventories comprising mainly consumables are stated at the lower of cost (weighted average method) and net realisable value. Cost includes all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price less all estimated costs to be incurred in marketing, selling and distribution.

PROPERTY, PLANT AND EQUIPMENT – Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses except for freehold land-hotels which are stated at revalued amounts.

Revaluations of freehold land – hotels are performed with sufficient regularity such that the carrying amounts do not differ materially from that which would be determined using fair values at the balance sheet date.

For the freehold land-hotels which has been revalued, the revaluation increase arising on the revaluation of freehold land-hotel is credited to the asset revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense, in which case the increase is credited to the profit and loss statement to the extent of the decrease previously charged. A decrease in

35


carrying amount arising on the revaluation of freehold land-hotel is charged as an expense to the extent that it exceeds the balance, if any, held in the asset revaluation reserve relating to a previous revaluation of that asset.

On subsequent sale or retirement of a revalued freehold land, the attributable revaluation surplus remaining in the property revaluation reserve is transferred directly to retained earnings.

Depreciation is charged so as to write off the cost of assets, other than freehold land, over their estimated useful lives, using the straight-line method except for linen, china, glassware, silver and uniforms where the original expenditure has been written down to approximately one-half of the original cost and all subsequent purchases have been written off as replacements. The estimated useful lives are as follows:

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

Depreciation is not provided on freehold land – hotels and freehold land for redevelopment.

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

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

Fully depreciated assets still in use are retained in the financial statements.

INVESTMENT PROPERTIES – Investment properties are held on a long-term basis for investment potential and income. Investment properties are stated at cost less accumulated depreciation and any accumulated impairment losses.

Depreciation is charged so as to write off the cost, other than freehold land, over their estimated useful lives, using the straight-line method. The estimated useful lives are as follows:

Number of years Freehold buildings 50 to 80 Leasehold buildings 80 *

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

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

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

BORROWING COSTS – Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, namely assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of these assets until such time as the assets are substantially ready for their intended use or sale.

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

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

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

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the profit 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, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the profit 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.

LEASES – Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessor

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

REVENUE RECOGNITION – Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts and sales related taxes.

Hotel room revenue is recognised based on room occupancy while other hotel related revenue is recognised when the goods are delivered or the services are rendered to the customers.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

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

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

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RETIREMENT BENEFIT COSTS - Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. Payments made to state-managed retirement benefit schemes, such as the Singapore Central Provident Fund, are dealt with as payments to defined contribution plans where the Group’s obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan.

A subsidiary operates an unfunded, defined benefit Retirement Benefit Scheme (“the Scheme”) for its eligible employees. The subsidiary’s obligation under the Scheme, calculated using the Projected Unit Credit Method, is determined based on actuarial computations by independent actuary, through which the amount of benefit that employees have earned in return for their service in the current and prior years is estimated. That benefit is discounted in order to determine its present value.

Actuarial gains and losses are recognised as income or expense over the expected average remaining working lives of the participating employees. Past service costs are recognised immediately to the extent that the benefits are already vested, and otherwise are amortised on a straight-line basis over the average period until the amended benefits become vested.

The amount recognised in the balance sheet represents the present value of the defined benefit obligations adjusted for unrecognised actuarial gains and losses and unrecognised past service costs. Any asset resulting from this calculation is limited to the net total of any unrecognised actuarial losses and past service costs, and the present value of any economic benefits in the form of refunds or reductions in future contributions to the plan.

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

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

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised based on the tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date.

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

Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or debited 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. In the case of a business combination,

38


the tax effect is taken into account in calculating goodwill or determining the excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over cost.

FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION - The individual financial statements of each Group entity are measured and presented in the currency of the primary economic environment in which the entity operates (its functional currency). The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company are presented in Singapore dollars, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the date of the transaction. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including comparatives) are expressed in Singapore dollars using exchange rates prevailing on the balance sheet date. Income and expense items (including comparatives) are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such translation differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities (including monetary items that, in substance, form part of the net investment in foreign entities), and of borrowings and other currency instruments designated as hedges of such investments, are taken to the foreign currency translation reserve.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

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

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Critical judgements in applying accounting policies

Impairment of investments in subsidiaries in the Company’s balance sheet

The carrying amounts of investments in subsidiaries, including advances to subsidiaries and deemed investments are disclosed in Note 11. Management has evaluated whether there is any indication of impairment by considering both internal and external sources of information, and are satisfied that there is no such impairment indicator.

Income tax on gain arising from the disposal of investment property

In February 2007, a subsidiary disposed of an investment property for $58 million and made a gain on disposal of $31 million. Management is of the view that this gain is capital in nature and therefore no provision for income tax on this gain has been provided in the financial statements.

Impairment indicators of available-for-sale investments (Note 8)

The Group and Company have available-for-sale investments amounting to $3.7 million (2007 : $7.3 million) and $0.3 million (2007 : $1.1 million) respectively which are measured at fair values. During the year, the fair value of these investments have undergone a significant decline as a result of the global financial crisis. Management exercises its judgement in determining if the magnitude of decline in fair value is an indication of objective evidence of impairment for each investments. An impairment loss of $1.5 million (2007 : $Nil) for the Group and $0.1 million (2007 : $Nil) for the Company was determined and was transferred from fair value reserve to the profit and loss statements.

Certain available-for-sale investment in unquoted shares with carrying amounts of $0.8 million (2007 : $0.8 million) are carried at cost. Based on latest financial information of the investees, management has evaluated that there is no impairment indicators relating to these investments.

Effect of exchange differences on advances deemed as extension of net investment in foreign operations

The Group entities have entered into intercompany advances of $36 million (2007 : $17 million) which are deemed as extension of net investment in foreign operations, as management does not expect that the repayment of these advances will be made in the foreseeable future. As such, exchange losses of $5.6 million loss (2007 : $0.6 million gain) that are recognised in separate financial statements of the Group entities are taken to the foreign currency translation reserve in the consolidated financial statements.

Provision for legal claim (Note 29)

During the year, Faber Kompleks Sdn. Bhd., a subsidiary, is served with a notice of civil suit by a former hotel operator for alleged wrongful termination of its services. Based on the legal advice obtained from a legal adviser in Malaysia, management is of the view that the claims are without merit and the subsidiary will defend the suit vigorously. As such, management has not made any provision for this legal claim as at 31 December 2008.

Unutilised tax losses and capital allowances carryforward (Note 27)

During the year, the Group acquired a subsidiary, Faber Kompleks Sdn. Bhd., which has unutilised tax losses and capital allowances of approximately $29.5 million which may be available for offset against future taxable profits of the subsidiary, subject to the approval by tax authorities. Management is of the view that the timing and amount of tax benefits that can be recovered are uncertain, and therefore no deferred tax asset has been recognised as at 31 December 2008.

Impairment indicators of investment properties (Note 13) and property, plant and equipment (Note 12)

Management engages independent professional valuers to reassess the market values of investment properties and hotel buildings which are measured using cost model, to determine if there are any impairment indicators. Management determines that there are no impairment indicators as at 31 December 2008.

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 significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Allowance for doubtful debts (Notes 9 and 10)

Management considered the recoverability of the Group’s trade and other receivables, and have made estimates for unrecoverable amounts based on objective evidence of debtors’ financial status. Allowances made are as disclosed in Notes 9 and 10.

Fair values of net assets acquired in a business combination (Note 27)

During the year, the Group acquired the subsidiary, Faber Kompleks Sdn. Bhd., which is accounted for using the purchase method. As at 31 December 2008, the Group has applied the purchase method using the provisional fair values of the net assets of the acquiree as described in Note 27.

Retirement benefit obligations (Note 16)

A subsidiary, Faber Kompleks Sdn. Bhd., operates an unfunded defined benefit Retirement Benefit Scheme, that requires actuarial estimates to determine the present value of the benefit obligations. The basis of estimates is described in Note 16.

Fair values of held-for-trading and available-for-sale investments (Notes 7 and 8)

The basis of determining the fair values of held-for-trading investments and available-for-sale investments are described in Note 4(c)(vi). Certain of these investments amounting to $2.4 million (2007 : $4.8 million) for the Group and $0.3 million (2007 : $1.0 million) for the Company are not traded in active markets, and therefore their fair values are obtained from other sources which may involve estimates. Management is satisfied as to the reasonableness and objectivity of these estimates.

Useful lives of investment properties and property, plant and equipment

Management exercises their judgement in estimating the useful lives of the depreciable assets which takes into consideration the physical conditions of the assets and their legal useful lives. Depreciation is provided to write off the cost of investment properties (Note 13) and property, plant and equipment (Note 12) over their estimated useful lives, using the straight-line method.

Freehold land - hotels at revalued amounts (Note 12)

Management engages independent professional valuers to assess the market values of freehold land-hotels on a regular basis to ensure that their revalued carrying amounts are not materially different from their fair values as at balance sheet date. The market values as at 31 December 2008 were assessed by desktop valuations performed by independent professional valuers, taking into account open market values of similar properties in Singapore on existing use basis, and considering current occupancy rates, room rates and rental rates of hotel premises prevailing at and around balance sheet date.

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4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT

(a) Categories of financial instruments

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

The Group The Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000 Financial assets

Fair value through profit or loss (FVTPL): Held-for-trading investments 5,294 8,430 320 1,041 Loans and receivables (including cash and cash equivalents) 13,570 13,202 61,469 35,482 Available-for-sale investments 4,498 8,046 1,111 1,941


Derivative instrument - 42 - - Amortised cost 66,988 49,653 34,885 15,443 Financial guarantee contracts - - - 9

(b) Financial risk management policies and objectives

The Group’s overall financial risk management programme seeks to minimise potential adverse effects of financial performance of the Group.

The Group’s activities expose it to a variety of financial risks, including the effects of changes in foreign currency exchange rates, interest rates and equity prices. The Group does not hold or issue derivative financial instrument for speculative purposes.

The Group invested in a variety of financial instruments such as bonds, fixed income funds, equity shares, structured notes with embedded derivatives and managed funds as disclosed in Notes 7 and 8. These investments are subject to a variety of financial risks, including credit risk of counterparties, liquidity risk, interest rate risk, foreign currency risk, and other market risks related to prices of equity, commodities or real estates.

The Group engaged professional investment managers from banks to manage the risks and returns from these investments. Investment risk is managed primarily by diversification in asset classes, currency denomination and geographical region. All investment accounts opened with professional managers from banks are approved by the board of directors.

For certain investment accounts (managed funds), the professional investment managers from the banks are given the discretionary powers to make investment decisions on behalf of management based on specified guidelines. The risks and performance of such managed funds are measured and evaluated by the fair values of the underlying investments on an overall portfolio basis.

It will not be practical to provide an analysis of the various types of financial risks for certain types of investments (such as managed funds) given the dynamic management of the portfolio or the variety of the underlying instruments involved.

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The maximum exposure on the investments is limited to the carrying amounts recognised in the financial statements.

There has been no change to the Group’s exposure to financial risks or the manner in which it manages and measures the risks. Financial risk exposures, to the extent practicable, are described below.

(c) Exposure to financial risks

i) Credit risk

The Group’s credit risk is primarily attributable to its cash and bank balances, trade and other receivables and investments. Cash and fixed deposits are placed with creditworthy financial institutions. The trade and other receivables presented in the balance sheets are net of allowances for doubtful receivables, estimated by management based on prior experience and the current economic condition. Investments are also subject to credit risk, which have been factored in the determination of their fair values.

The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.

The carrying amounts of financial assets recorded in the financial statements, net of any allowances for losses represents the Group’s maximum exposure to credit risk.

ii) Interest rate risk

Summary quantitative data of the Group’s interest bearing financial instruments can be found in Section (v) below. The Group is exposed to interest rate risk through the impact of rate changes on interest bearing liabilities and assets.

Further information related to interest rate and maturities of bank loans is disclosed in Notes 14 and 17.

Interest rate sensitivity

The sensitivity analyses below have been determined based on the exposure to interest rates for interest-bearing financial assets and financial liabilities at the balance sheet date. A 50 basis point increase or decrease is used when reporting interest rate risk sensitivity internally to the board of directors.

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

• theGroup’sprofit for theyearended31December2008woulddecrease/increasebyapproximately $0.3 million (2007 : decrease/increase by $0.2 million). This is mainly attributable to the Group’s exposure to interest rate risk on its variable rate borrowings and its investments in quoted bonds and fixed income funds measured at fair value through profit or loss.

• theCompany’sprofit for theyear ended31December2008woulddecrease/increaseby approximately $0.2 million (2007 : decrease/increase by $0.07 million). This is mainly attributable to the Company’s exposure to interest rate risk on its variable rate borrowings.

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

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iii) Foreign currency risk

The Group’s foreign currency exposures arose mainly from the exchange rate movements of the United States dollar, the Euro, the Australian dollar, the Great Britain pound, the Malaysian ringgit and the Swiss franc vis-a-vis the functional currencies of the Group entities.

At the reporting date, the carrying amounts of financial assets and liabilities denominated in currencies other than the respective Group entities’ functional currencies are as follows:

The Group The Company

Assets Liabilities Assets Liabilities 2008 2007 2008 2007 2008 2007 2008 2007 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

United States

dollar 3,074 7,017 - - 377 2,113 - -

Euro 447 986 - - - 350 - -

Australian dollar 62 396 - - - - - -

Great Britain

pound 183 435 - - - - - -

Malaysian ringgit 224 501 - - - - - -

Swiss franc 64 225 - 248 - - - -

Foreign currency sensitivity

The following table details the sensitivity to a 5% increase and decrease in the relevant foreign currencies against the functional currency of each Group entity. 5% is the sensitivity rate used when reporting foreign currency risk internally to the board of directors. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 5% change in foreign currency rates.

If the relevant foreign currency strengthens by 5% against the functional currency of each Group entity:

Profit or loss will increase (decrease) by approximately:

The Group The Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000 Impact arising from United States dollar 116 224 4 54 Euro 22 49 - 17 Australian dollar 3 20 - - Great Britain pound 9 22 - - Swiss franc 3 (1) - - 153 314 4 71

Fair value reserve in equity will increase by approximately:

The Group The Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000 Impact arising from United States dollar 38 127 15 51 Malaysian ringgit 11 25 - - 49 152 15 51

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If the relevant foreign currency weakens by 5% against the functional currency of each Group entity, there will be an equal and opposite effect on profit or loss and fair value reserve in equity.

In addition, the Group is exposed to currency translation risk as it has significant subsidiaries operating in New Zealand and Malaysia. For the year ended 31 December 2008, approximately 14% (2007 : 23%) of the Group’s net assets is denominated in New Zealand dollar and approximately 13% (2007 : 1%) is denominated in Malaysian ringgit.

iv) Price risk management

The Group is exposed to price risks arising from its investments classified as held-for-trading and available-for-sale. These investments include equity shares, and instruments whose fair values are subject to volatility in equity prices, commodity prices or real estate prices. 10% is the sensitivity rate used when reporting price risk internally to the board of directors.

Further details of these investments can be found in Notes 7 and 8.

Price sensitivity

The sensitivity analyses below have been determined based on the exposure to price risks of investments at the reporting date.

In respect of the Group’s investments, if prices had been 10% higher/lower while all other variables were held constant:

• theGroup’sprofitfortheyearended31December2008wouldincrease/decreasebyapproximately $0.4 million (2007 : $0.8 million); and

• theGroup’sfairvaluereservewouldincrease/decreasebyapproximately$0.4million(2007 : $0.7 million).

In respect of the Company’s investments, if prices had been 10% higher/lower while all other variables were held constant:

• theCompany’sprofitfortheyearended31December2008wouldincrease/decreasebyapproximately $0.03 million (2007 : increase/decrease by $0.1 million).

• theCompany’sfairvaluereservefortheyearended31December2008wouldincrease/decrease by approximately $0.03 million (2007 : increase/decrease by $0.1 million).

v) Liquidity risk

Liquidity risk reflects the risk that the Group will have insufficient resources to meet its financial liabilities as they fall due.

The global financial and capital markets have experienced severe credit crunch and volatility, and

have resulted in a general economic downturn. The Group’s profitability will be dependent to a large extent on the effectiveness of the fiscal measures and other actions, beyond their control, undertaken to achieve economic recovery. Nevertheless, the Group maintains sufficient cash and cash flows to finance their activities and adequate lines of credit are maintained to ensure necessary liquidity.

As at 31 December 2008, total current liabilities exceeded total current assets by $21.5 million (2007 : $24.6 million) for the Group, and by $31.8 million (2007 : $11.0 million) for the Company.

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This is mainly due to some of the Group’s and Company’s bank loans being arranged on short-term revolving basis, as the interest rates are more favourable.

Management assesses the availability of credit facilities on an on-going basis and no matters have been drawn to its attention that the roll-over of the short-term financing may not be forthcoming. The Group and the Company have unutilised credit facilities totalling $67.6 million (2007 : $90.7 million) and $52.1 million (2007 : $67.6 million) respectively.

Liquidity and interest risk analyses


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

Weighted average On demand effective or within Within interest rate 1 year 2 to 5 years After 5 years Adjustment Total 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 % p.a. % p.a. $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

The Group

Non-interest bearing NA NA 5,790 3,600 - - - - - - 5,790 3,600

Variable interest

rate instruments 1.28 4.02 35,210 47,904 1,684 - 25,100 - (796) (1,851) 61,198 46,053

The Company

Non-interest bearing NA NA 2,186 1,843 - - - - - - 2,186 1,843

Variable interest

rate instruments 1.90 3.13 33,320 14,026 - - - - (621) (426) 32,699 13,600

Financial guarantee

contracts NA NA - 9 - - - - - - - 9

Derivative financial instruments of the Group comprise interest rate swap of $Nil (2007 : $0.04 million) with information as disclosed in Note 15.

NA: not applicable.

Financial assets

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

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Weighted average effective On demand interest rate or within 1 year Within 2 to 5 years Adjustment Total 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007

% p.a. % p.a. $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

The Group

Non-interest bearing NA NA 14,613 18,969 2,048 3,126 - - 16,661 22,095 Fixed interest rate instruments 0.76 2.85 5,566 6,527 - - (42) (180) 5,524 6,347 Variable interest rate instruments 2.40 6.69 795 892 400 400 (18) (56) 1,177 1,236

The Company

Non-interest bearing NA NA 3,113 4,740 816 912 - - 3,929 5,652 Fixed interest rate instruments 1.93 3.61 1,539 586 58,570 33,410 (1,138) (1,184) 58,971 32,812

vi) Fair value of financial assets and financial liabilities

The fair values of financial assets and financial liabilities are determined as follows:

• Cashandfixeddeposits

The carrying amounts of cash and fixed deposits approximate their fair values due to their short-term maturities.

• Held-for-tradingandavailable-for-saleinvestments

Held-for-trading and available-for-sale investments that are measured at fair values amounted to $5.3 million (2007 : $8.4 million) and $3.7 million (2007 : $7.3 million) respectively for the Group and $0.3 million (2007 : $1 million) and $0.3 million (2007 : $1.2 million) respectively for the Company. The basis of their fair values were as follows:

The Group The Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Fair values determined using:

Published prices quoted in active markets 6,638 10,908 330 1,160 Indicative bid prices from dealers, representing actual and regularly occurring market transactions 958 2,377 250 704 Net asset values provided by fund managers 1,415 2,410 70 337 9,011 15,695 650 2,201

• Tradereceivables,otherreceivables,tradepayablesandotherpayables

The carrying amounts of these balances approximate their fair values because of the immediate or short-term maturity of those financial instruments.

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• Bankloans

The fair values of bank loans are disclosed in Notes 14 and 17.

(d) Capital risk management policies and objectives

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

The capital structure of the Group consists of debt, which includes the bank borrowings disclosed in Notes 14 and 17, and equity comprising share capital disclosed in Note 19, reserves and retained earnings.

The Group reviews the capital structure on an annual basis. As a part of this review, the Group considers the cost of capital and the risks associated with each class of capital. The Group seeks to balance its overall capital structure through the payment of dividends, new share issues and share buy-backs as well as the issue of new debt or the redemption of existing debt.

The Group’s overall strategy remains unchanged from 2007.

5 RELATED PARTY TRANSACTIONS

Related parties are entities with common direct or indirect shareholders and/or directors. Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions.

Compensation of directors and key management personnel

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

The Group 2008 2007 $’000 $’000

Short-term benefits 1,115 1,026 Post-employment benefits 68 74 1,183 1,100

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

Other related party transactions with a director and certain key management personnel:

The Group 2008 2007 $’000 $’000

Fees paid to a director in respect of professional services 40 56 Rental paid to key management personnel for staff housing 43 43

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6 CASH AND BANK BALANCES The Group The Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Cash on hand 123 132 90 114 Cash at bank 3,536 3,002 650 881 Fixed deposits 5,524 6,347 1,510 566 Total 9,183 9,481 2,250 1,561

Fixed deposits bear interest ranging from 0.3125% to 3% (2007 : 1.35% to 6.49%) per annum and for a tenure ranging from 31 to 58 days (2007 : 7 to 31 days) for the Group and 1.16% (2007 : 1.625% to 4.05%) per annum and for a tenure of 58 days (2007 : 14 to 31 days) for the Company.

The Group and Company’s cash and bank balances that are not denominated in the functional currencies of the respective entities are as follows:


United States dollar 1,116 1,311 13 43 Australian dollar 62 197 - - Euro 133 492 - 350 Great Britain pound 16 25 - -

7 HELD-FOR-TRADING INVESTMENTS


Quoted bonds 777 836 - - Quoted fixed income funds 475 - - - Structured notes with embedded derivatives 2,487 5,183 251 704 Managed funds and alternative investments 1,555 2,411 69 337 5,294 8,430 320 1,041

The Group’s investments in quoted bonds have effective interest rates ranging from 3.85% to 7.61% (2007 : 5.57% to 7.61%) per annum and have maturity dates ranging from November 2009 to October 2017 (2007 : January 2008 to October 2017).

Investments in quoted bonds, quoted fixed income funds, structured notes with embedded derivatives, and managed funds offer the Group and the Company the opportunity for return through fair value gains.

The Group’s held-for-trading investments amounting to $Nil (2007 : $6.9) million are secured for a short-term bank loan (Note 14).

The Group and Company’s held for trading investments that are not denominated in the functional currencies of the respective entities are as follows:

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United States dollar 1,204 3,161 69 1,041 Euro 314 494 - - Great Britain pound 167 410 - - Australian dollar - 199 - - Swiss franc 64 225 - -

8 AVAILABLE-FOR-SALE INVESTMENTS

The Group The Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000 Current assets

Equity-linked funds 998 1,570 - - Quoted equity shares 1,452 3,350 295 1,029 2,450 4,920 295 1,029

Non-current assets

Quoted equity shares 1,267 2,345 35 131 Unquoted equity share - at cost 781 781 781 781 2,048 3,126 816 912

Total 4,498 8,046 1,111 1,941

Available-for-sale investments are held for strategic rather than trading purpose. The Group does not actively trade available-for-sale investments. The available-for-sale investments presented as current assets are those held in investment accounts managed on behalf of the Group by professional fund managers. The available-for-sale investments presented as non-current assets are those held and managed directly by the Group and the Company.

Unquoted equity share is carried at cost as fair value cannot be reliably measured. Management has evaluated whether there is any indicator of impairment for unquoted equity share carried at cost, by considering both internal and external sources of information, and are satisfied that there is no such indicator.

Quoted equity shares offer the Group and the Company opportunity for return through dividend income and fair value gains. They have no fixed maturity or coupon rate.

The Group and Company’s available-for-sale investments that are not denominated in the functional currencies of the respective entities are as follows:


United States dollar 754 2,546 295 1,029 Malaysian ringgit 224 501 - -

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9 TRADE RECEIVABLES The Group The Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Trade receivables 3,597 2,864 1,667 1,588 Less: Allowance for doubtful debts (275) (226) (22) (22) 3,322 2,638 1,645 1,566

The average credit period granted to customers is 30 days (2007 : 30 days). No interest is charged on the trade receivables.

Before accepting any new customer, the Group assesses the potential customer’s credit quality and defines credit limits by customer. The review of customer credit limits is conducted annually. Except for two regular customers with total balance of $0.7 million (2007 : $1.0 million) which made up 20% (2007 : 36%) of the Group’s trade receivables, there is no other customer who represents more than 5% of the total balance of trade receivables of the Group.

The allowance for estimated irrecoverable amount has been determined based on on-going evaluation of collectibility and aging analysis of individual receivables by reference to their past default experience. The Group does not hold any collateral over these balances. The average age of receivables past due but not impaired amounting to $0.6 million (2007 : $1.4 million) is ranging from 31 to 60 days (2007 : 31 to 60 days). In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. Management believes that there is no further allowance required.

Movement in the allowance for doubtful debts:


Balance at beginning of the year 226 158 22 22 Amounts recovered (24) (18) - - Increase in allowance 123 86 - - Arising from acquisition of subsidiary 17 - - - Exchange adjustment (67) - - - Balance at end of the year 275 226 22 22

10 OTHER RECEIVABLES, DEPOSITS AND PREPAID EXPENSES


Outside parties 272 72 - - Income tax recoverable 103 14 - - Refundable deposits 291 597 113 108 Structured deposit with a bank 400 400 - - Prepaid expenses 653 188 447 68 1,719 1,271 560 176 Less: Structured deposit with a bank classified as non-current (400) (400) - - 1,319 871 560 176

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Structured deposit represents a capital-protected deposit placed with a bank, which earns interest that is linked to the performance of certain equities. The tenure of the deposit is 3 years, but is subject to early redemption by the bank if certain trigger events occur, hence placing a cap on the variable interest at 5% per annum. The deposit is carried at amortised cost and fair value approximates its carrying amount.

11 SUBSIDIARIES The Company 2008 2007 $’000 $’000

Unquoted equity shares - at cost 6,494 6,494 Advances to subsidiaries 57,461 32,246 Deemed investment in subsidiaries arising from fair value of corporate guarantee 258 258 64,213 38,998

The details of the Company’s subsidiaries at 31 December 2008 are as follows:

Country of incorporation Proportion of (or registration) ownership interest Name of subsidiary and operation and voting power held Principal activity 2008 2007 % %

Royal Properties Singapore 100 100 Property investment Investment Pte Ltd

Royal Capital Pte Ltd Singapore 100 100 Investment holding and provision of management services

Castle Mall Properties Singapore 100 100 Investment holding Pte Ltd (wholly owned subsidiary of Royal Properties Investment Pte Ltd)

Grand Complex New Zealand 100 100 Property investment Properties Ltd (wholly owned subsidiary of Royal Properties Investment Pte Ltd) (1)

Hotel Royal @ Queens Singapore 100 100 Hotelier (Singapore) Pte Ltd (wholly owned subsidiary of Royal Properties Investment Pte Ltd)

Hotel Royal Investment Singapore 100 100 Dormant Pte Ltd (2)

Prestige Properties Malaysia 100 100 Investment holding Sdn. Bhd. (1)

Faber Kompleks Malaysia 100 - Hotelier and property Sdn. Bhd. (1) investment (wholly owned subsidiary of Prestige Properties Sdn. Bhd.)

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

(1) Audited by overseas practices of Deloitte Touche Tohmatsu.

(2) Not audited as the subsidiary has remained dormant since incorporation.

The amounts owing by subsidiaries are unsecured, not expected to be repaid within the next 12 months and bear interest at 2.5% (2007 : 3.5%) per annum which approximate market interest rate. Hence, the carrying amounts approximate their respective fair values.

12 PROPERTY, PLANT AND EQUIPMENT

Linen, china, Freehold Freehold Building glassware, Freehold land building improvement Plant and silver and land for - hotels - hotels - hotels equipment uniform redevelopment Total $’000 $’000 $’000 $’000 $’000 $’000 $’000

The Group

Cost or valuation: As at 1 January 2007 101,138 43,061 3,344 10,557 398 - 158,498 Additions - 1,913 - 850 - 14,762 17,525 Adjustment/Disposal - (297) - (145) - - (442) Revaluation increase 63,362 - - - - - 63,362 As at 31 December 2007 164,500 44,677 3,344 11,262 398 14,762 238,943 Additions - - 859 4,970 - - 5,829 Additions arising from acquisition of a subsidiary 4,447 14,187 - 781 1 - 19,416 Disposal - - - (2) - - (2) Revaluation decrease (9,293) - - - - - (9,293) Exchange adjustment (89) (285) (17) (22) - - (413) As at 31 December 2008 159,565 58,579 4,186 16,989 399 14,762 254,480

Comprising:

31 December 2008 At valuation 159,565 - - - - - 159,565 At cost - 58,579 4,186 16,989 399 14,762 94,915 Total 159,565 58,579 4,186 16,989 399 14,762 254,480


Accumulated depreciation: As at 1 January 2007 - 7,851 3,108 4,890 217 - 16,066 Charge for the year - 672 28 973 - - 1,673 Disposal - - - (114) - - (114) As at 31 December 2007 - 8,523 3,136 5,749 217 - 17,625 Charge for the year - 216 42 1,631 - - 1,889 Disposal - - - (1) - - (1) As at 31 December 2008 - 8,739 3,178 7,379 217 - 19,513

Carrying amount: As at 31 December 2008 159,565 49,840 1,008 9,610 182 14,762 234,967 As at 31 December 2007 164,500 36,154 208 5,513 181 14,762 221,318

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Linen, china, Freehold Freehold Building glassware, Freehold land building improvement Plant and silver and land for - hotels - hotels - hotels equipment uniform redevelopment Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 The Company

Cost or valuation: As at 1 January 2007 81,000 7,985 3,344 8,918 398 - 101,645 Additions - - - 788 - 14,762 15,550 Disposal - - - (132) - - (132) Revaluation increase 34,500 - - - - - 34,500 As at 31 December 2007 115,500 7,985 3,344 9,574 398 14,762 151,563 Additions - - - 214 - - 214 Disposal - - - (3) - - (3) Revaluation decrease (5,500) - - - - - (5,500) As at 31 December 2008 110,000 7,985 3,344 9,785 398 14,762 146,274

Comprising:



Accumulated depreciation: As at 1 January 2007 - 6,791 3,108 4,514 217 - 14,630 Charge for the year - 28 28 778 - - 834 Disposal - - - (102) - - (102) As at 31 December 2007 - 6,819 3,136 5,190 217 - 15,362 Charge for the year - 28 28 822 - - 878 Disposal - - - (1) - - (1) As at 31 December 2008 - 6,847 3,164 6,011 217 - 16,239

Carrying amount: As at 31 December 2008 110,000 1,138 180 3,774 181 14,762 130,035

As at 31 December 2007 115,500 1,166 208 4,384 181 14,762 136,201

(a) Freehold land and buildings - hotels

The Group engages independent professional valuers to assess the fair values of the hotel properties on a regular basis. The fair values are estimated by reference to open market values of similar properties on existing use basis, and also considering the current occupancy rates, room rates and rental rates for hotel premises prevailing at or around the balance sheet date. The fair values as at balance sheet date of the Group’s freehold land and buildings - hotels are as follows:

2008 2007 $’000 $’000 The Company - Hotel Royal at Newton Road (1): Freehold land 110,000 115,500 Freehold building 60,000 51,100

Subsidiary - Hotel Royal @ Queens (2): Freehold land 45,000 49,000 Freehold building 63,500 49,000

Subsidiary - Hotel Royal Penang (3): Freehold land 4,565 N/A Freehold building 14,110 N/A

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(1) Desktop valuation performed by an independent professional valuer in Singapore. The last full valuation was performed by the same valuer as at 31 December 2006.

(2) Desktop valuation (2007 : full valuation) performed by an independent professional valuer in Singapore.

(3) Properties acquired during the year. A full valuation was performed by an independent professional valuer in Malaysia, as at 9 October 2008 (date of acquisition) for the purpose of applying purchase method accounting. A full valuation was performed by the same valuer as at 31 December 2008.

Revaluation increase/decrease is recognised only for freehold land - hotels in accordance with the Group’s accounting policies. Revaluation increase/decrease is not recognised for freehold building – hotels. As at 31 December 2008, had the freehold land - hotels been carried at historical cost less accumulated impairment losses, its carrying amount would have been approximately $25.4 million (2007 : $21 million) for the Group and $1 million (2007 : $1 million) for the Company.

Adjustment to freehold building - hotels in 2007 relates to a reversal of an over-accrual of building improvement costs by a subsidiary.

(b) Freehold land for redevelopment

Freehold land for redevelopment of the Company was valued on desktop valuation (2007 : full valuation) by an independent professional valuer in Singapore at approximately $17.1 million as at 31 December 2008 (2007 : $22 million) on open market value as a redevelopment site for residential property. Revaluation increase/decrease is not recognised for freehold land for redevelopment.

In 2007, borrowing costs of $0.2 million, which were directly attributable to the acquisition of the freehold land for redevelopment, were capitalised under the cost of the freehold land for redevelopment. The capitalisation rate was 1.1% per annum.

(c) Property, plant and equipment of the Group and the Company are pledged as securities for the Group’s and the Company’s bank loans as disclosed in Notes 14 and 17.

13 INVESTMENT PROPERTIES

Freehold Freehold Leasehold land buildings buildings Total $’000 $’000 $’000 $’000 The Group

Cost: As at 1 January 2007 13,197 46,153 1,456 60,806 Additions - 2,679 - 2,679 Exchange adjustment 420 1,378 - 1,798 As at 31 December 2007 13,617 50,210 1,456 65,283 Additions arising from acquisition of subsidiary 6,352 2,964 - 9,316 Additions - 789 - 789 Exchange adjustment (3,608) (12,196) - (15,804) As at 31 December 2008 16,361 41,767 1,456 59,584

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Freehold Freehold Leasehold land buildings buildings Total $’000 $’000 $’000 $’000

Accumulated depreciation: As at 1 January 2007 - 6,848 369 7,217 Charge for the year - 625 18 643 Exchange adjustment - 203 - 203 As at 31 December 2007 - 7,676 387 8,063 Charge for the year - 570 18 588 Exchange adjustment - (1,902) - (1,902) As at 31 December 2008 - 6,344 405 6,749

Impairment: As at 1 January 2007, 31 December 2007 and 31 December 2008 - 284 - 284

Carrying amount: As at 31 December 2008 16,361 35,139 1,051 52,551

As at 31 December 2007 13,617 42,250 1,069 56,936

The Group 2008 2007 $’000 $’000

Fair values of investment properties:

Freehold land and buildings in New Zealand (1) 55,561 83,925Freehold land and buildings in Malaysia (2) 9,545 - Freehold buildings in Singapore (3) 3,120 3,120Leasehold buildings in Singapore (4) 5,250 5,850 73,476 92,895

(1) Full valuation by an independent professional valuer in New Zealand.(2) Full valuation by an independent professional valuer in Malaysia.(3) Full valuation by an independent professional valuer in Singapore.(4) Desktop valuation by an independent professional valuer in Singapore.

Fair values of investment properties are generally assessed with reference to their open market values of similar properties on existing use basis, and taking into account current rental rates and market conditions prevailing at balance sheet date. Fair value increase/decrease is not recognised for investment properties.

Certain investment properties of the Group are pledged as securities for the Group’s bank loans as disclosed in Notes 14 and 17.

The property rental income for the Group from the Group’s investment properties which are leased out under operating leases, amounted to $5.6 million (2007 : $6.4 million). Direct operating expenses (including repairs and maintenance) of the Group arising from the rental-generating investment properties and non-rental generating investment properties amounted to $2.3 million (2007 : $1.8 million) and $0.7 million (2007 : $1.5 million) respectively.

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14 BANK LOANS The Group The Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Short-term bank loans (secured) 32,699 31,001 32,699 13,600 Long-term bank loans (secured) - current portion (Note 17) 2,066 15,052 - - 34,765 46,053 32,699 13,600

Short-term bank loan of $9.4 million was drawn down in 2007 by the Company from a specific advance facility with a bank. This short-term bank loan, with carrying amount of $6.8 million as at 31 December 2008 (2007 : $9.4 million), bears interest rate at 0.95% (2007 : 0.95%) per annum over the prevailing swap offer rate of the bank, repriced at the discretion of the Company. The specific advance facility is secured by a mortgage on the Company’s freehold land for re-development (Note 12) with carrying amount of $14.8 million (2007 : $14.8 million).

Another short-term bank loan of $23.8 million (2007 : $4.2 million) was drawn down in 2008 by the Company from a 5-year revolving credit facility with a bank. The short-term bank loan, with carrying amount of $25.9 million as at 31 December 2008 (2007 : $4.2 million), bears interest at 1.92% (2007 : 3.32%) per annum which represents 0.95% (2007 : 0.95%) plus Singapore Swap Offer Rate. The 5-year revolving credit facility is secured by a mortgage on the Company’s freehold hotel land and building with a carrying amount of $111.1 million (2007 : $116.7 million).

In 2007, short-term bank loans of $2.4 million was drawn down by a subsidiary and secured by certain investments held by fund managers with a total fair value of $6.9 million. The bank borrowings carried average effective interest rates of 3.03% to 3.52% per annum and were repayable within one year. Included in the short-term bank loans was an amount of $0.2 million denominated in Swiss franc. This loan was fully repaid during 2008.

In 2007, short-term bank loans of $15.0 million were drawn down by a subsidiary from a short-term revolving credit facility with a bank. The short-term bank loans bore interest rate at 1% per annum over the prevailing swap offer rate of the bank, repriced at the discretion of the subsidiary. The short-term credit facility was secured by a mortgage on the subsidiary’s freehold land and buildings of the hotel with carrying amount of $84.0 million, floating charge on other assets of the properties and rental proceeds arising. This loan was refinanced into a long-term bank loan (Note 17) in 2008.

The carrying amounts of short-term bank loans approximate their fair values due to the relatively short-term maturity of these borrowings.

15 OTHER PAYABLES The Group The Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Outside parties 2,159 770 25 25 Derivative financial instrument - 42 - - Financial guarantee contracts - - - 9 Director of a subsidiary 2 12 - - 2,161 824 25 34

In 2007, a subsidiary has an interest rate swap contract with nominal value of $10 million, and has fixed interest payments at 3.59% per annum for periods up until May 2008 and have floating interest receipts at

1.2% per annum plus Singapore Interbank Offered Rate. The interest rate swap is not designated as hedging instrument and the fair value movement has been charged to profit and loss (Note 23).

The amount owing to a director is unsecured, interest-free and is repayable on demand.

16 RETIREMENT BENEFIT OBLIGATIONS

A subsidiary operates an unfunded, defined benefit Retirement Benefit Scheme (the “Scheme”) for its eligible employees in Malaysia. Under the Scheme, eligible employees are entitled to retirement benefits based on 83% of their last drawn salary multiplied with the years of service on attainment of the normal retirement age of 55 or an early retirement age of 45.

Defined benefit obligations as at 31 December 2008 have been valued by projecting forward the most recent actuarial valuation which was performed by a qualified independent actuary using the projected unit credit method.

(i) Balance sheet

The amounts recognised on the balance sheet are determined as follows: The Group 2008 $’000

Present value of unfunded defined benefit obligations 389 Unrecognised net actuarial gain 132 Net liability 521

Analysed as due: Within 1 year 8 Later than 1 year but not later than 2 years 14 Later than 2 years but not later than 5 years 52 Later than 5 years 447 521

The defined benefit obligations arose from the acquisition of a subsidiary during the year (Note 27). The movement in the present value of the defined benefit obligations since the acquisition date is mainly due to exchange difference adjustment.

(ii) Profit and loss statement

The amount of expense recognised in the profit and loss statement during the year is immaterial. (iii) Actuarial assumptions

Principal actuarial assumptions used for the purpose of the latest actuarial valuation were as follows:

The Group 2008 %

Discount rate 6.0 Expected rate of salary increases 5.0

Assumptions regarding future mortality are based on published statistics and mortality tables.

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17 LONG-TERM BANK LOANS The Group The Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000 Bank Loan A - NZ$2,100,000 (2007 : NZ$4,600,000) 1,749 5,147 - - Bank Loan B - 9,905 - - Bank Loan C 26,750 - - - 28,499 15,052 - - Less: Current portion of long-term bank loans (Note 14) (2,066) (15,052) - - 26,433 - - -

Bank Loan A is secured by a mortgage over a subsidiary’s assets and its investment properties with a carrying amount of $40.0 million (NZ$48.0 million) [2007 : $53.5 million (NZ$47.8 million)] and corporate guarantees from both the Company and another subsidiary. In 2008, the non-current portion of the loan amounting to $0.08 million was repayable by 31 July 2010. The loan amount in 2007 was repayable on 31 July 2008. Bank Loan A bears floating interest rate at 9.18% (2007 : 9.70%) per annum.

In 2007, Bank Loan B was secured by a mortgage over a subsidiary’s freehold hotel building with a carrying amount of $35.0 million, fixed and floating charge of all assets of the subsidiary and all sales and rental proceeds and all tenancy, insurance and hotel management contracts of the subsidiary. The bank loan bore interest at 3.60% per annum which represents 1.0% plus the bank’s swap offer rate. The loan was classified as current as the subsidiary was in the process of re-financing the terms of the credit facilities. The loan was refinanced to Bank Loan C in 2008.

Bank Loan C is secured by a mortgage over a subsidiary’s freehold hotel building with a carrying amount of $38.2 million, fixed and floating charge on all assets of subsidiary and all undertakings of the subsidiary. The loan is repayable in 39 quarterly instalments of $0.1 million each from June 2008 and a final repayment amount of $25.1 million. The bank loan bears interest at 1.96% per annum which represents 0.75% plus the bank’s swap offer rate.

As the borrowing rates for the bank loans are variable, management expects those rates to be similar to the borrowing rates that would be available to the Group at the balance sheet date. Accordingly, the carrying amount of these bank loans approximate their fair value.

18 DEFERRED INCOME TAX


Balance at beginning of year 8,903 8,088 323 226 Origination of temporary differences 564 1,416 199 120 Effect of change in tax rate - (809) - (23) Exchange adjustment (1,778) 208 - - Balance at end of year 7,689 8,903 522 323

The deferred income tax balance is made up of the following:

The Group The Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000 Excess of net carrying amount over tax written down value of property, plant and equipment and investment properties 6,636 7,950 495 480 Other temporary differences 1,053 953 27 (157) 7,689 8,903 522 323

19 SHARE CAPITAL

The Group and the Company 2008 2007 2008 2007 Number of ordinary shares $’000 $’000 (’000) Issued and fully paid: At beginning and end of year 60,000 60,000 64,569 64,569

The Company has one class of ordinary shares with no par value, carry one vote per share and carry a right to dividends.

20 REVENUE The Group 2008 2007 $’000 $’000

Room revenue 22,824 17,007 Food and beverage revenue 4,128 3,444 Rental income from: Investment properties 5,575 6,419 Other properties 2,753 2,451 Car park revenue 1,062 865 Interest income from outside parties 335 511 Dividend income from: Quoted equity investments 169 234 Unquoted equity investments 8 - Others 55 30 36,909 30,961

21 OTHER INCOME The Group 2008 2007 $’000 $’000

Excess of fair values of net identifiable assets acquired over the cost of combination (Note 27) 4,826 - Gain on disposal of held-for-trading investments - 39 Gain on disposal of property, plant and equipment - 6 Write-back of allowance for doubtful debts 24 18 Other income 128 349 4,978 412

60


22 FINANCE COST The Group 2008 2007 $’000 $’000

Interest on bank loans 1,383 2,112

23 PROFIT BEFORE INCOME TAX

Profit before income tax includes: The Group 2008 2007 $’000 $’000

Staff costs (including directors’ remuneration) 6,356 5,719 Cost of defined contribution plans included in staff costs 405 380 Directors’ remuneration: Directors of the subsidiaries (key management personnel) 389 374 Proposed directors’ fee: Directors of the Company 129 78 Directors of the subsidiaries (key management personnel) 50 49 Fees paid to a director in respect of professional services 40 56 Non-audit fees paid to: Auditors of the Company 24 30 Depreciation of property, plant and equipment 1,889 1,673 Depreciation of investment properties 588 643 Gain on disposal of investment property - 30,978 Write-back of allowance for doubtful debts (24) (18) Allowance for doubtful debts 123 86 Bad debts written off 21 16 Impairment loss for available-for-sale investments * 1,503 - Gain on disposal of held-for-trading investments - (39) Loss on disposal of available-for-sale investments * 177 - Loss (Gain) on disposal of property, plant and equipment 1 (6) Fair value loss on held-for-trading investments * 2,895 244 Fair value loss on interest rate swap * - 13 Transfer from fair value reserve upon disposal of available-for-sale investments * 232 (32) Net foreign exchange adjustment loss * 231 289

* Included in other expenses in the consolidated profit and loss statement.

24 INCOME TAX EXPENSE The Group 2008 2007 $’000 $’000

Current tax 2,500 1,731 Deferred tax 564 1,416 3,064 3,147 Effect of change in tax rate - (809) (Over) Under-provision in prior years - current tax (214) 9 2,850 2,347

61


62


The income tax expense varied from the amount of income tax expense determined by applying the Singapore income tax rate of 18% (2007 : 18%) to profit before income tax as a result of the following differences:

The Group 2008 2007 $’000 $’000

Income tax expense at statutory rate 2,466 7,213 Non-deductible (taxable) items 665 (4,448) Effect of change in tax rates - (809) (Over) Under-provision in prior years (214) 9 Difference due to foreign tax rates - 478 Tax exemption and rebate (89) (107) Other items 22 11 Total income tax expense 2,850 2,347

25 EARNINGS PER SHARE

Basic earnings per share is calculated on the Group profit after tax of $10.9 million (2007 : $37.7 million) divided by weighted average number of ordinary shares of 60 million (2007 : 60 million).

Diluted earnings per ordinary share is the same as basic earnings per share as there are no shares under option.

26 BUSINESS AND GEOGRAPHICAL SEGMENTS

Segment revenue and expense are the operating revenue and expense reported in the Group’s profit and loss statement that are directly attributable to a segment and the relevant portion of such revenue and expense that can be allocated on a reasonable basis to a segment.

Segment assets and liabilities: Segment assets include all operating assets used by a segment and consist principally of operating receivables, inventories, property, plant and equipment and investment properties, net of allowances and provisions. Capital expenditure includes the total cost incurred to acquire property, plant and equipment and investment properties directly attributable to the segment. Segment liabilities include all operating liabilities and consist principally of accounts payable and accrued expenses.

Inter-segment pricing is determined on terms agreed between the parties to the transactions.

Business segments

For management purposes, the Group is currently organised into three operating divisions - hotel, properties and investments. These divisions are the basis on which the Group reports its primary segment information.

Principal activities are as follows:

Hotel - room rental, food and beverage and other related hotel revenue including rental of shop space within the hotels

Properties - rental income from investment properties

Investments - income from funds under management and long-term investments

63


Segment information about these businesses is presented below:

Hotel Properties Investments Eliminations Total 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

REVENUE

External revenue 30,125 23,256 6,272 6,959 512 746 - - 36,909 30,961

Inter-segment revenue - - 119 134 1,567 1,284 (1,686) (1,418) - -

Total revenue 30,125 23,256 6,391 7,093 2,079 2,030 (1,686) (1,418) 36,909 30,961

RESULT

Segment result 11,964 8,177 2,236 3,049 (3,940) (18) 10,260 11,208

Excess of fair values

of net identifiable

assets acquired over

cost of combination 2,726 - 2,100 - - - 4,826 -

Gain on disposal of

investment property - - - 30,978 - - - 30,978

Interest expense (1,383) (2,112)

Income tax (2,850) (2,347)

Profit after income tax 10,853 37,727

OTHER

INFORMATION

Segment assets 240,976 225,926 54,676 58,894 10,603 17,138 306,255 301,958

Unallocated corporate

assets 5,524 6,348

Consolidated total

assets 311,779 308,306

Segment liabilities 5,164 2,574 965 889 182 179 6,311 3,642

Unallocated corporate

liabilities 71,642 56,385

Consolidated total

liabilities 77,953 60,027

Capital expenditure 5,825 17,521 793 2,683 - - 6,618 20,204

Depreciation 1,883 1,642 594 674 - - 2,477 2,316

Impairment loss - - - - 1,503 - 1,503 -

Fair value loss - - - - 2,895 244 2,895 244

Geographical segments

Although the Group’s divisions are managed on a worldwide basis, they operate in three principal geographical areas of the world:

In Singapore - the Group derives revenue from its hotels, properties and investment activities.

In Malaysia - the Group derives revenue from its hotel and its property activities.

In New Zealand - the Group derives revenue from its properties activities.

64


Segment revenue: Segment revenue is analysed based on the location of customers regardless of where the goods are produced.

Segment assets and capital expenditure: Segment assets and capital expenditure are analysed based on the location of those assets. Capital expenditure includes the total cost incurred to acquire property, plant and equipment and investment properties.

Segment information about these geographical areas is presented below:

Carrying amount of Sales revenue segment assets Capital expenditure 2008 2007 2008 2007 2008 2007 $’000 $’000 $’000 $’000 $’000 $’000

Singapore 29,946 24,513 238,886 251,839 4,824 17,525 Malaysia 1,195 - 31,512 1,072 1,001 - New Zealand 5,768 6,448 41,381 55,395 793 2,679 36,909 30,961 311,779 308,306 6,618 20,204

27 ACQUISITION OF A SUBSIDIARY

On 9 October 2008, the Group acquired a wholly-owned subsidiary, Faber Kompleks Sdn. Bhd. (“FKSB”), incorporated in Malaysia, for a cash consideration of approximately $23.8 million (RM56 million). This transaction has been accounted for by the purchase method of accounting.

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

2008 Carrying Provisional amount before fair value Provisional acquisition adjustments fair value $’000 $’000 $’000 Net identifiable assets acquired:

Property, plant and equipment 17,293 2,123 19,416 Investment properties 7,681 1,635 9,316 Inventories 78 - 78 Trade and other receivables 2,079 - 2,079 Overdraft, less cash and bank balances (270) - (270) Other payables and accruals (1,401) - (1,401) Retirement benefit obligations (545) - (545) Total consideration 24,915 3,758 28,673 Excess of fair value of acquiree’s net identifiable assets over cost of combination (4,826) Total consideration, satisfied by cash 23,847

Net cash outflow arising on acquisitions: Cash consideration paid 23,847 Overdraft, less cash and bank balances acquired 270 24,117

FKSB contributed $0.2 million decrease to the Group’s profit before income tax for the period between the date of acquisition and the balance sheet date.


65

If acquisition had been completed on 1 January 2008, total Group’s profit before income tax would have decreased by $1.4 million.

The initial accounting for the acquisition of FKSB (acquiree) has only been provisionally determined at the balance sheet date, using the market values of property, plant and equipment and investment properties assessed by independent professional valuers, and the existing book values of other assets and liabilities as at acquisition date.

The acquiree has unutilised tax losses and capital allowances carryforward of approximately $29.5 million at the acquisition date, which management has not recognised the related deferred tax benefits, as the expected amount and timing of recoverability are uncertain.

The fair values of the identifiable assets and liabilities (including contingent liabilities), and the corresponding deferred tax effects will be finalised within 12 months from the acquisition date. The amount of goodwill or excess of fair values of net identifiable assets acquired over cost of combination will also be adjusted accordingly.

The Group has given an undertaking to the vendor not to resell its interest in the hotel properties and investment properties acquired within five years from the acquisition date.

Included in cash consideration paid is an amount of $0.1 million pertaining to fees paid to third parties that are directly attributable to the business combination.

28 OPERATING LEASE ARRANGEMENTS

The Group and Company as lessor

The Group and Company rents out its office premises and shop space under operating lease to outside parties. Most of the office premises and shop space held have committed tenancy ranging from 1 to 5 years.

At the balance sheet date, the Group and Company have contracted with tenant for the following future minimum lease payments for the following periods:

The Group The Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000 Within one year 7,515 6,822 1,475 1,159 In the second to fifth years inclusive 5,816 6,672 496 646 After fifth year 432 233 - - 13,763 13,727 1,971 1,805

29 CONTINGENT LIABILITIES

(a) Guarantees given The Company and its subsidiary provide guarantees amounting to $1.7 million (NZ$2.1 million)[2007 : $5.1 million

(NZ$4.6 million)] to banks for banking facilities granted to another subsidiary which are secured as disclosed in Note 17. In addition, the Company agrees to stand as guarantor for the banking facilities obtained by a subsidiary. The financial guarantee contracts liabilities are recognised as other payables (Note 15).

(b) Legal claims

The newly acquired subsidiary, Faber Kompleks Sdn. Bhd., was served with a notice of civil suit by the former hotel operator for alleged wrongful termination of its services. The former hotel operator is seeking to claim injunctive relief, specific performance and general damages.


66

Based on the legal advice obtained from a legal adviser in Malaysia, management is of the view that the claims by the former hotel operator are without merit, and management intends to and will defend vigorously the civil suit. As such, management has not made any provision for this legal claim as at 31 December 2008.

30 CAPITAL EXPENDITURE COMMITMENTS The Group 2008 2007 $’000 $’000 Estimated amounts committed for future capital expenditure but not provided for in the financial statements - 10,665

31 DIVIDENDS

During the financial year ended:

(i) 31 December 2007, the Company declared and paid a first and final dividend of $0.05 per share less tax on the ordinary shares of the Company totaling $2.5 million in respect of the financial year ended 31 December 2006.

(ii) 31 December 2008, the Company declared and paid a first and final one-tier tax exempt dividend of $0.05 per share on the ordinary shares of the Company totaling $3.0 million in respect of the financial year ended 31 December 2007.

Subsequent to 31 December 2008, the directors of the Company recommended that a first and final one-tier tax exempt dividend be paid at $0.05 per ordinary share totaling $3.0 million for the financial year just ended on the ordinary shares of the Company. The dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as liability in these financial statements.

67

In the opinion of the directors, the consolidated financial statements of the Group and the balance sheet and

statement of changes in equity of the Company set out on pages 24 to 66 are drawn up so as to give a true and fair

view of the state of affairs of the Company and of the Group as at 31 December 2008, and of the results, changes

in equity, and cash flows of the Group and changes in equity of the Company for the financial year then ended and

at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts

as and when they fall due.

ON BEHALF OF THE DIRECTORS

.

Dr Lee Keng Thon

Lee Khin Tien

12 March 2009

STATEMENT OF DIRECTORS

68

Day View

Night View

Interior View- Atrium

Artist’s Impression:

Proposed Rejuvenation of Penang Plaza

The schedule below shows the Group’s major properties as at 31 December 2008 with particulars of their tenure and usage.

Held By Location Description and area Tenure

Hotel Royal Limited 36 Newton Road Land area of about Freehold Singapore 7,200 sq m Hotel building with built-up area of approximately 23,500 sq m

1A Surrey Road Land area of about Freehold Singapore 718 sq m Residential building held for redevelopment with strata floor area of 1,232 sq m (The Company has a 87.5% share of the above property. The remaining 12.5% is owned by a related company)

Royal Properties No. 20 Office unit 99 yearsInvestment Pte Ltd Maxwell Road Strata floor area of about (from 1969) #12-02 551 sq m Maxwell House Singapore*

#05-14 Flatted factory unit Freehold Kapo Factory Building Strata floor area of about Singapore* 157 sq m #02-14, #06-02, #07-02 Factory unit Freehold and #09-08 Strata floor area of about Tong Lee Building 277 sq m each Singapore*

Grand Complex 16 Willis Street Land area of about FreeholdProperties 22-42 Willis Street 6,898 sq mLimited 80 Boulcott Street & Shopping centre 84 Boulcott Street and offices with Wellington lettable retail area New Zealand* of 4,431 sq m; lettable office area of 20,028 sq m and 323 car park lots

Hotel Royal @ Queens 12 Queen Street Land area of about FreeholdPte Ltd Singapore 1,979 sq m Hotel building with built-up area of approximately 14,605 sq m

Faber Kompleks 3 Jalan Larut Land area of about FreeholdSdn. Bhd. Georgetown 3,495 sq m Penang Hotel building Malaysia with built-up area of approximately 28,569 sq m

126 Jalan Burma Land area of about Freehold Georgetown 5,498 sq m Penang Shopping centre Malaysia* and offices with lettable retail area of 5,529 sq m; lettable office area of 1,699 sq m; and 88 carpark lots* Investment properties

69

Schedule of the Group’s Major Properties

ANALYSIS OF SHAREHOLDINGS as at 20 March 2009

Issued and Fully Paid-Up Capital - S$64,569,119

No of Shares Issued - 60,000,000

Class of Shares - Ordinary Shares

Voting Rights - 1 Vote Per Share

Treasury Shares - Nil

Size of No. of % ofShareholdings Shareholders Shareholders No. of Shares % of Shares

1 - 999 197 18.41 48,820 0.08

1,000 - 10,000 685 64.02 2,580,632 4.30

10,001 - 1,000,000 174 16.26 11,124,987 18.54

1,000,001 & above 14 1.31 46,245,561 77.08

Total 1,070 100.00 60,000,000 100.00

Based on the information provided and to the best knowledge of the Directors, approximately 19% of the issued ordinary shares of the Company is held in the hands of the public as at 20 March 2009 and therefore Rule 723 of the Listing Manual of Singapore Exchange Securities Trading Limited is complied with.

TOP TWENTY SHAREHOLDERS as at 20 March 2009

Name of Shareholders No. of Shares % of Shares1. Oversea Chinese Bank Nominees Pte Ltd 6,705,400 11.182. The Great Eastern Life Assurance Co Ltd - Participating Fund 6,647,866 11.083. Aik Siew Tong Ltd 5,890,000 9.824. Asia Building Bhd 4,911,000 8.195. Hock Tart Pte Ltd 3,780,000 6.306. United Overseas Bank Nominees Pte Ltd 2,850,295 4.757. Bank of Singapore Nominees Pte Ltd 2,400,000 4.008. Mayban Nominees (S) Pte Ltd 2,400,000 4.009. The Singapore-Johore Express (Private) Limited 2,253,000 3.7610. Sword Investments Private Ltd 2,232,000 3.7211. Melodies Limited 2,100,000 3.5012. Lee Chin Chuan 1,546,000 2.5713. Baxterley Holdings Private Limited 1,454,000 2.4214. Tan Chaw @ Tan Kow Tee 1,076,000 1.7915. Chan Tai Moy 984,000 1.6416. Chip Keng Holding Bhd 825,000 1.3817. Citibank Nominees S’pore Pte Ltd 800,000 1.3318. Season Holdings Pte Ltd 547,000 0.9119. The Great Eastern Trust Private Limited 529,333 0.8820. Liu Ping-Nan Phyllis 376,000 0.62

Total 50,306,894 83.84

70

Statistics of Shareholdings

STATISTICS OF SHAREHOLDINGS as at 20 March 2009

Substantial Shareholders as at 20 March 2009 as shown in the Register of Substantial Shareholders:- Direct Interest Deemed InterestSubstantial Shareholders No. of Shares % No. of Shares %

George Lee Chou Hor (1) 30,000 0.05 6,190,000 10.32Lee Chou Tart (2) - - 6,180,000 10.30Aik Siew Tong Ltd (3) 14,490,000 24.15 7,653,000 12.76Hock Tart Pte Ltd (4) 6,180,000 10.30 14,490,000 24.15The Great Eastern Life Assurance Co Ltd (5) 7,181,999 11.97 - -Great Eastern Holdings Limited (5) - - 7,181,999 11.97Oversea-Chinese Banking Corporation Limited (6) - - 7,181,999 11.97Asia Building Bhd (7) 4,911,000 8.19 825,000 1.38Melodies Limited (3) 5,400,000 9.00 - -The Straits Trading Company Limited (8) - - 3,720,000 6.20The Cairns Pte. Ltd. (9) - - 3,720,000 6.20Aequitas Pte. Ltd. (10) - - 3,720,000 6.20Dr Tan Kheng Lian (11) - - 3,720,000 6.20Siong Lim Private Limited (12) - - 3,720,000 6.20Tecity Pte. Ltd. (13) - - 3,720,000 6.20Raffles Investments Limited (14) - - 3,720,000 6.20 Other Shareholders The Singapore-Johore Express (Private) Limited (3) 2,253,000 3.76 - -Chip Keng Building Bhd (7) 825,000 1.38 - -Sword Investments Private Limited (8) 2,232,000 3.72 - -Baxterley Holdings Private Limited (8) 1,488,000 2.48 - -

Note:

(1) George Lee Chou Hor owns 23.8% of the share capital of Hock Tart Pte Ltd (“Hock Tart”). He is deemed interested in the shares held by Hock Tart. Additionally, George Lee Chou Hor is deemed interested in the shares held by his spouse.

(2) Lee Chou Tart owns 23.8% of the share capital of Hock Tart. He is deemed interested in the shares held by Hock Tart.

(3) Aik Siew Tong Ltd (“AST”) holds 83.4% and 69.1% of the share capital of Melodies Limited (“Melodies”) and The Singapore-Johore Express (Private) Limited (“S-J Express”) respectively and is deemed to be interested in the 5,400,000 shares and 2,253,000 shares which are held by Melodies and S-J Express respectively.

(4) Hock Tart Pte Ltd holds 31.7% of the share capital of AST and is therefore deemed interested in the shares held by AST.

(5) The Great Eastern Life Assurance Co Ltd is the wholly-owned subsidiary of Great Eastern Holdings Limited. Great Eastern Holdings Limited is therefore deemed interested in the shares which are held by The Great Eastern Life Assurance Co Ltd.

(6) Oversea-Chinese Banking Corporation Limited is deemed to be interested in the shares held by Great Eastern Life Assurance Company Ltd through Great Eastern Holdings Ltd.

(7) Chip Keng Building Bhd is the wholly-owned subsidiary of Asia Building Bhd. Asia Building Bhd is deemed interested in the 825,000 shares held by Chip Keng Building Bhd.

(8) The Straits Trading Company Limited is deemed interested in the 2,232,000 shares and 1,488,000 shares which are held by its wholly-owned subsidiaries, Sword Investments Private Limited and Baxterley Holdings Private Limited respectively.

(9) By virtue of Section 7 of the Companies Act, The Cairns Pte. Ltd. (“Cairns”) is deemed interested in The Straits Trading Company Limited’s (“STC”) 6.2% interest in Hotel Royal Limited (“HRL”).

(10) Aequitas Pte. Ltd. (“Aequitas”) owns 70% of the shares in Raffles Investments Limited, which in turn holds 33.08% of the shares in the capital of Cairns. By virtue of Section 7 of the Companies Act, Aequitas is deemed interested in STC’s 6.2% interest in HRL.

(11) Dr Tan Kheng Lian (“Dr Tan”) owns 57% of the shares in the capital of Tecity Pte. Ltd., which in turn owns 31.99% of the shares in the capital of Cairns. By virtue of Section 7 of the Companies Act, Dr Tan is deemed interested in STC’s 6.2% interest in HRL.

(12) Siong Lim Private Limited (“Siong Lim”) owns 26.05% of the shares in the capital of Cairns. By virtue of Section 7 of the Companies Act, Siong Lim is deemed interested in STC’s 6.2% interest in HRL.

(13) Tecity Pte. Ltd. (“Tecity”) owns 31.99% of the shares in the capital of Cairns. By virtue of Section 7 of the Companies Act, Tecity is deemed interested in STC’s 6.2% interest in HRL.

(14) Raffles Investments Limited (“Raffles Investments”) holds 33.08% of the shares in the capital of Cairns. By virtue of Section 7 of the Companies Act, Raffles Investments is deemed interested in STC’s 6.2% interest in HRL.

71

Statistics of Shareholdings

The Hotel Royal’s three distinctive hotels, strategically located in the respective city’s business, education, food and entertainment hubs, give you the convenience and warmth of a home away from home. Within the comfort of our fully air-conditioned, spacious and cosy rooms are tea/coffee-making facilities, mini-bar, broadband internet access, satellite television channels, IDD phone and a personal room safe. Make your stay in Singapore and Penang with Hotel Royal and be pampered by the much talked about Traditional Royal Service.

At Hotel Royal, we care.

833 fully air-conditioned suites, apartments and rooms * Chinese restaurants * Japanese restaurants * lobby lounges * coffee houses & brasserie* business centres * swimming pools * near to subway stations * ample car park * broadband internet access

All the modern comforts and amenities for today’s travellers.

The traditional Royal service awaits you ...

- Every Room A Home -

Hotel Royal36 Newton Road Singapore 307964Tel: (65) 6426 0168Fax: (65) 6253 8668Email: [email protected]: www.hotelroyal.com.sg

Hotel Royal @ Queens12 Queen Street Singapore 188553Tel: (65) 6725 9988Fax: (65) 6725 9966Email: [email protected]: www.royalqueens.com.sg

Hotel Royal Penang3 Jalan Larut Penang 10050 MalaysiaTel: (604) 226 7888Fax: (604) 226 6615Email: [email protected]: www.hotelroyalpenang.com

Hotel Royal Singapore Hotel Royal PenangHotel Royal @ Queens Singapore

2008 2007 2006 2005 2004

PROFIT & LOSS

Turnover 36,909 30,961 28,913 24,427 16,629

Profit before income tax 13,703 40,074 8,894 4,452 3,403

Profit after income tax 10,853 37,727 5,157 3,061 2,431

Dividends 3,000 2,460 12,400 2,400 2,400

BALANCE SHEET

Current assets 21,813 26,526 42,801 16,770 16,627

Investments 2,448 3,526 2,866 2,424 1,549

Associated companies - - - 165 123

Property, plant & equipment 234,967 221,318 142,433 141,952 141,416

Investment properties 52,551 56,936 53,306 81,374 83,711

Total 311,779 308,306 241,406 242,685 243,426

Current liabilities 43,310 51,124 27,736 11,498 10,064

Finance lease - - - 10 29

Long-term bank loans 26,433 - 57,512 79,115 82,195

Deferred income tax 7,689 8,903 8,088 5,424 4,947

Other payables 521 - - 154 -

Total liabilities 77,953 60,027 93,336 96,201 97,235

Shareholder’s equity 233,826 248,279 148,070 146,484 146,191

Total 311,779 308,306 241,406 242,685 243,426

Earnings per share before income tax (1) 22.84cts 66.79cts 15.55cts 8.17cts 6.24cts Earnings per share after income tax (1) 18.09cts 62.88cts 9.02cts 5.62cts 4.46cts

Net tangible asset backing per ordinary share $3.90 (2) $4.14 $2.47 $2.93 $2.92

(1) The number of ordinary shares for 2007 and 2008 is 60,000,000. The weighted average number of ordinary shares of 57,192,719 for 2006 and 54,520,548 for 2004 to 2005 have been adjusted to reflect the rights issue during 2006.

(2) Please refer to Chairman’s Message on page 3.

73

(in $’000) FIVE YEAR GROUP FINANCIAL STATISTICS

NOTICE IS HEREBY GIVEN that the 40th Annual General Meeting of Hotel Royal Limited will be held at Hotel Royal @ Queens, Royal Ballroom (Level 3), 12 Queen Street, Singapore 188553 on 25 April 2009 at 2.30 p.m. for the following purposes:-

Ordinary Business

1. ToreceiveandadopttheDirectors’ReportandAuditedFinancialStatementsforthefinancialyearended31December2008 together with the Auditors’ Report thereon. (Resolution 1)

2. TodeclareaFirstandFinalDividendof5centsperordinaryshare(1-tiertaxexempt)forthefinancialyearended31 December 2008. (Resolution 2)

3. ToapprovetheDirectors’FeesofS$128,625forthefinancialyearended31December2008. (FY2007: S$77,750) (Resolution 3)

4. To re-elect the following Directors who are retiring in accordance with Article 117 of the Company’s Articles of Association:-

(a) Col (Ret) Rodney How Seen Shing (Resolution 4)

(Note: Col (Ret) Rodney How Seen Shing will, upon re-election as director of the Company, remain as the Chairman of the Audit Committee and a member of the Nominating Committee and Remuneration Committee. Col (Ret) Rodney How Seen Shing is considered as an independent director).

(b) Mr Ng Kok Lip (Resolution 5)

(Note: Mr Ng Kok Lip will, upon re-election as director of the Company, remain as the Chairman of the Remuneration Committee and a member of the Audit Committee and Nominating Committee. Mr Ng Kok Lip is considered as an independent director).

5. Tore-appointMessrsDeloitte&ToucheLLPasAuditorsoftheCompanyandtoauthorisetheDirectorstofixtheir

remuneration. (Resolution 6)

Special Business

6. To consider and, if thought fit, to pass the following resolution,with orwithout amendments, asOrdinaryResolution:- (Resolution 7)

“That pursuant to Section 161 of the Companies Act, Cap. 50 and the listing rules of the Singapore Exchange Securities Trading Limited (the “Listing Rules”), authority be and is hereby given to the Directors of the Company to allot and issue: -

(a) shares; or(b) convertible securities; or(c) additional securities issued pursuant to Rule 829 of the Listing Rules; or (d) shares arising from the conversion of the securities in (b) and (c) above,

in the Company (whether by way of rights, bonus or otherwise) at any time to such persons and upon such terms andconditionsandforsuchpurposesastheDirectorsmayintheirabsolutediscretiondeemfit,providedthat:

(i) the aggregate number of shares and convertible securities to be issued pursuant to this Resolution must be notmorethanfiftypercentum(50%)oftheissuedsharecapitaloftheCompany(calculatedinaccordancewith (ii) below), of which the aggregate number of shares and convertible securities issued other than on a proratabasistoexistingshareholdersmustbenotmorethantwentypercentum(20%)oftheissuedsharecapital of the Company (calculated in accordance with (ii) below); and

74

NOTICE OF ANNUAL GENERAL MEETING

75

(ii) for the purpose of determining the number of shares and convertible securities that may be issued pursuant to (i) above, the percentage of issued share capital shall be calculated based on the Company’s issued share capital at the date of the passing of this Resolution after adjusting for new shares arising from the conversion of convertible securities or employee share options on issue when this Resolution is passed, and any subsequent consolidation or subdivision of shares.

Unless revoked or varied by ordinary resolution of the shareholders of the Company in general meeting, this Resolution shall remain in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.” [See Explanatory Note]

Any Other Business

7. To transact any other business which may properly be transacted at an Annual General Meeting.

BYORDEROFTHEBOARD

Sin Chee MeiCompany Secretary

Singapore9 April 2009

Explanatory Notes:-

Resolution 7, if passed, will empower the Directors from the date of the above Meeting until the date of the next Annual General Meeting, to allot and issue shares and convertible securities in the Company. The number of shares and convertible securitiesthattheDirectorsmayallotandissueunderthisResolutionwouldnotexceedfiftypercentum(50%)oftheissuedcapital of the Company at the time of the passing of this Resolution. For issue of shares and convertible securities other than on a pro rata basis to all shareholders, the aggregate number of shares and convertible securities to be issued shall not exceedtwentypercentum(20%)oftheissuedcapitaloftheCompany.

NOTES:-

1. A member entitled to attend and vote at the Annual General Meeting (“the Meeting”) is entitled to appoint not more than two proxies to attend and vote in his/her stead. A proxy need not be a member of the Company.

2. The instrument appointing a proxy shall, in the case of an individual, be signed by the appointor or his attorney, and incaseofacorporation,shallbeeitherundertheCommonSealorsignedbyitsattorneyoranofficeronbehalfofthe corporation.

3. TheinstrumentappointingaproxymustbedepositedattheregisteredofficeoftheCompanyat36NewtonRoad,Singapore 307964 not less than forty-eight (48) hours before the time for holding the Meeting.

NOTICE OF ANNUAL GENERAL MEETING

Artist’s Impression: Redevelopment of Star Mansions

HOTEL ROYAL LIMITED(Co. Reg. No. 196800298G)

(Incorporated in the Republic of Singapore)

ANNUAL GENERAL MEETINGPROXY FORM

I/We, _____________________________________________________(Name), NRIC/Passport No. ________________________ of

____________________________________________________________________________________________ (Address) being a member / members of HOTEL ROYAL LIMITED hereby appoint:

and/or (delete as appropriate)

or failing him/her, the Chairman of the Meeting, as my/our proxy/proxies to vote for me/us on my/our behalf, at the 40th Annual General Meeting of the Company, to be held on 25 April 2009, at 2.30 p.m. and at any adjournment thereof.

I/Wedirectmy/ourproxy/proxiestovotefororagainsttheResolutionstobeproposedattheMeetingasindicatedhereunder.Ifnospecificdirections as to voting is given or in the event of any item arising not summarised below, the proxy/proxies will vote or abstain from voting at his/their discretion.

1. Adoption of Directors’ Report, Audited Financial Statements and Auditors’ Report. 2. Declaration of First and Final Dividend. 3. Approval of Directors’ Fees. 4. Re-election of Col (Ret) Rodney How Seen Shing 5. Re-election of Mr Ng Kok Lip 6. Re-appointmentofAuditorsandfixingtheirRemuneration.7. To authorise the Directors to allot and issue shares.

* Please indicate your vote “For” or “Against” with a tick (✓) within the box provided.** If you wish to exercise all your votes “For” or “Against”, please tick (✓) within the box provided.

Alternately, please indicate the number of votes as appropriate.

Dated this _______ day of ________________________ 2009.

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

IMPORTANT: PLEASE READ NOTES OVERLEAF

Shares in:

IMPORTANT

1. For investors who have used their CPF monies to buy shares of Hotel Royal Limited, the Annual Report 2008 is forwarded to them at the request of their CPF Approved Nominees and is sentsolelyFORINFORMATIONONLY.

2. This Proxy Form is not valid for use by CPF Investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

3. CPF Investors who wish to vote should contact their CPF Approved Nominee.

(a) Depository Register

(b) Register of Members

No. of Shares

NRIC/ Proportion of Name Address Passport Shareholdings Number (%)

NRIC/ Proportion of Name Address Passport Shareholdings Number (%)

No. Resolutions: Number of Votes For**

For* Against*Number of Votes

Against**

To be used on ashow of hands

To be used in the event of a Poll

NOTES

1. A member of the Company entitled to attend and vote at the Meeting is entitled to appoint not more than two proxies to attend and vote in his stead. Such proxy need not be a member of the Company.

2. Where a member appoints more than one proxy, he/she shall specify the proportion of his/her shareholdings (expressed asapercentageofthewhole)toberepresentedbyeachproxy.Ifnosuchproportionornumberisspecified,thefirstnamedproxymaybetreatedasrepresenting100%oftheshareholdingandanysecondnamedproxyasanalternatetothefirstnamed.

3. A member should insert the total number of shares held. If the member has shares entered against his/her name in the DepositoryRegister(asdefinedinSection130AoftheCompaniesAct,Cap.50ofSingapore),he/sheshouldinsertthatnumber of shares. If the member has shares registered in his/her name in the Register of Members of the Company, he/she should insert that number of shares. If the member has shares entered against his/her name in the Depository Register and registered in his name in the Register of Members, he/she should insert the aggregate number of shares. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all shares held by the member.

4. The instrument appointing a proxy or proxiesmust be deposited at theCompany’sRegisteredOffice at 36Newton Road, Singapore 307964 not less than forty-eight (48) hours before the time for holding the Meeting.

5. The instrument appointing a proxy or proxies must be under the hand of the appointor or his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it mustbeexecutedeitherunderitsCommonSealorunderthehandofitsattorneyoradulyauthorisedofficer.

6. Where an instrument appointing a proxy is signed on behalf of the appointor by an attorney, the letter or power of attorney or a duly certified copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid.

7. The Company shall be entitled to reject the instrument appointing a proxy or proxies which is incomplete, improperly completed, illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointerspecifiedintheinstrumentappointingaproxyorproxies.Inaddition,inthecaseofsharesenteredintheDepository Register, the Company shall be entitled to reject any instrument appointing a proxy or proxies if the member, being the appointor, is not shown to have shares entered against his/her name in the Depository Register as at 48 hours beforethetimeappointedforholdingtheMeeting,ascertifiedbyTheCentralDepository(Pte)LimitedtotheCompany.

36 Newton Road Singapore 307964 Tel: 6426 0168 Fax: 6256 2710Email: [email protected]

website: www.hotelroyal.com

Hotel Royal LimitedGroup of Companies

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