2005 annual report

Transcription

2005 annual report

ASIAN GRACE, WARMTH AND CARE
Overseas Union Enterprise Limited
Company Reg. No. 196400050E
333 Orchard Road 6th Storey
Singapore 238867
Tel: (65) 6831 6334 Fax: (65) 6235 9688
OVERSEAS UNION ENTERPRISE LIMITED
ANNUAL REPORT 2005
CONTENTS
01
02
04
07
09
12
13
13
14
16
19
20
21
21
22
Corporate Information
Board of Directors
Chairman’s Statement
Management Committee
Other Key Personnel
Key Hotel Management Personnel
Meritus Hotels & Resorts Vision and
Mission Statements
Meritus Hotels & Resorts Marketing and
Branding Strategies
Hotel Highlights
Corporate Governance
Property Summary
Five-Year Financial Summary
Quarterly Results
Simplified Group Financial Position
Segmental Performance Analysis
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24
26
28
29
30
31
32
33
34
72
73
74
75
76
Group Value-Added Statement
Share Price and Turnover (2001-2005)
Directors’ Report
Statement by Directors
Auditors’ Report
Consolidated Income Statement
Balance Sheets
Consolidated Statement
of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Financial Statements
Shareholding Statistics
Substantial Shareholders
Public Float
Interested Person Transactions
Notice of Annual General Meeting
Proxy Form
OVERSEAS UNION ENTERPRISE LIMITED } A N N UA L
CORPORATE INFORMATION
BOARD
OF
DIRECTORS
Wee Cho Yaw
CHAIRMAN
Mrs Margaret Lien Wen Hsien
Gwee Lian Kheng
Kua Hong Pak
Wong Hung Khim
Miss Kho Piac-Suat
Lim Boon Kheng
Lo Ping
Chong Kim Chow
AUDIT COMMITTEE
SECRETARY
Kua Hong Pak
Philip Foo Joon Kim
CHAIRMAN
Miss Kho Piac-Suat
Wong Hung Khim
NOMINATING COMMITTEE
Wong Hung Khim
CHAIRMAN
SHARE REGISTRAR
Lim Associates (Pte) Ltd
10 Collyer Quay
#19-08 Ocean Building
Singapore 049315
Telephone : 6536 5355
Facsimile : 6536 1360
Gwee Lian Kheng
AUDITORS
Miss Kho Piac-Suat
PricewaterhouseCoopers
Certified Public Accountants
8 Cross Street #17-00
PWC Building
Singapore 048424
Partner in charge
: Ms Tan Khiaw Ngoh
Date of appointment : 26 April 2005
Kua Hong Pak
Wee Cho Yaw
REMUNERATION COMMITTEE
Wee Cho Yaw
CHAIRMAN
Miss Kho Piac-Suat
Wong Hung Khim
MANAGEMENT COMMITTEE
Gwee Lian Kheng
CHAIRMAN
Han Chan Juan
Lee Weng Kee
Philip Foo Joon Kim
BANKER
United Overseas Bank Limited
REGISTERED OFFICE
Singapore 238867
Telephone : 6831 6334
Facsimile : 6235 9688
R E P O RT 2 0 0 5
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BOARD OF DIRECTORS
1
Wee Cho Yaw
1
Chairman
Age 77. Appointed
Director and Chairman of
OUE on 10 May 2002 and
1 June 2002 respectively.
Last re-appointed on
26 April 2005. A nonindependent and nonexecutive Chairman.
Also Chairman of the
Remuneration Committee
and member of the
Nominating Committee.
A career banker with more
than 40 years of experience.
Received Chinese high
school education. Chairman
& CEO of United Overseas
Bank Group since 1974.
Chairman of several
other listed corporations
including United Overseas
Land, United International
Securities, United
Overseas Insurance, Haw
Par Corporation, United
Industrial Corporation,
Hotel Plaza and Singapore
Land. Former Director of
Singapore Press Holdings.
Honorary President
of Singapore Chinese
2
Chamber of Commerce &
Industry. Appointed ProChancellor of the Nanyang
Technological University
in 2004.
Businessman Of The Year
in 2001 and 1990 in the
Singapore Business Awards
that recognise outstanding
achievements by Singapore’s
business community.
Margaret Lien Wen Hsien 2
Age 63. Appointed
Director on 31 March 2001.
Last re-elected on 27 April
2004. An independent and
non-executive Director.
Chairman of Wah Hin
& Company (Private)
Limited. Director of
Lien Ying Chow Private
Limited and Governor
of the Lien Foundation.
Former Director of United
Overseas Bank Limited.
Holds a Bachelor of
Law (Honours) from
the London School of
Economics & Political
Science, University of
London.
3
Gwee Lian Kheng
4
3
Age 65. Appointed
Director on 30 November
2001. Last re-elected
on 10 May 2002. A
non-independent and
non-executive Director.
Chairman of the
and a Member of the
Nominating Committee.
Director and President &
CEO of United Overseas
Land (“UOL”) and Hotel
Plaza (“HPL”) and has
been with the UOL Group
since 1973. Director
of most of the UOL
Group and HPL Group of
companies, United Industrial
Corporation and Singapore
Land. Chairman of Hotel
Negara and Honorary
Treasurer of the Singapore
Children’s Society.
Holds a Bachelor of
Accountancy (Honours)
from the University of
Singapore. A Fellow of
the Chartered Institute of
Management Accountants,
Chartered Certified
Accountants, Institute of
5
Chartered Secretaries and
Administrators and the
Institute of Certified Public
Accountants (Singapore).
Kua Hong Pak
4
Age 62. Appointed Director
on 31 March 2001. Last
re-elected on 27 April
2004. An independent
and non-executive Director.
Chairman of the Audit
Committee and member of
the Nominating Committee.
Managing Director/Group
CEO of ComfortDelGro
Corporation Limited.
Deputy Chairman/Director
of SBS Transit Ltd and
VICOM Ltd. Director of
Temasek Holdings (Private)
Limited, PSA Corporation
Limited, PSA International
Pte Ltd, Starhub Ltd and
Ringier Print (HK) Limited.
Former Managing Director
of Sheng-Li Holding Co Pte
Ltd and President & CEO
of Times Publishing Limited.
Holds a Bachelor of
Accountancy from the
University of Singapore.
6
Attended the Advanced
Management Programme at
Harvard Business School.
Wong Hung Khim
5
Age 67. Appointed
Director on 20 February
on 26 April 2005. An
independent and nonexecutive Director.
Chairman of the
Nominating Committee
and member of the
Audit and Remuneration
Committees.
Director of Stamford
Land Corporation and
Medi-Flex. Independent
and non-executive
Chairman of Zhonghui
Holdings. Former
Permanent Secretary of
the Ministry of Community
Development, Executive
Director of the Por t
of Singapore, President
& CEO of Singapore
Telecommunications,
Chairman of Jurong Town
Corporation and Group
Chairman & CEO of
DelGro Corporation.
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8
Holds a Bachelor of Science
with Honours from the
University of Singapore.
Kho Piac-Suat
6
Age 64. Appointed
Director on 5 November
Member of the Audit
Committee, Nominating
Committee and the
Remuneration Committee.
Chairman of Lieng Chung
Corp (Kowloon) Ltd.
Director of Hotel Negara.
Holds a Bachelor of
Science with Honours
in Mathematics from the
Imperial College of Science,
Technology and Medicine,
University of London.
Lim Boon Kheng
7
Age 75. Appointed
Director on 29 September
1977. Last re-appointed
9
Chairman of Beakaye
(Malaysia) Sdn Bhd and
Lim Lean Teng Foundation.
Director of Meritus Hotels
& Resor ts Marketing
Services Sdn Bhd.
Lo Ping
R E P O RT 2 0 0 5
8
Age 62. Appointed
Director on 28 July 1987.
Last re-elected on 5 May
2003. An independent
and non-executive
Director.
Chairman of Lo Pte Ltd.
Director of Overseas
Union Insurance Limited
and Overseas Union
Facilities (Private) Limited.
Holds a Bachelor of
Science and a Bachelor
of Engineering from
the University of
Sydney, Australia.
Chong Kim Chow
9
Age 67. Appointed
Director on 1 July 1992.
Last re-elected on 5 May
2003. A non-independent
and non-executive
Director.
Former General Manager
of OUE. Vice Chaiman
of the Advisory Board
to Ang Mio Kio Primary
School.
A Fellow of the Australian
Society of Cer tified
Practising Accountants
and of the Institute of
Char tered Secretaries
and Administrators.
Also a Fellow of the
Institute of Cer tified Public
Accountants of Singapore
and of the Singapore
Institute of Directors.
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R E P O RT 2 0 0 5
CHAIRMAN’S STATEMENT
“During the year, the Company took steps to selectively
rationalise its non-core investments (including listed
securities) as part of its efforts to realise and unlock
value for its shareholders.”
O
n behalf of the Board, I am pleased to present the
Annual Report and Financial Statements of the Group for the
year ended 31 December 2005 and the Balance Sheet of the
Company as at 31 December 2005.
Overall Performance Review
The Group’s total revenue (comprising room sales, food and
beverage sales, rental income, dividend income and other
operating income) for the year under review grew from $185.3
million to $204.2 million, while its pre-tax profit improved
from $13.4 million to $79.9 million. The improvement in the
pre-tax profit was mainly due to lower provision made for
impairment, and better performance by Meritus Mandarin
Singapore.
Excluding the provisions for impairment of $5.7 million and
$57.0 million for 2005 and 2004 respectively, the Group’s
pre-tax profit for 2005 would be $85.6 million as compared
to $70.4 million for 2004, an increase of 21.6%.
Operations Review
HOTEL INVESTMENTS
Singapore saw a new high of 8.9 million tourist arrivals in
2005, reflecting a 7.4% growth over 2004. Consequently, the
hotel industry’s average occupancy rate rose from 80.7% in
2004 to 84.1% in 2005 and the average room rate from $122
to $136.
Despite keen competition from the newly-opened hotels in
its vicinity, Meritus Mandarin Haikou was able to raise the
average room rate albeit at a slight expense of the average
occupancy rate, thereby maintaining its overall room sales
revenue. Although the hotel’s GOP improved by 12.1% largely
through cost reductions, it nevertheless made a pre-tax loss
(after provision for impairment) of $6.2 million, down from
$9.6 million the year before.
In line with its higher revenue due to an increase in average
room rate, Meritus Shantou’s GOP increased by 7.8% to
$3.1 million. While cash flow was positive, the GOP could
not cover interest and depreciation charges, and that led to
a pre-tax loss of $6.1 million, as against the pre-tax loss of
$53.9 million for 2004. The pre-tax loss for 2004 was higher
because of a provision for impairment.
HOTEL ASSOCIATES AND MANAGEMENT
Marina Mandarin Singapore re-opened in September
2005, after having closed for about 3.5 months for a major
remodelling of its lobby, guestrooms and restaurants. In
consequence to the lower revenue caused by the closure, the
hotel’s GOP was substantially lower than that of 2004.
Shanghai JC Mandarin saw increases in both room and food
& beverage sales on the back of the strong Chinese economy.
As a result, the hotel’s GOP improved significantly.
Reflecting the growth in tourist arrivals, Meritus Mandarin
Singapore’s average room rate went up from $142 to $169,
which enabled it to achieve a gross operating profit (“GOP”)
of $33.3 million, representing an increase of 27.5% over 2004.
During the year, the Company disposed of its 25% interest
in Capital Hotel Co. Ltd for a gain of $1.9 million. It also sold
its 20% shareholding in Hema-OUE Otel Yatirim A.S to its
Turkish partners after obtaining, among others, a full release
of the Company’s liabilities and obligations.
During the year, Meritus Mandarin Singapore, which still has an
unexpired leasehold term of 50 years granted byThe Ngee Ann
Kongsi, completed the soft refurbishments of the guestrooms
at the South Tower, which had commenced in 2004. In late
2005, Chatterbox, Pine Court and Mezzanine lounge (now
known as Mezebar lounge) were also refurbished.
Meritus Hotels & Resorts did well with an improved pre-tax
profit of $2.3 million as compared to $1.6 million the year
before. During 2005, the hotel management agreements for
Hotel Istana and Riveria Bay Resort were terminated.Two new
hotel projects in China and Thailand are scheduled to open
in 2006.
R E P O RT 2 0 0 5
PROPERTY INVESTMENTS AND DEVELOPMENT
Current Year Commentary
Rental income from Mandarin Gallery, Overseas Union
House and Change Alley Aerial Plaza registered an increase
due to higher occupancy and rental rates.
The outlook for the tourism industry in the region is expected
to remain positive in 2006, and this augurs well for the Group’s
hotel operations.
The pre-tax profit of OUB Centre Limited increased from
$7.4 million to $19.6 million principally on account of higher
contribution from residential proper ty developments in
Singapore and Shanghai.
With improving hotel market sentiment as well as further
upgrading works planned for the guestrooms in the Grand
Tower and the hotel facilities, Meritus Mandarin Singapore
should continue to see an increase in GOP. Marina Mandarin
Singapore is also expected to perform better in this respect.
OTHER INVESTMENTS
Dividend income from other investments rose by 16.9% to
$47.5 million, mainly due to higher dividends received from
United Overseas Bank Limited (“UOB”).
Meritus Shantou, Meritus Mandarin Haikou and Shanghai
JC Mandarin are likely to show better performances in the
current financial year.
During the year, the Company took steps to selectively
rationalise its non-core investments (including listed
securities) as par t of its effor ts to realise and unlock value
for its shareholders. Accordingly, the Company divested its
100% shareholdings in Mandate Adver tising International
Pte Ltd and Mandate-Saga Adver tising International Sdn Bhd.
As of end February 2006, the Company had also disposed
of 26.1 million shares of UOB in the open market for an
aggregate gross consideration of $378.8 million, thereby
realising a gain of $128.2 million. The proceeds of the sale
will be used to par tially fund the special dividend mentioned
below.
Rental income for the Group’s investment properties is
projected to remain steady at the 2005’s level.
AcknowleDgement
Mr Michael Ow Kum Fei retired as President of Meritus
Hotels & Resorts in September 2005, after having served the
Group for nearly 34 years. The Board wishes to thank him for
his long service and contributions.
I would like to thank my fellow Directors for their guidance
and counsel. On behalf of the Board, I would also like to
thank our guests and shareholders for their support, and
management and staff for their dedication.
Dividend
In line with the Company’s intention to unlock value for its
shareholders, the Board of Directors is recommending a final
dividend of 6 cents per share less income tax, in addition to
a special dividend of $2.00 per share less income tax and a
special tax exempt (one-tier) dividend of $1.60 per share.
Together with the interim dividend of 6 cents per share less
income tax amounting to $8.5 million, the total net dividend
payout for the financial year ended 31 December 2005 will
be $581.2 million. The Company paid a total net dividend of
$22.6 million for the previous financial year.
WEE CHO YAW
CHAIRMAN
FEBRUARY 2006
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Experience the best of Asian Grace, Warmth and Care
every time you choose to Meet, Dine or Stay with us...
F
rom formal business meetings to elaborate family gatherings to a simple get-together, you’ll find our friendly
staff more than equipped to take care of your needs. We’ll be delighted to make your acquaintance whenever
you choose to
Meet With Us.
R E P O RT 2 0 0 5
MANAGEMENT COMMITTEE
From left to right:
Mr Lee Weng Kee, Mr Philip Foo Joon Kim, Mr Gwee Lian Kheng, Mr Han Chan Juan
Gwee Lian Kheng
Chairman
Please refer to page 2 for
write-up of Mr Gwee.
Lee Weng Kee
Assistant General Manager
(Finance & Acquisitions)
Mr Lee joined the Company
in July 2001. A Fellow of
the Chartered Association
of Certified Accountants
and Chartered Institute of
Management Accountants,
and a member of the
Accountants of Singapore, he
holds a Master of Business
Administration from Brunel
University. Mr Lee has over
20 years of experience in
the field of finance and
management, and previously
held senior appointments
with property and hospitality
related companies. His
responsibilities include
monitoring and controlling
of financial activities, leasing,
acquisitions and joint ventures.
company secretarial functions.
He is a Fellow of the
Accountants of Singapore.
Philip Foo Joon Kim
Han Chan Juan
Group Company Secretary
Senior Vice President
(Asset Management)
Mr Foo joined the Company
in September 1991. He holds
a Bachelor of Accountancy
from the University of
Singapore and has over 30
years of experience in general
management, finance and
As Group’s Company
Secretary, his responsibilities
include the Group’s legal
and corporate secretarial
functions.
Mr Han joined the Company
in March 2005. He is an
Associate Member of the
Institute of Chartered
Accountants in England
and Wales. He brings with
him more than 15 years of
experience in the financial and
asset management of hotels.
Mr Han is responsible for
performance monitoring
and asset management of
the Group’s investments in
hotel properties, including
identifying and managing
operating risks faced by
those hotels.
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E
R E P O RT 2 0 0 5
xciting culinary pleasures await you at each of our hotels situated in the most enchanting Asian cities.
Experience gourmet delights and
our gracious Asian hospitality each time you
Dine With Us.
R E P O RT 2 0 0 5
OTHER KEY PERSONNEL
From left to right:
Ms Tan Hui Mean
Mr Thomas Chin
Mr Peter Tung Hing Ping
Mr Frank Foster
OUE
Tan Hui Mean
Group Financial Controller
Ms Tan joined the Group as
Group Financial Controller
in January 2006. She holds
a Bachelor of Accounting
(First Class Honours)
from Universiti Putra
Malaysia. She is a Chartered
Accountant with Malaysia
Institute of Accountants, a
Certified Public Accountant
with the Malaysian
Institute of Certified
Public Accountants and an
Associate Member of CPA
Australia.
Ms Tan brings with her
10 years of experience
in auditing and financial
management. Her
responsibilities include
monitoring and controlling
the Group’s financial activities
and treasury functions.
Thomas Chin
Legal Manager
Mr Chin joined the
Company as Legal Manager
in August 2005. He
graduated with a LL.B
(Hons) from the National
University of Singapore in
1990. Prior to joining the
Company, he was in legal
practice for six years before
working at another publiclisted company as its Legal
Counsel for more than eight
years.
As Legal Manager, Mr Chin
is responsible for legal and
compliance matters.
MERITUS HOTELS
& RESORTS
Peter Tung Hing Ping
(Operations)
Mr Tung joined the
Company in February
1998. A Certified Hotel
Administrator, he has over
in the hospitality industry
and had held senior
appointments with
international 5-star hotels.
Mr Foster had worked for
several international hotel
groups, including Forte
Hotels, Shangri-la Hotels, the
Radisson SAS and Radisson
Hotels Worldwide and Le
Meridien Hotels & Resorts.
Mr Tung’s responsibilities
include overseeing the
daily operations of the
hotels managed by
Meritus Group in China.
Mr Foster is responsible for
Meritus Group’s marketing
and sales, as well as the
development and expansion
of the new Meritus brand.
Frank Foster
(Marketing & Sales)
Mr Foster joined the
Company in October 2005.
He holds a degree in Hotel
Management (OND/HND)
from Blackpool & Fylde,
United Kingdom. He
brings with him 20 years
of extensive experience
in hotel management and
marketing & sales.
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R E P O RT 2 0 0 5
T
radition lies in perfect harmony with cutting-edge modernity.
In the same way, our exquisite service complemented with modern amenities allows you to enjoy yourself
each time you choose to
Stay With Us.
R E P O RT 2 0 0 5
Other KEY PERSONNEL
From left to right:
Mr Eddie Kwan
Mr Jeffrey Gan
Mr Han Hun Juan
Mr Aldric Tan
Eddie Kwan
Vice President (Finance)
Mr Kwan joined the
Company in October
2005. He holds an MBA,
accounting and char tered
secretarial qualifications
and is a member of various
professional bodies in
the UK.
Mr Kwan has 25 years of
experience in the hotel
industry. He had held
senior appointments
with international hotel
groups, including Hotel
InterContinental Singapore
and Conrad Centennial
Singapore.
Mr Kwan’s responsibilities
include the management
of the Meritus Group’s
corporate financial and
administrative functions.
Jeffrey Gan
Vice President
(Business Development)
Mr Gan joined the
Company in November
2004. He has over thir ty
years of experience in the
hospitality industry and had
with international 5-star
hotels, including Hilton
International Asia/ Pacific
and Banyan Tree Hotels &
Resor ts.
Human Resource of Raffles
Hotels & Resorts.
Mr Han is responsible for all
Human Resource matters
of Meritus.
Aldric Tan
Mr Gan is in charge
of promoting Meritus
management services and
securing new projects.
Han Hun Juan
Vice President
(Human Resource)
Mr Han joined the
Company in November
2005. He holds a Bachelor
of Ar ts from National
University of Singapore
and a Graduate Diploma
in Personnel Management
from Singapore Institute of
Management.
Mr Han has more than
20 years of experience in
human resource, industrial
relations, recruitment as
well as compensation and
benefits at hotel, regional
and corporate levels. Prior
to joining Meritus, he was
the Group Director of
Company Secretary
Mr Tan joined the Company
in October 2005. He holds
a Bachelor of Business
(Accountancy) (Distinction)
from RMIT University
and is an Associate of the
Singapore Association
of the Institute of
Chartered Secretaries and
Administrators.
Mr Tan has more than
in corporate secretarial
functions. Before joining
Meritus, he was the
Assistant Vice President,
Company Secretariat of
The Hongkong and Shanghai
Banking Corporation
Limited, Singapore Branch.
Mr Tan’s responsibilities
include managing the
corporate secretarial
matters of Meritus.
INTERNAL AUDIT
John Chung Chun Yee
Senior Internal Audit Manager
Mr Chung joined the
Company in October
2005. A member of the
Accountants of Singapore,
he has more than 17 years
of audit experience.
Mr Chung is responsible
for the internal audit
activities, which include the
examination and evaluation
of the Group’s system of
internal control.
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R E P O RT 2 0 0 5
KEY Hotel Management PERSONNEL
Gerhard Kropp
General Manager, Meritus
Mandarin Singapore
Mr Kropp was appointed
as General Manager of the
Meritus Mandarin Singapore
in August 2005.
Graduated from the Hotel
School in Luebeck and
Hannover, Mr Kropp is a
seasoned hotelier with 30
years’ experience and had
spent the last six years with
Hotel InterContinental and
The Fuller ton. Prior to
that, he was the Director of
Operations for the group
of hotels in Singapore and
Malaysia operating under
the InterContinental Hotels,
Crowne Plaza, Holiday
Inn and Parkroyal Hotels
brands.
Mr Kropp is responsible
for re-branding the Meritus
Mandarin and overseeing its
upgrading and renovation.
Tony J Cousens,
General Manager, Marina
Mandarin Singapore
Mr Cousens was appointed
as General Manager of
Marina Mandarin Singapore
in March 2005.
Mr Cousens was previously
with Four Seasons Hotels
and Resor ts in Nor th
America and Le Meridien
Hotels & Resor ts, where
he spent the last four years
as General Manager of the
luxury Le Royal Meridien
King Edward Hotel in
Toronto.
Mr Cousens is responsible
for the overall management
of the Hotel and its
re-positioning in the 5 Star
luxury market.
Raymond Ang
Hotel Manager,
Meritus Negara Singapore
Mr Ang was appointed as
Hotel Manager of Meritus
Negara Singapore in
October 2004. Prior to
this appointment, he was
Executive Assistant Manager
of Marina Mandarin
Singapore.
Mr Ang star ted his hotel
career with Hyatt Regency
Singapore in 1978, and
was later posted to other
management positions
within the Hyatt group
in Macau, Taiwan and
Hong Kong.
His responsibilities include
leading the Hotel’s
management team and
directing the overall daily
operations of the Hotel.
Gerhard Hecker
General Manager,
Shanghai JC Mandarin
Mr Hecker was appointed
Shanghai JC Mandarin in
August 2005.
Mr Hecker had held senior
management positions with
the Holiday Inn Group and
InterContinental Grand
Stanford, Hong Kong. Prior
to joining Meritus, he
was the Special Projects
Consultant for Stanford
Hotels International for
hotel projects in Hong
Kong, Macau and China.
Mr Hecker is responsible
for the day-to-day
operation of the Hotel
and the development of
its service standards and
product quality.
Malcolm Ewen
McLauchlan
Mandarin Haikou
Mr McLauchlan was
appointed as General
Manager of Meritus
Mandarin Haikou in
October 2005.
A graduate of the Lausanne
Hotel School,
Mr McLauchlan had held
senior management
positions with several
international hotel
establishments, including
China Hotel in Guangzhou
and Stamford Plaza
Auckland.
Besides being responsible
for the operation of
Meritus Mandarin Haikou,
Mr McLauchlan is also
overseeing the opening and
subsequent operation of
Meritus Sanya Spa Resort,
Hainan (expected to open
in July 2006).
Dick Wong
Shantou China
Mr Wong was appointed
Meritus Shantou China in
August 2002.
Mr Wong obtained his
Marketing and Hotel
Management degrees in the
USA. He had 25 years
of experience in the hotel
industry, having worked
with Mandarin Oriental
Hotel in Hong Kong and
other leading hotels in USA
and China.
His responsibilities include
reinforcing Meritus vision,
and establishing and
achieving business plans and
objectives for the Hotel.
Francois G Sigrist
General Manager, Pelangi
Beach Resort & Spa
Mr Sigrist was appointed as
General Manager of Pelangi
Beach Resort & Spa in
April 2003.
A graduate of Ecole
Hoteliere of Lausanne in
Switzerland, Mr Sigrist had
with 5-star international
hotels, including
InterContinental Hotels in
Bangkok, Shangri-La Hotel
in Kuala Lumpur and Hotel
Equatorial in Penang.
Mr Sigrist is responsible
for the operation
of the Resort & Spa,
including overseeing the
refurbishments of the
Resort.
R E P O RT 2 0 0 5
MERITUS HOTELS & RESORTS
VISION & MISSION STATEMENTS
VISION
To become Asian’s outstanding hospitality brand
MISSION
Lead the region in Asian hospitality through our Asian grace,
warmth and care.
GUESTS
To reliably deliver a consistent experience of Asian grace,
warmth and care at every Meritus Hotel & Resort.
EMPLOYEES
Create an environment privileged to a selected few
through motivation and personal career development.
SHAREHOLDERS/OTHER HOTEL OWNERS
To maximize respectable financial returns on investment.
MERITUS HOTELS & RESORTS
CORPORATE
OFFICE
HOTEL PORTFOLIO
SINGAPORE
333 Orchard Road
Singapore 238867
Meritus Mandarin
Marina Mandarin
Meritus Negara
Tel: 6831 6360
(Administration)
Tel: 6831 6386
(Marketing & Sales)
MALAYSIA
Pelangi Beach Resort & Spa,
Langkawi
NEW PROJECTS
Meritus Sanya Spa Resort,
Hainan, China
(opening in July 2006)
Meritus Chiang Mai
Riverside Spa Resort,
Chiang Mai, Thailand
(opening in August 2006)
CHINA
Meritus Mandarin Haikou
Meritus Shantou
Shanghai JC Mandarin
MARKETING & BRANDING
STRATEGIES
M
eritus Hotels and Resor ts is leveraging and
capitalising on its growth oppor tunities by investing into and
enriching its brand.
Through a series of multi-media awareness campaigns,
promoting newly launched products and services, in a new
look and feel for the Hotels and Resor ts, the company
is aiming to shake up the 5 star market and entice new
developments under the Meritus brand, ultimately to drive
increased profitability.
A communications deployment of the new identity is
underway, both visually and verbally, which have been crafted
to specifically excite and target the high-end business and
leisure traveler and is backed up using the latest technology
to maximise on the full potential of on-line strategies, from
the new corporate website’s dynamic booking engine to
cross branding promotions, retention programs, and all other
e-marketing activities.
These marketing initiatives will reach out to a larger
customer base, and will be supported by our key partners in
the travel and hospitality industry, such as the long standing
relationship with Asian Hotels Alliance (AHA), Dusit Hotels
& Resorts (Thailand), Landis Hotels and Resorts (Taiwan),
Marco Polo Hotel Group (Hong Kong) and New Otani
Hotels (Japan).
Meritus Hotels and Resorts will continue to deliver on
its founding values of Asian grace, warmth and care, through
its employees and communication avenues promoting an
ambience of passion, commitment, respect and integrity;
each and every time guests meet, dine or stay at any of the
hotels or resorts.
13
14
R E P O RT 2 0 0 5
HOTEL HIGHLIGHTS
2.
1.
MERITUS MANDARIN SINGAPORE
M
eritus Mandarin Singapore, the flagship hotel,
continues to earn awards in 2005 in two of the world’s most
prestigious US consumer travel publications, Conde Nast
Traveler - Readers’ Choice Gold List Hotels in Asia, Australia
and Pacific Nations and Travel + Leisure - T+L 500 guide to
the world’s best hotels and resor ts around the globe.
The hotel has undergone a refurbishment programme
for the South Tower guestrooms as well as all function rooms
and it was completed in August 2005. The South Tower
guestrooms now emerged with a brand new look with the
inclusion of a new exclusive Club Lounge, The Mandarin Club,
that provides distinctive amenities and services customised
for savvy travelers.
South Tower Level 8 Meeting Suites are now perfect
venues for small cosy meetings with their all-new furnishings.
In addition to the new classic yet vibrantly-coloured
furnishing, all our function rooms are now equipped with
a wireless projector and high-speed broadband internet
accessibility.
In December, the hotel unveiled the new look at its awardwinning Pine Cour t Chinese Restaurant and Chatterbox
- Home of the Mandarin Chicken Rice (established 1971),
as well as a brand new Asian Tapas Bar, MezeBar. Top of the
‘M’ Revolving Restaurant and Triple 3, The Buffet Restaurant,
will be undergoing renovations in 2006.
Renovation plans have also been conceived for
improvements to be made to main lobby areas, South
Tower lifts, public areas, pool and other areas of the hotel
in 2006.
3.
MARINA MANDARIN SINGAPORE
The Marina Mandarin Singapore is a world-class, 5-star
luxury hotel enhanced recently by a remodelling, and is the only
member of The Leading Hotels of the World® in Singapore.
Linked to the Marina Square Shopping Mall, the hotel is
directly opposite the Suntec Convention & Exhibition Centre
and The Esplanade - Singapore’s new Performing Arts Centre.
Just a three-minute drive from the financial and business
district, and 20 minutes’ drive from the airport, the hotel is
centrally located for ease of access.
With its strategic location at Marina Bay, the series
of developments that has been slated for the area, such
as the Circle Line, Integrated Resort, Gardens by the Bay,
and Singapore Flyer, will play a huge part in improving the
positioning of Marina Mandarin in time to come.
MERITUS NEGARA SINGAPORE
With just 200 rooms located in an exclusive residential
district a few steps from Orchard Road, the Meritus Negara
is one of Singapore’s best-kept secrets, providing warm,
cozy ambience and highly intimate and personalised service.
Refurbished in 2005, plans are underway to strengthen the
hotel’s positioning as the preferred choice for discerning
business travelers.
SHANGHAI JC MANDARIN
Nestled in the very heart of Shanghai, along Nan Jing Xi
Lu, the bustling shopping and commercial district, the 600-room
JC Mandarin has benefited from an extensive makeover of its
lobby and F&B outlets, restoring its past grandeur and splendour.
R E P O RT 2 0 0 5
5.
6.
1. Meritus Mandarin Singapore
2. Marina Mandarin Singapore
3. Pelangi Beach Resort & Spa, Langkawi
4. Meritus Shantou
5. Meritus Negara Singapore
6. Meritus Mandarin Haikou
4.
During the year 2005, the hotel’s Pool and Fitness
Club facilities were entirely renovated and a luxury Spa and
Wellness Center was opened in October. Renovation work
was also done for the 6th floor banquet rooms, converting
them into high-tech meeting suites. Mock up rooms have
been built to pave the way for the guest room renovation
project which is likely to commence in 2006.
Featuring six Mandarin Club floors and extensive
facilities for banquets and conventions including a grand
ballroom, six function rooms and two meeting rooms,
the hotel is ideal for any meeting or event.
PELANGI BEACH RESORT & SPA, LANGKAWI
MERITUS MANDARIN HAIKOU
(Opening July 2006)
Combining Asian hospitality with modern comfor ts,
the 318-room Meritus Mandarin Haikou is a 5-star hotel
ideally located in the city’s new business district. The hotel,
which has two swimming pools, two tennis cour ts and
the largest ballroom in the city, completed an upgrading
program to its rooms in 2005, making it even more ideal
for meetings, incentives and events.
The Meritus Wanjia Spa Resort in Sanya is a 188-room
seaside spa resort located on 50 acres of land, sitting above
a natural spring source. Overlooking a pristine white sandy
beach along a scenic stretch of the Sanya Bay area, it is only a
10 minutes’ drive from Sanya Phoenix International Airport and
20 minutes to the nearest golf course and the famous Nan
Shan Monastery.
MERITUS SHANTOU
MERITUS CHIANG MAI RIVERSIDE SPA
RESORT, CHIANG MAI
The only internationally managed hotel in Shantou,
the Meritus Shantou is centrally located and features
318 deluxe rooms and suites. It offers an exciting range
of food & beverage and enter tainment outlets, including
an open-kitchen coffee house, an elegant Club Lounge
and a KTV and recreation club. The hotel boasts
the city’s only all-season swimming pool and a lifestyle
club offering gym and spa facilities including therapeutic
massages.
An idyllic beach & spa paradise offering 18 years of service
excellence, within 31 acres of lush gardens, overlooking long
sandy beaches. The resort boasts activities from sailing to
jungle trekking, surrounded by nine themed bars/restaurants
and a spa that oozes treatments of delight, both eastern and
western. This beach and spa resort, proudly serves Asian
grace, warmth and care within a Malaysian Village setting
that personifies the meaning of holiday.
MERITUS SANYA SPA RESORT, HAINAN
(Opening August 2006)
A luxurious, low-rise spa resort with 74 exclusive
deluxe accommodations built along the River Mae Ping.
Designed in the architectural style and tradition of the Thai
Lana Kingdom, all rooms enjoy soothing river views. Among
other world-class facilities, this five-star resort will offer a
unique experience to the guests - including a 10-minute
boat ride from the airport to the resort!
15
16
R E P O RT 2 0 0 5
The Company is committed to developing and maintaining high standards of corporate governance and has put in place policies and
procedures consistent with those standards.
BOARD OF DIRECTORS
BOARD COMPOSITION
AND
COMPETENCY
The Board of Directors is chaired by Mr Wee Cho Yaw. It comprises nine Directors, all of whom are non-executive. The
Nominating Committee has deemed Mrs Margaret Lien Wen Hsien, Mr Kua Hong Pak, Mr Wong Hung Khim, Miss Kho Piac-Suat,
Mr Lim Boon Kheng and Mr Lo Ping to be independent. The Nominating Committee considers Mrs Margaret Lien to be independent,
although she is a director of a substantial shareholder of United Overseas Bank Limited (the “Bank”), which in turn is a substantial
shareholder of the Company, as she is able to exercise independent business judgment in the best interests of the Company when
discharging her duties as a Director. Mrs Lien stepped down from the Board of the Bank on 30 April 2005.
The Board is of the view that its current size is appropriate, having regard to the scope and nature of the Company’s operations. The
diverse and extensive corporate experiences and qualifications of the Directors collectively provide the core competencies necessary
for effective decision making and execution of their responsibilities. More information on the Directors’ particulars and background
can be found on pages 2 & 3 of the Annual Report.
Directors who are of or over the age of 70 years are subject to re-appointment pursuant to the provisions of the Companies Act, Cap.
50.The other Directors are subject to re-election by rotation under the Company’s Articles of Association. Both re-appointments and
re-elections are subject to review by the Nominating Committee and approval of the shareholders of the Company.
BOARD’S ROLE
AND
RESPONSIBILITIES
The principal functions and responsibilities of the Board include:
•
•
•
•
•
•
setting the strategic direction;
reviewing and approving strategies and corporate policies;
approving operational and financial plans and budgets;
overseeing the conduct of the Group’s business and affairs and monitoring its performance against pre-approved goals;
approving major investments, financing decisions, acquisitions and disposals of assets; and
establishing a framework of controls which enables risks to be assessed and managed.
The Board is assisted by three board committees, namely the Audit Committee, Remuneration Committee and Nominating
Committee. The Board is further assisted by the Management Committee (“MC”), which provides guidance and coordination to
senior management on the day-to-day administration and operation of the Company.
Directors may seek independent professional advice at the Company’s expense as and when a need arises.
AUDIT COMMITTEE (“AC”)
The AC, consisting of three independent Directors, met 6 times in 2005.
The principal functions of the AC include reviewing:
•
•
•
•
•
•
•
significant financial reporting issues and judgments to ensure the integrity of the financial statements of the Company ;
the annual plans of the external and internal auditors and their findings on evaluation of the system of internal controls and
management responses thereto;
the scope and results of the internal and external audit procedures;
the quarterly and full-year balance sheets and profit and loss accounts of the Group and the Company;
the assistance given by the Company’s officers to the AC, external auditors and internal auditors, where applicable;
interested person transactions; and
effectiveness of the Company’s internal audit function and adequacy of internal audit resources.
The results of its review are reported to the Board.
The AC has reviewed and is satisfied that the independence and objectivity of the external auditors have not been compromised by
the provision of non-audit services. Accordingly, it has recommended to the Board the nomination of the external auditors, Messrs
PricewaterhouseCoopers, for re-appointment at the forthcoming Annual General Meeting to be held on 11 April 2006.
The AC is empowered to conduct or authorise investigations into any activity within its terms of reference, and obtain independent
professional advice as it deems necessary.
17
R E P O RT 2 0 0 5
NOMINATING COMMITTEE (“NC”)
The NC is made up of five Directors, of whom three, including the Chairman, Mr Wong Hung Khim, are independent. The NC met
once in 2005.
The principal responsibilities of the NC include:
•
•
•
reviewing nominations of Directors for appointment to the Board;
evaluating the performance of the Board and the Directors; and
assessing the independence of the Directors.
In evaluating each Director’s performance and that of the Board, the NC considered, inter alia, the Directors’ contribution and
participation at Board and Board Committee meetings and the overall effectiveness of the Board in steering and overseeing the
conduct of the Company’s business. In the evaluation of the Directors, the Chairman of the NC also consulted with the Chairman
of the Board.
REMUNERATION COMMITTEE (“RC”)
The RC comprises three Directors, two of whom are independent. Its Chairman is Mr Wee Cho Yaw, who is also the Chairman of
the Board, and is non-independent. The Board considers Mr Wee the most appropriate person to chair the RC, which met once in
2005.
The principal functions of the RC are to review and recommend to the Board Directors’ fees and remuneration packages of key
executives. Fees payable to the Directors are proposed as a lump sum. The lump sum of $390,000, subject to the approval of
shareholders of the Company at its forthcoming Annual General Meeting, will be divided among the Directors, as the Board deems
appropriate. A breakdown showing the level and mix of each individual Director’s remuneration payable for 2005 is shown on page
18 of the Annual Report.
BOARD MEETINGS
The Chairman sets the agenda for board meetings and ensures that they are held regularly and whenever necessary. He also ensures
that the Directors receive adequate, relevant and timely information. As part of the Chairman’s responsibilities, he ensures that high
standards of corporate governance are promoted within the Company.
The Board met 5 times last year. The attendance report of the Directors for Board and Board Committee meetings are set out below.
Directors who are unable to attend Board or Board Committee meetings may convey their views to the respective Chairmen or the
Company Secretary. Furthermore, such Directors, if they so wish, may take part in the proceedings of the meetings via telephone
and/or video-conference, as provided by the Company’s Articles of Association.
Directors have separate and independent access to the Company Secretary.The Company Secretary ensures that all board procedures
are followed and that applicable rules and regulations prescribed by the Companies Act and the Listing Manual of the Singapore
Exchange Securities Trading Limited are complied with. Under the direction of the Chairman, the responsibilities of the Company
Secretary include ensuring good information flows within the Board and its committee and between senior management and nonexecutive Directors.
DIRECTORS’ ATTENDANCE
Name of Director
Number of meetings attended in 2005
Board of
Audit Nominating Remuneration
Directors Committee Committee
Committee
Wee Cho Yaw
Margaret Lien Wen Hsien
Gwee Lian Kheng
Kua Hong Pak
Wong Hung Khim
Kho Piac-Suat
Lim Boon Kheng
Lo Ping
Chong Kim Chow
5
5
4
5
3
5
4
5
5
2(1)
6
5
4(2)
-
1
1
1
1
1
-
1
1
1
-
Number of meetings held in 2005
5
6
1
1
Note
(1) Mrs Margaret Lien Wen Hsien stepped down as a member of the Audit Committee on 2 May 2005.
(2) Miss Kho Piac-Suat was appointed as a member of the Audit Committee with effect from 2 May 2005.
18
R E P O RT 2 0 0 5
DISCLOSURE
ON
DIRECTORS’ REMUNERATION
Name of Director
FOR
2005
Salary
%
Bonuses
%
Directors’Fees
%
Others
%
Total
Remuneration
%
-
-
100
100
20
100
100
100
100
100
100
80
-
100
100
100
100
100
100
100
100
100
Non-executive Director
Below $250,000
Wee Cho Yaw
Margaret Lien Wen Hsien
Gwee Lian Kheng
Kua Hong Pak
Wong Hung Khim
Kho Piac-Suat
Lim Boon Kheng
Lo Ping
Chong Kim Chow
Directors’ and Executive (Excluding Executive Director) Remuneration
Number of Directors and top five executives of the Company in each remuneration band:
Remuneration Bands
Number of Directors
2005
2004
Number of Executives
2005
2004
$500,000 and above
$250,000 to $499,999
Below $250,000
9
1
8
2
3
2
3
Total
9
9
5
5
INTERNAL AUDIT
The Senior Internal Audit Manager reports directly to the Chairman of AC and administratively to the Chairman of MC. The internal
audit department is responsible for assisting the AC in reviewing and evaluating the adequacy and effectiveness of the Group’s system
of financial internal controls. It also audits the operations, regulatory compliance and risk management processes of the Company. The
scope of the internal audit reviews are carried out in accordance with the yearly plans prepared by the Senior Internal Audit Manager
and approved by the AC.
In carrying out its functions, the Department has adopted the Standards for the Professional Practice of Internal Auditing set by the
Institute of Internal Auditors. The AC is satisfied with the adequacy of the internal audit function and its resources.
INTERNAL CONTROLS
Based on the AC’s review of the effectiveness of the Group’s internal controls, and other management controls in place, the Board is
satisfied that the Group’s system of internal control is adequate.
COMMUNICATION WITH SHAREHOLDERS
Shareholders are kept apprised of the Company’s performance and developments through the release of its quarterly and full-year
results on the SGXNET and Annual Report. Shareholders are also kept informed of significant events and happenings as and when they
occur through the same channel.
In addition, shareholders are afforded the opportunity to communicate their views and raise pertinent questions at shareholders’
meetings. The Company does not practise selective disclosure of information. Shareholders and potential investors can visit the
Company’s website at www.oue.com.sg for information on the Company.
DEALINGS IN COMPANY’S SECURITIES
The Company has adopted the Best Practices Guide issued by the Singapore Exchange Securities Trading Limited relating to dealings in
securities and has a Code on Dealings in Securities for the guidance of its Directors and officers.
INTERESTED PERSON TRANSACTIONS (“IPTS”)
The Company has adopted a policy on IPTs and has established procedures to monitor and review such transactions.
There were no IPTs during 2005 which, pursuant to the Listing Manual, required immediate announcement or shareholder’s approval.
R E P O RT 2 0 0 5
PROPERTY SUMMARY
Properties Held for Recurrent Income
Tenure
of Land
Approximate Net
Lettable/Gross
Floor Area (sqm)
OVERSEAS UNION BUILDING
a 39-storey main tower with a 37-storey
South Wing extension known as the ‘Meritus
Mandarin Singapore’ with 1,064 rooms and
shopping arcade at 333 Orchard Road, Singapore
Hotel - Meritus Mandarin Singapore
Shopping Arcade - Mandarin Gallery
99-Year Lease from
The Ngee Ann Kongsi
from 1957
MERITUS MANDARIN HAIKOU
a 23-storey hotel with 318 rooms
at Wenhua Road, Longhua District,
Central Haikou City,
The People’s Republic of China
Present
Car Park Carrying Value
Facilities
(S$Million)
108,719
6,110
447
0
144.2
68.0
70-Year Lease
from 1989
53,767
100
83.3
MERITUS SHANTOU
a 21-storey hotel with 318 rooms at
Jin Sha East Road, Shantou, Guangdong Province,
50-Year Lease
from 1997
66,132
210
88.6
OVERSEAS UNION HOUSE
a 8-storey office and
carpark building at
Collyer Quay, Singapore
99-Year Lease from Urban
Redevelopment Authority
(“URA”) from 1968
10,554
720
53.0
CHANGE ALLEY AERIAL PLAZA
comprising a shopping ramp of 50 shop units
and a tower building erected on 2 adjoining sites
at Collyer Quay, Singapore
99-Year Lease from
URA from 1970
2,477
0
19.0
19
20
R E P O RT 2 0 0 5
Five-YEar Financial Summary
2001
(restated)
$’000
%
2002
(restated)
$’000
%
2003
(restated)
$’000
%
Group Turnover
Hotel operations
Property investments
Other investments
Other operations
102,992
11,637
24,838
21,026
65
7
13
15
103,834
11,471
31,443
18,663
63
7
19
11
93,472
9,836
28,049
20,510
62
6
18
14
Total
160,493
100
165,411
100
151,867
100
Group Profit and Loss
Hotel operations
Other investments
Other operations
Profit from operations
Exceptional items
Finance income
Finance expense
Share of results of
associated companies
Profit before income tax
Income tax expense
Profit after income tax
Minority interests
Profit attributable to equity
holders of the Company
Per Ordinary Share
Basic earnings (cents)
Gross dividends paid (cents)
Dividend cover (times)
Net Asset Backing Per Share ($)
Ratio
Debt equity ratio
115,709
9,977
40,612
17,195
63
6
22
9
183,493 100
2005
$’000
%
124,783
11,020
47,481
15,453
63
5
24
8
198,737 100
11,508
2,512
19,948
(854)
33,114
562,516
1,590
(10,397)
1,291
4,806
30,610
(2,660)
34,047
(22,310)
729
(498)
115
2,913
27,218
(2,275)
27,971
181
608
(430)
12,907
3,230
38,566
(37)
54,666
(49,865)
1,196
(559)
19,041
6,509
46,903
(2,797)
69,656
(1,488)
3,740
(1,085)
9,109
595,932
(5,242)
590,690
(115)
2,011
13,979
(13,628)
351
2,996
8,239
36,569
(10,003)
26,566
1,775
8,005
13,443
(12,198)
1,245
11,756
9,110
79,933
(16,579)
63,354
785
590,575
3,347
28,341
13,001
64,139
520,669
433,512
327,863
141,000
758
520,638
410,086
271,712
134,130
407
526,871
337,818
233,336
136,870
443
854,980
330,770
237,786
144,265
327
58,319
95,632
177,401
228,745
Group Balance Sheet
Available-for-sale financial assets
514,420
Property, plant and equipment
300,537
Investments in associated companies
372,887
Investment properties
174,174
Other non-current assets
Net current assets,
excluding borrowings
73,289
Non-current liabilities,
excluding borrowings
(8,329)
Net assets employed
1,426,978
Share capital and share premium
Other reserves
Retained earnings
Interests of the shareholders
Minority interests
Loan from a minority
shareholder of a subsidiary
Borrowings
2004
(restated)
$’000
%
(9,401)
1,472,720
(9,768)
1,422,837
(10,258)
1,402,481
(12,655)
1,784,218
488,885
853,848
42,371
1,385,104
12,641
488,885
890,911
51,526
1,431,322
9,645
488,885
826,571
64,882
1,380,338
7,548
488,885
153,154
725,383
1,367,422
(4,153)
488,885
487,285
766,952
1,743,122
803
18,400
10,833
1,426,978
18,400
13,353
1,472,720
18,400
16,551
1,422,837
18,400
20,812
1,402,481
13,400
26,893
1,784,218
334.94
1.90
16.07
7.37
36.38
40.00
11.09
12.00
0.20
12.00
1.70
12.00
0.77
16.00
2.84
7.86
8.12
7.83
7.76
9.89
1 : 47.38
1 : 45.08
1 : 39.49
1 : 34.87
1 : 43.26
R E P O RT 2 0 0 5
Quarterly Results
Ist Quarter
$’000
2nd Quarter
$’000
3rd Quarter
$’000
4th Quarter
$’000
Total
$’000
36,427
35,076
71,425
60,034
50,073
46,725
40,812
41,658
198,737
183,493
Profit Before INCOME Tax
2005
2004
9,757
4,438
46,714
27,575
18,085
15,519
5,377
(34,089)
79,933
13,443
Profit After INCOME Tax
2005
2004
8,209
4,990
37,730
19,629
14,330
13,069
3,085
(36,443)
63,354
1,245
Profit Attributable to EQUITY holders
2005
2004
8,221
5,574
38,103
19,381
14,543
13,582
3,272
(25,536)
64,139
13,001
4.66
3.16
21.61
10.99
8.25
7.70
1.86
(14.48)
36.38
7.37
Turnover
2005
2004
Basic and Diluted Earnings Per
Ordinary Share of $1 Each (IN CENTS)
2005
2004
Total Assets Owned
($ million)
19 (1%)
23 (2%)
144
(8%)
137
(9%)
248
(13%)
199
(14%)
238
(13%)
233
(16%)
331
(18%)
338
(23%)
Sources of Finance
($’000)
Total Liabilities Owned and
Capital Invested ($ million)
12 (1%)
39 (3%)
22 (1%)
30 (2%)
40
(2%)
39
(3%)
Group Turnover
($’000)
1,800,000
200,000
1,600,000
180,000
160,000
1,400,000
140,000
1,200,000
120,000
1,743
(95%)
1,367
(93%)
1,000,000
100,000
800,000
80,000
600,000
855
(47%)
527
(36%)
60,000
400,000
40,000
200,000
2005
1,835
(100%)
2004
1,457
(100%)
2005
1,835
(100%)
2004
1,457
(100%)
Others
Other Liabilities
Investment Properties
Trade and Other Payables
Cash and Cash
Equivalents
Borrowings
Investments in
Associated Companies
Property, Plant and
Equipment
Available-for-sale
Financial Assets
Shareholders’ Funds
0
20,000
2005 2004 2003 2002 2001
Loan from Minority
Shareholders
0
2005 2004 2003 2002 2001
Other Investments
Borrowings
Trading, Laundry and
Advertising Operations
Minority Interests
Property Investments
Shareholders’ Funds
Hotel Operations
21
22
R E P O RT 2 0 0 5
SEGMENTAL PERFORMANCE ANALYSIS
TOTAL TURNOVER BY BUSINESS SEGMENT
2005
Hotel operations
Other investments
Advertising related and
laundry operations
2004
$’000
%
$’000
%
124,783
11,020
47,481
63%
5%
24%
115,709
9,977
40,612
63%
6%
22%
15,453
8%
17,195
9%
198,737
100%
183,493
100%
Hotel
operations
Property
investments
%
63
Other
investments
%
24
5
Advertising
8
related and
laundry operations
%
19
%
Advertising
1
related and
laundry operations
Property
investments
8
Associated
companies
Other
investments
59
TOTAL ASSETS BY BUSINESS SEGMENT
2005
Hotel operations
Other investments
Advertising related and
laundry operations
Associated companies
Unallocated assets
2004
$’000
%
$’000
%
356,379
154,919
1,076,813
19%
8%
59%
357,202
150,513
700,115
25%
10%
48%
1%
13%
0%*
15,682
233,336
443
1%
16%
0% *
9,097
237,786
327
1,835,321
100%
1,457,291
Hotel
operations
13
100%
TOTAL TURNOVER BY GEOGRAPHICAL SEGMENT
2005
Singapore
PRC
Others
2004
$’000
%
$’000
%
172,076
24,123
2,538
87%
12%
1%
156,346
23,443
3,704
85%
13%
2%
198,737
100%
183,493
100%
Singapore
%
87
PRC
12
Singapore
%
77
PRC
10
Others
%
1
TOTAL ASSETS BY GEOGRAPHICAL SEGMENTS
2005
$’000
Singapore
PRC
Others
Unallocated assets
1,408,850
184,776
3,582
237,786
327
1,835,321
*
denotes less than 1%.
2004
%
77%
10%
0%*
13%
0%*
100%
$’000
1,029,169
191,021
3,322
233,336
443
1,457,291
%
71%
13%
0% *
16%
0% *
100%
Associated
companies
%
13
R E P O RT 2 0 0 5
2005
$’000
2004
$’000
Sale of goods and services
Purchases of materials and services
Gross value added
Share of results of associated companies
Income from investments and interest
Exceptional items
Exchange difference
151,980
(68,274)
83,706
9,110
51,221
(1,488)
965
143,511
(63,524)
79,987
8,005
41,808
(49,865)
(377)
Total value added
143,514
79,558
39,350
390
39,740
39,930
878
40,808
20,077
14,549
1,085
22,570
23,655
83,472
559
16,927
17,486
72,843
19,258
(9,456)
9,802
22,216
(6,524)
15,692
(458)
51,221
(1,488)
965
50,240
(543)
41,808
(49,865)
(377)
(8,977)
Distribution of value added:
To employees and directors
Employees’ salaries, wages and benefits
Directors’ remuneration
To government
Corporate and property taxes
To providers of capital
Interest expense
Net dividend to shareholders
Total value-added distributed
Retained in the business
Depreciation
Retained earnings
Non-production cost and income
Bad debts
Income from investment and interest
Exceptional items
Exchange difference
Productivity ratios:
Value added per employee
Value added per $ employment costs
Value added per $ investment in
fixed assets (before depreciation)
Value added per $ net sales
143,514
79,558
34,166
2.11
34,732
1.96
0.14
0.55
0.13
0.56
23
JAN-01
FEB-01
MAR-01
APR-01
MAY-01
JUN-01
JUL-01
AUG-01
SEP-01
OCT-01
NOV-01
DEC-01
JAN-02
FEB-02
MAR-02
APR-02
MAY-02
JUN-02
JUL-02
AUG-02
SEP-02
OCT-02
NOV-02
DEC-02
JAN-03
FEB-03
MAR-03
APR-03
MAY-03
JUN-03
JUL-03
AUG-03
SEP-03
OCT-03
NOV-03
DEC-03
JAN-04
FEB-04
MAR-04
APR-04
MAY-04
JUN-04
JUL-04
AUG-04
SEP-04
OCT-04
NOV-04
DEC-04
JAN-05
FEB-05
MAR-05
APR-05
MAY-05
JUN-05
JUL-05
AUG-05
SEP-05
OCT-05
NOV-05
DEC-05
Price (in S$)
8
6
6.45
7.20
6.85
7.55
6.30
7.50
6.65
7.65
6.80
7.60
6.55
8.95
7.20
8.55
6.30
7.45
4.94
6.70
5.40
6.25
5.35
6.15
5.90
6.45
6.30
7.20
6.70
7.20
6.75
7.10
6.70
7.00
6.60
7.50
6.70
7.20
6.75
7.50
6.65
7.05
5.50
6.85
5.50
6.40
6.00
6.55
5.60
6.10
5.75
6.20
5.80
6.30
5.60
6.05
5.30
6.00
5.60
6.70
6.25
7.20
6.95
7.75
6.65
7.25
6.45
7.00
6.45
7.00
6.60
7.10
6.75
7.10
6.85
7.15
6.55
7.00
6.50
6.85
5.85
6.85
6.05
7.10
6.95
7.30
7.00
7.35
7.20
7.40
7.25
7.65
7.00
7.35
7.25
7.50
7.35
7.85
7.65
8.10
7.40
7.90
7.45
8.40
8.20
8.85
8.00
8.45
8.25
9.20
9.00
9.60
9.30
9.75
9.25
9.60
9.45
9.90
9.75
9.95
9.75
10
JAN-01
FEB-01
MAR-01
APR-01
MAY-01
JUN-01
JUL-01
AUG-01
SEP-01
OCT-01
NOV-01
DEC-01
JAN-02
FEB-02
MAR-02
APR-02
MAY-02
JUN-02
JUL-02
AUG-02
SEP-02
OCT-02
NOV-02
DEC-02
JAN-03
FEB-03
MAR-03
APR-03
MAY-03
JUN-03
JUL-03
AUG-03
SEP-03
OCT-03
NOV-03
DEC-03
JAN-04
FEB-04
MAR-04
APR-04
MAY-04
JUN-04
JUL-04
AUG-04
SEP-04
OCT-04
NOV-04
DEC-04
JAN-05
FEB-05
MAR-05
APR-05
MAY-05
JUN-05
JUL-05
AUG-05
SEP-05
OCT-05
NOV-05
DEC-05
Turnover (in millions)
11.00
24
R E P O RT 2 0 0 5
Share price and Turnover (2001-2005)
12
OUE SHARE PRICE (from 2001 to 2005)
4
2
0
High
Month
Low
Price (in S$)
10
OUE SHARE TURNOVER (from 2001 to 2005)
9
8
7
6
5
4
3
2
1
0
Month
R E P O RT 2 0 0 5
25
CONTENTS
26
28
29
30
31
OUE AR05-OP1 FinancialCR5.indd 25
Directors’ Report
Auditors’ Report
Balance Sheets
32
33
34
3/3/06 5:33:41 PM
26
R E P O RT 2 0 0 5
DIRECTORS’ Report
For The Financial Year Ended 31 December 2005
The directors present their report to the members together with the audited financial statements of the Group for the financial year
ended 31 December 2005 and the balance sheet of the Company at 31 December 2005.
Directors
The directors of the Company in office at the date of this report are as follows:
Wee Cho Yaw (Chairman)
Kua Hong Pak
Gwee Lian Kheng
Wong Hung Khim
Miss Kho Piac-Suat
Lim Boon Kheng
Lo Ping
Chong Kim Chow
Arrangements to enable directors
to acquire shares and debentures
Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose object is to enable
the directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other
body corporate.
Directors’ interests in shares or debentures
(a) According to the register of directors’ shareholdings, none of the directors holding office at the end of the financial year had any
interest in the share capital or debentures of the Company and related corporations, except as follows:
No. of Ordinary Shares of $1 each
Holdings registered in names
of directors or nominee
The Company
Miss Kho Piac-Suat
Lim Boon Kheng
Lo Ping
Holdings in which directors
are deemed to have interests
At
31.12.2005
At
1.1.2005
At
31.12.2005
At
1.1.2005
118,000
19,000
500,000
6,000
118,000
19,000
500,000
6,000
2,000
105,000
6,000
932,000
105,000
6,000
(b) Pursuant to Section 7 of the Companies Act, Cap 50, Mr Lo Ping is also deemed to have an interest in 650,000 shares in the
Company in his capacity as Administrator of the Estate of Lo Kwang Pheng, deceased, of which 162,500 shares are beneficially
owned by Mr Lo Ping as follows:
(i)
81,250 shares as beneficiary entitled to 1/8 share of the Estate of Lo Kwang Pheng deceased; and
(ii) 81,250 shares as beneficiary entitled to 1/4 share of the Estate of Tan Nguk Theng deceased, which is entitled to 1/2 share in
the Estate of Lo Kwang Pheng deceased.
(c) The directors’ interests in the shares of the Company at 21 January 2006 were the same as at 31 December 2005.
3/3/06 5:33:43 PM
27
R E P O RT 2 0 0 5
DIRECTORS’ Report
Directors’ contractual benefits
Since the end of the previous financial year, no director has received or become entitled to receive a benefit by reason of a contract
made by the Company or a related corporation with the director or with a firm of which he is a member or with a company in which
he has a substantial financial interest, except as disclosed in the financial statements.
Share options
There were no options granted during the financial year to subscribe for unissued shares of the Company or any subsidiary.
No shares have been issued during the financial year by virtue of the exercise of options to take up unissued shares of the Company
or the subsidiary companies.
There were no unissued shares under option in the Company and the subsidiary companies at 31 December 2005.
Auditors
The auditors, PricewaterhouseCoopers, have expressed their willingness to accept re-appointment.
On behalf of the directors
WEE CHO YAW
GWEE LIAN KHENG
Chairman
Director
18 February 2006
3/3/06 5:33:44 PM
28
R E P O RT 2 0 0 5
STATEMENT BY DIRECTORS
In the opinion of the directors,
(a) the balance sheet of the Company and the consolidated financial statements of the Group as set out on pages 30 to 71 are drawn
up so as to give a true and fair view of the state of affairs of the Company and of the Group at 31 December 2005, and of the
results of the business, changes in equity and cash flows of the Group for the financial year then ended; and
(b) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they fall due.
On behalf of the directors
WEE CHO YAW
GWEE LIAN KHENG
Chairman
Director
18 February 2006
3/3/06 5:33:44 PM
29
R E P O RT 2 0 0 5
AUDITORS’ REPORT TO THE MEMBERS OF
We have audited the accompanying financial statements of Overseas Union Enterprise Limited set out on pages 30 to 71 for the
financial year ended 31 December 2005, comprising the balance sheet of the Company and the consolidated financial statements of
the Group. These financial statements are the responsibility of the Company’s directors. 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 plan and perform our
audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by the directors, as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion,
(a) the accompanying balance sheet of the Company and the consolidated financial statements of the Group are properly drawn up
in accordance with the provisions of the Companies Act, Cap 50 (“the Act”) and Singapore Financial Reporting Standards 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 2005, and the results, changes
in equity and cash flows of the Group for the financial 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.
PRICEWATERHOUSECOOPERS
CERTIFIED PUBLIC ACCOUNTANTS
Singapore, 18 February 2006
3/3/06 5:33:45 PM
30
R E P O RT 2 0 0 5
CONSOLIDATED INCOME STATEMENT
Notes
2005
$’000
2004
$’000
Sales
Cost of sales
Gross profit
5
141,600
(96,217)
45,383
134,016
(95,331)
38,685
Rental income
Dividend income
Other operating income
Marketing expenses
Administrative expenses
Other operating expenses
Exceptional items
Finance expense
Profit before income tax
5
5
5
9,656
47,481
5,429
(5,153)
(9,883)
(19,517)
(1,488)
(1,085)
9,110
79,933
8,865
40,612
1,826
(5,349)
(11,363)
(17,414)
(49,865)
(559)
8,005
13,443
(16,579)
63,354
(12,198)
1,245
64,139
(785)
63,354
13,001
(11,756)
1,245
Income tax expense
Profit after income tax
6
7
17
10
8
Attributable to:
Equity holders of the Company
Minority interests
Earnings per Share attributable to the
equity holders of the Company
(expressed in $ per share)
Basic and diluted
11
0.36
0.07
The accompanying notes form an integral part of these financial statements.
Auditors’ Report - Page 29
3/3/06 5:33:45 PM
31
R E P O RT 2 0 0 5
Balance Sheets
As at 31 December 2005
Notes
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
12
13
14
15
Non-current assets
Available-for-sale financial assets
Investments in associated companies
Investments in subsidiary companies
Loans to subsidiary companies
Investment properties
Property, plant and equipment
Deferred income tax assets
16
17
18(a)
18(b)
19
20
23
Total assets
The Group
2005
2004
$’000
$’000
248,302
11,422
2,636
4,833
267,193
199,531
15,972
3,022
3,428
221,953
231,886
9,326
1,380
2,544
245,136
187,630
10,916
1,924
1,939
202,409
854,980
237,786
144,265
330,770
327
1,568,128
1,835,321
526,871
233,336
136,870
337,818
443
1,235,338
1,457,291
854,980
129,525
54,536
127,623
144,265
145,179
1,456,108
1,701,244
527,209
126,147
34,636
154,561
136,870
142,046
1,121,469
1,323,878
39,412
5,140
44,552
23,340
7,546
30,886
26,750
4,526
31,276
39,212
10,258
12,653
49,470
12,653
94,022
43,539
1,363,269 1,657,705
10,098
10,098
41,374
1,282,504
488,885
473,231
695,589
1,657,705
1,657,705
488,885
146,077
647,542
1,282,504
1,282,504
LIABILITIES
Current liabilities
Trade and other payables
Current income tax liabilities
Borrowings
21
8
22
30,490
7,958
26,893
65,341
Non-current liabilities
Borrowings
Deferred income tax liabilities
22
23
13,400
12,655
26,055
91,396
1,743,925
24
25
26
488,885
487,285
766,952
1,743,122
803
1,743,925
Total liabilities
NET ASSETS
EQUITY
Capital and reserves attributable to the
Company’s equity holders
Share capital and share premium
Other reserves
Retained earnings
Minority interests
Total equity
The Company
2005
2004
$’000
$’000
488,885
153,154
725,383
1,367,422
(4,153)
1,363,269
3/3/06 5:33:46 PM
32
R E P O RT 2 0 0 5
Consolidated Statement of Changes in Equity
Notes
Balance at 1 January 2005
- As previously reported
- Retrospective restatement
- Effect of changes in
accounting policies
- Adjusted prospectively
- As restated
Revaluation surplus
Share of changes in revaluation reserve
of associated companies
Additional investment in subsidiary
by minority interest
Net movements of fair value gains
on available-for-sale financial assets
Currency translation differences
Net gains recognised directly in equity
Net profit/(loss)
Total recognised gains/(losses)
Dividends
Balance at 31 December 2005
Balance at 1 January 2004
- As restated
Revaluation surplus
of associated companies
Net gains/(losses) recognised
directly in equity
Net profit/(loss)
Total recognised gains/(losses)
Transfer to/(from)
Dividends
Balance at 31 December 2004
25(e)
25(d)
27
25(e)
27
Attributable to equity
holders of the Company
Share capital
and share
Other
Retained
premium
reserves
earnings
$’000
$’000
$’000
Minority
interest
Total
equity
$’000
$’000
488,885
488,885
127,356
25,798
153,154
725,383
725,383
488,885
266,839
419,993
725,383
-
4,838
-
-
4,838
-
164
-
-
164
-
-
-
5,000
5,000
488,885
56,303
5,987
67,292
67,292
487,285
488,885
488,885
800,773
25,798
826,571
64,882
64,882
7,548
7,548
1,362,088
25,798
1,387,886
-
2,740
-
-
2,740
-
(6,178)
(5,552)
-
55
488,885
(8,990)
(8,990)
(664,427)
153,154
64,139
64,139
(22,570)
766,952
13,001
13,001
664,427
(16,927)
725,383
(4,153)
(4,153)
1,337,471
25,798
1,363,269
266,839
(4,153) 1,630,108
56,303
741
6,728
5,741
73,033
(785)
63,354
4,956
136,387
(22,570)
803 1,743,925
(6,178)
(5,497)
55
(8,935)
(11,756)
1,245
(11,701)
(7,690)
(16,927)
(4,153) 1,363,269
An analysis of the movement in each category within “Other reserves” is presented in Note 25.
The effects on financial statements on adoption of new or revised FRS are set out in Note 3.
3/3/06 5:33:47 PM
33
R E P O RT 2 0 0 5
2005
$’000
2004
$’000
63,354
1,245
16,579
19,258
5,700
1,145
3,470
1,085
(3,740)
(47,481)
(9,110)
(940)
12,198
22,216
57,000
323
559
(1,196)
(40,612)
(8,005)
580
(4,212)
(18,246)
45,108
(7,135)
35,928
37,173
563
386
(5,444)
(4,495)
40,613
(3,550)
37,063
(732)
(361)
(2,102)
(3,195)
33,978
(2,596)
31,382
Cash flows from investing activities
Proceeds from disposal of plant and equipment
Interest received
Dividends received (net of tax)
Dividends received from associated companies (net of tax)
Purchase of property, plant and equipment
Capital reductions from associated companies
Capital reductions from listed securities
Proceeds from sale of subsidiary companies
Proceeds from sales of listed securities
Proceeds from sale of unlisted securities
Repayment of loan by an investee company
Net cash inflow from investing activities
3,740
27,040
4,792
(17,075)
504
2,131
5,905
2,594
29,631
89
1,196
32,547
10,802
(13,190)
22,562
356
54,362
Cash flows from financing activities
Increase in bank loan
Interest paid
Dividends paid to shareholders
Net cash used in financing activities
5,732
(1,085)
(22,570)
(17,923)
4,261
(559)
(16,927)
(13,225)
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the financial year
Cash and cash equivalents at end of the financial year
48,771
199,531
248,302
72,519
127,012
199,531
Note
Cash flows from operating activities
Profit after income tax
Adjustments for:
Tax expense
Depreciation of property, plant and equipment
Impairment losses of property, plant and equipment
Loss on disposal of plant and equipment
Adjustment to cost of property
Interest expenses
Interest income
Dividend income
Unrealised transaction (gain)/loss
Net gain from exceptional items excluding
impairment losses of property, plant and equipment
8
Operating cash flow before working capital changes
Change in operating assets and liabilities,
net of effects from sale of subsidiary companies
Receivables and other current assets
Inventories
Cash generated from operations
Income tax paid
Net cash inflow from operating activities
12
3/3/06 5:33:48 PM
34
R E P O RT 2 0 0 5
NOTES TO THE FINANCIAL STATEMENTS
These notes form an integral part of and should be read in conjunction with the accompanying financial statements.
1. General
Overseas Union Enterprise Limited (the “Company”) is incorporated and domiciled in Singapore and is publicly traded on the
Singapore Exchange. The address of its registered office is as follows:
333 Orchard Road
6th Storey
Overseas Union Building
Singapore 238867
The principal activities of the Company include the hotel operation of the Meritus Mandarin Singapore, the letting of commercial
offices and shopping arcades, and the holding of investments.
The principal activities of the Company’s subsidiary companies are set out in Note 36.
2. Significant accounting policies
2.1
BASIS
OF PREPARATION
The financial statements have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”). The financial
statements have been prepared under the historical cost convention, as modified by the revaluation of certain land and buildings
on 31 December 1975 and investment properties.
The preparation of financial statements in conformity with FRS requires the management to exercise its judgement in the process
of applying the Group’s accounting policies. It also requires the use of accounting estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the financial year. Although these estimates are based on management’s best
knowledge of current events and actions, actual results may ultimately differ from those estimates. Critical accounting estimates and
assumptions used that are significant to the financial statements are disclosed in Note 4.
In 2005, the Group and the Company adopted the new or revised FRS that are applicable in the current financial year.
The 2005 financial statements have been prepared and their comparatives amended as required, in accordance with the relevant
transitional provisions in the respective FRS. The following are the FRS that are relevant to the Group:
FRS 1 (revised 2004) Presentation of Financial Statements
FRS 2 (revised 2004) Inventories
FRS 8 (revised 2004) Accounting Policies, Changes in Accounting Estimates and Errors
FRS 10 (revised 2004) Events after the Balance Sheet Date
FRS 16 (revised 2004) Property, Plant and Equipment
FRS 17 (revised 2004) Leases
FRS 21 (revised 2004) The Effects of Changes in Foreign Exchange Rates
FRS 24 (revised 2004) Related Party Disclosures
FRS 27 (revised 2004) Consolidated and Separate Financial Statements
FRS 28 (revised 2004) Investments in Associates
FRS 32 (revised 2004) Financial Instruments: Disclosure and Presentation
FRS 33 (revised 2004) Earnings per Share
FRS 36 (revised 2004) Impairment of Assets
FRS 39 (revised 2004) Financial Instruments: Recognition and Measurement
FRS 103 Business Combinations
The adoption of the above FRS did not result in substantial changes to the Group’s accounting policies except as disclosed in Note 3.
FRS 21 (revised 2004) requires translation differences on loans which form part of the Group’s net investment in foreign operations
and are not denominated in either the functional currency of the parent or the subsidiary to be recognised in the income statement
of the Group. On 26 January 2006, the Council of Corporate Disclosure Group issued an amendment to FRS 21 (revised 2004)
which removes the requirement for such translation differences to be recognised in the income statement of the Group. Such
translation differences can be taken directly to the currency translation reserve. The amendment to FRS 21 (revised 2004) is
applicable for financial periods beginning 1 January 2006. The Group has elected to early adopt this amendment for the financial
year ended 31 December 2005. With this amendment, there is no change to the treatment of such translation differences prior to
the adoption of FRS 21 (revised 2004).
3/3/06 5:33:49 PM
35
R E P O RT 2 0 0 5
2. Significant accounting policies (CONTINUED)
2.2
REVENUE
RECOGNITION
Revenue for the Group comprises the fair value of the consideration received or receivable for the sale of goods and rendering of
services, net of goods and services tax, rebates and discounts, and after eliminating sales within the Group. Revenue is recognised
as follows:
(a) Hotel operations and other services rendered
Revenue from the rental of hotel rooms and other facilities is recognised on an accrual basis. Revenue from the sale of
food and beverage is recognised when invoiced. Revenue from the rendering of services is recognised when the service is
rendered.
(b) Sale of goods
Revenue from the sale of goods is recognised when a Group entity has delivered the products to the customer, the customer
has accepted the products and collectibility of the related receivables is reasonably assured.
(c) Rental income
Rental income from operating leases on investment properties is recognised on a straight line basis over the lease term.
(d) Dividend income
Dividend income is recognised when the right to receive payment is established.
(e) Interest income
Interest income is recognised on a time proportion basis using the effective interest method.
2.3
GROUP
ACCOUNTING
(a) Subsidiaries
Subsidiaries are entities over which the Group has power to govern the financial and operating policies, generally accompanying
a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether the Group controls another entity.
The purchase method of accounting is used to account for the acquisition of subsidiaries.The cost of an acquisition is measured
as the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange, plus
costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair values on the date of acquisition, irrespective of the extent of any
minority interest.
Subsidiaries are consolidated from the date on which control is transferred to the Group to the date on which that control
ceases. In preparing the consolidated financial statements, intercompany transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides
evidence of an impairment of the asset transferred. Where necessary, adjustments are made to the financial statements of
subsidiaries to ensure consistency of accounting policies with those of the Group.
Minority interest is that part of the net results of operations and of net assets of a subsidiary attributable to interests which
are not owned directly or indirectly by the Group. It is measured at the minorities’ share of the fair value of the subsidiaries’
identifiable assets and liabilities at the date of acquisition by the Group and the minorities’ share of changes in equity since the
date of acquisition, except when the losses applicable to the minority in a subsidiary exceed the minority interest in the equity
of that subsidiary. In such cases, the excess and further losses applicable to the minority are attributed to the equity holders
of the Company, unless the minority has a binding obligation to, and is able to, make good the losses. When that subsidiary
subsequently reports profits, the profits applicable to the minority are attributed to the equity holders of the Company until
the minority’s share of losses previously absorbed by the equity holders of the Company has been recovered.
Please refer to Note 2.6 for the Company’s accounting policy on investment in subsidiaries.
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2.3
GROUP
ACCOUNTING
(CONTINUED)
(b) Associated companies
Associated companies are entities over which the Group has significant influence, but not control, generally accompanying a
shareholding of between and including 20% and 50% of the voting rights. Investments in associated companies are accounted
for in the consolidated financial statements using the equity method of accounting. Investments in associated companies in the
consolidated balance sheet include goodwill (net of accumulated amortisation) identified on acquisition, where applicable.
Equity accounting involves recording investments in associated companies initially at cost, and recognising the Group’s share of
its associated companies’ post-acquisition results and its share of post-acquisition movements in reserves against the carrying
amount of the investments. When the Group’s share of losses in an associated company equals or exceeds its investment in
the associated company, including any other unsecured receivables, the Group does not recognise further losses, unless it has
incurred obligations or made payments on behalf of the associated company.
In applying the equity method, unrealised gains on transactions between the Group and its associated companies are
eliminated to the extent of the Group’s interest in the associated companies. Unrealised losses are also eliminated unless
the transaction provides evidence of an impairment of the asset transferred. Where necessary, adjustments are made to the
financial statements of associated companies to ensure consistency of accounting policies with those of the Group.
Please refer to Note 2.6 for the Company’s accounting policy on investment in associated companies.
2.4
PROPERTY,
PLANT AND EQUIPMENT
(a) Measurement
Property, plant and equipment are initially recorded at cost. Certain leasehold land and building have been included at valuation
made by the directors on 31 December 1975 with subsequent additions recorded at cost, less depreciation. All other property,
plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses (Note 2.7).
The cost of property, plant and equipment includes expenditure that is directly attributable to the acquisition of the items.
Dismantlement, removal or restoration costs are included as part of the cost of property, plant and equipment if the obligation
for dismantlement, removal or restoration is incurred as a consequence of acquiring or using the asset. Cost may also include
transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and
equipment.
(b) Depreciation
Depreciation is calculated so as to write off the cost of property, plant and equipment, other than leasehold land and buildings
and hotel operating equipment (comprises china, glass, silver, linen and uniform), on a straight-line basis over the expected
useful lives of the assets concerned.
The annual rates used for this purpose are:
%
Leasehold improvements
Freehold premises
Plant, machinery and office equipment
Furniture and fittings
Motor vehicles
31/2 - 5
2
5 - 331/3
10 - 20
10 - 25
Leasehold land and buildings are amortised evenly over the remaining period of the leases. Hotel operating equipment in use
is depreciated or written off using bases and at rates ranging from 5% to 67% per annum, which are normal within the industry.
Those held in the stores are not depreciated.
The residual values and useful lives of property, plant and equipment are reviewed, and adjusted as appropriate, at each
balance sheet.
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2.4
PROPERTY,
PLANT AND EQUIPMENT
(CONTINUED)
(c) Subsequent expenditure
The cost of major renovations and restorations is added to the carrying amount of the asset when it is probable that future
economic benefits, in excess of the standard of performance of the asset before the expenditure was made, will flow to the
Group and the cost can be reliably measured. Repair and maintenance are expensed to the income statement during the
financial period in which they are incurred.
(d) Disposal
On disposal of an item of property, plant and equipment, the difference between the net disposal proceeds and its carrying
amount is taken to the income statement; any amount in revaluation reserve relating to that asset is transferred to retained
earnings.
2.5
INVESTMENT
PROPERTIES
Investment properties of the Group, principally comprising office buildings, apartments and shopping arcades/ramps, are held
for long-term rental yields. Investment properties are treated as non-current investments and are stated at revalued amounts,
representing open market value determined annually by independent professional valuers. Investment properties are not subject
to depreciation.
When an investment property is revalued, revaluation surplus is taken to an asset revaluation reserve, unless it offsets previous
revaluation losses of the same category of investment that were taken to the income statement. Revaluation losses are taken to
the asset revaluation reserve, to the extent that they offset previous revaluation surpluses of the same category of investments that
were taken to the asset revaluation reserve. Other revaluation surpluses or losses are taken to the income statement.
On disposal of an investment property, the difference between the net disposal proceeds and the carrying amount is taken to the
income statement; any amount in revaluation reserve relating to that investment property is transferred to the income statement.
2.6
INVESTMENTS
IN SUBSIDIARIES AND ASSOCIATED COMPANIES
Investments in subsidiaries and associated companies are stated at cost less accumulated impairment losses (Note 2.7) in the
Company’s balance sheet. On disposal of investments in subsidiaries and associated companies, the difference between the net
disposal proceeds and the carrying amount of the investment is taken to the income statement.
2.7
IMPAIRMENT
OF ASSETS
Property, plant and equipment and investments in subsidiaries and associated companies are reviewed for impairment whenever
there is any indication that these assets may be impaired. If any such indication exists, the recoverable amount (i.e. the higher of the
fair value less cost to sell and value in use) of the asset is estimated to determine the amount of impairment loss.
For the purpose of impairment testing of these assets, recoverable amount is determined on an individual asset basis unless the
asset does not generate cash flows that are largely independent of those from other assets. If this is the case, recoverable amount
is determined for the cash-generating-units (“CGU”) to which the asset belongs to.
If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset
(or CGU) is reduced to its recoverable amount. The impairment loss is recognised in the income statement unless the asset is
carried at revalued amount, in which case, such impairment loss is treated as a revaluation decrease.
An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to
determine the assets’ recoverable amount since the last impairment loss was recognised. The carrying amount of an asset other
than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount
that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset
in prior years. A reversal of impairment loss for an asset other than goodwill is recognised in the income statement, unless the
asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase. However, to the extent that an
impairment loss on the same revalued asset was previously recognised in the income statement, a reversal of that impairment is
also recognised in the income statement.
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2.8
INVESTMENTS
IN FINANCIAL ASSETS
(a) Classification
The Group classifies its investments in financial assets in the following categories: financial assets at fair value through profit or
loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets.
The classification depends on the purpose for which the assets were acquired. Management determines the classification of
its financial assets at initial recognition and re-evaluates this designation at every reporting date, with the exception that the
designation of financial assets at fair value through profit or loss is not revocable.
(i)
Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or
loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short
term or if so designated by management. Derivatives are also categorised as held for trading unless they are designated
as hedges. Assets in this category are classified as current assets if they are either held for trading or are expected to be
realised within 12 months after the balance sheet date.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of
trading the receivable. They are included in current assets, except those maturing more than 12 months after the balance
sheet date. These are classified as non-current assets. Loans and receivables are included in trade and other receivables
on the balance sheet (Note 2.9).
(iii) Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities
that the Group’s management has the positive intention and ability to hold to maturity.
(iv) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of
the other categories. They are included in non-current assets unless management intends to dispose of the assets within
12 months after the balance sheet date.
(b) Recognition and derecognition
Purchases and sales of investments are recognised on trade-date - the date on which the Group commits to purchase or sell
the asset. Investments are derecognised when the rights to receive cash flows from the financial assets have expired or have
been transferred and the Group has transferred substantially all risks and rewards of ownership.
(c) Initial measurement
Financial assets are initially recognised at fair value plus transaction costs except for financial assets at fair value through profit
or loss, which are recognised at fair value.
(d) Subsequent measurement
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value.
Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method.
Realised and unrealised gains and losses arising from changes in the fair value of the “financial assets at fair value through profit
or loss” investment category are included in the income statement in the period in which they arise. Unrealised gains and
losses arising from changes in the fair value of investments classified as available-for-sale are recognised in the fair value reserve
within equity. When investments classified as available-for-sale are sold or impaired, the accumulated fair value adjustments in
the fair value reserve within equity are included in the income statement.
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2.8
INVESTMENTS
IN FINANCIAL ASSETS
(CONTINUED)
(e) Determination of fair value
The fair values of quoted financial assets are based on current bid prices. If the market for a financial asset is not active, the
Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference
to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models refined to reflect
the issuer’s specific circumstances.
(f) Impairment
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial
assets is impaired. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair
value of the investment below its cost is considered in determining whether the investments are impaired. If any such evidence
exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the
current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is removed from the
fair value reserve within equity and recognised in the income statement. Impairment losses recognised in the income statement
on equity investments are not reversed through the income statement, until the equity investments are disposed of.
2.9
TRADE
RECEIVABLES
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method, less allowance for impairment. An allowance for impairment of trade receivables is established when there is objective
evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount
of the allowance 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 amount of the allowance is recognised in the income statement.
2.10 BORROWINGS
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised
cost. Any difference between the proceeds (net of transaction costs) and the redemption value is taken to the income statement
over the period of the borrowings using the effective interest method.
Borrowings which are due to be settled within twelve months after the balance sheet date are included in current borrowings in
the balance sheet even though the original term was for a period longer than twelve months and an agreement to refinance, or
to reschedule payments, on a long-term basis is completed after the balance sheet date and before the financial statements are
authorised for issue. Other borrowings due to be settled more than twelve months after the balance sheet date are included in
non-current borrowings in the balance sheet.
2.11
TRADE
PAYABLES
Trade payables are initially measured at fair value, and subsequently measured at amortised cost, using the effective interest
method.
2.12 LEASES
Leases of assets in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as
operating leases.
(a) When a group company is the lessee of an operating lease:
Payments made (net of any incentives received from the lessor) are taken to the income statement on a straight-line basis over
the period of the lease.
When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor
by way of penalty is recognised as an expense in the period in which termination takes place.
(b) When a group company is the lessor of an operating lease:
Assets leased out are included in investment properties and are stated at revalued amounts and are not depreciated. Rental
income (net of any incentives given to lessees) is recognised on a straight-line basis over the lease term.
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2.13 INVENTORIES
Inventories are stated at the lower of cost and net realisable value. Cost is determined on a weighted-average basis and includes
all costs in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the
ordinary course of business, less the costs of completion and selling expenses.
2.14 DEFERRED INCOME TAXES
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the financial statements. However, if the deferred income tax arises from initial
recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects
neither accounting nor taxable profit or loss, it is not accounted for. Deferred income tax is determined using tax rates (and laws)
that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred
income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which
the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associated companies, except
where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference
will not reverse in the foreseeable future.
2.15 PROVISIONS FOR OTHER LIABILITIES AND CHARGES
Provisions are recognised when the Group has a legal or constructive obligation as a result of past events; it is more likely than not
that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made.
2.16 EMPLOYEE BENEFITS
(a) Employee leave entitlements
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.
(b) Defined contribution plans
Defined contribution plans are post-employment benefit plans under which the Group pays fixed contribution into separate
entities such as the Central Provident Fund, and will have no legal or constructive obligation to pay further contributions if
any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and
preceding financial years. The Group’s contribution to defined contribution plans are recognised in the financial year to which
they relate.
(c) Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or whenever an
employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when
it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal
plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary
redundancy. Benefits falling due more than 12 months after balance sheet date are discounted to present value.
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2.17 CURRENCY TRANSLATION
(a) Functional and presentation currency
Items included in the financial statements of each entity in the Group are measured using the currency of the primary
economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are
presented in Singapore Dollars, which is the Company’s functional and presentation currency.
(b) Transactions and balances
Transactions in a currency other than the functional currency (“foreign currency”) are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions. Currency translation gains and losses resulting from
the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement, except for currency translation differences on
net investment in foreign operations and borrowings and other currency instruments qualifying as net investment hedges for
foreign operations in the consolidated financial statements (see Note 2.17(d)).
Currency translation differences on non-monetary items when the gain or loss is recognised in the income statement, such
as equity investments held at fair value through profit or loss, are reported as part of the fair value gain or loss. Currency
translation differences on non-monetary items when the gain or loss is recognised directly in equity, such as equity investments
classified as available-for-sale financial assets, are included in the fair value reserve within equity.
(c) Translation of Group entities’ financial statements
The results and financial position of group entities (none of which has the currency of a hyperinflationary economy) that have
a functional currency different from the presentation currency are translated into the presentation currency as follows:
(i)
Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance
sheet;
(ii) Income and expenses for each income statement are translated at average exchange rates (unless this average is not
reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income
and expenses are translated at the dates of the transactions); and
(iii) All resulting exchange differences are taken to the foreign currency translation reserve within equity.
Goodwill and fair value adjustments arising on acquisition of a foreign entity on or after 1 January 2005 are treated as assets
and liabilities of the foreign entity and translated at the closing rate. For acquisitions prior to 1 January 2005, the exchange rates
at the dates of acquisition were used.
(d) Consolidation adjustments
On consolidation, currency translation differences arising from the net investment in foreign operations and borrowings and
other currency instruments designated as hedges of such investments are taken to the foreign currency translation reserve.
When a foreign operation is disposed of, such currency translation differences are recognised in the income statement as part
of the gain or loss on disposal.
2.18 SEGMENT REPORTING
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and
returns that are different from those of other business segments. A geographical segment is engaged in providing products or
services within a particular economic environment that is subject to risks and returns that are different from those of segments
operating in other economic environments.
2.19 CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, deposits with financial institutions and bank overdrafts. Bank overdrafts are
included in borrowings on the balance sheet.
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2.20 SHARE CAPITAL
Ordinary shares with discretionary dividends are classified as equity.
Incremental external costs directly attributable to the issuance of new shares, other than for the acquisition of businesses, are
taken to equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issuance of new equity
instruments for the acquisition of businesses are included in the cost of acquisition as part of the purchase consideration.
2.21 DIVIDEND
Interim dividends are recorded during the financial year in which they are declared payable. Final dividends are recorded during the
financial year in which the dividends are approved by the shareholders.
3. Effects on financial statements on adoption
of new or revised FRS
The effects on adoption of the following FRS in 2005 are set out below:
3.1
FRS 21 (REVISED 2004) THE EFFECTS
OF
CHANGES
IN
FOREIGN EXCHANGE RATES
Previously, translation differences on loans from the Company to its subsidiaries which form part of the Company’s net investment
in the subsidiaries were included in the currency translation reserve of the Company. FRS 21 (revised 2004) requires these
exchange differences of the Company to be recognised in the income statement of the Company (Note 2.17(b)).
This change was effected retrospectively and consequently affected the following previously repor ted balances as at
31 December 2004:
Company
$’000
Increase/(Decrease) in:
Currency translation reserve (Note 25(c))
Retained earnings
7,761
(7,761)
The effects on the balance sheet as at 31 December 2005 are set out in Note 3.4.
3.2
FRS 27 (REVISED 2004) CONSOLIDATED
AND
SEPARATE FINANCIAL STATEMENTS
Previously, there was no requirement for the presentation of minority interests within equity. FRS 27 (revised 2004) requires
minority interests to be presented with equity of the Group retrospectively.
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of new or revised FRS (CONTINUED)
3.3
FRS 39 (REVISED 2004) FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT
FRS 32 (REVISED 2004) FINANCIAL INSTRUMENTS: DISCLOSURE AND PRESENTATION
AND
(a) Classification and consequential accounting for financial assets and financial liabilities
(i)
Under FRS 39 (revised 2004), the investments in equity interests of other companies are classified as “available-for-sale
financial assets” and are initially recognised at fair value and subsequently measured at fair values at the balance sheet date
with all gains and losses other than impairment loss taken to equity. Impairment losses are taken to the income statement
in the period it arises. On disposal, gains and losses previously taken to equity are included in the income statement
(Notes 2.8(c), (d) and (f)).
This change was effected prospectively from 1 January 2005 and consequently affected the following balance sheet items
as at 1 January 2005.
Group
Company
$’000
$’000
Increase/(Decrease) in:
Available-for-sale financial assets (Note 16)
Deferred income tax liability (Note 23)
Fair value reserve (Note 25(d))
268,559
1,720
266,839
268,191
1,720
266,471
The effects on the balance sheets as at 31 December 2005 are set out in Note 3.4(a) and 3.4(b). This change has no
impact on the Group’s income statement.
(ii) Previously, the Group’s trade and other payables and bank borrowings were stated at cost. Bank borrowings were stated
at the proceeds received and transaction costs on borrowings were classified as deferred charges and amortised on a
straight-line basis over the period of the borrowings. These financial liabilities are not held for trading and have not been
designated as fair value through profit or loss at inception on adoption of FRS 39 (revised 2004). In accordance with
FRS 39 (revised 2004), they are initially recognised at fair value less transaction costs and subsequently accounted for at
amortised cost using the effective interest method (Note 2.10 and Note 2.11).
This change did not materially affect the financial statements for the year ended 31 December 2005.
(b) Impairment and uncollectibility of financial assets
Previously, the Group maintained a general provision against its trade and other receivables for risks that were not specifically
identified to any customer. Investments in equity interests were reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. On adoption of FRS 39 (revised 2004), the Group is
now required to assess at each balance sheet date if there is any objective evidence that a financial asset or group of financial
assets is impaired (Note 2.8). Impairment of trade receivables is established when there is objective evidence that the Group will
not be able to collect all amounts due according to the original terms of receivables (Note 2.9).
(c) Fair values of financial assets and liabilities
Previously, the Group used the last transacted prices of quoted financial assets or liabilities as the market values. Fair values of
unquoted financial assets and liabilities were measured based on last transacted prices of recent arm’s length transactions.
Fair value estimation is now carried out in accordance with guidance set out in FRS 39 (revised 2004) (Note 2.8(e)).
3/3/06 5:33:59 PM
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of new or revised FRS (CONTINUED)
3.4
SUMMARY
OF EFFECTS ON ADOPTION OF NEW OR REVISED
FRS
ON:
(a) Consolidated Balance Sheet as at 31 December 2005
Increase/(Decrease)
Description of change
Consolidated balance sheet items
at 31 December 2005
Fair value reserve
Deferred income tax liability
FRS 21
(revised
2004)
Note 3.1
-
FRS 39
(revised
2004)
Note 3.3
323,142
1,905
325,047
Total
323,142
1,905
325,047
(b) Company Balance Sheet as at 31 December 2005
Increase/(Decrease)
Description of change
Balance sheet items
at 31 December 2005
Fair value reserve
Deferred income tax liability
Foreign currency translation reserve
Retained earnings
FRS 21
(revised
2004)
Note 3.1
(983)
983
-
FRS 39
(revised
2004)
Note 3.3
323,142
1,905
325,047
Total
323,142
1,905
(983)
983
325,047
4. Critical accounting estimates and assumptions
The preparation of financial statements in conformity with FRS requires the exercise of judgement and the use of estimates by
management.
The Group on its own or in reliance on third party experts, applies estimates and judgements in the following areas:
(i) the level of impairment of the hotel properties, plant and equipment;
(ii) the determination of the fair values of unquoted available-for-sale investments; and
(iii) the assessment of adequacy of provision for income taxes
These estimates and judgements are however not expected to have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year.
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5
Revenue
Revenue of the Group represents gross revenue from hotel operations, management fee income, rental income, investment income,
trading and commission agency fee income, advertising, printing and commercial laundry services at invoiced value. Amounts are
stated net of goods and services tax.
Significant categories of revenue are as follows:
The Group
2005
2004
$’000
$’000
Sales of goods and services
Rental income
Dividend income
Other operating income:
- interest income
- foreign exchange gain
- others
Total other operating income
141,600
9,656
47,481
198,737
134,016
8,865
40,612
183,493
3,740
965
724
5,429
204,166
1,196
181
449
1,826
185,319
6. Exceptional items
Exceptional items comprise the following:
The Group
2005
2004
$’000
$’000
Write back/(provision) for impairment of investment in equity shares
of an associated company
Write-back of provision for foreseeable losses of an associated company
Gain on disposal of listed securities
Gain on disposal of unlisted securities (Note 16)
Loss on disposal of subsidiary companies (Note 12)
Total
(5,700)
(57,000)
2,045
738
1,933
(504)
(1,488)
(2,045)
9,180
(49,865)
On 15 September 2005, the Group disposed of its 100% interest in Mandate Advertising International Pte Ltd and Mandate-Saga
Advertising International Sdn Bhd for a cash consideration of $504,000 (Note 12).
The carrying value of net identifiable assets disposed of (including currency translation difference) amounted to $1,008,000 at 15
September 2005, resulting in a loss on disposal of $504,000.
Please refer to Note 12 for the effect of disposals of the subsidiaries on the Group’s cash flow.
3/3/06 5:34:00 PM
46
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7. Finance expense
The Group
2005
2004
$’000
$’000
Interest expenses:
- Bank loans
- Bank overdrafts
(1,078)
(7)
(1,085)
(557)
(2)
(559)
8. Income taxes
(a) Income tax expense
The Group
2005
2004
$’000
$’000
Tax expense attributable to
profit is made up of:
Current income tax
- Singapore
- Foreign
Deferred income tax (Note 23)
Over-provision in the
preceding financial years
- Current income tax
15,783
190
15,973
767
16,740
11,918
42
11,960
454
12,414
(161)
16,579
(216)
12,198
The tax expense on profit differs from the amount that would arise using the Singapore standard rate of income tax due to the
following:
The Group
2005
2004
$’000
$’000
Profit before tax
Share of results of associated companies (net of tax)
79,933
(9,110)
70,823
13,443
(8,005)
5,438
Tax calculated at a tax rate of 20% (2004: 20%)
Singapore statutory stepped income exemption
Income not subject to tax
Expenses not deductible for tax purposes
Tax losses of certain subsidiaries not recognised
Other deferred tax assets not recognised
Additional capital allowances for qualifying assets under hotel refurbishment scheme
Effect of changes in tax rate
Tax charge
14,165
(42)
(796)
1,300
1,311
1,139
(337)
16,740
1,088
(42)
(2,196)
1,939
1,516
11,400
(440)
(851)
12,414
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47
R E P O RT 2 0 0 5
8. Income taxes (CONTINUED)
(b) Movements in current income tax liabilities
The Group
2005
2004
$’000
$’000
Balance at beginning of financial year
Disposal of subsidiary companies
Income tax paid
Tax deducted at source
Tax expense on profit
- current financial year
- over provision in preceding financial years
Balance at end of financial year
The Company
2005
2004
$’000
$’000
5,140
(24)
(3,550)
(9,420)
4,060
(2,596)
(8,068)
4,526
(2,790)
(11,338)
3,968
(2,321)
(9,024)
15,973
(161)
7,958
11,960
(216)
5,140
17,148
7,546
11,903
4,526
9. Employee benefits
The Group
2005
2004
$’000
$’000
Wages and salaries
Employer’s contribution to defined contribution plans
including Central Provident Fund
Termination benefits
35,891
36,567
3,140
319
39,350
3,363
39,930
10. Profit before income tax
The following items have been included in arriving at profit before income tax:
The Group
2005
2004
$’000
$’000
Charging/(Crediting):
19,258
22,216
5,700
57,000
Loss on disposal of plant and equipment
1,145
323
Adjustment to cost of property
3,470
-
Fees paid to auditors of the Company:
Audit fees:
- current year
Non-audit fees:
- current year
270
276
128
89
Audit fees paid to other auditors
145
96
(513)
543
Rental expense - operating lease
56
54
Foreign exchange (gain)/loss - net
(965)
377
Depreciation of property, plant and equipment (Note 20)
(Write-back)/Provision for impairment of trade receivables
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R E P O RT 2 0 0 5
11. Earnings per ordinary share
Basic earnings per share of $1 each is calculated by dividing the net profit attributable to equity holders of the Company of
$64,139,000 (2004: $13,001,000) by the weighted average number of ordinary shares in issue during the year of 176,320,000
(2004: 176,320,000).
The diluted earnings per share is the same as basic earnings per share as there are no dilutive potential ordinary shares.
There is no material impact on the basic and diluted earnings per share from the effect of changes in accounting policies.
12. Cash and cash equivalents
The Group
2005
2004
$’000
$’000
Cash at bank and on hand
Fixed deposits with financial institutions
18,670
229,632
248,302
20,979
178,552
199,531
The Company
2005
2004
$’000
$’000
10,053
221,833
231,886
14,786
172,844
187,630
The carrying amounts of cash and cash equivalents approximate their fair value.
Cash and cash equivalents are denominated in the following currencies:
The Group
2005
2004
$’000
$’000
Singapore Dollars
United States Dollars
Renminbi
Malaysia Ringgit
Others
239,283
2,272
3,819
1,394
1,534
248,302
191,558
2,507
3,393
1,254
819
199,531
The Company
2005
2004
$’000
$’000
230,902
984
231,886
186,656
974
187,630
The fixed deposits with financial institutions mature on varying dates within 6 months (2004: 6 months) from the financial year end.
The weighted average effective interest rate of these deposits as at 31 December 2005 was 2.95% (2004: 1.15%) per annum.
Disposal of subsidiaries
On 15 September 2005, the Group disposed of its 100% interest in Mandate Advertising International Pte Ltd and Mandate-Saga
Advertising International Sdn Bhd (“the Mandate Group”) for a cash consideration of $504,000 (Note 6).
The effects of disposal of subsidiaries are as follows:
The Group
Carrying amount
$’000
Trade and other receivables
Plant and equipment
Other current assets
Total assets
2,361
101
162
2,624
Current/deferred income tax liabilities
Total liabilities
1,433
183
1,616
Net identifiable assets disposed
Loss on disposal (Note 6)
Net cash inflow on disposal
1,008
(504)
504
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R E P O RT 2 0 0 5
13. Trade and other receivables - current
The Group
2005
2004
$’000
$’000
Trade receivables
- Associated companies
- Third parties
Less: Provision for impairment of receivables
Trade receivables - net
Non-trade receivables
- Associated companies
- Subsidiary companies
Non-trade receivables - net
The Company
2005
2004
$’000
$’000
1,012
12,298
13,310
3,431
16,199
19,630
9,032
9,032
10,550
10,550
(1,936)
11,374
(3,720)
15,910
(160)
8,872
(485)
10,065
48
48
62
62
48
406
454
62
789
851
11,422
15,972
9,326
10,916
Non-trade receivables due from associated and subsidiary companies are unsecured, interest free and repayable on demand.
The carrying amounts of current trade and other receivables approximate their fair values.
Trade and other receivables are denominated in the following currencies:
The Group
2005
2004
$’000
$’000
Singapore Dollars
United States Dollars
Renminbi
Others
10,279
53
617
473
11,422
14,209
123
677
963
15,972
The Company
2005
2004
$’000
$’000
9,326
9,326
10,916
10,916
14. Inventories
Food and beverage
General supplies
Others
The Group
2005
2004
$’000
$’000
The Company
2005
2004
$’000
$’000
1,470
614
552
2,636
1,129
251
1,380
1,474
1,206
342
3,022
1,095
829
1,924
The cost of inventories recognized as expense and included in “cost of sales” amounted to $26,678,000 (2004: $29,469,000).
3/3/06 5:34:04 PM
50
R E P O RT 2 0 0 5
15. Other current assets
The Group
2005
2004
$’000
$’000
Sundry receivables and advance payments
Less: Deferred income (Note 17)
Prepayments
Deposits
Staff loans and advances
Loans to minority shareholders
of certain subsidiary companies
The Company
2005
2004
$’000
$’000
4,781
(1,670)
3,111
1,242
324
30
2,153
2,153
748
361
41
3,342
(1,670)
1,672
598
247
27
1,260
1,260
361
284
34
126
4,833
125
3,428
2,544
1,939
Included in sundry receivables and advance payment for the Group and the Company is proceed of $1,670,000 from sale of the
Group’s 20% interest in an associated company to its joint venture partner (Note 17).
The loans to minority shareholders of certain subsidiary companies are secured by pledges of the shares held by the minority
shareholders.
The carrying amounts of deposits approximate their fair values.
16. Available-for-sale financial assets
The Group
2005
2004
$’000
$’000
(a)
The Company
2005
2004
$’000
$’000
- At cost
- Effect of adoption of FRS 39 on
1 January 2005 (Note 3.3(a)(i))
As restated
526,871
520,638
527,209
520,594
268,559
795,430
520,638
268,191
795,400
520,594
Disposals
Additions
Reclassified from “Investments in Associated companies” (Note 17)
Fair value gains transferred to equity (Note 25(d))
(10,630)
11,021
59,159
854,980
(356)
6,589
526,871
(10,553)
11,021
59,112
854,980
(354)
6,969
527,209
Other long-term investments as at 1 January 2004 and 31 December 2004 have been reclassified into ‘available-for-sale financial
assets’ so as to conform to the presentation adopted in 2005 arising from the adoption of FRS 39. Available-for-sale financial assets
are measured in accordance with the accounting policy as set out in Note 2.8 which came into effect from 1 January 2005.
Available-for-sale financial assets amounting to $824,033,000 as at 31 December 2005 were held for long-term investment
purposes. The fair value gains on these financial assets were considered to be capital in nature.
(b) On 29 April 2005, the sale of the Company’s 25% shareholding in Capital Hotel Co. Ltd for a cash consideration of US$3,600,000
(S$5,905,000) was completed.
The carrying value of the Company’s investment in Capital Hotel Co. Ltd was $3,972,000, resulting in a gain on disposal of
$1,933,000 (Note 6).
3/3/06 5:34:04 PM
51
R E P O RT 2 0 0 5
16. Available-for-sale financial assets (CONTINUED)
(c) Available-for-sale financial assets include the following:
The Group
Listed securities:
- Equity securities - Singapore
Unlisted securities:
- Equity securities - Singapore
- Equity securities - Outside Singapore
- Loan to an investee company
The Company
2004
$’000
$’000
At fair
At cost
value
2005
$’000
At fair
value
$’000
At fair
value
$’000
At cost
2005
$’000
At fair
value
788,405
735,615
490,280
788,405
735,574
490,240
66,575
854,980
52,300
4,897
2,618
795,430
30,000
3,973
2,618
526,871
66,575
854,980
52,300
4,908
2,618
795,400
30,000
4,351
2,618
527,209
2004
17. Investments in associated companies
The Group
2005
2004
$’000
$’000
The Company
2005
2004
$’000
$’000
Equity investment at cost
Less: Provision for impairment of investments
173,236
(47,089)
126,147
196,325
(70,178)
126,147
Subordinated loans and other loans
Less: Provision for impairment of loans
47,309
(43,931)
3,378
129,525
46,340
(46,340)
126,147
- Retrospective restatement (Note 25(e))
- As restated
Reclassification to “Available-for-sale
financial assets” (Note 16)
Share of results
Capital reduction by associates
Dividends paid
207,538
25,798
233,336
(32)
245,914
25,798
271,712
(250)
9,110
164
(4,792)
237,786
(6,589)
8,005
(6,178)
(22,562)
(10,802)
233,336
(a) The summarised financial information of associated companies are as follows:
- Assets
- Liabilities
- Revenues
- Net profit
792,250
415,656
185,555
15,673
1,167,911
686,162
362,099
27,424
3/3/06 5:34:06 PM
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R E P O RT 2 0 0 5
17. Investments in associated companies (CONTINUED)
(b) Unrecognised share of losses of associated companies is as follows:
The Group
2005
2004
$’000
$’000
Movement in the year
14,518
(10,547)
3,971
14,386
132
14,518
(c) On 22 April 2005, the Company disposed of its 20% shareholding in Hema-OUE Otel Yatirim A.S. (“Hema-OUE”) for a cash
consideration of US$1,000,000 (S$1,670,000) payable in equal instalments in 2006 and 2007. The carrying value of the Company’s
investment in Hema-OUE is nil, resulting in a gain on disposal of $1,670,000. The gain on disposal is not recognised in the income
statement for the year ended 31 December 2005 and is deferred until the actual receipt of the sale consideration (Note 15).
Details of associated companies are included in note 36.
18. Investments in subsidiary companies/Loans to
subsidiary companies
(a) Investments in subsidiary companies:
The Company
2005
2004
$’000
$’000
Unquoted equity shares, at cost
Less: Provision for impairment of investments
119,956
(65,420)
54,536
100,056
(65,420)
34,636
(b) Loans to subsidiary companies
The Company
2005
2004
$’000
$’000
Loans to subsidiary companies
Less: Provision for impairment of loans
200,133
(72,510)
127,623
219,541
(64,980)
154,561
Loans to subsidiary companies are unsecured, interest free and repayments are not expected within the next 12 months.
On 17 June 2005, the Company subscribed to 20 million new ordinary shares of $1.00 each in its subsidiary, Hotel Investment
(Shantou) Private Limited (“HIS”), at par, thereby increasing its equity investment in HIS from $46,320,000 to $66,320,000. The
Company utilised its exisiting shareholder loan of $73,600,000 to HIS to the extent of $20,000,000 to pay for the new shares. The
Company will continue to maintain its 80% shareholding in HIS.
On 15 September 2005, the Company disposed of its 100% interest in Mandate Advertising International Pte Ltd. The cost of
investment in this subsidiary is $100,000. Details of the disposal of subsidiary are included in Note 12.
Details of subsidiary companies are included in Note 36.
3/3/06 5:34:07 PM
53
R E P O RT 2 0 0 5
19. Investment properties
The Group
2005
2004
$’000
$’000
Acquisition from a subsidiary company
Additions/reclassification from property, plant and equipment
Surplus on revaluation (Note 25(b))
136,870
2,557
4,838
144,265
134,130
2,740
136,870
The Company
2005
2004
$’000
$’000
136,870
3,383
4,012
144,265
134,130
2,740
136,870
Investment properties are stated at valuation based on independent professional valuation carried out by HVS International, a firm
of professional valuers on the basis of open market value for existing use. The surplus on revaluation has been transferred to the
revaluation reserve. It is the intention of the directors to hold the investment properties for the long term.
(a) The Group’s investment properties are:
Tenure of Land
99-year lease from Urban Redevelopment
Authority (“URA”) from16 February 1968
Overseas Union House
an 8-storey office/carpark complex at
Collyer Quay, Singapore
Change Alley Aerial Plaza
a shopping ramp of 47 shops and a tower
building at Collyer Quay, Singapore
99-year lease from URA from 2 June 1970
a shopping gallery at Meritus Mandarin
Singapore, Orchard Road, Singapore
99-year lease from The Ngee Ann Kongsi
from 1 July 1957
Cavenagh House
an apartment unit at 100 Clemenceau
Avenue North, Singapore
Freehold
Asiawide Industrial Building
2 factory/office units at 5 Pereira Road,
Singapore
Freehold
(b) The properties below were appraised at the following open market values:
Leasehold land, buildings
and improvements
Overseas Union House
Change Alley Aerial Plaza
(Mandarin Gallery)
Cavenagh House
Asiawide Industrial Building
Date of
Appraisal
Open
Market Value
2005
$’000
2004
$’000
31 December
31 December
53,000
19,000
52,000
18,000
31 December
31 December
31 December
68,000
965
3,300
144,265
66,000
870
136,870
3/3/06 5:34:07 PM
54
R E P O RT 2 0 0 5
20.Property, plant and equipment
The Group
Cost or Valuation
At 1 January 2005
Cost
Valuation (note (c)
below)
Leasehold
Land and
Leasehold
Freehold
Buildings Improvements Premises
$’000
$’000
$’000
Plant,
Machinery Furniture
Hotel Construction
and Office
and
Motor
Operating
in
Equipment Fittings Vehicles Equipment Progress Total
$’000
$’000
$’000
$’000
$’000
$’000
237,745
69,562
3,400
136,479
55,873
3,156
9,502
132
515,849
83,308
321,053
69,562
3,400
136,479
55,873
3,156
9,502
132
83,308
599,157
Exchange differences
Additions
Reclassification
Reclassified to
investment property
Adjustment
Disposal of subsidiary
companies
Disposals
9,648
273
(17,811)
4,349
-
944
-
2,380
3,593
9,882
729
6,073
7,929
79
145
-
171
1,828
-
3
(130)
-
13,010
17,075
-
(3,470)
-
-
-
-
-
At 31 December 2005
309,693
73,831
944
148,739
65,488
226,385
83,308
309,693
73,831
73,831
944
944
148,739
148,739
Representing:
Cost
Valuation
-
(80)
(3,400)
-
(504)
(3,091)
-
(3,400)
(3,470)
(1,197)
-
(808)
(9,265)
3,295
10,304
5
612,299
65,488
65,488
3,295
3,295
10,304
10,304
5
5
528,991
83,308
612,299
34,014
352
4,193
(4,691)
617
2,112
69
328
(26)
-
-
261,339
5,138
19,258
(8,120)
-
-
-
(1,079)
(18)
2,465
4,572
-
(707)
5,700
281,529
830
5,732
(271)
(4,845)
(33)
(52)
Accumulated depreciation and
accumulated impairment losses
At 1 January 2005
Depreciation charge
Disposals
Reclassification
Reclassified to
investment property
Disposal of subsidiary
companies
Impairment loss
At 31 December 2005
98,907
3,542
5,471
(1,386)
28,229
3,554
(10)
-
1,034
45
-
-
-
5,700
112,234
31,773
-
Net book value at
31 December 2005 197,459
42,058
944
(1,079)
92,927
1,105
4,875
(2,987)
769
(449)
96,240
(240)
34,245
52,499 31,243
-
4,116
70
792
(406)
-
5 330,770
3/3/06 5:34:08 PM
55
R E P O RT 2 0 0 5
20.Property, plant and equipment (CONTINUED)
The Group
Cost or Valuation
At 1 January 2004
Cost
Valuation (note (c)
below)
Additions
Disposals
At 31 December 2004
Representing:
Cost
Valuation
Leasehold
Land and
Leasehold
Freehold
Buildings Improvements Premises
$’000
$’000
$’000
Plant,
Machinery Furniture
Hotel Construction
and Office
and
Motor
Operating
in
Equipment Fittings Vehicles Equipment Progress Total
$’000
$’000
$’000
$’000
$’000
$’000
240,848
68,834
3,400
135,971
54,514
3,212
9,287
-
516,066
83,308
324,156
68,834
3,400
135,971
54,514
3,212
9,287
-
83,308
599,374
728
-
-
321,053
69,562
3,400
136,479
55,873
3,156
9,502
132
599,157
237,745
83,308
321,053
69,562
69,562
3,400
3,400
136,479
136,479
55,873
55,873
3,156
3,156
9,502
9,502
132
132
515,849
83,308
599,157
51,073
(2,077)
6,141
43,770
98,907
24,766
3,463
28,229
966
68
1,034
76,671
(452)
7,217
(3,739)
13,230
92,927
30,175
(206)
4,148
(103)
34,014
2,116
(37)
352
(319)
2,112
3,521
(41)
827
(191)
4,116
222,146
41,333
2,366
43,552
21,859 1,044
5,386
(6,417)
3,314
-
(1,591)
5,858
(3,759)
(472)
2,017
(186)
(51)
314
(319)
(112)
827
(500)
132
-
(8,643)
13,190
(4,764)
Accumulated depreciation and
accumulated impairment losses
At 1 January 2004
Depreciation charge
Disposals
Impairment loss
At 31 December 2004
Net book value at
31 December 2004
-
189,288
(2,813)
22,216
(4,352)
57,000
261,339
132 337,818
3/3/06 5:34:09 PM
56
R E P O RT 2 0 0 5
The Company
Cost or Valuation
At 1 January 2005
Cost
Valuation (note (c) below)
Leasehold
Land and
Leasehold
Buildings Improvements
$’000
$’000
20,751
83,308
104,059
68,408
68,408
104,059
4,340
(80)
72,668
20,751
83,308
104,059
72,668
72,668
Accumulated Depreciation
At 1 January 2005
Charge
Disposals
At 31 December 2005
35,808
1,320
37,128
27,719
3,516
(10)
31,225
Net book value
at 31 December 2005
66,931
Additions
Disposals
At 31 December 2005
Representing:
Cost
Valuation
The Company
Cost or Valuation
At 1 January 2004
Cost
Valuation (note (c) below)
41,443
Freehold
Premises
$’000
-
Plant,
Machinery Furniture
Hotel
and Office
and
Motor
Operating
Equipment Fittings Vehicles Equipment
$’000
$’000
$’000
$’000
77,419
77,419
39,477
39,477
487
487
4,967
4,967
944
944
2,729
(2,425)
77,723
5,298
(4,610)
40,165
487
1,674
14,985
(937) (8,052)
5,704 301,750
944
944
77,723
77,723
40,165
40,165
487
487
5,704
5,704
60,184
3,012
(2,420)
60,776
26,503
2,748
(4,472)
24,779
373
36
409
2,184 152,771
418
11,050
(348) (7,250)
2,254 156,571
944
16,947
15,386
78
67,672
67,672
75,847
75,847
39,290
39,290
627
627
104,059
736
68,408
5,161
(3,589)
77,419
325
(138)
39,477
97
(237)
487
20,751
83,308
104,059
68,408
68,408
77,419
77,419
39,477
39,477
487
487
Accumulated Depreciation
At 1 January 2004
Charge
Disposals
At 31 December 2004
34,489
1,319
35,808
24,285
3,434
27,719
60,913
2,855
(3,584)
60,184
23,978
2,601
(76)
26,503
582
28
(237)
373
Net book value
at 31 December 2004
68,251
40,689
Representing:
Cost
Valuation
17,235
12,974
114
211,509
83,308
294,817
218,442
83,308
301,750
3,450 145,179
Plant,
Leasehold
Machinery Furniture
Hotel
Land and
Leasehold
and Office
and
Motor
Operating
Buildings Improvements Equipment Fittings Vehicles Equipment
$’000
$’000
$’000
$’000
$’000
$’000
20,751
83,308
104,059
Additions
Disposals
At 31 December 2004
Total
$’000
4,852
4,852
Total
$’000
209,039
83,308
292,347
615
6,934
(500) (4,464)
4,967 294,817
4,967
4,967
211,509
83,308
294,817
2,078 146,325
297
10,534
(191) (4,088)
2,184 152,771
2,783 142,046
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57
R E P O RT 2 0 0 5
(b) The Group’s major leasehold land and buildings are:
Tenure of Land
99-year lease with The Ngee Ann Kongsi
from 1 July 1957
a 39-storey main tower with a 37-storey
south wing extension known as the
“Meritus Mandarin Singapore” at
Orchard Road, Singapore
Meritus Mandarin Haikou
a 23-storey building known as the
“Meritus Mandarin Haikou” in Haikou,
Hainan, The People’s Republic of China
70-year lease from 13 March 1989
Meritus Shantou China
a 21-storey building known as
“Meritus Shantou” in Shantou, Guangdong,
50-year lease from 23 September 1997
Roche Building
2 warehouse/office units at
30 Shaw Road, Singapore
Freehold
(c) The leasehold land and building at Orchard Road is leased from The Ngee Ann Kongsi with a remaining lease period of approximately
51 years. The land and building is stated at valuation made by the directors on 31 December 1975 at $83,308,000. This valuation
was substantially lower than the professional valuation made at that time using the earnings method. Subsequent additions to the
buildings, including the south wing extension of the main hotel at Orchard Road, are stated at cost.
(d) In accordance with paragraph 77(e) of FRS 16, the Company is required to disclose the carrying amount of the leasehold land and
buildings in the financial statements had the assets been carried at cost less depreciation. The valuation of the leasehold land and
buildings was carried out in 1975, and hence it is not possible to obtain the relevant information for such disclosure to be made in
the financial statements. In addition, paragraph 61 of FRS 12 requires deferred tax to be charged directly to equity for revaluation
credited directly to equity. It is also not possible to reasonably determine the amount of deferred tax required for the revaluation
without the relevant information. Accordingly, no deferred tax is provided for the revaluation.
(e) On 31 December 2005, the Company’s hotel property, Overseas Union Building (excluding Mandarin Shopping Arcade), was
appraised by professional valuers at open market value of $375,000,000 (2004: $281,000,000). The carrying amount of the hotel
property as at 31 December 2005 is $144,157,000 (2004: $141,932,000). This valuation has not been incorporated in the financial
statements.
(f) On 31 December 2005, the Group’s hotel property, Meritus Mandarin Haikou and Meritus Shantou Hotel, were
appraised by independent professional valuers at open market values of $64,170,000 (2004: $73,071,000) and $78,660,000
(2004: $75,240,000) respectively. The carrying amount of the hotel properties as at 31 December 2005 is $83,328,000
(2004: $87,383,000) and $88,632,000 (2004: $91,689,000) respectively. The valuation deficit of $29,130,000 (2004: $30,761,000)
has not been incorporated in the financial statements.
(g) The recoverable amounts of hotel properties, plant and equipment have been determined based on value-in-use calculations,
resulting in an impairment charge of $5,700,000 (2004: $8,000,000) for Meritus Mandarin Haikou. No impairment charge was
considered necessary for Meritus Shantou in the current year (2004: $49,000,000). These calculations use cash flow projections
determined by the independent professional valuers and the discount rate applied to these future cash flows is 8% (2004: 8%) as
determined by the management.
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58
R E P O RT 2 0 0 5
21. Trade and other payables
Trade payables to:
- associated companies
- subsidiary companies
- third parties
Non-trade payables to:
- associated companies
- subsidiary companies
Sundry creditors
Rental deposits
The Group
2005
2004
$’000
$’000
The Company
2005
2004
$’000
$’000
438
5,012
89
5,970
1,142
3,550
524
2,737
22,285
2,755
30,490
2,045
28,653
2,655
39,412
565
15,833
2,250
23,340
2,045
1,427
17,912
2,105
26,750
Included in rental deposits for the Group and the Company are rental deposits amounting to $1,898,515 (2004: $1,068,169) which
are due after 1 year.
Non-trade payables to associated and subsidiary companies are unsecured, interest free and are repayable on demand.
The carrying amounts of current trade and other payables approximate their fair value.
Trade and other payables are denominated in the following currencies:
The Group
2005
2004
$’000
$’000
Singapore dollars
United States dollars
Renminbi
Others
25,730
3,963
797
30,490
26,546
2,296
9,591
979
39,412
The Company
2005
2004
$’000
$’000
23,340
23,340
24,705
2,045
26,750
22. Borrowings
The Group
2005
2004
$’000
$’000
Current
Bank loan (Note (a))
Non-current
Bank loan (Note (a))
Loan from a minority shareholder
of a subsidiary company (Note (b))
Total Borrowings
26,893
-
-
20,812
13,400
13,400
18,400
39,212
40,293
39,212
(a) The bank loan is unsecured and interest is payable at 1.2% (2004: 1.2%) over SIBOR per annum. The loan is repriced on a monthly
basis, repayable on 16 January 2006. The loan is currently still being negotiated. The loan is denominated in USD (2004: USD).
The weighted average effective interest rate of the bank loan as at 31 December 2005 is 4.54% (2004: 2.7%) per annum.
The directors are of the opinion that the carrying amount of the bank loan approximates its fair value.
(b) The loan from a minority shareholder of a subsidiary company is unsecured, interest-free and has no fixed terms of repayment, but
repayment is not expected within the next twelve months.
The directors are of the opinion that the carrying amount of the loan from a minority shareholder of a subsidiary approximates its
fair value.
3/3/06 5:34:13 PM
59
R E P O RT 2 0 0 5
23. Deferred income taxes
Deferred income taxes are calculated in full on temporary differences under the liability method using a principal tax rate
of 20% (2004: 20%).
Deferred income 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 the deferred income taxes relate to the same fiscal authority. The amounts, determined after
appropriate offsetting, are shown on the balance sheets as follows:
The Group
The Company
2005
2004
2005
2004
$’000
$’000
$’000
$’000
Deferred income tax assets:
- to be recovered within one year
- to be recovered after one year
Deferred income tax liabilities:
- to be recovered within one year
- to be recovered after one year
Net deferred income tax liabilities
(327)
(327)
(443)
(443)
-
-
1,905
10,750
12,655
10,258
10,258
1,905
10,748
12,653
10,098
10,098
12,328
9,815
12,653
10,098
The movement in the deferred income tax account is as follows:
The Group
2005
2004
$’000
$’000
Effect of changes in accounting policies
Effect of changes in tax rates
Tax charge to:
- Income statement (Note 8)
- Equity
- Fair value reserve (Note 25(d))
The Company
2005
2004
$’000
$’000
9,815
1,720
(159)
9,361
(851)
-
10,098
1,720
-
767
1,305
650
1,366
185
12,328
9,815
185
12,653
10,098
9,605
(873)
-
Deferred income tax assets are recognised for tax losses carried forward to the extent that realisation of the related
tax benefits through future taxable profits is probable. The Group has unrecognised tax losses and capital allowances of
$111,232,000 and $2,513,000 (2004: $64,935,000 and $2,820,000) respectively which can be carried forward and used to
offset against future taxable income subject to meeting certain statutory requirements by those companies with unrecognised
tax losses and capital allowances in their respective countries of incorporation. The deferred income tax asset of $37,200,392
(2004: $22,159,326) arising from the tax losses and capital allowance has not been recognised.
3/3/06 5:34:14 PM
60
R E P O RT 2 0 0 5
23.Deferred income taxes (CONTINUED)
The movement in the deferred income tax assets and liabilities (prior to offsetting of balances within the same tax jurisdiction)
during the period is as follows:
The Group
Deferred income tax liabilities
Accelerated
tax
depreciation
$’000
Fair
value
gain
$’000
Others
$’000
Total
$’000
2005
Effect of changes in accounting policy
Charged to:
- Income statement
- Equity
10,162
-
1,720
96
-
10,258
1,720
651
(159)
10,654
185
1,905
96
651
185
(159)
12,655
2004
Charged to income statement
9,662
(878)
1,378
10,162
-
106
(10)
96
9,768
(888)
1,378
10,258
Others
$’000
Total
$’000
Provisions
$’000
2005
(443)
116
(327)
-
(443)
116
(327)
2004
Credited to income statement
(472)
43
(14)
(443)
65
(6)
(59)
-
(407)
37
(73)
(443)
Accelerated
tax
depreciation
$’000
Fair
value
gain
$’000
Others
$’000
Total
$’000
10,170
-
1,720
(72)
-
10,098
1,720
682
10,852
185
1,905
(32)
(104)
650
185
12,653
-
(98)
9
17
(72)
9,605
(873)
1,366
10,098
The Company
Deferred income tax liabilities/(assets)
2005
Effect of changes in accounting policy
Charged to:
- Income statement
- Equity - Fair value reserve (Note 25(d))
2004
9,703
(882)
1,349
10,170
3/3/06 5:34:15 PM
61
R E P O RT 2 0 0 5
24. Share capital and share premium
Number
of shares
‘000
The Company
2005 and 2004
Share
Share
capital premium
$’000
$’000
Total
$’000
Authorised
Ordinary shares of $1 each
500,000
500,000
-
500,000
Issued and fully paid
Ordinary shares of $1 each
176,320
176,320
312,565
488,885
25. Other reserves
(a) Other reserves comprise:
The Group
2005
2004
$’000
$’000
Revaluation reserve
Translation reserve
Fair value reserve
Other capital reserves
Other distributable reserves
176,830
(38,485)
323,142
25,798
487,285
171,828
(44,472)
25,798
153,154
The Company
2005
2004
$’000
$’000
150,089
323,142
473,231
146,077
146,077
Other reserves are non-distributable.
(b) Movements in revaluation reserve are as follows:
The Group
2005
2004
$’000
$’000
Surplus on revaluation
The Group’s share of changes in revaluation
reserve of associated companies
The Company
2005
2004
$’000
$’000
171,828
4,838
175,266
2,740
146,077
4,012
143,337
2,740
164
176,830
(6,178)
171,828
150,089
146,077
(c) Movements in translation reserve are as follows:
The Group
2005
2004
$’000
$’000
- Effects of adoption of FRS 21 adjusted
retrospectively (Note 3.1)
- As restated
Exchange differences on consolidation
Exchange differences on translation of long term loans
Exchange differences on equity accounting for
associated companies
The Company
2005
2004
$’000
$’000
(44,472)
(38,920)
(7,761)
(6,043)
(44,472)
4,590
1,409
(38,920)
(3,683)
(1,657)
7,761
-
6,043
-
(12)
(38,485)
(212)
(44,472)
-
-
3/3/06 5:34:16 PM
62
R E P O RT 2 0 0 5
25. Other reserves (CONTINUED)
(d) Movements in fair value reserve are as follows:
The Group
2005
2004
$’000
$’000
- Effects of adoption of FRS 39 adjusted
prospectively (Note 3.3)
- Tax on fair value gains
- As restated
Fair value gains on available-for-sale
financial assets (Note 16)
Tax on fair value gains
Transfer to income statement
-
-
The Company
2005
2004
$’000
$’000
-
-
268,559
(1,720)
266,839
-
268,191
(1,720)
266,471
-
59,159
(185)
58,974
(2,671)
323,142
-
59,112
(185)
58,927
(2,256)
323,142
-
(e) Movements in other capital reserves are as follows:
The Group
2005
2004
$’000
$’000
- As restated
25,798
25,798
25,798
25,798
25,798
25,798
The retrospective restatement relates to the Group’s share of capital reserve of an associated company, which had not been
taken up in prior years in the consolidated financial statement as required by FRS 28 - Investment in Associates. The effects of
this retrospective restatement are to increase the carrying value of the Group’s investment in associated companies and the other
capital reserves by $25,798,000 as at 31 December 2004 and 31 December 2005.
(f) Movements in other distributable reserves are as follows:
The Group
2005
2004
$’000
$’000
Transfer to retained earnings
-
664,427
(664,427)
-
The Company
2005
2004
$’000
$’000
-
484,022
(484,022)
-
3/3/06 5:34:17 PM
63
R E P O RT 2 0 0 5
26. Retained Earnings
Movements in the retained earnings of the Company are as follows:
The Company
2005
2004
$’000
$’000
- Effects of changes in accounting policies
adjusted restrospectively (Note 3.1)
- As restated
Net profit for the financial year
- Effects of changes in accounting policies adjusted
restrospectively (Note 3.1)
- As restated
Transfer from other distributable capital reserve
Dividends paid (Note 27)
655,303
185,180
(7,761)
647,542
(6,043)
179,137
70,617
(22,570)
695,589
3,028
(1,718)
1,310
484,022
(16,927)
647,542
Movements in the retained earnings of the Group are shown in the Consolidated Statement of Changes in Equity.
27. Dividends
(a)
The Group and
The Company
2005
2004
$’000
$’000
Ordinary dividends paid:
Final of 6 cents per share less tax at 20% paid in respect
of financial year ended 31 December 2004
(2004: Final of 6 cents per share less tax of 20%
paid in respect of financial year ended
31 December 2003)
Special of 4 cents per share less tax at 20% paid in respect
of financial year ended 31 December 2004 (2004: Nil)
Interim of 6 cents per share less tax at 20% paid in respect
of financial year ended 31 December 2005
(2004: Interim of 6 cents per share less tax at 20%
paid in respect of financial year ended 31 December 2004)
8,463
8,463
5,643
-
8,464
22,570
8,464
16,927
(b) The Directors have proposed a final dividend for 2005 of 6 cents per share and a special dividend of 200 cents per share amounting
to $290,576,000 net of tax at 20% and a special tax exempt (one-tier) dividend of 160 cents per share amounting to $282,112,000
for approval by the shareholders at the Annual General Meeting on 11 April 2006. These financial statements do not reflect this
dividend payable, which will be accounted for in the shareholders’ equity as an appropriation of retained earnings in the financial
year ending 31 December 2006.
3/3/06 5:34:17 PM
64
R E P O RT 2 0 0 5
28. Contingent liabilities (unsecured)
As at 31 December 2005, the Company and the Group have the following contingent liabilities:
(a) The Company has given a guarantee for a bank loan granted to Meritus Shantou Hotel Co., Ltd, a subsidiary company
of Hotel Investment (Shantou) Private Limited, amounting to US$25 million (2004: US$25 million) equivalent to S$41.8 million
(2004: S$40.9 million), of which US$16.0 million (2004: US$12.7 million) was drawndown at the balance sheet date. The
Company’s obligation is limited to 80% of the bank loan granted.
(b) As at 31 December 2005, there is a legal claim of $32,217,000 brought against Singapore Meritus International Hotels Pte Ltd
by Riveira Bay Resort Condominiums Sdn Bhd. The claim is a counter claim in response to a legal claim by Singapore Meritus
International Hotels Pte Ltd for wrongful early termination of a management contract. In the opinion of the directors, after
taking appropriate legal advice, the outcome of this counter claim is not expected to succeed.
The Company has given continuing financial support to OUE Trading Private Limited, Overseas Union Enterprise Sdn Bhd, Meritus
Mandarin Haikou and Meritus Shantou China.
The directors are of the opinion that there are unlikely to have any losses arising from any of the above contingent liabilities.
29. Commitments
(a) As at 31 December 2005, the Group and the Company have the following capital commitments:
Expenditure contracted for
The Group
2005
2004
$’000
$’000
The Company
2005
2004
$’000
$’000
8,113
8,108
8,806
7,937
(b) As at 31 December 2005, the Group has a commitment of $120,285 (2004: $123,849) in connection with the called but unpaid
share capital of its subsidiary, SMI Services (Thailand) Co., Ltd.
(c) Operating lease commitments - where a Group company is a lessee
The Group has lease commitments in respect of lease of land up to October 2020 at an annual rental expense presently of $56,055
(2004: $56,055). The lease rentals are subject to review annually.
In addition, the future aggregate minimum lease payments under non-cancellable operating leases contracted for at the reporting
date but not recognised as liabilities, are as follows:
The Group
The Company
2005
2004
2005
2004
$’000
$’000
$’000
$’000
Not later than 1 year
Later than 1 year but not later than 5 years
Later than 5 years
129
315
470
914
184
510
556
1,250
73
127
200
73
174
247
(d) Operating lease commitments - where a Group company is a lessor
The future minimum lease payments receivable under non-cancellable operating leases contracted for at the reporting date but
not recognised as receivables are as follows:
The Group
The Company
2005
2004
2005
2004
$’000
$’000
$’000
–
Not later than 1 year
Later than 1 year but not later than 5 years
Later than 5 years
5,118
2,281
7,399
8,166
2,543
10,709
4,636
2,035
6,671
7,585
2,502
10,087
3/3/06 5:34:18 PM
65
R E P O RT 2 0 0 5
30.Financial risk management
Financial risk factors
The Group’s main financial risks comprise foreign exchange risk, interest rate risk, credit risk and liquidity risk. Risk management is
carried out by Group management under policies approved by the Board of Directors. While the Group’s overall risk management
seeks to minimise potential adverse effects on the financial performance of the Group, its policy prohibits it to enter into speculative
transactions.
(i)
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures primarily
with respect to US Dollars, Chinese Renminbi,Thai Baht and Malaysian Ringgit. The Group management monitors the Group’s
foreign currency risk exposure and, when appropriate, uses forward contracts to hedge such exposure.
The Company has a number of investments in foreign subsidiaries and associated companies whose net assets are exposed
to currency translation risk. Currency exposure to the net assets of the Group’s subsidiaries and associated companies are
mainly in Malaysia and The People’s Republic of China.
(ii) Interest rate risk
Cash held by the Company in excess of operating requirements is placed with financial institutions as fixed deposits. To
maximise the potential gain on interest income, the Company monitors the interest rate movements and then looks into
available funds at any point in time at the best possible rate available at the time.
The Group sometimes borrows at variable rates and uses interest rate swaps as cash flow hedges of future interest payments,
which have the economic effect of converting borrowings from floating rates to fixed rates.
(iii) Credit risk
The Group has no significant concentration of credit risk. The Group has policies in place to ensure that sales of products and
services are made to customers with an appropriate credit history.
Concentrations of credit risk with respect to trade receivables are limited due to the Group’s large number of customers, who
are internationally dispersed. Due to these factors, management believe that no additional credit risk beyond the amount of
allowance for impairment made is inherent in the Group’s and Company’s trade receivables.
(iv) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding
through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic
nature of the underlying businesses, Group management aims at maintaining flexibility in funding by keeping committed credit
lines available.
(v) Market risk
The Group is exposed to equity securities market risk because of the investments held. The Group is not exposed to
commodity market risk.
(vi) Carrying amounts and fair values
The carrying amounts of the following financial assets and liabilities approximate to their fair value: cash and cash equivalents,
trade and other receivables, trade and other payables.
The fair value of borrowings is disclosed in Note 22.
3/3/06 5:34:19 PM
66
R E P O RT 2 0 0 5
31. Related party transactions
(a) Related party transactions were mainly with a substantial shareholder, United Overseas Bank Limited and its subsidiary and
associated companies (“UOB Group”). In addition to acting as a banker providing banking and other related services, the UOB
Group also provided insurance and financial services to the Group.
The Company leased out premises and its subsidiary companies provided advertising, commercial laundry and property management
services to the UOB Group.
(b) During the year, the Group provided advertising and hotel management services to its associated companies.
The following significant transactions took place between the Group and related parties during the financial year on terms agreed
between the parties concerned:
The Group
2005
2004
$’000
$’000
With UOB Group
Interest income earned on fixed deposits
Interest on loans and overdrafts paid/payable
Rental income earned on lease of premises
Revenue from commercial laundry services
Revenue from advertising services
Sale of goods
Insurance premium paid
Purchase of plant and equipment
3,536
1,085
1,063
1,765
539
266
168
931
1,195
555
1,063
1,452
632
512
324
653
With associated companies
Management fees earned
Purchase of freehold premises
Sale of goods
Revenue from advertising services
Revenue from commercial laundry services
2,818
923
366
31
498
2,939
6
402
51
26,893
242,768
20,812
194,323
(c) As at the balance sheet date, outstanding balances with the UOB Group comprise:
Bank overdrafts and loans
Bank balances, fixed deposits and accounts receivable
(d) The Company made loans to subsidiaries and associated companies as disclosed in Notes 17 and 18 of the financial statements.
(e) Key management personnel remuneration
Key management personnel remuneration is as follows:
The Group
2005
2004
$’000
$’000
Salaries and other short-term employee benefits
1,784
2,561
Total compensation to directors of the Company included in above amounted to $390,000 (2004: $878,000).
The remuneration for 2004 included ex-gratia payment of $297,000 paid to an executive director, who retired from the office in
recognition of his long service and contributions.
3/3/06 5:34:20 PM
67
R E P O RT 2 0 0 5
31. Related party transactions (CONTINUED)
(f) Directors’ and Executive remuneration
Number of directors and top five executives of the Company in each remuneration band:
Remuneration Bands
Number of
Directors
2005
2004
$500,000 and above
$250,000 to $499,999
Below $250,000
Total
Number of
Executives
2005
2004
9
9
1
8
9
2
3
5
Other
Investments
$’000
Others
$’000
2
3
5
32. Segment information
(a) Primary reporting format - business segments
Financial year ended
31 December 2005
Revenue
External revenue
Inter-segment revenue
Total revenue
Hotel
Property
Operations Investments
$’000
$’000
11,020
410
11,430
47,481
47,481
Segment Results
19,041
6,509
50,643
Exceptional items
(5,700)
-
4,212
Profit/(Loss) before finance
expense, share of results
from associated companies
and tax
13,341
6,509
54,855
(2,797)
-
(5)
(1,085)
-
9,110
(1,078)
(2)
1,152
7,958
-
Profit/(Loss) before tax
13,415
14,465
54,855
(2,797)
-
(2,802)
(2,705)
(2,705)
Group
$’000
124,783
31
124,814
Finance expense
Share of results of associated
companies
15,453
2,264
17,717
Elimination
$’000
198,737
198,737
73,396
(1,488)
71,908
79,933
Income tax expense
(16,579)
Profit after tax
63,354
Segment assets
Unallocated assets
Total consolidated assets
Segment liabilities
Unallocated liabilities
Total consolidated
liabilities
Other segment items
Capital expenditure
Depreciation
Impairment charge on property,
plant and equipment
356,379
26,482
382,861
154,919
211,304
366,223
1,076,813
1,076,813
9,097
9,097
1,597,208
237,786
327
1,835,321
50,847
-
19,674
-
-
676
-
71,197
20,199
50,847
19,674
-
676
91,396
15,951
18,490
1,007
59
-
117
709
17,075
19,258
5,700
-
-
-
5,700
3/3/06 5:34:21 PM
68
R E P O RT 2 0 0 5
32. Segment information (CONTINUED)
(b) Primary reporting format - business segments
Financial year ended
31 December 2004
Revenue
External revenue
Inter-segment revenue
Total revenue
Segment Results
Hotel
Property
Operations Investments
$’000
$’000
Other
Investments
$’000
115,709
115,709
9,977
351
10,328
40,612
40,612
12,907
3,230
39,762
Others
$’000
17,195
2,846
20,041
(37)
Exceptional items
(57,000)
-
7,135
Profit/(Loss) before finance
expense, share of results
from associated companies
and tax
(44,093)
3,230
46,897
(37)
(557)
-
-
(2)
1,133
6,872
-
-
(43,517)
10,102
46,897
Finance expense
Share of results of associated
companies
Profit/(Loss) before tax
-
(39)
Elimination
$’000
(3,197)
(3,197)
Group
$’000
183,493
183,493
55,862
(49,865)
5,997
(559)
8,005
13,443
Income tax expense
(12,198)
Profit after tax
1,245
Segment assets
Unallocated assets
Total consolidated assets
Segment liabilities
Unallocated liabilities
Total consolidated
liabilities
Other segment items
Capital expenditure
Depreciation
Impairment charge on property,
plant and equipment
357,202
25,911
383,113
150,513
207,425
357,938
700,115
700,115
15,682
15,682
1,223,512
233,336
443
1,457,291
71,626
-
4,354
-
-
2,682
-
78,662
15,360
71,626
4,354
-
2,682
94,022
12,855
21,179
19
185
-
316
852
13,190
22,216
57,000
-
-
-
57,000
3/3/06 5:34:22 PM
69
R E P O RT 2 0 0 5
32. Segment information (CONTINUED)
(c) Secondary reporting format - geographical segments
Sales
Singapore
Others
2005
$’000
2004
$’000
172,076
24,123
2,538
198,737
156,346
23,443
3,704
183,493
Unallocated assets
Total assets
2005
2004
$’000
$’000
1,408,850
184,776
3,582
1,597,208
237,786
327
1,835,321
1,029,169
191,021
3,322
1,223,512
233,336
443
1,457,291
Capital expenditure
2005
2004
$’000
$’000
15,478
1,597
17,075
7,247
5,927
16
13,190
(d) The above segmental information has been compiled in a consistent manner. The division of the Group’s results, assets and liabilities
into business activity segments has been ascertained by reference to direct identification of assets and liabilities and revenue/cost
centres. Inter-segment transactions are determined on an arm’s length basis.
(e) Revenue from the above business segments is derived as follows:
(i)
Hotel operations - operation of Meritus Mandarin Singapore, Meritus Mandarin Haikou and Meritus Shantou, restaurant and
hotel operations and management including marketing and promotion of service apartments and other hotels.
(ii) Property investments - rental income from the letting of commercial offices and shops at the Meritus Mandarin Singapore,
Overseas Union House and Change Alley Aerial Plaza.
(iii) Other investments - dividend income.
(iv) Others - income from advertising, printing, trading and commercial laundry operations.
(f) Geographical segmental information is based on the principal areas of operations by the Group.
33. Events occurring after balance sheet date
The Company sold a significant portion of its investments in available-for-sale financial assets subsequent to the balance sheet date
for a total gross consideration of $378,838,000. The net gain arising from the sale amounted to $128,223,000.
34. New accounting standards and FRS Interpretations
Certain new accounting standards and interpretations have been published that are mandatory for accounting periods beginning
on or after 1 January 2006. The Group’s assessment of those standards and interpretations that are relevant to the Group is set
out below.
- FRS 40, Investment Property
The Group will adopt FRS 40 on 1 January 2007, which is the effective date of the Standard.
Currently, investment properties are accounted for under FRS 25 Investments as set out in Note 2.5. Under FRS 40, changes in fair
values of investment properties are required to be included in the income statement. On transition to FRS 40 on 1 January 2007,
the asset revaluation reserve at 31 December 2006 will be adjusted against the opening retained earnings at 1 January 2007; and
correspondingly, for the comparative figures, the asset revaluation reserve as at 31 December 2005 of $96,604,000 will be adjusted
against the opening retained earnings at 1 January 2006.
35. Authorisation of financial statements
These financial statements were authorised for issue in accordance with a resolution of the Board of Directors of Overseas Union
Enterprise Limited on 18 February 2006.
3/3/06 5:34:23 PM
70
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36. Listing of Companies in the Group
Subsidiary
companies
Country of
Incorporation
and Business
Hotel management
Singapore
Meritus Hotels & Resorts
Sdn. Bhd.(a)
Hotel management
Marketing Services Sdn. Bhd.(a)
Cathay International Hotels &
Resorts Management Pte Ltd(f)
Name of Company
% of Paid-up Capital held by
The Company
Subsidiaries
2005
2004
2005
2004
%
%
%
%
Subsidiary companies
Singapore Mandarin
International Hotels Pte Ltd
100
100
-
-
Malaysia
-
-
70
70
Hotel promoters
Malaysia
-
-
100
100
Dormant
Singapore
-
-
100
100
Singapore Meritus International Hotel management
Hotels Pte Ltd
Singapore
100
100
-
-
Limited(a)
Marketing and promotion
of hotels and resorts
Hong Kong
-
-
100
100
Meritus Hospitality Services
(Thailand) Co., Ltd(a)
Managers and operators
of service apartments
Thailand
-
-
49(b)
49(b)
SMI Services (Thailand)
Co., Ltd(a)
Managers and operators
of food & beverage outlets
Thailand
-
-
49(b)
49(b)
Meritus Hospitality
Services Pte Ltd(f)
Dormant
Singapore
100
100
-
-
Mandate Advertising
International Pte Ltd
Advertising agent
and printer
Singapore
-
100
-
-
Mandate-Saga Advertising
International Sdn Bhd
Advertising agent
Malaysia
-
-
-
100
OUE Trading Private Limited
Trading and commission
agent and commercial
laundry operator
Singapore
100
100
-
-
e-magination.com Pte Ltd(f)
Dormant
Singapore
-
-
100
100
Hotel Investment (Marina)
Private Limited
Investment holding
Singapore
100
100
-
-
Mandarin Hotel (Singapore)
Private Limtied(f)
Dormant
Singapore
100
100
-
-
Overseas Union Enterprise
Sdn Bhd(f)
In the process
of striking off
Malaysia
100
100
-
-
Hotel Investment (Hainan)
Private Limited
Investment holding
Singapore
100
100
-
-
3/3/06 5:34:24 PM
71
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36. Listing of Companies in the Group (CONTINUED)
Name of Company
Subsidiary
companies
Country of
Incorporation
and Business
% of Paid-up Capital held by
The Company
Subsidiaries
2005
2004
2005
2004
%
%
%
%
Subsidiary companies (Continued)
-
-
100
100
80
80
-
-
The People’s
Republic of China
-
-
99
99
Hotel management
The People’s
Republic of China
-
-
100
100
ASPAC Investments
Corporation(c)
Property investment
The United States
of America
50
50
-
-
Capital Hotel Co., Ltd
Hotel operation
The People’s
Republic of China
-
25
-
-
Chung Sing Development
(H.K.) Limited(d)
Investment holding
Hong Kong
50
50
-
-
Hema-OUE Otel Yatirim A.S.
Hotel under construction
Turkey
-
20
-
-
OUB Centre Limited
Property investment
Singapore
50
50
-
-
Overseas Union Land
Pte Ltd (in members’
Voluntary Liquidation)
Investment holding
Singapore
49.5
49.5
-
-
TCB OUE Sdn. Bhd.
(formerly known as
Pernas OUE Sdn. Bhd.)(a)
Investment holding
Malaysia
30
30
-
-
Weslia Pty Limited(a)
Property investment
Australia
50
50
-
-
Aquamarina Hotel Pte Ltd
Hotel operation
Singapore
-
-
25(e)
25(e)
Hainan Mandarin
Hotel Limited(a)
Hotel operation
The People’s
Republic of China
Hotel Investment (Shantou)
Private Limited
Investment holding
Singapore
Meritus Shantou Hotel
Co., Ltd(a)
Hotel operation
Meritus Hotels & Resort
(Hainan) Company Limited(a)
All subsidiary companies and associated companies are audited by PricewaterhouseCoopers, Singapore except as indicated below:
(a)
(b)
(c)
(d)
(e)
Companies audited by other members of the worldwide PricewaterhouseCoopers organisation.
The Group holds more than half of the voting rights in these companies and consequently, it has the power to govern the financial and operating policies
of these companies.
Audited by Perry Hay & Chu LLP.
Audited by Deloitte Touche, Hong Kong.
Shares held by Hotel Investment (Marina) Private Limited.
(f)
Not required to be audited under the laws of the country of incorporation.
3/3/06 5:34:25 PM
72
R E P O RT 2 0 0 5
As At 20 February 2006
ISSUED AND PAID-UP CAPITAL
CLASS OF SHARES
:
:
$488,885,206
Ordinary
Voting Rights of Ordinary Shareholders
Every member shall have the right to attend any General Meeting and to speak and vote on any resolution before the Meeting in
person or by proxy. On a show of hands every member present in person or by proxy shall have one vote, provided that if a member
is represented by two proxies only one of the proxies shall be entitled to vote and on a poll, every member present in person or by
proxy shall have one vote for each share he holds.
Breakdown of Shareholdings
Size of
Shareholdings
Number of
Shareholders
% of
Shareholders
Number of
Shares
% of Issued
Share Capital
1 - 999
1,000 - 10,000
10,001 - 1,000,000
1,000,001 and above
147
1,653
247
10
7.15
80.36
12.01
0.48
60,469
4,700,901
17,314,501
154,244,501
0.03
2.67
9.82
87.48
TOTAL
2,057
100.00
176,320,372
100.00
Number of
Shares
% of Issued
Share Capital
42,795,930
32,520,594
20,694,123
16,427,145
15,848,853
11,116,496
10,076,250
1,994,546
1,673,619
1,096,945
650,000
646,780
600,000
577,299
572,983
567,000
550,688
543,000
463,000
446,687
24.27
18.44
11.74
9.32
8.99
6.30
5.71
1.13
0.95
0.62
0.37
0.37
0.34
0.33
0.32
0.32
0.31
0.31
0.26
0.25
159,861,938
90.65
Twenty Largest Shareholders
Name of Shareholder
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
UNITED OVERSEAS BANK LIMITED
OVERSEAS UNION BANK NOMINEES (PTE) LTD
UNITED OVERSEAS BANK NOMINEES (PRIVATE) LIMITED
CITIBANK NOMINEES SINGAPORE PTE LTD
DBS NOMINEES PTE LTD
RAFFLES NOMINEES PTE LTD
OVERSEAS UNION INSURANCE, LTD
HSBC (SINGAPORE) NOMINEES PTE LTD
TEE TEH SDN BERHAD
GAN TECK YEOW SDN BHD
ESTATE OF LO KWANG PHENG, DECEASED
GAN TECK KAR SDN BHD
GAN TECK YEE SDN BERHAD
KIM ENG SECURITIES PTE LTD
MORGAN STANLEY ASIA (SINGAPORE)
HOTEL NEGARA LIMITED
ABN AMRO NOMINEES SINGAPORE PTE LTD
MORPH INVESTMENTS LTD
UOB KAY HIAN PTE LTD
ENG GUAN CHAN SDN BHD
TOTAL
3/3/06 5:34:26 PM
73
R E P O RT 2 0 0 5
As Shown In The Company’s Register Of Substantial Shareholders As At 20 February 2006
Direct Interests
Number of
% of Issued
Shares
Share Capital
1.
United Overseas Bank
Limited (“UOB”)
2.
Deemed Interests
Number of
% of Issued
Shares
Share Capital
42,795,930
24.27
56,611,003(1)
32.10
Overseas Union Holdings
Private Limited (“OUH”)
-
-
40,175,368(2)
22.78
3.
Overseas Union Trust
Limited (“OUT”)
-
-
40,175,368(3)
22.78
4.
Overseas Union Insurance
Limited (“OUI”)
10,076,250
5.71
8,207,899(4)
4.66
5.
Third Avenue Management
LLC (“TAM”)
-
-
22,105,000(5)
12.54
6.
Third Avenue International
Value Fund (“TAVIX”)
9,594,000
5.44
-
-
Notes:
1.
UOB is deemed to be interested in the Shares held by:
(a) Client Portfolios managed by UOB Asset Management Ltd (Discretionary);
(b) United International Securities Limited;
(c) UOB Life Assurance Limited;
(d) United Overseas Insurance Limited;
(e) OUH;
(f) Hotel Negara Limited;
(g) Overseas Union Facilities (Private) Limited;
(h) OUI; and
(i) Tye Hua Nominees (Pte) Limited for UOB.
2.
OUH is deemed to be interested in the Shares held by Hotel Negara Limited, Overseas Union Bank Nominees (Pte) Limited for Overseas Union Facilities
(Private) Limited, OUI and Overseas Union Bank Nominees (Pte) Limited for OUH.
3.
OUT is deemed to be interested in the Shares held by Hotel Negara Limited, Overseas Union Bank Nominees (Pte) Limited for Overseas Union Facilities
(Private) Limited, OUI and Overseas Union Bank Nominees (Pte) Limited for OUH.
4.
OUI is deemed to be interested in the Shares held by Overseas Union Bank Nominees (Pte) Limited for Overseas Union Facilities (Private) Limited.
5.
TAM is deemed to be interested in Shares held on behalf of numerous portfolios, including TAVIX.
3/3/06 5:34:27 PM
74
R E P O RT 2 0 0 5
Public Float
Rule 723 of the Listing Manual of the Singapore Exchange Securities Trading Limited (“the Exchange”) requires that at least 10% of the
equity securities (excluding preference shares and convertible equity securities) of a listed company in a class that is listed is at all times
held by the public. The Company has complied with this requirement. As at 20 February 2006, approximately 30.29% of its Shares listed
on the Exchange were held in the hands of the public.
3/3/06 5:34:28 PM
75
R E P O RT 2 0 0 5
Entered Into During The Financial Year 2005
Aggregate value of all interested
person transactions (excluding
transactions less than $100,000
and transactions conducted under
shareholders’ mandate pursuant to
Rule 920)
Aggregate value of all interested
person transactions conducted
under shareholders’ mandate
pursuant to Rule 920 (excluding
transactions less than $100,000)
$1,275,3491
-
United Venture Furnishings
Pte Ltd
$930,6782
-
Ampat Industrial Pte Ltd
$923,0003
-
Name of
interested
person
Hotel Negara Limited
1.
In respect of provision of hotel management services.
2.
Being purchase of furniture and fittings.
3.
Being purchase of two industrial units.
3/3/06 5:34:28 PM
76
R E P O RT 2 0 0 5
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the Forty-Third Annual General Meeting of Overseas Union Enterprise Limited will be held
at Meritus Mandarin Singapore, Mandarin Court D, 4th Floor, Grand Tower, 333 Orchard Road, Singapore 238867, on Tuesday,
11 April 2006 at 11.00a.m. to transact the following business:
AS
ORDINARY BUSINESS
1.
To receive and adopt the Directors’ Report and Financial Statements for the year ended 31 December 2005.
2.
To declare a final dividend of 6 cents per ordinary share less income tax, a special dividend of $2.00 per ordinary share less income
tax and a special tax exempt (one-tier) dividend of $1.60 per ordinary share for the year ended 31 December 2005.
3.
To approve Directors’ Fees of $390,000 for 2005 (2004: $380,000).
4.
To pass the following resolutions separately under Section 153(6) of the Companies Act, Cap. 50:
“That pursuant to Section 153(6) of the Companies Act, Cap. 50, _____________ be and is hereby re-appointed a Director of the
Company to hold such office until the next Annual General Meeting of the Company.”
in respect of:
(a) re-appointment of Mr Wee Cho Yaw
(b) re-appointment of Mr Lim Boon Kheng.
5.
To re-elect the following Directors retiring by rotation:
(a) Mr Gwee Lian Kheng
(b) Mr Lo Ping.
6.
To re-appoint Auditors and to authorise Directors to fix their remuneration.
7.
To transact any other business of an Annual General Meeting.
AS
SPECIAL BUSINESS
8.
To consider and, if thought fit, pass the following resolution as Ordinary Resolution:
“That pursuant to Section 161 of the Companies Act, Cap. 50 and Rule 806(2) of the Listing Manual of the Singapore Exchange
Securities Trading Limited, authority be and is hereby given to the Directors to allot and issue shares in the capital of the Company
(whether by way of rights, bonus or otherwise) at any time and upon such terms and conditions and for such purposes and to
such persons as the Directors may in their absolute discretion deem fit, provided that the aggregate number of shares to be
allotted and issued pursuant to such authority shall not exceed fifty per cent (50%) of the issued share capital of the Company
for the time being, of which the aggregate number of shares to be allotted and issued other than on a pro rata basis to the then
existing shareholders of the Company shall not exceed twenty per cent (20%) of the issued share capital of the Company for the
time being, and, unless revoked or varied by the Company in general meeting, such authority shall continue in full 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.”
By Order of the Board
PHILIP FOO JOON KIM
Secretary
Singapore, 13 March 2006
3/3/06 5:34:28 PM
77
R E P O RT 2 0 0 5
NOTICE OF ANNUAL GENERAL MEETING
EXPLANATORY
NOTES TO RESOLUTIONS
4, 5
AND
8
Resolution 4(a)
To re-appoint Mr Wee Cho Yaw, who is non-independent. Mr Wee is Chairman of the Board and of the Remuneration Committee, as
well as a member of the Nominating Committee.
Resolution 4(b)
To re-appoint Mr Lim Boon Kheng, who is independent.
Resolution 5(a)
To re-elect Mr Gwee Lian Kheng, who is non-independent and non-executive. Mr Gwee is Chairman of the Management Committee
and a member of the Nominating Committee.
Resolution 5(b)
To re-elect Mr Lo Ping, who is independent.
Resolution 8
Resolution No. 8, if passed, will empower the Directors of the Company to issue additional shares in the Company without seeking
any further approval from members in general meeting but within the limitations imposed by the resolution, for such purposes as they
consider would be in the interest of the Company. This authority will, unless previously revoked or varied at a general meeting, expire
at the conclusion of the next Annual General Meeting of the Company or the period within which the next Annual General Meeting is
required by law to be held, whichever is the earlier.
Notes:
1.
A member entitled to attend and vote at a meeting of the Company is entitled to appoint not more than two proxies to attend and vote on his behalf.
A proxy need not be a member of the Company.
2.
The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 333 Orchard Road, 6th Storey,
Singapore 238867, not less than 48 hours before the time set for the meeting.
3.
The instrument appointing a proxy or proxies must be under the hand of the appointer or of his attorney duly authorised in writing. Where the instrument
appointing a proxy or proxies is executed by a corporation, it must be executed under its common seal or under the hand of its officer or attorney duly
authorised.
3/3/06 5:34:29 PM
78
R E P O RT 2 0 0 5
This page is intentionally left blank
3/3/06 5:34:30 PM
PROXY FORM
79
R E P O RT 2 0 0 5
IMPORTANT:
1. For investors who have used their CPF monies to buy
Overseas Union Enterprise Limited shares, the Annual
Report is forwarded to them at the request of their
CPF Approved Nominees and is sent solely FOR
INFORMATION ONLY.
2. This Proxy Form is not valid for use by CPF Investors
and shall be ineffective for all intents and purposes if
used or purported to be used by them.
Annual General Meeting
(Incorporated in the Republic of Singapore)
(Company Registration Number: 196400050E)
I/We ____________________________________________________________________________________________ (Name)
of _____________________________________________________________________________________________ (Address)
being a member/members of OVERSEAS UNION ENTERPRISE LIMITED (the “Company”), hereby appoint:
Name
Address
NRIC/ Passport No.
Proportion of
Shareholdings (%)
Address
NRIC/ Passport No.
Proportion of
Shareholdings (%)
and/or (delete as appropriate)
Name
or failing him/her, the Chairman of the Meeting, as my/our proxy/proxies to attend and to vote for me/us on my/our behalf and, if
necessary, to demand a poll at the Forty-Third Annual General Meeting of the Company to be held at Meritus Mandarin
Singapore, Mandarin Court D, 4th Floor, Grand Tower, 333 Orchard Road, Singapore 238867 on Tuesday, 11 April 2006 at
11.00 a.m. and at any adjournment thereof.
(Please indicate with an “X” in the spaces provided whether you wish your vote(s) to be cast for or against the resolution as set out in the Notice
of Annual General Meeting. In the absence of specific directions, the proxy/proxies will vote or abstain as he/they may think fit.)
No.
1.
2.
3.
4
5.
6.
7.
8.
Ordinary Resolutions
Financial Statements and Directors’ Report
Final dividend and special dividends
Directors’ fees
(a) Re-appointment of Mr Wee Cho Yaw as Director
(b) Re-appointment of Mr Lim Boon Kheng as Director
(a) Re-election of Mr Gwee Lian Kheng as Director
(b) Re-election of Mr Lo Ping as Director
Auditors and their remuneration
Any other business
Authority to issue shares
For
Against
Dated this _________ day of ____________ 2006
Total No. of Shares in:
No. of Shares
(a) CDP Register
(b) Register of Members
Signature(s) of Member(s) or Common Seal
IMPORTANT: Please read notes on the reverse
3/3/06 5:34:30 PM
80
R E P O RT 2 0 0 5
Notes:
1.
Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as
defined in Section 130A of the Companies Act, Cap. 50), you should insert that number. If you have shares registered in your name
in the Register of Members of the Company, you should insert that number. If you have shares entered against your name in the
Depository Register and shares registered in your name in the Register of Members, you should insert the aggregate number. If no
number is inserted, this form of proxy will be deemed to relate to all shares held by you.
2.
A member entitled to attend and vote at a meeting of the Company is entitled to appoint not more than two proxies to attend
and vote on his behalf. A proxy need not be a member of the Company.
3.
The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 333 Orchard Road,
6th Storey, Singapore 238867, not less than 48 hours before the time set for the Meeting.
4.
Where a member appoints more than one proxy, he shall specify the proportion of his shareholding to be represented by
each proxy. If no such proportion or number is specified, the first named proxy shall be deemed as representing 100% of the
shareholding and the second named proxy shall be deemed as an alternate to the first named.
5.
The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing.
Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed under its common seal or
under the hand of its officer or attorney duly authorised.
6.
Where an instrument appointing a proxy or proxies is signed on behalf of the appointor by an attorney, the power of attorney
(or other authority) or a duly certified copy thereof must (failing previous registration with the Company) be lodged with the
instrument of proxy, failing which the instrument may be treated as invalid.
7.
A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fit
to act as its representative at the Meeting, in accordance with Section 179 of the Companies Act, Cap. 50.
8.
The Company shall be entitled to reject an instrument of proxy which is incomplete, improperly completed, illegible or where the
true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument of proxy. In
addition, in the case of shares entered in the Depository Register, the Company may reject an instrument of proxy if the member,
being the appointor, is not shown to have shares entered against his name in the Depository Register as at 48 hours before the
time appointed for holding the Meeting, as certified by The Central Depository (Pte) Limited to the Company.
3/3/06 5:34:31 PM
CONTENTS
01
02
04
07
09
12
13
13
14
16
19
20
21
21
22
Corporate Information
Board of Directors
Chairman’s Statement
Other Key Personnel
Key Hotel Management Personnel
Meritus Hotels & Resorts Vision and
Mission Statements
Meritus Hotels & Resorts Marketing and
Branding Strategies
Hotel Highlights
Property Summary
Five-Year Financial Summary
Quarterly Results
Segmental Performance Analysis
23
24
26
28
29
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Share Price and Turnover (2001-2005)
Directors’ Report
Auditors’ Report
Balance Sheets
Public Float
Notice of Annual General Meeting
Proxy Form
ASIAN GRACE, WARMTH AND CARE
Company Reg. No. 196400050E
Singapore 238867
Tel: (65) 6831 6334 Fax: (65) 6235 9688
ANNUAL REPORT 2005

2005 annual report

Transcription

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