Welcome to Keppel Land Report to Shareholders 2002

Like the rest of the world, Singapore and the region were affected adversely by the US economic slowdown, the US-Iraq conflict, and revived fears of terrorist attacks after the Bali blasts. Singapore’s modest 2.2% GDP growth for 2002 could not lift the soft markets in both the residential and office sectors.

Keppel Land’s consolidated sales fell 0.5% to $298.9 million against the previous year’s.

Based on construction and sales progress, there was progressive recognition from the Caribbean at Keppel Bay and One Park Avenue for the units sold, and a write-back of provisions totalling $22 million for Amaranda Gardens, Butterworth 8 and The Edgewater. These contributions, together with final cost adjustments for Villa Verde, The Mayfair and Palm Gardens, lower interest costs and higher project management fees more than offset the profit from the sale of Cluny Hill plots achieved last year. Thus, the Group’s profit before exceptional items of $129.2 million was higher than the previous year’s.

The effective tax rate of 25.4%, which resulted in a tax charge of $32.8 million, was higher than the standard rate of 22% as losses in certain of the Group’s companies could not be offset for tax purposes and the overall rate for overseas tax was higher.

Excluding exceptional items, the Group made an attributable profit of $94.3 million. However, the net exceptional loss items of $67.9 million arising from the loss of $70.4 million from the sale of Capital Square and a gain of $2.5 million from the sale of Bayswater Village, reduced the Group’s net profit to $26.4 million. Nonetheless, the Group succeeded in returning to profitability after suffering a loss of $368.4 million in 2001 arising from landbank provisions.

As capital values of Singapore office buildings declined, Keppel Land revalued downwards its investment properties in Singapore by $164 million to reflect the fall in market values by about 10%, after taking into account minority interests’ share. This revaluation deficit was charged against the surplus of $653.4 million in capital reserves in the balance sheet. As a result, the Group’s net tangible assets per share fell to $2.09 from $2.23 a year ago.

Shareholders’ funds declined from $1.58 billion a year ago to $1.48 billion as at 31 December 2002.

PROPOSED DIVIDEND

The Board is recommending a final gross dividend of 7% or 3.5 cents per share less tax, up from 6% or 3 cents per share last year, to shareholders. The dividend payout, amounting to $19.3 million, is subject to shareholders’ approval at the Annual General Meeting to be held on 20 May 2003. If approved, the dividend will be paid on 10 June 2003.

SUCCESSFUL EXECUTION OF PLANS

Despite the difficult environment, Keppel Land achieved several initiatives in 2002: the monetisation of receivables from the sale of residential units, the divestment of a major investment property and the lowering of its debt-equity ratio.

In June, the Group monetised $355 million worth of its residential receivables, effectively bringing forward cash flows from Amaranda Gardens, The Edgewater and Butterworth 8 which were sold on a deferred payment basis.

Despite the poor office market, Keppel Land successfully sold its 70% stake in prime office tower Capital Square valued at $490 million. The divestment reduced the attributable market value of Keppel Land’s investment assets by about 20% from $2.1 billion to $1.7 billion.

Both the monetisation of residential receivables and the divestment of Capital Square contributed to the lowering of the Group’s debt-equity ratio from 1.30 at end-2001 to 1.09 at end-2002.

The Group remains committed to divesting its investment building portfolio to re-deploy resources to focus on property development for sale in Asia, and property fund management. We will continue to explore various options including direct sale, the set-up of real estate investment trusts, and securitisation in our divestment efforts.

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