Aseana Prop. Regulatory News (ASPL)

20 April 2011

Aseana Properties Limited

("Aseana" or "the Company")

Full Year Results for the Year Ended 31 December 2010

The Board of Directors (the "Board") of Aseana Properties Limited (LSE: ASPL), a property developer in Malaysia and Vietnam listed on the Main Market of the London Stock Exchange, is pleased to announce its audited results of the Company and its subsidiaries (the "Group" or "Aseana Properties") for the year ended 31 December 2010*.

Financial Highlights

Operational Highlights

* These results have been extracted from the Annual Report and financial statements, and do not constitute the Group's Annual Report and financial statements for the year ended 31 December 2010. The financial statements for 2010 have been prepared under International Financial Reporting Standards. The auditors, KPMG Audit Plc, have reported on those financial statements. Their report was unqualified and did not include a reference to any matters to which the auditors draw attention by way of emphasis without qualifying their report.

** The Group has adopted IFRIC 15 - Agreements for the Construction of Real Estate, which prescribes that revenue be recognised only when the properties are completed and occupancy permits are issued. This has resulted in certain costs being recognised ahead of revenue during the year.

Commenting on the Company's results, Mohammed Azlan Hashim, Chairman of Aseana Properties Limited said:

"The sale of 1 Mont' Kiara retail mall and office tower is in line with our current strategy to bring capital back to the Group. We are looking forward to the completion of SENI Mont' Kiara this year which will further strengthen our financial position.

On the Vietnam front, we are excited that the Group has started on the construction of the private tertiary care hospital at the International Hi-Tech Healthcare Park in Ho Chi Minh City. We are confident that progress in the other projects will also pick up in the current year."

-Ends-

For further information:

Notes to Editors:

London-listed Aseana Properties Limited (LSE: ASPL) is a property developer investing in Malaysia and Vietnam.

Aseana typically invests in development projects at pre-construction stage. Investment is made in projects where it is believed there will be a minimum 30% annualised return on equity ("ROE") on investments in Vietnam and a minimum 20% ROE on investments in Malaysia.

Ireka Development Management Sdn Bhd ("IDM") is the exclusive Development Manager for Aseana. It is a wholly-owned subsidiary of Ireka Corporation Berhad, a company listed on the Bursa Malaysia since 1993, which has over 40 years experience in construction and property development. IDM is responsible for the day-to-day management of Aseana's property portfolio and the introduction and facilitation of new investment opportunities.

CHAIRMAN'S STATEMENT

Many view 2010 as a watershed year for the world economy after the tumultuous events in 2008 and 2009. The world's economies started to recover from negative growth, spearheaded by the Asian nations, followed by US stock markets reaching the levels before the Lehman Brothers' crash of 2008. The capital markets for the new issuance of stocks and bonds also began to see signs of recovery, especially in Asia. As this annual report goes to print, the hope of recovery continuing in 2011 may be punctuated by unprecedented events like the devastating earthquake in Japan and the political unrest in the Middle East. The world's economies once again have to contend with high oil prices, continuing inflationary pressures and the threat of recession.

Closer to home for Aseana Properties and its group of companies ("the Group"), both the Malaysian and Vietnamese economies have fared well in 2010, with Gross Domestic Product growing by 7.2% and 6.8% respectively. Both economies are however facing challenges to sustain growth in the year ahead, not just from external pressures, but also from internal structural issues that the respective governments are dealing with.

In Malaysia, business activity in 2010 has been spurred by the introduction of the Government-initiated Economic Transformation Programme ("ETP"). The ETP initiative aims to lift the nation from being in a 'middle-income trap' by raising the Gross National Income per capita from US$6,700 to US$15,000 in nine years through a series of government-initiated, private sector-led investment projects. One significant project that will benefit Aseana Properties is the extension of the Kuala Lumpur rail system to key urban and suburban areas. This plan to extend the public transport system will certainly attract potential buyers or investors to suburban areas such as Mont' Kiara. The successful and timely implementation of these bold projects will weigh on the outlook for Malaysia until clear progress and results from these policies are evident. 

In Vietnam, the Government continues to deal with a weak and devaluing local currency, the Vietnamese Dong, and high inflationary pressures. International investors' confidence had also been rocked in 2010 by the default of Vinashin, a state-owned ship builder, on a US dollar bond. The Government has made efforts to balance growth and inflation by raising the benchmark interest rate twice in early 2011. However, in the short to medium term, investors expect that the Government's priorities will be to instil greater confidence in the Vietnamese Dong and to demonstrate a clearer commitment to reforming and improving productivity of state-owned enterprises.

Against this economic backdrop, Aseana Properties has steadfastly continued to implement its development strategy, balancing between growth and managing near term risks. Key milestones achieved in 2010 and the year to date include:

In 2010, Aseana Properties also experienced a setback in launching its first residential development in Vietnam. The Tan Thuan Dong project in District 7, Ho Chi Minh City experienced unexpected delays in obtaining final master plan approvals from the relevant authorities due to changes in land usage. The project team is working closely with our local partner, Nam Long Investment Corporation, to resolve matters. Full approvals for the project are now expected towards the third quarter of 2011. In August 2010, Aseana Properties had entered into a conditional Sales & Purchase Agreement with PRUPIM Vietnam Property Fund, which is managed by Prudential Property Investment Management (Singapore) Pte. Ltd. ("PRUPIM Singapore") to dispose of an effective stake of 39.2% in the project. The completion of the disposal to PRUPIM Singapore is expected after full approvals from relevant authorities are obtained, which include the investment license and the transfer of the land use rights, hence enabling Aseana Properties to complete its original investment and the Nam Long joint venture to be established.

The Board expects 2011 to be another busy and eventful year for Aseana Properties as we work towards completing several key projects. Phase 1 of SENI Mont' Kiara achieved physical construction completion in February 2011, and the Certificate of Fitness was obtained in April 2011. The units will be delivered progressively to the end buyers from April 2011. Phase 2 of SENI Mont' Kiara is expected to be completed in September 2011. We are also looking forward to the completion of the Sandakan Harbour Square development, where the retail mall and Four Points by Sheraton Hotel are expected to commence operation in the fourth quarter of 2011.

The property sectors in Malaysia and Vietnam are expected to experience moderate growth in 2011. The long term nature of property development projects requires persistence and dexterity in managing through the various cycles of the economy. The Board remains confident that the combination of our experienced Development Manager and the quality of our property portfolio will position the company as the investment gateway to the real estate markets in Malaysia and Vietnam.

On the corporate front, the Board has appointed Panmure Gordon & Co as its financial adviser and broker, replacing Fairfax I.S. Plc, and has appointed KPMG Audit Plc as the Group auditor replacing Mazars. This demonstrates the Group's continual commitment in maintaining a high standard of corporate governance.

Finally, I would like to thank my fellow Directors for their commitment, support and guidance throughout the year. I also wish to extend my gratitude to the shareholders, Government authorities, financiers and business associates for their continued support and confidence in Aseana Properties.

MOHAMMED AZLAN HASHIM

Chairman

19 April 2011

DEVELOPMENT MANAGER'S REVIEW

BUSINESS OVERVIEW

2010 has been a busy year for the Board and the Development Manager as the Group worked towards completing two significant projects in the portfolio. In November 2010, the Group completed construction of the mixed office and retail development at 1 Mont' Kiara, followed by the completion of Phase 1 of the luxury condominiums at SENI Mont' Kiara in February 2011 and obtaining Certificate of Fitness in April 2011.

To return capital to the Group, the final two components of retail mall and office tower at 1 Mont' Kiara were sold to ARA Asia Dragon Fund, a Singapore-based real estate investment fund, the sale of which was completed in December 2010. 1 Mont' Kiara development was a 50:50 joint venture between Aseana Properties and MCDF Investment Pte Ltd., a private equity fund managed by CapitaLand Financial Limited. The joint venture received gross consideration of RM333 million (US$104 million). The third component of 1 Mont' Kiara development is a 34-storey building consisting of 186 office suites, which have been fully sold to individual buyers for total sales proceeds of RM200million (US$62 million). The debt outstanding on the project as at 31 December 2010 of RM225.0 million (US$72.9 million) was fully repaid in January 2011. The final distribution from the joint venture is being finalised.

The Group also extended its involvement in the Kuala Lumpur Sentral project by acquiring the four-star business hotel that is currently being developed by Excellent Bonanza Sdn. Bhd., a 40:60 joint venture between Aseana Properties and Malaysian Resources Corporation Berhad. Kuala Lumpur Sentral, alongside the Kuala Lumpur City Centre ("KLCC"), has been a top performing hotel location in Malaysia for the past few years. Aseana Properties is currently in advanced negotiations with Starwood Hotel and Resorts Worldwide, Inc. to manage the hotel under its 'aloft' brand. With its prime location and a buoyant business travel market, the Development Manager believes this is a strategic investment for the Group, with sound capital appreciation potential in the medium term.

In May 2010, the Group achieved a significant milestone in Vietnam by commencing construction on the 250-bed tertiary care City International Hospital. The City International Hospital forms the first phase of the International Hi-tech Healthcare Park, with a residential development to commence in the latter part of 2011. City International Hospital will be managed by Parkway Health, Asia's largest and leading private healthcare group.

The Group, however, experienced some setbacks in launching its first residential development project in Vietnam. Construction of the Tan Thuan Dong project was planned to commence in early 2011 but has experienced delays in obtaining final approvals from the relevant authorities. Full approval for the project is now expected towards the third quarter of 2011.

Malaysia Economic Update

The Malaysian economy registered a strong gross domestic product ("GDP") growth of 7.2% in 2010 (2009: -1.7%), exceeding the Government's revised growth rate of 6%, which was forecasted in June 2010. The domestic economy is expected to remain strong with continued growth in private consumption and investment, augmented by public investment spending.

This was reflected by the Consumer Sentiments Index which stood firm at 117.2 points at the end of year 2010, backed by sustained employment. However, the Business Conditions Index declined to 99.5 points (value below the 100 points threshold represents expectations of contraction) because of lower demand and global inflationary pressures arising from higher commodities and food prices.

During the first seven months of 2010, the Central Bank of Malaysia increased the overnight policy rate three times by a total of 75 basis points to stabilise at 2.75%. Moving forward, while the stance on monetary policy is expected to remain supportive of growth, the Central Bank is expected to keep a close watch on balancing between inflation and sustained growth of the economy. In March 2011, the Central Bank decided to increase the statutory reserve requirement for banks by 100 basis points to 2.00%, effective from 1 April 2011, as a pre-emptive measure to manage the risk of increasing liquidity in the economy.

In November 2010, the Central Bank of Malaysia implemented a maximum loan-to-value ("LTV") ratio of 70% for borrowers seeking financing to purchase a third house. Financing for purchases of first and second homes are not affected, and borrowers will continue to be able to obtain financing for these purchases at the present prevailing LTV level applied by individual banks, based on their internal credit policies. This measure aims to support a stable and sustainable property market, and promote the continued affordability of homes for the general public.

In October 2010, the Government launched the Economic Transformation Programme ("ETP"). The ETP includes 131 high impact entry point projects spread across 12 national key economic areas which aim to transform the country into a high income nation by 2020. These projects range from improvements in public infrastructure and facilities, to tourism projects and to improving efficiencies and productivity in key industries in Malaysia. To date, 60 entry point projects with total investment of RM95.0 billion, aimed at contributing an additional RM137.2 billion to the nation's Gross National Income, have commenced.

Vietnam Economic Update

The Vietnamese economy grew by 6.8% in 2010, exceeding the Government's target growth rate of 6.5%, with most economic sectors posting higher growth than last year. Key sectors leading the growth include the industrial and construction sector, with 7.7% growth, followed by the services sector with 7.52%.

The State Bank of Vietnam ("SBV") maintained the prime interest rate at a low of 8% for the first 10 months of 2010. Subsequently on 5 November 2010, SBV increased the prime interest rate to 9%. In addition, the SBV increased the capital adequacy ratio for financial institutions from 8 to 9% in October 2010. Between February and April 2011, the refinancing rate was raised three times, from 9 to 13% as a part of the efforts to control rising prices. These actions resulted in lending rates for individual borrowers and companies increasing sharply during the fourth quarter of 2010 with rates reaching as high as 18 to 20%, making access to credit challenging for many developers and home buyers.

Year on year, inflation stood at 11.75% at the end of December 2010. Foodstuff, housing, construction materials and education were the main sectors that saw large price hikes. The inflation rate has been exacerbated by high food and crude oil prices globally. The Vietnamese Dong has also been the focus of the SBV. On 11 February 2011, the SBV devalued the Vietnamese Dong against the US Dollar by 9.3%, its third devaluation within the last 13 months. The SBV also narrowed the trading band for the Vietnamese Dong from 3 to 1%. The international financial community has been highly critical of the monetary and exchange rate policies of the SBV. However, the Government of Vietnam has reaffirmed its confidence in the SBV actions as long-term measures towards instilling stability in the exchange rate regime and promoting sustainable growth in the economy.

Despite the short term economic imbalances, Vietnam continues to attract Foreign Direct Investment ("FDI"), recording a total pledged FDI of US$18.6 billion in 2010. Whilst the total pledged FDI represents a 17.8% reduction from 2009, the FDI disbursement for 2010 hit US$11.0 billion, up 10% from a year earlier.

PORTFOLIO REVIEW

MALAYSIA

Residential Property Market

After a relatively quiet 2009, 2010 saw developers launching residential projects on the back of renewed buying confidence. However, the number of new launches of condominiums in the high-end market declined by 31% compared with 2009, while new landed and gated properties in sought after locations achieved new benchmark prices. The market for residential properties continues to be competitive for developers, where buyers are offered incentive schemes which may include price rebates, zero interest and principal repayment during construction and free legal fees. This trend of a 'buyers market' is expected to continue in 2011.

The surge in landed residential property prices in some locations has raised concerns of a property bubble. The Central Bank's swift action in imposing a 70% loan-to-value cap for financing of third residential properties, has led to a short-term pullback by investors. However, the effect on the property market is not expected to be significant as the market is largely dominated by primary as opposed to speculative buyers. Property prices at the high-end segment of the market have remained stable over the past year, a trend that is expected to continue in 2011 as a result of a scarcity in prime development land in sought after locations such as KLCC, Bangsar and Mont' Kiara.

Aseana Properties has three residential projects in Malaysia, located in sought after residential locations of Mont' Kiara and KLCC:

Commercial Office and Retail Property Market

The Kuala Lumpur office market remained soft in 2010, with average rental rates facing downward pressure, as a result of an increase in supply during 2010 and beyond. Compounded by the effect of business confidence remaining tepid throughout the year, the take-up rate of new offices remained slow in 2010. The year, however, was relatively active for transactions in the office suites market. Office suites are typically stratified offices of various sizes, within an office block, that are sold to end buyers. Completed office suite units in prime locations such as Bangsar and Mont' Kiara, including Aseana Properties' recently completed 1 Mont' Kiara, are transacted at a 20 to 40% gain from the original selling prices. New office suite launches in Kuala Lumpur Sentral and other decentralised office areas such as Kelana Jaya and Bangsar South have also reported a healthy take-up rate.

Retailers and consumer sentiments were positive during the first half of 2010 as a result of solid GDP growth, consistently low unemployment, rising disposable incomes and a strong tourism industry. Despite moderate growth during the second half of the year, sentiment continued to remain positive because of the festive period and school holidays.

Key established shopping malls in Kuala Lumpur such as Bangsar Shopping Centre, Gardens, Pavilion, Farenheit 88 and Suria KLCC all saw active renewal of leases and the entry of new international retailers offering fresh retail concepts in Malaysia. The entrance of new market players as well as the numerous expansion plans announced by retailers suggested high levels of confidence in the local retail market. The Group's recently completed 1 Mont' Kiara mall has fared well in attracting various local and regional brands with more than 40% committed leases at the end of December 2010. With sound initial performance, the 1 Mont' Kiara mall is set to become the hub of leisure and retail activities in Mont' Kiara neighbourhoods over the coming years.

The ETP has also identified retail and tourism as one of the key drivers of growth for Malaysia. Various projects and incentives are expected to be announced in the coming years, providing a boost for the retail and tourism industries.

With the completion and disposal of the 1 Mont' Kiara mixed office and retail development in 2010, the Group currently has two ongoing commercial office, retail and hospitality developments and one hospitality development in the pipeline. These developments are set to benefit from the buoyant and improving sentiment in the retail and tourism markets.

VIETNAM

Residential Property Market

In 2010, the residential property market in Ho Chi Minh City ("HCMC") continues to recover from the lows of the previous two years. Average prices of new apartments in HCMC increased by a healthy 10% in year 2010 to approximately US$1,079 per square metre. New landed residential villas in suburban locations such as District 7 and 9 have also fared well, in particular developments by strong and reputable developers.

Demand in the low to affordable segment is expected to continue to surpass other sectors. For example, the affordable housing segment continues to be the main revenue and earnings driver for Nam Long Investment Corporation, a HCMC-based property development company in which Aseana Properties owns a 16.4% strategic minority stake. The continual recovery of the residential property market in the coming year will hinge on the overall health of the economy. At the present time, high lending rates for buyers and scarcity of medium term financing to property developers is weighing down the property sector. We continue to remain positive on the fundamental demand that is driving the residential property market, and we believe these conditions will favour developers with sound experience and financial standing, such as Aseana Properties.

Commercial Office and Retail Property Market

In 2010, HCMC saw the completion of the landmark 68-storey Bitexco Financial Tower, which at 265 metres is the tallest building in HCMC. The completion of Bitexco Financial Tower added 37,000 square metres of new Grade A office space into the market, and reduced the average occupancy rate of Grade A office space in HCMC from 83% in fourth quarter of 2009 to 68% in 2010. The average occupancy rates of for Grade B and Grade C offices in the fourth quarter of 2010 were 82 and 81% respectively. Although office rental rates have been relatively stable in 2010, they are expected to come under pressure in 2011 with completion of an additional 208,000 square metres of new office space, adding to the current stock of 1,055,000 square metres. With the increasing supply of office space in HCMC, multinational and foreign companies are expected to be more selective in assessing their office space requirements with quality of building, location and management and maintenance being key factors in the selection process.

The retail property market in HCMC remained buoyant throughout 2010, with rents recording an 11% increase year on year, reaching an average of US$74 per square metre, and occupancy levels remaining high at 90%. Demand for retail space in the Central Business District ("CBD") remains high due to a scarcity of choice locations. Constraints in land plot sizes in the CBD have so far limited the development of large shopping centres with sizable floor plates. Year 2010 also witnessed several active moves and the entry of retailers in the market. Debenhams, which entered the market in 2009, moved from Kumho Asiana Plaza to Vincom Centre Shopping Mall. Vincom Centre is also the home to the new Emporio Armani Café. Saigon Paragon in District 7, despite only opening in 2009, went through an internal layout revamp and was taken over by Parkson Holdings, a Malaysian-based retail chain owner. 

Aseana Properties' investments in Vietnam have both residential and commercial components. With two ongoing investments and two investment pipeline projects in HCMC, the Group will continue to seek further growth opportunities in the city. Highlights of the investments include:

FUTURE OUTLOOK

2011 promises to be a busy and exciting year for the Development Manager and Aseana Properties. Not only is Aseana Properties completing two key projects in its portfolio, SENI Mont' Kiara and Sandakan Harbour Square in Malaysia, it also anticipates that a number of projects in Vietnam will commence development. We will continue to seek to realise Aseana Properties' earlier investments in Malaysia, whilst ensuring that ongoing projects follow a strict regime of prudent cash flow management and timely and cost-efficient delivery. In Vietnam, despite the initial set-backs resulting from an uncertain global and local economy, we are confident that we will be able to position Aseana Properties to capitalise on current and other growth opportunities in the near future. In closing, we would like to thank the Board of Aseana Properties, our advisers and business associates for their support and guidance throughout 2010, and we look forward to a greater year of achievement and success in 2011.

LAI VOON HON

President / Chief Executive Officer

Ireka Development Management Sdn. Bhd.

Development Manager

19 April 2011

PERFORMANCE SUMMARY

Notes:

1 Debt-to-equity ratio = (Total Borrowings ÷ Total equity) x 100%

2 Net debt-to-equity ratio = (Total Borrowings less Cash and Cash Equivalent ÷ Total equity] x 100%

3 Total expense ratio = Administrative expenses, Management fees, Marketing and Other Operating expenses ÷ Total Assets less Current liabilities

FINANCIAL REVIEW

INTRODUCTION

The results for the year ended 31 December 2010 were affected by losses on the disposal of the 1 Mont' Kiara retail mall and office tower. The disposal was made to accelerate cash flow back to the Group and this was reflected in the healthy cash balances at year end. 

The Group has adopted IFRIC 15 - Agreements for the Construction of Real Estate, which prescribes that revenue be recognised only when the properties are completed and occupancy permits are issued. This resulted in certain costs being recognised ahead of revenue during the year. 

INCOME STATEMENT

The Group's revenue for the year ended 31 December 2010 was US$179.3 million, a 55.6% increase compared to 2009. The revenue was mainly attributable to the recognition of revenue upon completion of 1 Mont' Kiara of US$166.3 million and sale of completed properties in i-ZEN@Kiara I, Tiffani by i-ZEN and Sandakan Harbour Square (Phase 2) totalling US$12.4 million.

The Group's net loss before taxation was US$15.4 million, compared to a profit before taxation of US$4.3 million in 2009. This included losses from disposal of 1 Mont' Kiara retail mall and office tower of US$6.7 million (2009: US$NIL) and marketing expenses of US$10.0 million (2009: US$4.8 million). The tax charge for 2010 was US$5.8 million, compared to US$3.6 million in 2009, reflecting sales of properties in 1 Mont Kiara. 

The consolidated comprehensive loss for the year ended 31 December 2010 was US$13.3 million compared to US$0.5 million profit in 2009. This included gains arising from foreign currency translation differences for foreign operations of US$3.1 million (2009: loss of US$ 0.21) and gains arising from changes in the fair value of available-for-sale investments of US$4.8 million (2009: US$ Nil). 

Basic and diluted loss per share for the year ended 31 December 2010 were both at US cents 9.51 (2009: Earning per share of US cents 0.37).

STATEMENT OF FINANCIAL POSITION

Total assets of US$676.9 million were US$148.1 million higher than 2009, mainly reflecting an increase in inventories and cash and cash equivalents. Cash and cash equivalents were significantly higher at US$150.4 million (2009: US$62.0 million) due to receipt of sales proceeds from the 1 Mont' Kiara retail mall and office tower. 

Net asset value per share as at 31 December 2010 was US cents 90.8 (2009: US cents 96.5).

CASH FLOW AND FUNDING

Operating cash flow was positive at US$66.4 million, an improvement from the negative cash flow of US$13.9 million in 2009. Cash used in investing activities included a deposit paid of US$2.9 million for the acquisition of a hotel at KL Sentral.

The Group's subsidiaries borrow to fund property development projects. At 31 December 2010, the Group had gross borrowings of US$162.6 million (2009: US$119.9 million), a rise of 35.6% over the previous year, due to an increase in investment and business activities. Net debt-to-equity ratio reduced from 27.6% in 2009 to 6.2% in 2010 due to sale proceeds from 1 Mont' Kiara.

The Group has embarked on a programme to issue medium term notes of up to US$162 million, the details are stated in note 2.1 to the financial statements.

Finance income decreased from US$2.1 million in 2009 to US$0.8 million in 2010. Finance costs decreased from US$0.6 million in 2009 to US$0.5 million in 2010. 

DIVIDEND

No dividend was paid in 2010.

PRINCIPAL RISKS AND UNCERTAINTIES

A review of the principal risks and uncertainties facing the Group is set out in the Directors' Report of the Annual Report.

TREASURY AND FINANCIAL RISK MANAGEMENT

The Group undertakes risk assessments and identifies the principal risks that affect its activities. The responsibility for the management of each key risk has been clearly identified and delegated to the senior management of the Development Manager. The Development Manager's senior management team is involved in the day-to-day operation of the Group. 

A comprehensive discussion on the Group's financial risk management policies is included in the notes to the financial statements in the Annual Report.

MONICA LAI VOON HUEY

Chief Financial Officer

Ireka Development Management Sdn. Bhd.

Development Manager

19 April 2011

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 DECEMBER 2010

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 DECEMBER 2010 (cont'd)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 

at 31 DECEMBER 2010

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 

at 31 DECEMBER 2010 (cont'd)

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 december 2010

CONSOLIDATED Statement OF Cash FlowS

For the year ended 31 december 2010

CONSOLIDATED Statement OF Cash FlowS

For the year ended 31 december 2010 (cont'd)

Notes to the Financial Statements

1 General Information

The principal activities of the Group are acquisition, development and redevelopment of upscale residential, commercial and hospitality projects in the major cities of Malaysia and Vietnam. The Group typically invests in development projects at the pre-construction stage and may also selectively invest in projects in construction and newly completed projects with potential capital appreciation.

2 BASIS OF PREPARATION

2.1 Statement of compliance and going concern

The Group financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), and IFRIC interpretations issued, and effective, or issued and early adopted, at the date of these financial statements.

The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. The Board has reviewed the accounting policies set out below and considers them to be the most appropriate to the Group's business activities.

The financial statements have been prepared on the historical cost basis except for available-for-sale investments which are measured at fair value and on the assumption that the Group are going concerns.

The Group has prepared and considered prospective financial information derived based on assumptions and events that may occur in the next twelve months and the possible actions to be taken by the Group. Prospective financial information includes the Group's profit and cash flow forecasts for the ongoing projects.

In its cash flow forecast, the Group considered its obligations to repay a significant portion of its borrowings within the next twelve months, as shown in the consolidated statement of financial position, and to fund the costs of ongoing construction works. As part of its financial planning, the Group has embarked on a programme to issue medium term notes ("MTN") of up to US$162 million. The Group had appointed two lead arrangers for the MTN programme and expects to complete the exercise by September 2011.

In the unlikely event that the MTN programme is delayed, the Group will obtain bridging finance from existing financiers to temporarily fund its obligations.

Should both the MTN programme and bridging finance be unsuccessful, due to unforeseen circumstances, the Group is able to generate adequate cash from the sale of completed properties and land in its portfolio, as well as from the deferral of its projects and hence meets its liabilities as they fall due.

The Directors are confident that the Group will not encounter significant setbacks in fulfilling either of the above.

On this basis, the Directors believe it is appropriate to prepare the financial statements on a going concern basis. The financial statements do not include any adjustments that would result from the basis of preparation being inappropriate.

The Group have not applied the following new/revised accounting standards and interpretations that have been issued by International Accounting Standards Board but are not yet effective.

The Directors anticipate that the adoption of IAS 24, IAS 32, and IFRIC 19 in future periods will have no material impact on the financial information of the Group or Company. IFRS9, which becomes mandatory for the Group's 2013 Consolidation Financial Statements, could change the classification and measurement of financial assets. The Directors are currently determining the impact of IFRS 9.

2.2 Restatement

The comparative figures in the Consolidated Statement of Financial Position have been restated as follows:

These restatements have been made to conform with current year presentation that has been amended to align with accepted disclosure practices of developers listed on recognised exchanges preparing accounts in accordance with IFRS. These restatements have also led to changes in the presentation of the following items in the Statement of Cash Flows: Increase in inventories, Increase in property development costs, Decrease in deferred revenue, Increase in payables and Purchase of land held for property development.

The comparative figures in the Consolidated Statement of Cash Flows have been restated to separately disclose interest paid of US$7,448,731. The comparative figures in the Company Statement of Cash Flows has been restated to separately disclose interest paid of US$187,891. These restatements have been made to comply with the requirements of paragraph 32 of IFRS 7.

The net effect of the statements on the Consolidated Statement of Financial Position and Consolidated Statement of Cash Flows is as follows:

The Directors have not included a third balance sheet in these financial statements on the grounds of materiality.

3 revenue AND SEGmeNTAL information

The gross revenue represents the sales value of development properties where the effective control of ownership of the properties is transferred to the purchasers when the completion certificate or occupancy permit has been issued.

The Company is an investment holding company and has no operating revenue. The Group's operating revenue for the year was mainly attributable to the sale of development properties in Malaysia. The Company's property development investments in Vietnam have just commenced business at 31 December 2010. 

3.1 Revenue recognised during the year as follows:

3.2 Segmental Information

The Group's assets and business activities are managed by Ireka Development Management Sdn. Bhd. ("IDM") as the Development Manager under a management agreement dated 27 March 2007.

Segmental information represents the level at which financial information is reported to the Executive Management of IDM, being the chief operating decision maker as defined in IFRS 8. The Executive Management consists of the Chief Executive Officer, the Chief Financial Officer and the Chief Operating Officer of IDM. The management determines the operating segments based on reports reviewed and used by the Executive Management for strategic decision making and resource allocation. For management purposes, the Group is organised into project units.

The Group's reportable operating segments are as follows:

Other non-reportable segments comprise the Group's Vietnam subsidiaries which develop the Hi-Tech Healthcare Park and other new development projects. None of these segments meets any of the quantitative thresholds for determining reportable segments in 2010 and 2009.

Information regarding the operations of each reportable segment is included below. The Executive Management monitors the operating results of each segment for the purpose of performance assessments and making decisions on resource allocation. Performance is based on segment gross profit and profit before taxation, which the Executive Management believes are the most relevant in evaluating the results relative to other entities in the industry. Segment assets and liabilities are presented inclusive of inter-segment balances and inter-segment pricing is determined on an arm's length basis. 

The Group's revenue generating development projects are currently only in Malaysia since

development activities in Vietnam are at preliminary stage.

3.3 Analysis of the group's reportable operating segments is as follows:-

Operating Segments - ended 31 December 2010

Operating Segments - ended 31 December 2009

Geographical Information - ended 31 December 2010

Others include Jersey, British Virgin Islands and Singapore.

Major customers exceed 10% of the Group's total revenues are as follows:

Geographical Information - ended 31 December 2009

Others include Jersey, British Virgin Islands and Singapore.

In 2009, no single customer exceeded 10% of the Group's total revenue.

4. SEASONALITY

The Group's business operations are not materially by seasonal factors for the period under review.

5. Cost of Sales

6. Other Income

7. Foreign exchange (loss)/ GAIN

8. Management Fees

The management fees payable to the Development Manager is based on 2% of the Group's net asset value calculated on the last business day of March, June, September and December of each calendar year, and payable quarterly in advance. The management fees were allocated to the subsidiaries and Company based on where the service was provided.

In addition to the annual management fee, the Development Manager is entitled to a performance fee calculated at 20% of the out performance net asset value over a total return hurdle rate of 10%. No performance fee has been paid during the year.

9. Finance Costs

All finance cost above, excluding hire purchase charges, arose on other financial liabilities carried at amortised cost.

10. net (Loss)/ profit BEFORE TAXATION

11. TAXATION

The numerical reconciliation between the income tax expenses and the product of accounting results multiplied by the applicable tax rate is computed as follows:

* The applicable corporate tax rate in Malaysia and Vietnam is 25%.

** The applicable corporate tax rate in Singapore is 17%. A subsidiary of the Group, Hoa Lam-Shangri-La Healthcare Ltd Liability Co is granted preferential corporate tax rate of 10%. The preferential income tax is given by the government due to the subsidiary involvement in the hospital and education industry.

Following changes to the Income Tax (Jersey) Law 1961 (as amended), the Company is no longer able to apply to be tax-exempt. From 1 January 2009 the Company has been treated as a tax resident for the purpose of Jersey tax laws and is subject to a tax rate of 0%. This has lead to a cost saving of £600 p.a. which was the fee for the exempt application.

A Goods and Services Tax was introduced in Jersey in May 2008. The Company has been registered as an International Services Entity so that it does not have to charge or pay local GST. The cost for this application has been £100 p.a., increasing to £200 from 1 January 2011.

The Directors intend to conduct the Group's affairs such that the central management and control is not exercised in the United Kingdom and so that neither the Company nor any of its subsidiaries carries on any trade in the United Kingdom. The Company and its subsidiaries will thus not be residents in the United Kingdom for taxation purposes. On this basis, they will not be liable for United Kingdom taxation on their income and gains other than income derived from a United Kingdom source.

12. (loss)/ Earnings Per Share

Basic and diluted (loss)/ earnings per ordinary share

The calculation of basic and diluted (loss)/ earnings per ordinary share for the year ended 31 December 2010 was based on the (loss)/ profit attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding, calculated as below:

(Loss)/ profit attributable to ordinary shareholders

13. Investment in AN Associate

The Company, via a wholly-owned subsidiary ASPL M3A Limited, acquired 40% of the ordinary shares of a company known as Excellent Bonanza Sdn. Bhd., a company incorporated in Malaysia, which is a vehicle set up to undertake a commercial development in Kuala Lumpur, Malaysia.

The Group's aggregate share of the current assets, non-current assets, current liabilities, non-current liabilities, income and expenses of the associate is as follows:

The amount of unrecognised share of loss for the current year and cumulatively is US$184,727 (2009: US$212,835) and US$397,562 (2009: US$212,835) respectively.

The associated company commenced trading since 2009.

14. Available-for-Sale Investments

The available-for-sale investments represent the investment in shares of Nam Long Investment Corporation which the Group acquired over four tranches in 2008 and 2009.

In 2009, the available-for-sale investments could not be reliably measured and were therefore stated at cost. No impairment was deemed necessary as the recoverable amount was deemed by the Directors to be higher than the cost.

In 2010, the fair value of the available-for-sale investments was determined by reference to the latest transacted price paid by a new investor during the year. The Directors are of the opinion that the fair value remained unchanged at the end of the reporting period.

In March 2009, IFRS 7 Financial Instruments: Disclosures was amended by the IASB to require certain additional disclosures to be included in IFRS financial statements. This includes a requirement that financial instruments carried at fair value be analysed by level of the IFRS 7 defined fair value hierarchy. This hierarchy is based on the inputs of the fair value measurement and reflects the lowest level input that is significant to that measurement. The Directors are of the opinion that the available-for-sale investments at 31 December 2010 is classified in Level 3 (Fair values measured using inputs for the asset or liability that are not based on observable market data).

15. Intangible Assets

The licence contracts and related relationships represented the rights to develop the International Hi-Tech Healthcare Park venture with an operation period ending on 9 July 2077. The project is at its preliminary stage.

For the purpose of impairment testing, goodwill and licence contracts and related relationships are allocated to the Group's operating divisions which represent the lowest level within the Group at which the goodwill and licence contracts and related relationships are monitored for internal management purposes.

The aggregate carrying amounts of intangibles assets allocated to each unit are as follows:

The recoverable amount of licence, contract and related relationships is determined based on the value-in-use calculation using discounted cash flow projections for the next 5 years and using a pre-tax discount rate of 17% per annum and gross margin of 23%. The key assumptions used are expected changes in budgeted gross development value and gross development costs. The Group believes that any reasonably possible changes in the above key assumptions applied are not likely to materially cause the recoverable amount to be lower than its carrying amount.

The recoverable amount of goodwill is determined based on the value-in-use calculation using discounted cash flow projections for the next 3 years. The recoverable amount of goodwill has been tested by reference to underlying profitability of the developments. The Group believes that any reasonably possible changes to the above methodology are not likely to materially cause the recoverable amount to be lower than its carrying amount.

16. Deferred Tax Assets

The deferred tax assets comprise:

Deferred tax assets have not been recognised in respect of unused tax losses of US$561,112 (2009: US$3,129,872) which are available for offset against future taxable profits. Deferred tax asset have not been recognised due to the uncertainty of recovery of the losses.

17. INVENTORIES

(a) Land held for property development

(b) Work-in-progress

The above amounts included borrowing cost capitalised of US$4,443,829 (2009:US$6,853,687).

18. Amount Due from an Associate

The amount due from an associate represents project management fee receivable.

19. Share Capital

20. Share Premium

Share premium represents the excess of proceeds raised on the issuance of shares over the nominal value of those shares. The costs incurred in issuing shares were deducted from the share premium.

21. CAPITAL REDEMPTION RESERVE

The capital redemption reserve was incurred after the Company cancelled its 37,475,000 ordinary shares of US$0.05 per share in the previous year.

22. deferred revenue

Deferred revenue represents excess of progress billings to purchasers of development properties over revenue recognised in the statement of comprehensive income.

23. Bank Loans and Borrowings

The effective interest rates of the bank loans for the year ranged from 4.85% to 7.13% (2009: 3.59% to 6.55%) per annum. 

The effective interest rates of the bank overdraft for the year ranged is 0.84% (2009: 1.05%) per annum. 

Borrowings were denominated in Malaysian Ringgit and United States Dollars.

Bank loans were repayable by monthly or quarterly instalments and the overdraft is repayable on demand.

Bank loans were secured by land held under property development cost and the corporate guarantee of the Company.

The carrying amount of borrowings approximated its fair value at statement of financial position date.

24. AMOUNT DUE TO NON-CONTROLLING INTERESTS

The amount due to non-controlling interests are unsecured and without fixed term of repayment.

25. Bank Loans

The effective interest rates of the bank loans for the year ranged from 4.85% to 7.13% (2009: 3.59% to 6.55%) per annum.

Bank loans of the Group were secured by land held under property development costs and the corporate guarantee of the Company.

Bank loans were denominated in Malaysian Ringgit and United State Dollars.

Bank loans were repayable by monthly or quarterly instalments.

26. MEDIUM TERM NOTES

The medium term notes were issued by a subsidiary, acquired on 30 March 2009, to fund a development project known as 1 Mont' Kiara in Malaysia. The weighted interest rate of the loan was 6.17% (2009: 6.29%) per annum at the statement of financial position date. The effective interest rates of the medium term notes and their outstanding amounts are as follows:

The medium term notes were secured by way of:

The medium term notes were denominated in Malaysian Ringgit. On 29 December 2010, the subsidiary informed all parties of its intention to early redeem all outstanding medium term notes. The redemption was completed and fully paid on 6 January 2011.

27. PURCHASE OF OWN SHARES AND CANCELLATION OF SHARES

The Company was granted authority by the shareholders at the Extraordinary General Meeting held on 17 October 2008 to purchase its own shares up to a total aggregate value of 14.99% of the issued nominal capital. The authority expired twelve months from the date of passing of the resolution.

The Company announced on 22 April 2009 and 29 May 2009 its intention to implement a share buy-back scheme of up to 10.00% and 4.99% of the Company's shares in is-sue respectively. Subsequently on 23 April 2009, the Company purchased 25,000,000 ordinary shares at a price of US$0.15 per share and on 1 June 2009, an additional 12,475,000 ordinary shares were purchased at a price of US$0.18 per share. Collectively, the Company has bought back 37,475,000 ordinary shares which is equivalent to 14.99% of the Company's shares in issue representing the Company's total share buy-back authority in place.

The Company cancelled all shares bought back in the previous year. Following the share cancel-lation, the Company has 212,525,000 ordi-nary shares in issue and capital redemption reserves of US$1,874,000.

28. Related Party Transactions

Transactions between the Group and the Company with Ireka Corporation Berhad ("ICB") and its group of companies are classified as related party transactions based on ICB's 23.02% shareholding in the Company.

The amount due by an associate for project management fee amounted to US$381,682 at 31 December 2010 (2009: US$784,632).

The amount due to an ICB's subsidiary for contract works performed was US$37,518,226 at 31 December 2010 (2009: US$34,841,286).

The amount due to an ICB's subsidiary for site staff salary costs was US$617,944 at 31 December 2010 (2009: US$388,308).

The amount due to an ICB's subsidiary for marketing commissions amounted to US$807,422 at 31 December 2010 (2009: US$130,345).

The amount due to an ICB's subsidiary for management fees amounted to US$1,001,979 at 31 December 2010 (2009: US$1,084,248).

29. Acquisition of Business

Aseana Properties Limited is the parent company of a group of companies involved in property development business.

2010

On 20 April 2010, the Company had, via its wholly-owned subsidiary ASPL M9 Limited, subscribed for 700,000 ordinary shares representing 70% of the issued share capital of Urban DNA Sdn. Bhd. (formerly known as World Trade Frontier Sdn. Bhd.) for a total consideration of US$218,330. The transaction was accounted for using the purchase method of accounting. Urban DNA Sdn. Bhd. is a developer to develop a residential tower at No.7, Jalan Kia Peng, 50450 Kuala Lumpur.

The Group had accounted for the business combination of Urban DNA Sdn. Bhd. using fair values assigned to Urban DNA Sdn. Bhd.'s identifiable assets and liabilities determined at 20 April 2010.

At 20 April 2010, Urban DNA Sdn. Bhd. had a shareholders' equity of US$309,492 of which 70% was owned by the Group. Against a consideration of US$218,330, a fair value adjustment of US$1,686 on property development cost was recorded. 

The acquisition had the following effect on the Group's asset and liabilities on acquisition date:

The acquisition of Urban DNA Sdn. Bhd. had not increased nor reduced the Group's loss before taxation for the period as no income or expenses were incurred by Urban DNA Sdn. Bhd. after it became a subsidiary of the Group.

If the acquisition of Urban DNA Sdn. Bhd. had occurred on 1 January 2010, this would have increased the Group's revenue and loss before taxation for the period by approximately US$Nil and US$26 respectively.

2009

(a) Acquisition of Legolas Capital Sdn. Bhd.

On 30 March 2009, the Group acquired 85.1% of the issued share capital of Legolas Capital Sdn. Bhd. for a total consideration of US$233. The transaction was accounted for using the purchase method of accounting. Legolas Capital Sdn. Bhd. was acquired to fund a development project known as 1 Mont' Kiara in Malaysia.

The Group had accounted for the business combination of Legolas Capital Sdn. Bhd. using fair values assigned to Legolas Capital Sdn. Bhd.'s identifiable assets and liabilities determined provisionally at 30 March 2009.

At 30 March 2009, Legolas Capital Sdn. Bhd. had a negative shareholders' equity of US$7,969 when 85.1% was owned by the Group. Against a consideration of US$233, a goodwill of US$7,015 was created. This goodwill arising from the acquisition was impaired in 2009.

The acquisition had the following effect on the Group's asset and liabilities on acquisition date:

* denotes US$418

# denotes US$233

^ denotes (US$418)

** denotes (US$185)

The acquisition of Legolas Capital Sdn. Bhd. had reduced the Group's profit before taxation in 2009 by approximately US$3,570.

If the acquisition of Legolas Capital Sdn. Bhd. had occurred on 1 January 2009, this would have reduced the Group's revenue and profit before tax for 2009 by approximately US$Nil and US$1,280 respectively.

(b) Acquisition of ICSD Ventures Sdn. Bhd.

On 30 June 2009, the Group acquired the remaining 40% of the issued share capital of ICSD Ventures Sdn. Bhd. for a total consideration of US$4.2million. The transaction was accounted for using the purchase method of accounting.

The acquisition had the following effect on the Group's asset and liabilities on acquisition date:

If the acquisition of the remaining 40% shares in ICSD Ventures Sdn. Bhd. had occurred on 1 January 2009, this would have increased the Group's revenue and profit before tax for 2009 by approximately US$4,226,202 and US$955,029.

(c) Acquisition of Amatir Resources Sdn. Bhd.

On 30 Nov 2009, the Group acquired the remaining 9.09% of the issued share capital of Amatir Resources Sdn. Bhd. for a total consideration of US$3.4 million. The transaction was accounted for using the purchase method of accounting.

The acquisition had the following effect on the Group's asset and liabilities on acquisition date:

If the acquisition of the remaining 9.09% shares in Amatir Resources Sdn. Bhd. had occurred on 1 January 2009, this would have reduced the Group's revenue and profit before tax for 2009 by approximately US$Nil and US$114,111 respectively.

The acquisition of Legolas Capital Sdn. Bhd., ICSD Ventures Sdn. Bhd. and Amatir Resources Sdn. Bhd. amounted to a total cash consideration of US$7,629,928. Therefore, the net cash outflow arising from these three acquisitions is:

* denotes (US$418)

30 Dividends

The Company has not paid or declared any dividends during the year ended 31 December 2010.

31 Events After The STATEMENT OF FINANCIAL POSITION Date

32 REPORT CIRCULATION

Copies of the Annual Report and Financial Statements will be sent to shareholders for approval at the Annual General Meeting ("AGM") to be held in June 2011. 

Principal Risks and Uncertainties

The Group's business is property development in Malaysia and Vietnam. Its principal risks are therefore related to the property market in these countries in general, and also the particular circumstances of the property development projects it is undertaking. More detailed explanations of these risks and the way they are managed are contained under the heading of Financial and Capital Risk Management Objectives and Policies in the Annual Report. 

Other risks faced by the Group in Malaysia and Vietnam include the following:

The Board seeks to mitigate and manage these risks through continual review, policy setting and enforcement of contractual rights and obligations. It also regularly monitors the economic and investment environment in countries that it operates in and the management of the Group's property development portfolio. Details of the Group's internal controls are described in the Annual Report.

RESPONSIBILITY STATEMENT

The Directors of the Company confirm that to the best of their knowledge that:

On behalf of the Board