Corporate Information Board of Directors Executive Directors Mr. Cheung Hon Kit (Chairman) Ms. Chan Ling, Eva (Managing Director) Mr. Chan Pak Cheung,

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1 Rosedale Hotel Holdings Limited 珀麗酒店控股有限公司 (Incorporated in Bermuda with limited liability) (Stock Code : 1189) (於百慕達註冊成立之有限公司) (股份代號 : 1189) Interim Report 中期報告 Rosedale Hotel Holdings Limited Units , 30th Floor, Paul Y. Centre, 51 Hung To Road, Kwun Tong, Kowloon, Hong Kong 珀麗酒店控股有限公司 香港九龍觀塘鴻圖道51號保華企業中心30樓 室

2 Corporate Information Board of Directors Executive Directors Mr. Cheung Hon Kit (Chairman) Ms. Chan Ling, Eva (Managing Director) Mr. Chan Pak Cheung, Natalis Independent Non-executive Directors Mr. Kwok Ka Lap, Alva Mr. Poon Kwok Hing, Albert Mr. Sin Chi Fai Company Secretary Ms. Law Sau Lai Registered Office Clarendon House 2 Church Street Hamilton HM 11 Bermuda Head Office and Principal Place of Business Units , 30th Floor, Paul Y. Centre 51 Hung To Road Kwun Tong Kowloon, Hong Kong Auditor Deloitte Touche Tohmatsu Certified Public Accountants 35/F., One Pacific Place 88 Queensway Hong Kong Principal Share Registrar Butterfield Fulcrum Group (Bermuda) Limited Rosebank Centre 11 Bermudiana Road Pembroke HM 08 Bermuda Hong Kong Branch Share Registrar Tricor Secretaries Limited 26/F., Tesbury Centre 28 Queen s Road East Wanchai Hong Kong Stock Code Stock Code on The Stock Exchange of Hong Kong Limited : 1189 Clarendon House 2 Church Street Hamilton HM 11 Bermuda Butterfield Fulcrum Group (Bermuda) Limited Rosebank Centre 11 Bermudiana Road Pembroke HM 08 Bermuda

3 Condensed Consolidated Statement of Comprehensive Income The board of directors (the Board ) of Rosedale Hotel Holdings Limited (the Company ) announces the unaudited results of the Company and its subsidiaries (hereinafter collectively referred to as the Group ) for the six months ended 30 June 2012 together with comparative figures for the corresponding period in 2011 as follows: Six months ended NOTES HK$ 000 HK$ 000 (unaudited) (unaudited) Turnover 3 181, ,226 Direct operating costs (137,444) (156,860) Gross profit 43,993 21,366 Other gains and losses (20,814) (8,628) Distribution and selling expenses (2,316) (1,821) Administrative expenses (94,594) (92,234) Fair value loss on investments held for trading (530) (1,911) Finance costs (6,470) (19,418) Fair value loss on derivative financial instrument 19 (300) (2,080) Gain on disposal of available-for-sale investment 7 17,037 Impairment loss recognised in respect of property, plant and equipment 10 (30,383) (9,980) Impairment loss recognised in respect of other intangible assets 10 (14,617) Share of result of an associate (2,100) Loss on disposal of subsidiaries 6 (549) Increase (decrease) in fair value of investment properties 203 (2,272) Loss before taxation 4 (110,891) (117,527) Taxation charge 5 (3,445) (818) Loss for the period (114,336) (118,345) Other comprehensive (expenses) income Exchange difference arising on translation of financial statements of foreign operations Total comprehensive expenses for the period (1,995) 33,306 (116,331) (85,039) 1

4 Condensed Consolidated Statement of Comprehensive Income Six months ended NOTE HK$ 000 HK$ 000 (unaudited) (unaudited) Loss for the period attributable to: Owners of the Company (111,019) (111,344) Non-controlling interests (3,317) (7,001) (114,336) (118,345) Total comprehensive expenses for the period attributable to: Owners of the Company (113,014) (82,078) Non-controlling interests (3,317) (2,961) (116,331) (85,039) LOSS PER SHARE 9 Basic (HK$) (0.17) (0.17) Diluted (HK$) N/A (0.17) 2 Rosedale Hotel Holdings Limited Interim Report 2012

5 Condensed Consolidated Statement of Financial Position At 30 June 2012 At At NOTES HK$ 000 HK$ 000 (unaudited) (audited) Non-current assets Property, plant and equipment 10 2,204,318 2,137,518 Investment properties , ,400 Interest in an associate 4 4 Interest in a jointly controlled entity 17,050 17,050 Available-for-sale investments 63,877 63,877 Other intangible assets 10 22,882 39,018 Other assets 43,232 32,861 Amount due from an associate 20 31,896 33,996 Club debentures, at cost less impairment Restricted bank balances 15 11,861 14,933 2,706,640 2,611,177 Current assets Inventories 5,785 6,088 Amount due from an investee 11 12,300 Available-for-sale investment 56,259 Trade and other receivables 12 58,729 64,220 Investments held for trading 15,212 15,682 Restricted bank balances 15 2,153 Bank balances and cash 209, , , ,751 Asset classified as held for sale 13 32, , ,478 Current liabilities Trade and other payables , ,886 Loan from a related company 20 14,569 Tax liabilities 13,967 14,138 Amount due to a related company Borrowings amount due within one year , ,880 Amount due to a non-controlling shareholder of a subsidiary 9,157 9,157 Derivative financial instrument 19 3,158 2, , ,588 3

6 Condensed Consolidated Statement of Financial Position At 30 June 2012 At At NOTES HK$ 000 HK$ 000 (unaudited) (audited) Net current liabilities (397,164) (116,110) Total assets less current liabilities 2,309,476 2,495,067 Non-current liabilities Borrowings amount due after one year , ,963 Deferred taxation 177, , , ,821 Net assets 1,915,915 2,094,246 Capital and reserves Share capital 16 6,577 6,577 Reserves 1,722,762 1,848,382 Equity attributable to owners of the Company 1,729,339 1,854,959 Non-controlling interests 186, ,287 Total equity 1,915,915 2,094,246 4 Rosedale Hotel Holdings Limited Interim Report 2012

7 Condensed Consolidated Statement of Changes in Equity Attributable to owners of the Company Convertible Asset Non- Share Share Special Other notes Translation revaluation Accumulated controlling capital premium reserve reserve reserve reserve reserve losses Total interests Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 At 1 January 2011 (audited) 6,577 1,248, ,303 (60,683) 63, ,622 1,719 (103,786) 2,005, ,594 2,269,151 Loss for the period (111,344) (111,344) (7,001) (118,345) Other comprehensive income for the period Exchange difference arising on translation of financial statements of foreign operations 29,266 29,266 4,040 33,306 Total comprehensive income (expenses) for the period 29,266 (111,344) (82,078) (2,961) (85,039) Redemption of convertible notes (63,757) 63,757 Purchase of shares of subsidiaries from non-controlling shareholders 2,399 2,399 (2,399) Disposal of subsidiaries (14,615) (14,615) At 30 June 2011 (unaudited) 6,577 1,248, ,303 (58,284) 220,888 1,719 (151,373) 1,925, ,619 2,169,497 At 1 January 2012 (audited) 6,577 1,248, ,303 (57,607) 244,591 (244,953) 1,854, ,287 2,094,246 Loss for the period (111,019) (111,019) (3,317) (114,336) Other comprehensive expenses for the period Exchange difference arising on translation of financial statements of foreign operations (1,995) (1,995) (1,995) Total comprehensive expenses for the period (1,995) (111,019) (113,014) (3,317) (116,331) Purchase of shares of subsidiaries from non-controlling shareholders (12,606) (12,606) (49,394) (62,000) At 30 June 2012 (unaudited) 6,577 1,248, ,303 (70,213) 242,596 (355,972) 1,729, ,576 1,915,915 5

8 Condensed Consolidated Statement of Cash Flows Net cash used in operating activities Six months ended NOTES HK$ 000 HK$ 000 (unaudited) (unaudited) (67,711) (24,189) Investing activities Proceeds from disposal of available-forsale investment 71,296 Proceeds from disposal of property, plant and equipment 17,408 62,194 Decrease in amount due from an investee 11 12,300 Decrease (increase) in restricted bank balances 919 (14,113) Purchase of property, plant and equipment 10 (64,151) (292,713) Additions to investment properties (37,338) Additions to investments held for trading (60) Advance to an investee (1,109) Proceeds from disposal of subsidiaries 6 20,790 Investment deposits refunded 1,669 Other investing cash flows 78 1,489 Net cash from (used in) investing activities 452 (221,793) Financing activities Purchase of shares of subsidiaries from non-controlling shareholders of subsidiaries (62,000) Repayment of loan from a related company (14,569) (10,000) Repayments of bank and other borrowings (22,204) (46,037) Repayment to a related company (100) New bank loans raised 502,614 Redemption of convertible notes (341,880) Other borrowings raised 9,000 2,648 Other financing cash flows 14,794 36,931 Net cash (used in) from financing activities (75,079) 144,276 6 Rosedale Hotel Holdings Limited Interim Report 2012

9 Condensed Consolidated Statement of Cash Flows Six months ended HK$ 000 HK$ 000 (unaudited) (unaudited) Net decrease in cash and cash equivalents (142,338) (101,706) Cash and cash equivalents at beginning of the period 353, ,519 Effect of foreign exchange rate changes (944) 725 Cash and cash equivalents at end of the period 209, ,538 Represented by: Bank balances and cash 209, ,428 Cash included in assets held for sale , ,538 7

10 Notes to the Condensed Consolidated Financial Statements 1. BASIS OF PREPARATION 1. The condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard ( HKAS ) 34, Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants ( HKICPA ) as well as with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the Listing Rules ). 34 In preparing the condensed consolidated financial statements, the directors of the Company have given careful consideration to the future liquidity and going concern of the Company and its subsidiaries (collectively referred to as the Group ) in view of the fact that the Group s current liabilities exceeded its current assets by approximately HK$397,164,000 as at 30 June 2012 and recorded recurring losses of approximately HK$114,336,000 for the six months period then ended. The directors of the Company are satisfied that the Group will have sufficient financial resources to meet its financial obligations as they fall due for the foreseeable future, after taking into consideration that (i) the existing bank facilities can be renewed on similar terms and conditions as the market value of the hotel properties and hotel properties in construction is higher than the existing available banking facilities; (ii) there are other assets available to pledge for obtaining further banking facilities; and (iii) there were undrawn borrowing facilities of approximately HK$5,325,000 at the end of the reporting period. 2. PRINCIPAL ACCOUNTING POLICIES 397,164, ,336,000 (i) (ii) (iii) 5,325, The condensed consolidated financial statements have been prepared on the historical cost basis except for investment properties, investments held for trading and derivative financial instrument which are measured at fair values, as appropriate. 8 Rosedale Hotel Holdings Limited Interim Report 2012

11 Notes to the Condensed Consolidated Financial Statements 2. PRINCIPAL ACCOUNTING POLICIES (Continued) 2. The accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 June 2012 are the same as those followed in the preparation of the Group s annual financial statements for the year ended 31 December In the current interim period, the Group has applied, for the first time, certain amendments to Hong Kong Financial Reporting Standards ( HKFRSs ) issued by the HKICPA that are mandatorily effective for the current interim period. The application of the amendments to HKFRSs in the current interim period has had no material effect on the amounts reported in these condensed consolidated financial statements and/or disclosures set out in these condensed consolidated financial statements. 3. SEGMENT INFORMATION 3. Segment information reported externally was analysed on the basis of the types of services provided and activities carried out by the Group s operating divisions. The Group is currently organised into two operating divisions hotel and leisure services, and securities trading. The information reported to the Group s chief operating decision maker (i.e. Executive Directors) for the purposes of resource allocation and assessment of performance is focused on these operating divisions. However, limited securities trading activities are noted for both periods. 9

12 Notes to the Condensed Consolidated Financial Statements 3. SEGMENT INFORMATION (Continued) 3. The following is an analysis of the Group s revenue and results by reportable and operating segments for the period under review: Six months ended 30 June 2012 (unaudited) Hotel and leisure services Securities trading Consolidated HK$ 000 HK$ 000 HK$ 000 Segment turnover External sales 181, ,437 Results Amount excluding impairment loss recognised in respect of other intangible assets and property, plant and equipment Impairment loss recognised in respect of other intangible assets and property, plant and equipment (39,119) (535) (39,654) (45,000) (45,000) Segment results (84,119) (535) (84,654) Interest income 78 Finance costs (6,470) Fair value loss on derivative financial instrument Share of result of an associate Central administrative costs and other unallocated expenses Increase in fair value of investment properties (300) (2,100) (17,648) 203 Loss before taxation (110,891) 10 Rosedale Hotel Holdings Limited Interim Report 2012

13 Notes to the Condensed Consolidated Financial Statements 3. SEGMENT INFORMATION (Continued) Six months ended 30 June 2011 (unaudited) 3. Hotel and leisure services Securities trading Consolidated HK$ 000 HK$ 000 HK$ 000 Segment turnover External sales 178, ,226 Results Amount excluding impairment loss recognised in respect of property, plant and equipment Impairment loss recognised in respect of property, plant and equipment (62,049) (1,916) (63,965) (9,980) (9,980) Segment results (72,029) (1,916) (73,945) Interest income 87 Finance costs (19,418) Central administrative costs and other unallocated expenses Fair value loss on derivative financial instrument Loss on disposal of subsidiaries Decrease in fair value of investment properties (19,350) (2,080) (549) (2,272) Loss before taxation (117,527) 11

14 Notes to the Condensed Consolidated Financial Statements 3. SEGMENT INFORMATION (Continued) 3. Segment result represents the profit earned or loss incurred by each segment without allocation of central administrative costs and other unallocated expenses, interest income, finance costs, share of result of an associate, loss on disposal of subsidiaries, changes in fair value of investment properties and the derivative financial instrument. This is the measure reported to the Group s chief operating decision maker for the purposes of resource allocation and performance assessment. 4. LOSS BEFORE TAXATION 4. Six months ended HK$ 000 HK$ 000 (unaudited) (unaudited) Loss before taxation has been arrived at after charging: Amortisation of other intangible assets 1,519 2,931 Depreciation of property, plant and equipment 40,308 52,729 Loss on disposal of property, plant and equipment (included in other gains and losses) 19,573 4,533 Minimum lease payments in respect of rented premises 40,312 45,218 and after crediting: Interest income Rosedale Hotel Holdings Limited Interim Report 2012

15 Notes to the Condensed Consolidated Financial Statements 5. TAXATION CHARGE 5. Six months ended HK$ 000 HK$ 000 (unaudited) (unaudited) Taxation charge comprises: Current tax: Hong Kong Other jurisdiction 3,335 2,618 Deferred tax: Current period 110 (1,800) Taxation charge 3, Hong Kong Profits Tax is recognised based on management s best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate used is 16.5% for both periods under review. 16.5% People s Republic of China ( PRC ) enterprise income tax is calculated at the applicable rates in accordance with the relevant laws and regulations in the PRC. Taxation arising in other jurisdiction is recognised based on management s best estimate of the weighted average annual income tax rate expected for the full financial year. 13

16 Notes to the Condensed Consolidated Financial Statements 6. DISPOSAL OF SUBSIDIARIES 6. On 25 October 2010, the Group entered into an agreement with an independent third party and the agreement entitled the counterparty to purchase one out of two shares of Sinomatrix Limited ( Sinomatrix ), a wholly-owned subsidiary of the Group, at a consideration of US$2,200,000 (approximately equivalent to HK$17,050,000). The transaction was completed in June 2011, and the Group has retained a 50% equity interest in Sinomatrix. Accordingly, Sinomatrix and its subsidiaries ( Sinomatrix Group ) ceased to be subsidiaries of the Company and Sinomatrix became a jointly controlled entity of the Company from that day. No loss arose from the disposal during the six months ended 30 June Sinomatrix Limited Sinomatrix 2,200,000 17,050,000 Sinomatrix 50% Sinomatrix Sinomatrix Sinomatrix In December 2010, the Group entered into an agreement for the sale of its entire interest in ( ), a 50.5% owned subsidiary of the Group, at a consideration of RMB3,000,000 (equivalent approximately to HK$3,519,000). The transaction was completed in January This transaction has resulted in the recognition of a loss of approximately HK$395,000 in profit or loss during the six months ended 30 June % 3,000,000 3,519, ,000 During the six months ended 30 June 2011, the Group entered into an agreement for the sale of its 100% equity interest in Wise Mark International Investment Inc. ( Wise Mark ), a wholly-owned subsidiary of the Group, to an independent third party, at a consideration of HK$3,000,000. The disposal was completed in April This transaction has resulted in the recognition of a loss of approximately HK$154,000 in profit or loss during the six months ended 30 June % 3,000, , Rosedale Hotel Holdings Limited Interim Report 2012

17 Notes to the Condensed Consolidated Financial Statements 6. DISPOSAL OF SUBSIDIARIES (Continued) 6. The net assets of the subsidiaries at the respective dates of disposal were as follows: Six months ended Sinomatrix Wise Mark Group at at at Total (unaudited) (unaudited) (unaudited) (unaudited) HK$ 000 HK$ 000 HK$ 000 HK$ 000 Sinomatrix Net assets disposed of 48,715 3,914 3,154 55,783 Non-controlling interests (14,615) (14,615) Fair value of remaining 50% equity interest retained as interest in 50% a jointly controlled entity (17,050) (17,050) Loss on disposal (395) (154) (549) Total consideration 17,050 3,519 3,000 23,569 Satisfied by: Deposit received in prior period 2,478 2,478 Cash 17,050 1,041 3,000 21,091 17,050 3,519 3,000 23,569 Net cash inflow arising on disposal Cash 17,050 1,041 3,000 21,091 Bank balances and cash disposed of (301) (301) 17, ,000 20,790 15

18 Notes to the Condensed Consolidated Financial Statements 7. GAIN ON DISPOSAL OF AVAILABLE-FOR- SALE INVESTMENT 7. On 27 February 2012, the Group completed the disposal of its 10% equity interest in HKWOT (BVI) Limited ( HKWOT ) to the controlling shareholder of HKWOT, C-Travel International Limited ( C-Travel International ), for a consideration of US$9,440,000 (equivalent to approximately HK$73,600,000), which was paid as to US$9,180,000 (equivalent to approximately HK$71,600,000) by way of cash at completion and as to the balance of US$260,000 (equivalent to approximately HK$2,000,000) on the first anniversary of the completion date. The Group had previously disposed of 90% equity interest in HKWOT to C-Travel International in May The balance was previously stated at its cost. This transaction has resulted in the Group recognising a gain of approximately HK$17,037,000 in profit or loss. 8. DIVIDEND HKWOT (BVI) Limited H K W O T C - Tr a v e l Inter national LimitedC-Travel International HKWOT 10% 9,440,000 73,600,000 9,180,000 71,600, ,000 2,000,000 C-Travel International HKWOT 90% 17,037, No dividends were paid, declared or proposed during the interim period. The directors have determined that no dividend will be paid in respect of the interim period. 16 Rosedale Hotel Holdings Limited Interim Report 2012

19 Notes to the Condensed Consolidated Financial Statements 9. LOSS PER SHARE 9. The calculation of the basic loss per share attributable to the owners of the Company is based on the following data: Six months ended HK$ 000 HK$ 000 (unaudited) (unaudited) Loss for the purpose of basic (basic and diluted for 30 June 2011) loss per share for the six months ended 30 June 2012 Loss for the period attributable to owners of the Company (111,019) (111,344) Number of shares Number of ordinary shares in issue during the period for the purpose of basic (basic and diluted for 30 June 2011) loss per share for the six months ended 30 June ,675, ,675,872 17

20 Notes to the Condensed Consolidated Financial Statements 9. LOSS PER SHARE (Continued) 9. There were no potential ordinary shares outstanding during the six months ended 30 June The computation of diluted loss per share for the six months ended 30 June 2011 has not assumed the conversion of the Company s convertible notes outstanding during that period since their conversion would result in a decrease in loss per share. 10. MOVEMENTS IN PROPERTY, PLANT AND EQUIPMENT, OTHER INTANGIBLE ASSETS AND INVESTMENT PROPERTIES 10. D u r i n g t h e p e r i o d, t h e G ro u p s p e n t a p p ro x i m a t e l y HK$144,062,000 (for the six months ended : HK$292,713,000) on acquisition of property, plant and equipment of which approximately HK$109,644,000 was in relation to hotel properties under construction (for the six months ended : HK$270,650,000) in Hong Kong. 144,062, ,713, ,644, ,650,000 In addition, due to the unsatisfactory results of some of the budget hotels in the Group s hotel operations, the Group has disposed of certain leasehold improvements and furniture and fixtures relating to those budget hotel s operations during the period to certain independent third parties. The carrying amount of these assets disposed of were approximately HK$42,968,000 with cash proceeds of approximately HK$15,800,000, resulting in a loss on disposal of approximately HK$27,168, ,968,000 15,800,000 27,168, Rosedale Hotel Holdings Limited Interim Report 2012

21 Notes to the Condensed Consolidated Financial Statements 10. MOVEMENTS IN PROPERTY, PLANT AND EQUIPMENT, OTHER INTANGIBLE ASSETS AND INVESTMENT PROPERTIES (Continued) 10. In view that some of the budget hotels are making recurring losses, and are projected to incur losses in future periods, and with the weakening Chinese economy, the directors have reviewed the recoverability of the carrying amounts of the Group s leasehold improvements in respect of hotel properties under operating leases amounting to HK$55,716,000 (for the six months ended : HK$183,730,000) and the related operating rights amounting to HK$20,784,000 (for the six months ended : HK$31,318,000) at the end of the reporting period. The recoverable amounts of the assets and liabilities of the cash generating units ( CGUs ) which are represented by each of the budget hotels have been determined on the basis of the value in use of each of the CGUs. The discount rate in measuring the amounts of value in use was 12%. The directors determined that the carrying amounts of certain of the budget hotel CGUs exceeded their recoverable amounts. Accordingly, an impairment loss of approximately HK$30,383,000 (for the six months ended : HK$9,980,000) has been recognised in respect of leasehold improvements and approximately HK$14,617,000 (for the six months ended : HK$ nil) in respect of operating rights of the CGUs. 55,716, ,730,000 20,784,000 31,318,000 12% 30,383,000 9,980,000 14,617,000 19

22 Notes to the Condensed Consolidated Financial Statements 10. MOVEMENTS IN PROPERTY, PLANT AND EQUIPMENT, OTHER INTANGIBLE ASSETS AND INVESTMENT PROPERTIES (Continued) 10. The fair value of investment properties at 30 June 2012 has been arrived at on the basis of a valuation carried out on that date by Norton Appraisals Limited ( Norton Appraisals ), an independent qualified professional valuer not connected with the Group. Norton Appraisals is a member of the Hong Kong Institute of Surveyors, and has appropriate qualifications and recent experiences in the valuation of similar properties in the relevant locations. The valuation was arrived at using the direct comparison approach and also taking into consideration of the outstanding renovation costs of the investment property at date of valuation. The resulting increase in fair value of investment properties of approximately HK$203,000 (for the six months ended : HK$2,272,000) has been recognised in profit or loss. 11. AMOUNT DUE FROM AN INVESTEE 203,000 2,272, In February 2012, the Group completed the disposal of its 13.5% equity interest in and amount due from an investee, Ocean Champion Investments Limited, at a consideration of HK$12,300,000 to an independent third party. No gain or loss arose from this disposal. Ocean Champion Investments Limited 13.5% 12,300, Rosedale Hotel Holdings Limited Interim Report 2012

23 Notes to the Condensed Consolidated Financial Statements 12. TRADE AND OTHER RECEIVABLES 12. Included in trade and other receivables are trade receivables o f a p p r o x i m a t e l y H K $ 1 5, 2 9 2, ( a t : HK$10,805,000) and the aged analysis of the trade receivables (net of impairment) based on invoice date, at the end of the reporting period is as follows: 15,292,000 10,805,000 At HK$ 000 (unaudited) At HK$ 000 (audited) 0 30 days ,727 6, days ,385 2, days , Over 90 days ,292 10,805 The Group allows an average credit period of 0 to 30 days to its trade customers Included in other receivables at 30 June 2012 are prepaid rentals and other deposits related to the Group s budget hotels located in the PRC and other prepayments in aggregate of approximately HK$17,181,000 that are expected to be utilised within one year ( : HK$35,906,000). 17,181,000 35,906,000 21

24 Notes to the Condensed Consolidated Financial Statements 13. ASSET CLASSIFIED AS HELD FOR SALE 13. In June 2011, the directors of the Company resolved to dispose of a vessel ( Vessel ) and started negotiations with several interested parties. Accordingly, the assets attributable to the Vessel have been classified as a disposal group held for sale and were separately presented in the condensed consolidated statement of financial position as at 30 June Due to the weakening Chinese economy, the interested parties previously identified will not proceed with the purchase. During the period, the directors have given careful consideration on the probability to dispose of the Vessel and have concluded that it is not highly probable for the Vessel to be disposed of within the next twelve months. Thus, the Vessel was reclassified from asset classified as held for sale to property, plant and equipment as at 30 June The Vessel is included in the Group s hotel and leisure services for segment reporting purposes (see note 3). 14. TRADE AND OTHER PAYABLES Included in trade and other payables are trade payables of approximately HK$8,796,000 (at : HK$10,287,000) and the aged analysis of the trade payables based on invoice date at the end of the reporting period is as follows: 8,796,000 10,287,000 At HK$ 000 (unaudited) At HK$ 000 (audited) 0 30 days ,956 5, days ,135 2, days ,519 1,427 Over 90 days 90 1, ,796 10, Rosedale Hotel Holdings Limited Interim Report 2012

25 Notes to the Condensed Consolidated Financial Statements 14. TRADE AND OTHER PAYABLES (Continued) 14. Included in other payables at 30 June 2012 are balances as follows: (a) Deposits received of approximately HK$11,696,000 (a) ( : HK$11,344,000) from shop tenants in the 1 1, 6 9 6, hotel properties. 11,344,000 (b) Payables of approximately HK$22,338,000 ( : HK$20,175,000) for hotel supplies incurred for the Group s hotel properties. (b) 22,338,000 20,175,000 (c) Accrual for direct operating and administrative (c) expenses amounting to approximately HK$29,167,000 ( : HK$58,275,000) that are expected to be 29,167,000 settled within one year. 58,275,000 (d) P a y a b l e f o r h o t e l c o n s t r u c t i o n a m o u n t i n g t o (d) approximately HK$79,911,000 ( : HK$nil) for the Group s hotel property located in Tai Kok Tsui, Hong 79,911,000 Kong. 15. BORROWINGS 15. During the period, the Group did not obtain any new bank loans (for the six months ended : HK$502,614,000). The Group obtained a new other borrowing of HK$9,000,000 (for the six months ended : HK$2,648,000) from a company which has a common significant shareholder with the Company. The new other borrowing bears interest rate at Hong Kong Dollar Prime rate plus 2% per annum. Bank and other borrowings of approximately HK$22,204,000 (for the six months ended : HK$46,037,000) was repaid during the period. 502,614,000 9,000,000 2,648, ,204,000 46,037,000 23

26 Notes to the Condensed Consolidated Financial Statements 15. BORROWINGS (Continued) 15. Bank deposits of approximately HK$14,014,000 ( : HK$14,933,000) and hotel properties located in Tai Kok Tsui, Hong Kong and Beijing of approximately HK$1,434,190,000 ( : HK$1,322,046,000) were pledged as securities for the borrowings as at 30 June ,014,000 14,933,000 1,434,190,000 1,322,046,000 In July 2012, the Group obtained a revolving bank loan facility of HK$30 million for a term of up to 2 January 2013 or the completion date of refinancing of the existing loan facilities of HK$405 million ( Existing Loan ), whichever is earlier. The new facility bears interest at 2.75% per annum over one, two or three months Hong Kong Interbank Offer Rate and is pledged by the same collateral as the Existing Loan. 30,000, ,000, As of the date of approval for issuance of the condensed consolidated financial statements, this new revolving bank facility was fully utilised. 16. SHARE CAPITAL 16. Number of shares Amount HK$ 000 Authorised Shares of HK$0.01 each at 1 January 2011, 31 December 2011 and 30 June ,000,000,000 1,500,000 Issued and fully paid Shares of HK$0.01 each and at 1 January 2011, 31 December 2011 and 30 June ,675,872 6, Rosedale Hotel Holdings Limited Interim Report 2012

27 Notes to the Condensed Consolidated Financial Statements 17. CAPITAL COMMITMENTS 17. At HK$ 000 (unaudited) At HK$ 000 (audited) Contracted for but not provided in the condensed consolidated financial statements in respect of Capital expenditure on investment property 17,540 20,065 Capital expenditure on hotel property 529 Capital contribution to an associate 11,115 11,115 Purchase of property, plant and equipment 1,465 31,752 30,649 62,932 25

28 Notes to the Condensed Consolidated Financial Statements 18. OPERATING LEASE COMMITMENTS As lessee 18. At 30 June 2012, the Group had commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows: At HK$ 000 (unaudited) At HK$ 000 (audited) Hotel property Within one year 65,119 74,762 In the second to fifth years inclusive 102, ,896 Over five years 11,287 55, , ,421 Office premises and staff quarters Within one year Rosedale Hotel Holdings Limited Interim Report 2012

29 Notes to the Condensed Consolidated Financial Statements 19. DERIVATIVE FINANCIAL INSTRUMENT 19. As of 30 June 2012, the Group has the following interest rate swap with a bank which is not under hedge accounting and the major terms of the swap are as follows: Notional amount Commencement date Maturity date Swaps HK$100,000, March December 2014 From 1.765% to 3 months HIBOR 100,000, The change in fair value of the interest rate swap was at a loss of approximately HK$300,000 (for the six months ended : HK$2,080,000) and was charged directly to profit or loss for the period. 20. RELATED PARTY TRANSACTIONS 300,000 2,080, The following is a summary of significant related party transactions carried out during the period: Six months ended HK$ 000 HK$ 000 (unaudited) (unaudited) Nature of transactions Name of company Loan interest paid by the Group ITC Management Limited ( ITC Management ) 242 ITC Management Limited ITC Management 27

30 Notes to the Condensed Consolidated Financial Statements 20. RELATED PARTY TRANSACTIONS (Continued) 20. The holding company of ITC Management has significant influence over the Company. ITC Management The loan from a related company, ITC Management, was unsecured, bearing interest at Hong Kong Dollar Prime Rate plus 2% per annum and was fully repaid during the period. ITC Management 2 The amount due from an associate is unsecured, non-interest bearing and repayable on demand. At 30 June 2012, the Group expects that such balance will be repayable in more than one year and it is classified as non-current. The amount due to a related company, ITC Management, was unsecured, non-interest bearing and was also fully repaid during the period. ITC Management Compensation of key management personnel The remuneration of key management personnel, which are the directors of the Company, during the period was as follows: Six months ended HK$ 000 HK$ 000 (unaudited) (unaudited) Short-term benefits 1, Rosedale Hotel Holdings Limited Interim Report 2012

31 Management Discussion and Analysis REVIEW OF OPERATIONS The Group attained a turnover of HK$181.4 million for the six months ended 30 June 2012, represented a small increase of 1.8% as compared to HK$178.2 million for the corresponding period of The results of the Group for the six months ended 30 June 2012 was a loss of HK$114.3 million (2011: HK$118.3 million) which was mainly attributable to gross profit of HK$44 million (2011: HK$21.4 million); administrative expenses of HK$94.6 million (2011: HK$92.2 million); finance costs of HK$6.5 million (2011: HK$19.4 million); gain on disposal of available-for-sale investment of HK$17 million (2011: HK$nil); impairment losses recognised in respect of property, plant and equipment and other intangible assets of HK$30.4 million (2011: HK$10 million) and HK$14.6 million (2011: HK$nil) respectively arising from certain under-performed hotel lease contracts. SEGMENT RESULTS Hotel and Leisure Services 181,400, ,200, % 114,300, ,300,000 44,000,000 21,400,000 94,600,000 92,200,000 6,500,000 19,400,000 17,000,000 30,400,000 10,000,00014,600,000 The hotel and leisure business of the Group comprises the three Rosedale branded 4-star rated hotels, the Times Plaza Hotel, Shenyang, the Luoyang Golden Gulf Hotel and the Square Inn budget hotel chain. Turnover increased slightly by 1.8% to HK$181.4 million for the six months ended 30 June 2012 (2011: HK$178.2 million). Segment loss for the reporting period was HK$84.1 million (2011: HK$72 million). Consequent to the worse than expected PRC economy, the demand for hotel accommodation was not as good as expected during traditional golden week and the Spring trade fair in Guangzhou. Accordingly, the directors have reviewed the recoverability of the carrying amount of the Group s leasehold improvements in respect of hotel properties and related intangible assets by comparing with the anticipated discounted cash flow. The directors determined that impairment losses of HK$30.4 million (2011: HK$10 million) and HK$14.6 million (2011: HK$nil) respectively have to be recognised in respect of its leasehold improvements and other intangible assets in arriving at the segment results for the six months ended 30 June % 181,400, ,200,000 84,100,000 72,000,000 30,400,000 10,000,000 14,600,000 29

32 Management Discussion and Analysis Securities Trading Loss from securities trading for the six months ended 30 June 2012 was HK$0.5 million (2011: HK$1.9 million). MATERIAL ACQUISITIONS AND DISPOSALS 500,000 1,900,000 On 13 January 2012, the Group entered into a conditional sale and purchase agreement with an independent third party (the Vendor ). Pursuant to the agreement, the Vendor agreed to sell and the Group agreed to purchase 14,000,000 ordinary shares of US$0.02 each in the capital of Apex Quality Group Limited ( Apex ), representing approximately 5.05% of the issued share capital of Apex at a total cash consideration of HK$62,000,000. Following completion, the Company s equity interest in Apex was increased to approximately 88.2% and Apex remains as an indirect non wholly-owned subsidiary of the Company. The said agreement was completed in January Apex Quality Group LimitedApex 14,000, Apex 5.05% 62,000,000 Apex88.2%Apex On 2 February 2012, the Company entered into a conditional agreement with C-Travel International Limited ( C-Travel ) and pursuant to which the Company conditionally agreed to sell and C-Travel conditionally agreed to purchase the remaining 10% equity interest in the issued share capital of HKWOT (BVI) Limited, at a consideration of US$9.44 million (equivalent to approximately HK$73.6 million). The consideration was paid by C-Travel as to US$9.18 million (equivalent to approximately HK$71.6 million) by way of cash at completion and as to the balance of US$0.26 million (equivalent to approximately HK$2 million) by way of cash on the first anniversary of the completion date. The said agreement was completed in February C-Travel International LimitedC-Travel C-Travel HKWOT (BVI) Limited10% 9,440,000 73,600,000 C-Travel 9,180,000 71,600, ,000 2,000, Rosedale Hotel Holdings Limited Interim Report 2012

33 Management Discussion and Analysis On 1 February 2012, Eagle Spirit Holdings Limited ( Eagle Spirit ), a wholly-owned subsidiary of the Company, entered into a conditional share sale agreement (the Agreement ) with an independent third party (the Purchaser ), amongst other things, for the disposal of the entire equity interest (the Sale Share ) in and the shareholder s loan (the Sale Loan ) to More Star Limited ( More Star ) for a total consideration of approximately HK$1,317,708,000 (subject to adjustment). Of the total consideration, 95% would be settled by way of payment in cash, while the remaining 5% would be settled by the Purchaser by way of issue of the consideration units to Eagle Spirit (or its related entity as approved by the Purchaser). The consideration units represented interest in the stapled group comprising the Ascendas Hospitality Real Estate Investment Trust and Ascendas Hospitality Business Trust admitted for trading on the Main Board of the Singapore Exchange Securities Trading Limited under the initial public offering of the units which was then in contemplation. More Star is a wholly-owned subsidiary of Eagle Spirit. The sole asset of the More Star is its investment in the entire issued share capital of the Fortress State International Limited ( Fortress State ) and of which the sole asset is the building named as the Rosedale Hotel Kowloon (the Property ) was then under construction on Kowloon Inland Lot No located at No. 86 Tai Kok Tsui Road, Tai Kok Tsui, Kowloon, Hong Kong. It was a term of the Agreement that Rosedale Hotel Kowloon Limited, a wholly-owned subsidiary of Eagle Spirit, shall enter into a master lease upon the later of (i) issuance of the Certificate of Compliance; and (ii) completion of Agreement. Under the master lease, Rosedale Hotel Kowloon Limited shall lease the Property for hotel operation from Fortress State for a term commencing from the date of signing until six (6) years after the date of completion. Under the Agreement, Eagle Spirit also granted to the Purchaser a put option pursuant to which, under certain circumstances after completion, the Purchaser may require Eagle Spirit to purchase back all of the issued shares of More Star and all shareholder s loan due by More Star to the Purchaser at the consideration equal to the (i) total consideration of the Sale Share and the Sale Loan; and (ii) any amount injected into Eagle Spirit Holdings Limited Eagle Spirit More Star LimitedMore Star 1,317,708,000 95% 5% Eagle Spirit Ascendas Hospitality Real Estate Investment Trust Ascendas Hospitality Business Trust More Star Eagle Spirit More Star Eagle Spirit (i) (ii) (6)Eagle Spirit Eagle SpiritMore Star More Star (i) (ii) More Star 31

34 Management Discussion and Analysis the More Star and Fortress State after completion. The disposal of the Sale Share and the Sale Loan constituted a very substantial disposal whereas the exercise of the put option by the Purchaser constituted a very substantial acquisition for the Company under the Listing Rules. The Agreement and the transactions contemplated thereunder were therefore subject to the shareholders approval requirements under the Listing Rules. The Agreement and the transactions contemplated thereunder were approved by the shareholders of the Company at the special general meeting convened in April On 29 June 2012, the Purchaser informed the Company that the condition precedent to Completion in relation to the initial public offering of the Units in the stapled group would not be satisfied on or before 30 June Accordingly, the Agreement lapsed on 30 June 2012 and was of no further effect and no party shall have any claim against other party(ies) by reason thereof. LIQUIDITY AND FINANCIAL RESOURCES At the end of the reporting period, the Group s total borrowings were as follows: As at HK$ million (unaudited) As at HK$ million (audited) Loan from a related company 14.6 Borrowings amount due within one year Borrowings amount due after one year Rosedale Hotel Holdings Limited Interim Report 2012

35 Management Discussion and Analysis Borrowings of approximately HK$8.1 million bears interest at a fixed rate of 10% per annum. All other borrowings bear floating interest rates. 8,100,00010 The gearing ratio as at 30 June 2012, expressed as a percentage of total borrowings to equity attributable to owners of the Company, was 40.1% (at 31 December 2011: 38.9%). PLEDGE OF ASSETS 40.1% 38.9% At 30 June 2012, certain assets of the Group at net book value of HK$1,448.2 million (at 31 December 2011: HK$1,337 million) were pledged to banks and financial institutions for credit facilities. CONTINGENT LIABILITIES 1,448,200,000 1,337,000,000 The Group did not have any significant contingent liabilities as at 30 June 2012 (as at 31 December 2011: Nil). FOREIGN CURRENCY EXPOSURE The majority of the Group s assets and liabilities and business transactions were denominated in Hong Kong dollars and Renminbi. During the six months ended 30 June 2012, the Group has not entered into any hedging arrangements. However, the management will continue to monitor closely its foreign currency exposure and requirements and to arrange for hedging facilities when necessary. EMPLOYEES At 30 June 2012, the Group had 1,218 employees of which 960 employees were stationed in the PRC. Competitive remuneration packages are structured to commensurate with the responsibilities, qualifications, experience and performance of individual employee. The Group also provides training programs, provident fund scheme and medical insurance for its employees. 1,

36 Management Discussion and Analysis PROSPECTS Following the lapse of the agreement for the disposal of the entire equity interest in and the shareholder s loan to More Star, the Company commenced the soft operation of its newly erected Rosedale Hotel Kowloon in July Following the opening of this new fourstar hotel, the Company expects that both the bottomline and the market share of the Group shall be strengthened in the coming years. More Star The budget hotel market is under keen competition in the PRC. The Group shall continue to refine its strategy by focusing on running quality leased-and-operated budget hotels at prime locations in Guangdong Province and popular tourists spots like Wuyishan of the Fujian Province. In the coming years, the Group shall continue to lay resources to strengthen its branding and position in the market and to explore further quality investment opportunities to enhance shareholders wealth. 34 Rosedale Hotel Holdings Limited Interim Report 2012

37 Supplementary Information DIRECTORS INTERESTS IN SECURITIES As at 30 June 2012, the interests and short positions of the directors of the Company in the shares, underlying shares and debentures of the Company or its associated corporation (within the meaning of Part XV of the Securities and Futures Ordinance (the SFO )) (a) as recorded in the register required to be kept under section 352 of the SFO; or (b) as otherwise notified to the Company and The Stock Exchange of Hong Kong Limited (the Stock Exchange ) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the Model Code ) as set out in Appendix 10 of the Rules Governing the Listing of Securities on the Stock Exchange (the Listing Rules ) adopted by the Company, are as follows: Interests in the shares XV (a)352 (b) Long position/ Capacity/ Number of Name of director Short position Nature of interest shares held Approximate percentage of shareholding Mr. Kwok Ka Lap, Alva Long position Beneficial owner 7, % 7, % Save as disclosed above, as at 30 June 2012, none of the directors of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or its associated corporation (within the meaning of Part XV of the SFO) (a) as recorded in the register required to be kept under section 352 of the SFO; or (b) as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code. XV (a)352 (b) 35

38 Supplementary Information Share Option Scheme A share option scheme (the Scheme ) which was adopted by the Company on 3 May 2002 and amended on 27 May 2005, is valid and effective for a period of 10 years since the date of adoption until 3 May No options were granted, nor were there any options outstanding under the Scheme during the period. SUBSTANTIAL SHAREHOLDERS AND OTHER PERSONS INTERESTS As at 30 June 2012, the interests or short positions of persons, other than directors of the Company, in the shares and underlying shares of the Company as recorded in the register required to be kept under section 336 of the SFO are as follows: 336 Interests in the Shares Name of Shareholder Long position/ Short position Capacity/ Nature of interest Number of shares held Approximate percentage of the issued share capital of the Company (a) Dr. Chan Kwok Keung, Long position Beneficial owner 1,132, % Charles (Note 1) 1 1,132, % Long position Interest of controlled 194,336, % corporation 194,336, % Ms. Ng Yuen Lan, Macy Long position Interest of spouse 195,468, % (Note 1) 1 195,468, % ITC Corporation Limited ( ITC ) (Note 1) Long position Interest of controlled corporation 194,336, % 1 194,336, % 36 Rosedale Hotel Holdings Limited Interim Report 2012

39 Supplementary Information SUBSTANTIAL SHAREHOLDERS AND OTHER PERSONS INTERESTS (Continued) Interests in the Shares (Continued) Name of Shareholder Long position/ Short position Capacity/ Nature of interest Number of shares held Approximate percentage of the issued share capital of the Company ITC Investment Holdings Limited ( ITC Investment ) (Note 1) ITC Investment Holdings Limited ( ITC Investment ) 1 Long position Interest of controlled corporation 194,336, % 194,336, % Leaptop Investments Limited (Note 1) Leaptop Investments Limited 1 Long position Interest of controlled 194,336, % corporation 194,336, % Asia Will Limited ( AWL ) (Note 1) 1 Long position Beneficial owner 194,336, % 194,336, % (b) China Enterprises Limited ( CEL ) (Note 2) China Enterprises Limited CEL 2 Long position Interest of controlled 48,660, % corporation 48,660, % Long position Beneficial owner 250, % 250, % Cosmos Regent Ltd. (Note 2) Long position Beneficial owner 43,325, % Cosmos Regent Ltd. 2 43,325, % 37

40 Supplementary Information SUBSTANTIAL SHAREHOLDERS AND OTHER PERSONS INTERESTS (Continued) Interests in the Shares (Continued) Notes: : (1) AWL was interested in 194,336,000 shares of the Company and was a wholly-owned subsidiary of Leaptop Investments Limited which in turn was a wholly-owned subsidiary of ITC Investment. ITC Investment was a wholly-owned subsidiary of ITC. Dr. Chan Kwok Keung, Charles ( Dr. Chan ) directly and indirectly held a total of more than one third of the issued share capital of ITC and was therefore deemed to be interested in the shares of the Company held by AWL. Dr. Chan also personally held 1,132,450 shares of the Company. Ms. Ng Yuen Lan, Macy, the spouse of Dr. Chan, and was therefore deemed to be interested in the shares of the Company held by AWL and Dr. Chan. (1) 194,336,000 Leaptop Investments Limited Leaptop Investments Limited ITC Investment ITC Investment 1,132,450 In addition to the interests as recorded in the register required to be kept by the Company under section 336 of the SFO, the Company was notified that AWL held 195,706,000 shares of the Company as at 30 June ,706,000 (2) Million Good Limited and Cosmos Regent Ltd. were interested in 5,334,870 shares of the Company and 43,325,554 shares of the Company respectively and were wholly-owned subsidiaries of CEL. CEL was therefore deemed to be interested in the shares of the Company held by Million Good Limited and Cosmos Regent Ltd. (2) Million Good Limited Cosmos Regent Ltd. 5,334,870 43,325,554 CEL CEL Million Good Limited Cosmos Regent Ltd. In addition to the interests as recorded in the register required to be kept by the Company under 336 of the SFO, the Company was notified that the 250,000 shares of the Company held by CEL in the capacity of beneficial owner had been sold and CEL held 48,660,424 shares of the Company as at 30 June CEL 250,000 CEL48,660,424 Save as disclosed above, as at 30 June 2012, the Company had not been notified of any other persons (other than the directors of the Company) who had interests or short positions in the shares and underlying shares which would be required to be disclosed to the Company and the Stock Exchange pursuant to Part XV of the SFO. XV 38 Rosedale Hotel Holdings Limited Interim Report 2012

41 Supplementary Information INTERIM DIVIDEND The Board has resolved not to declare an interim dividend for the six months ended 30 June 2012 (for the six months ended 30 June 2011: Nil). PURCHASE, SALE OR REDEMPTION OF THE COMPANY S LISTED SECURITIES Neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company s listed securities during the six months ended 30 June AUDIT COMMITTEE The audit committee of the Company (the Audit Committee ) has reviewed with the management and the Company s auditor the accounting principles and practices adopted by the Group and discussed auditing and financial reporting matters including a review of the condensed consolidated financial statements for the six months ended 30 June 2012 on the basis that such review does not in itself constitute an audit. The Audit Committee currently comprises three independent non-executive directors, namely Mr. Poon Kwok Hing, Albert, Mr. Kwok Ka Lap, Alva, and Mr. Sin Chi Fai. CORPORATE GOVERNANCE On 1 April 2012, the Code on Corporate Governance Practices as set out in Appendix 14 of the Listing Rules (the Former Code ) was amended and renamed as the Corporate Governance Code (the New Code ). In the opinion of the Board, the Company had complied with the code provisions as set out in the Former Code during the period from 1 January 2012 to 31 March 2012 as well as those in the New Code during the period from 1 April 2012 to 30 June 2012, except for the following deviation: Code Provision A.4.1 Under Code Provision A.4.1, non-executive directors should be appointed for a specific term, subject to re-election. The current independent non-executive directors of the Company are not appointed for a specific term. However, all directors (including executive and independent non-executive directors) of the Company are subject to retirement by rotation and re-election at the annual general meeting in accordance with Bye-Law 99 of the Bye-Laws of the Company. As such, the Board considers that this is no less exacting than that in the Former and the New Code. A.4.1 A

42 Supplementary Information COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS OF LISTED ISSUERS The Company has adopted the Model Code as its own code of conduct for dealing in securities of the Company by the directors of the Company. Having made specific enquiry of all directors of the Company, the Company confirmed that all directors of the Company had complied with the required standard as set out in the Model Code during the six months ended 30 June On behalf of the Board Cheung Hon Kit Chairman Hong Kong, 28 August Rosedale Hotel Holdings Limited Interim Report 2012