Econ Annual Report 2010 by Johnny Tan

为企业成长加强服务及提高质量

Annual Report 2010 财政年度报告 This document has been prepared by the Company and the contents have been reviewed by the Company’s sponsor, Shooklin Advisory Services Pte Ltd, for compliance with the relevant rules of the Singapore Exchange Securities Trading Limited (“Exchange”). The Company’s Sponsor has not independently verified the contents of this document. This document has not been examined or approved by the Exchange and the Exchange assumes no responsibility for the contents of this document, including the correctness of any of the statements or opinion made or reports contained in this document. The contact person for the Sponsor is Ms Janet Tan. Telephone number: (65) 6439 4893 Email: janet_tan@shooklin.com.sg

China Healthcare Limited Annual Report 2010 • 3

4 â&#x20AC;˘ China Healthcare Limited Annual Report 2010

02 Vision & Mission 03 Corporate Profile 04 Chairmanâ&#x20AC;&#x2122;s Message 06 Econ Commitment 08 Growing Presence 10 East-West Tradition 12 Operations Review 15 Board of Directors 16 Key Management Staff 18 Report on Corporate Governance 25 Risk Management Policies & Processes 27 Director's Report 31 Statement by Directors 32 Independent Auditors' Report 35 Balance Sheets 36 Consolidated Income Statement 37 Consolidated Statement of Comprehensive Income 38 Consolidated Statement of Changes in Equity 40 Consolidated Cash Flow Statement 42 Notes to the Financial Statements 83 Statistics of Shareholdings 85 Notice of Annual General Meeting 89 Proxy Form

China Healthcare Limited Annual Report 2010 â&#x20AC;˘ 1

To be a premium and leading brand in healthcare services in the Asia Pacific region, recognised by our customers for our holistic approach, personal touch and technological advancement.

我们致力于提供高质量的、以顾客为中心的医疗护理服务。我们通过以下途径以完成:

顾客需求始终坚持顾客需求至上的原则

研究与开发成为亚太地区医疗保健服务行业的卓越及主导品牌，以我们全方位，个性化的服务及领先的技术获得顾客的认可。

通过持续的研究和技能开发，不断改善我们的服务

质量体系不断系统化、规范化我们提供的服务和品质控制

联系网络 We are dedicated to provide high quality and customer-focused healthcare services. We will achieve this by focusing on:

Customer Needs Being sensitive to our customers’ needs

与医疗护理领域的合作伙伴建立本地及国际化的联系网络

员工素质关心并支持我们的员工实现更高的个人目标

Research & Development Improving our services through constant research and skills development

Excellence in our services 卓越的医疗服务

Quality System

Commitment to do our best 时刻全力以赴

Continuing to be highly systematic and organised in our service delivery and quality control

On the dot always 随时为您服务

Networking

Nimble mind at work 保持高效率的工作

Building up our local and international network with our partners in healthcare

People Development Caring and grooming our people to set and achieve higher goals CERT NO.: 96-2-0634 ISO 9001:2008

新加坡素质级称号

2 • China Healthcare Limited Annual Report 2010

国际品质服务证书

新加坡具潜力品牌奖

Integrated healthcare services provider 综合医疗服务提供者

ECON MEDICARE CENTRES & NURSING HOMES 宜康医疗保健中心与疗养院 ECON hOME CARE sERVICES 宜康登门护理服务 eCON aMBULANCE SERVICES 宜康救护车服务 eCON CARESKILL TRAINING CENTRE (ECTC) 宜康护理培训中心

China Healthcare Limited was founded in 1987 by Mr Ong Chu Poh, the Group Executive Chairman. Beginning with just one nursing home, it is now the market leader in providing quality healthcare and elder care to the population in Singapore and Malaysia. China Healthcare owns and operates seven nursing homes and medicare centres in Singapore, two medicare centres in Malaysia, a careskill training centre, and also provides professional care services such as home care, ambulance, physiotherapy & rehabilitation, and traditional Chinese medicine under the well respected ECON Healthcare brand. Additionally, it owns West Point Hospital, the only hospital in Singapore licensed by the Ministry of Health to provide both acute and convalescent care in a 24-hr setting. Offering a comprehensive suite of services to meet the needs of the residential, business and industrial communities in the West, West Point Hospital adopts a holistic approach and integrates western medical advancements with the benefits of eastern healing methods in the recovery process, promoting true East-West medicine. In China, the Group has a strategic 35% stake in an associate that manufactures hospital equipment and exports to more than 400 cities worldwide, as well as investment in a Health Park and management consultancy for a Retirement Village. China Healthcare was the first in the nursing home industry to obtain the ISO 9002 Certification in 1996. It upgraded its quality standard to ISO 9001:2000 Certificate in 2002 and was successfully recertified for the ISO 9001:2008 in 2010. In 2003, it achieved the Singapore Quality Class status and the Singapore Promising Brand Award. China Healthcare was invited by SPRING Singapore to lead in establishing quality standards and operational procedures for the Singapore nursing home industry as part of the National Skills Recognition System (NSRS). With 23 years of experience in the healthcare industry, China Healthcare is recognised by the community for its holistic approach, high quality and customer-focused services. Our key strength lies in our ability to provide a wide range of personalised healthcare services for our customers.

中国医疗保健有限公司是由集团执行主席王再保先生于 1987年创立。从最初的一家疗养院，发展成为目前新马两地医疗保健机构的市场领先者，专门提供高素质的医疗保健服务及年老护理。公司以宜康医疗保健品牌在新加坡拥有并经营七家医疗保健中心与疗养院、马来西亚拥有两所医疗保健中心、一所护理培训中心以及提供多项相关的专业服务，包括登门护理、救护车服务、物理治疗与康复服务及中医药服务。此外，公司还拥有康裕医院，唯一一所持有新加坡卫生部执照以同时提供24小时紧急医疗与康复服务的医院。康裕医院拥有全面性的医疗护理服务，为新加坡西部社区、商业及工业客户提供周全的相应服务。医院采用综合治疗方法，使用西方医学的先进技术外，也纳入传统中医学的精髓，相辅相成达到更显著的治疗效果，积极提倡中西医治疗。在中国，公司持有一家医疗仪器生产商35%策略性的股份，医疗仪器外销出口至超过400多个城市之外，同时也投资于养生保健园区的建设和乐龄退休村的咨询发展项目。中国医疗保健在 1996年成为首家获得 ISO 9002证书的医疗保健机构。之后，公司再接再厉提升服务水平，又于2002年及2010年分别成功获颁ISO 9001:2000及 ISO 9001:2008证书。2003年，公司同时荣获新加坡素质级别及新加坡具潜力品牌大奖。中国医疗保健也曾经受新加坡标准、生产与创新局SPRING Singapore之邀，为新加坡医疗保健业拟定运作程序及服务标准，以作为新加坡技能认可系统的部分内容。在保健领域拥有23年经验的中国医疗保健有限公司积极提供全面性、高素质的服务，处处以客为尊，获得广大社群的推崇，能为客户量身制定广泛的保健护理配套，是我们的优势。

China Healthcare Limited Annual Report 2010 • 3

On behalf of the Board of Directors, I am pleased to present our Annual Report for the financial year ended 31 March 2010. Despite the global economic downturn, our Group registered a significant growth. Revenue grew from $21.9 million to $24.8 million, an increase of $2.9 million or 13.2% compared to the previous financial year. The growth in revenue was mainly attributed to higher contribution from West Point Hospital arising from the expansion of medical services and an increase in overall business, supported by an enhanced marketing effort. Revenue from the Medicare Centres and Nursing Homes also contributed to the increase. In line with the increase in revenue, profit before impairment of investment in an overseas subsidiary before taxation increased from $1.0 million to $3.7 million, an increase of 270%. Manpower costs increased from $10.5 million to $11.4 million. The increase of 8.6% in manpower costs arose from additional headcounts to support the higher volume of business, as well as continual upgrading of overall management capabilities to position and drive the group’s expansion both locally and internationally. In Singapore, our Medicare Centres and Nursing Homes continued to perform well, with almost full occupancy consistently, reflecting our customers’ continued confidence in the quality of our care and services. The Group will continue to focus on West Point Hospital (“WPH”) by continuously growing the pool of clients in the western part of Singapore; providing more specialist medical services; as well as collaboration with restructured hospitals and other healthcare providers. The Group plans to commence expansion of WPH by early 2011 and this will be executed in phases to minimise disruption to the normal hospital operations. Upon completion, WPH is expected to have premium and classic private wards, medical suites, operating theatres, day surgery facilities and retail space with state-of-the-art hardware and five-star quality services, thus increasing its diversity of income sources. In Malaysia, our Medicare Centre in Kuala Lumpur also performed very well. Revenue increased 10.4% from $0.9 million to $1.0 million and operating profit increased by 134% from $0.1 million to $0.2 million. Construction of our other Medicare Centre in Taman Perling, Johor Bahru is expected to start by early 2011 and completed by 1st quarter 2012. The planned capacity of 200 beds will comprise private rooms, open wards, physiotherapy and traditional Chinese medicine facilities. The new Medicare Centre is expected to contribute positively to our group’s profitability as it is expected to attract residents from both Malaysia and Singapore. In the People’s Republic of China (PRC), we signed a Memorandum of Understanding (MOU) with China-Singapore Suzhou Industrial Park Land Co. Ltd in May 2009 for a proposed development of a Retirement Village (RV) in Suzhou Industrial Park. Under the terms of the MOU, we will provide our Econ brand of consultancy and know-how in the planning and construction of the RV, as well as day-to-day management services upon its completion of the RV. This strategic collaboration will enable both parties to provide quality retirement homes with high standard of healthcare services to meet the increasing needs in Suzhou and other

4 • China Healthcare Limited Annual Report 2010

parts of China. In addition, we have the option to purchase up to 30% equity in the project within three years of operation. In relation to the Group’s 51% equity interest in Chengdu Tian Li to develop a healthcare park, there was an impairment loss on investment amounted to $9.2 million. The Tian Li Group, had in 2004, entered into a contract with the Chongzhou city government to obtain a 50-year exclusive right to develop and operate a scenic healthcare park at Mt Jiguan-Jiulonggou. However, based on the legal update issued by a PRC law firm on 14 May 2010, non-fulfillment of certain contractual obligations by the other shareholders of Tian Li had resulted in a breach of the terms and conditions under the Joint Venture Agreement. In view of that, the development of the healthcare park is still on hold. Management has taken a prudent approach to impair the entire carrying value of the investment while it continues to pursue legal and other options to recover the investment. Our associate company in Zhuhai, Zhuhai Boxuan Medical Science Co. Ltd, which manufactures hospital beds and equipment, had performed well and contributed $0.8 million to net profit. Moving forward, we will continue to build on our strengths in our niche areas and also explore and identify other strategic business opportunities. As ageing populations coupled with the scarcity of quality and reliable nursing care services in the region increasingly becomes a growing concern, our expertise and track record will well position us to expand our businesses not only in Singapore but also in the region, particularly in Malaysia, Australia and China. We will also continue to invest in the upgrading of our human resources so as to further strengthen our management and operating capabilities to achieve our vision and bring more value to our customers and shareholders. I would also like to thank our board members for their expert counsel and support, our management team and staff for their dedication, hard work and commitment and our customers and suppliers for their confidence and trust in us. A special note of thanks goes to you, our esteemed shareholders, for your continuing support. The trust you placed in us is a constant motivation for us to give our best. Ong Chu Poh Group Executive Chairman

我谨代表董事会向全体股东呈报截至2010年3月31日的公司财政年度报告。尽管全球经济趋缓，我们集团的业绩仍显著增长，与上一个财政年度比较，销售收入由2,190万增长至2,480万，同比增长13.2%。收入的增长主要来自康裕医院的业绩增长，医院不断扩大市场营销、拓宽医疗服务领域，促进了总体业务的增长。而医疗保健中心及疗养院的营业收入也为业绩增长作出了持续的贡献。海外子公司业务发展迅速，成绩显著，税前利润由100万增加至370万，同比增长270%。人力成本由1,050万增加至1,140万, 同比增加8.6%。新员工的不断加入，将提升企业整体管理和运作能力及国际市场的竞争力。在新加坡，我们的医疗保健中心及疗养院继续保持优异的表现，几乎保持全入住率，反映了顾客对我们的护理及服务质量的信任。提供更多的专科医疗服务及与其他医院及医疗保健业者合作，吸引更多新加坡西部企业客户群是康裕医院的奋斗目标。集团计划在2011年初拓展康裕医院，并分阶段进行以减少对医院正常运作的影响。工程建成后，康裕医院将拥有特级及经典私人病房，医疗套房，手术室，日间手术中心设备，零售区及最先进的医疗硬件设备及五星级高品质的服务，从而增加其知名度和收入来源。在马来西亚，位于吉隆坡的医疗保健中心表现优异。收入增加了10.4%，由90万增加至100万, 营业利润增长了 134%，即由10万增加至20万。另一所将新建的宜康医疗保健中心位于柔佛州新山柏伶花园，预计在2011年初开始兴建工程，并在2012年的第一季竣工。新的医疗保健中心计划可容纳200张床位, 包括私人及开放式住房，物理治疗区及中医药等设施，落成后预料将吸引来自新马两地的居民，大幅提升集团的市场竞争力和盈利能力。在中国，我们于2009年5月与中新苏州工业园有限公司签署了谅解备忘录(MOU)，计划在苏州工业园区内发展乐龄退休村(RV)。根据MOU条例，我们将提供宜康品牌的专业咨询与建设乐龄退休村的专业技术服务，以及在退休村落成后的日常管理服务。这项战略性合作将为集团涉足退休村建设、管理、经营等积累丰富经验和培训锻炼队伍，从而复制、辐射到中国其他地区。此外，我们可以在项目运营的3年中，选择购买30%以上的产权。关于集团为开发养生保健度假旅游区向成都天立投资的 51%股份方面，削减投资损失额至920万。天立集团在2004 年与崇州市政府签订了鸡冠山自然景区开发及经营观光保健度假旅游区的50年专营权合同。然而由于天立集团其他股东未能履行某些合同义务从而导致度假区的发展仍然处于停滞状态。管理层已经采取了谨慎措施以减少这项投资的损失并将继续努力通过法律及其他途径收回我们的投资。在珠海的合营公司 - 珠海伯轩医疗科仪有限公司，是一间制造医院配备及器材的公司。其产品质量优异，销售业绩良好，年实现净利润80万新元。展望未来，亚太地区人口老龄化加剧及缺乏高质量、可信赖的护理服务已经成为人们越来越关注的焦点。而宜康将凭借二十多年积累的品牌知名度和良好的企

业信誉，在进一步稳固本国市场的同时，扩大整个亚太区域，尤其是马来西亚、澳大利亚及中国的业务范围和市场占有率，提升宜康在国际的品牌知名度。探索及寻找相关产业链的商业投资机会。加大人力资源的战略储备和持续投入，提升管理及营运能力，实现企业的愿景，给顾客及股东创造更多价值。我也借此机会感谢支持及给予我们专业指导的董事会成员；感谢乐于奉献，踏实苦干，信守承诺的管理层及公司员工；感谢我们的客户及供应商对我们的信心及信任。在此也要特别感谢你们—尊敬的股东们长期以来对我们的支持。您的信任是我们努力的持续动力。

王再保集团执行主席

Group Performance Year-on-Year Consolidated Revenue 集团年度财务业绩表汇总营业收入

S$ Millions 30

24.8

21.9 18.6

20 16.3

13.4

13.6

FY05

FY06

11.2

9.2

8.9

5 0 FY02

FY03

FY04

FY07

FY08

FY09

FY10

Consolidated Operating Profit Before Tax 汇总税前利润 S$ Millions

3.7*

3.8 3.3 2.8

2.3 1.8 1.0

1.3 0.8 0.3 0 -0.3

(0.3)

FY08

FY09

FY10

* Before impairment losses on long-lived assets and trade and other receivables of an overseas project 不包括国外投资项目的长期资产及应收帐款的减值准备

China Healthcare Limited Annual Report 2010 • 5

6 â&#x20AC;˘ China Healthcare Limited Annual Report 2010

• We treat each resident with Dignity and Respect. • We deliver Appropriate and Quality Care in a Cost-Effective manner. • We provide a ‘Home-Away-From-Home’ Environment. We strive to give our sponsors/families Peace of Mind when they entrust their loved ones to our care.

•

我们为住户提供有尊严及礼貌的服务。

•

我们致力于提供高素质，物超所值及舒适的护理服务。

•

我们提供宾至如归的环境。

我们确保您能放心的让我们照顾您的亲人！

China Healthcare Limited Annual Report 2010 • 7

8 â&#x20AC;˘ China Healthcare Limited Annual Report 2010

China Healthcare (formally ECON Healthcare) is a home grown brand based in Singapore with presence in Malaysia and China. 中国医疗保健是新加坡本土品牌，并且在马来西亚及中国建立了业务发展基地。

Our new 200 bedded ECON Medicare Centre & Nursing Home in Taman Perling, Malaysia is targeted to be operational by the 1st quarter of 2012. Construction of the facility will commence by early 2011. Facilities in this centre include a pharmacy, physiotherapy & rehabilitation area, traditional Chinese medicine clinics and doctor consultation rooms. For their stay, our residents can choose from a selection of open ward beds or 1 to 4 bedded rooms if they require more privacy. In addition, they can spend private time with their family members in the indoor visitor lounge and outdoor garden. 我们位于马来西亚新山柏伶花园将新建的拥有200张床位的宜康医疗保健中心及疗养院计划在2012年的第一季度投入运作。建造工程将在2011年初开始。本中心的设施包括药房、物理治疗区、中医诊所及医生诊疗室等。住房类型由开放式或单人至四人住房供选择。中心也具有室内亲友探访厅和户外花园供住户和家人聚会。

In operation since 2004, our ECON Medicare Centre & Nursing Home in Kuala Lumpur is the first overseas centre in Malaysia. Offering the full range of ECON nursing services, this 100 bedded Medicare Centre has been consistently achieving full occupancy every year. 吉隆坡宜康医疗保健中心及疗养院于2004年开始运作，它是位于马来西亚的第一间海外中心。本医疗保健中心拥有100张床位，提供全方位的宜康护理服务并保持多年的全入住率。

Based in Zhuhai, our associate company, Zhuhai Boxuan Medical Science Co. Ltd manufactures hospital beds and equipment and exports to more than 400 cities worldwide. 我们位于珠海的合营公司 - 珠海伯轩医疗科仪有限公司生产医院配备及器材并出口至全世界400多个城市。

China Healthcare Limited Annual Report 2010 • 9

At China Healthcare, we adopt traditional eastern values with today’s modern management approach in managing our business. We continually focus on promoting true East-West medicine in our hospital, as well as Medicare Centres & Nursing Homes by offering both Western and Eastern medicine. 中国医疗保健结合传统的东方价值理念及先进管理方式经营。我们坚持在本身的医院、医疗保健中心及疗养院里提供西医治疗与中医药相辅相成，提倡真正的中西医治疗。

It has been a fruitful year for the company as we focused on enhancing our services and quality at various fronts. 由于我们注重在各方面提升我们的服务水平及质量，2010 年是公司硕果累累的一年。

SINGAPORE West Point Hospital At the West Point Hospital, we expanded our team of Specialists and Resident Medical Officers. Our Emergency Department and 24-hour Clinic attended to an increased number of patients, both from the business community, as well as residents in the vicinity. Specialist services like General Surgery, Colonoscopy, Gastroscopy and Urology were introduced. In addition to meeting the needs of our growing pool of corporate clients through the comprehensive services provided in the hospital, we have also value added with onsite medical support, vaccinations and health screening services where required. Our partnership with the National University Hospital (NUH) through the establishment of an NUH Ward in West Point has been working well, benefiting patients and both hospitals. The monthly Continuing Medical Education (CME) lectures conducted in West Point for the General Practitioners (GPs) from the Jurong vicinity were well attended. These lectures, accredited by the Singapore Medical Council, provided GPs with updates in medicine relevant to their practice. Through the CME, we were able to further strengthen our partnership with the GPs. As part of our support to the community, we conducted onsite health screening for residents from Ayer Rajah - West Coast GRC. This is in addition to the free healthcare services we are providing to the needy residents of Taman Jurong and Ayer Rajah -

12 • China Healthcare Limited Annual Report 2010

West Coast GRC. We have also continued with organising periodic public forums on relevant health issues to educate the residents in the community. In recognition of our contribution to the community, West Point was presented with a plague by Mr Tharman Shanmugaratnam, Minister for Finance, MP for Jurong GRC and Advisor to Taman Jurong Grassroots Organisations. The planned expansion of the West Point Hospital has also progressed well. We are targeting to commence construction of the new block, comprising additional beds, medical suites, operating theatres and enhanced support facilities early next year and to complete the project by end 2012.

新加坡康裕医院康裕医院不断增加专科服务及驻院医务人员以壮大医疗团队。紧急部门及24小时诊所的患者人数与日俱增，主要来源自企业客户及邻里居民。我们引进了普通外科，结肠镜检查，胃镜检查及泌尿科等专科服务以满足不断增长的企业客户需求，在需要的情况下我们也提供现场医疗支援，疫苗接种及体检等增值服务。我们与国大医院之间的合作，在康裕医院设立的“国大医院病房”运作顺利，裨益于医院与患者。康裕医院定期每月为裕廊社区的全科医生提供医学延续教育(CME)讲座，反应热烈。此由新加坡医药理事会所认可的讲座提供医生们最新的医疗实践相关的信息。通过医学延续教育讲座，进一步增进我们与医生的合作关系。作为对社区的一种支持，我们为来自于西海岸集选区亚逸拉惹的居民提供现场体检。这是继达曼裕廊及西海岸集选区亚逸拉惹的居民提供的保健服务之外的另一个项目。我们也持续阶段性的主办各种与保健课题有关的公共

座谈会，以教育社区居民。由此我们荣获财务部长兼裕廊集选区议员兼达曼裕廊基层组织顾问尚达曼先生亲自颁发的奖项，作为我们对社区所作的贡献的一种鼓励。康裕医院的扩展计划也正顺利进行。计划在明年初开工，以容纳新增的床位、医疗室、手术室及更先进的设施，将于2012年底竣工。

Ms Kyi Nyunt Kyaw, Senior Staff Nurse, ECON Medicare Centre awarded with the Healthcare Humanity Award 2009 by President S.R. Nathan. She was the only winner from Nursing Home sector. 宜康医疗保健中心（东海岸上段分院）的高级注册护士 Kyi Nyunt Kyaw 接受由纳丹总统颁发的2009年“仁心奖”。她是疗养院行业的唯一得奖者。

Medicare Centres and Nursing Homes

医疗保健中心及疗养院

We have also seen good growth in our Medicare Centres & Nursing Homes with average occupancy consistently maintained at a high level. The increased utilisation of our nursing home beds reflects the growing confidence our customers have in the quality of our care and service. This is supported by the constant good feedback we received from our sponsors and residents including compliment letters published in the media. In fact, we are proud that one of our nurses was awarded the nation's prestigious Healthcare Humanity Award 2009 for her dedication and excellent service. In our continuing effort to enhance our quality, we were successfully recertified for the Quality Management System ISO 9001:2008. To further enhance the value we give to residents in our ECON centres, we established the ECON Commitment - to treat each resident with dignity and respect, to deliver appropriate and quality care in a cost-effective manner and to provide a home-away-fromhome environment. At the same time, we also focused on building staff capability, driving productivity and reducing waste. We are encouraged by the improved overall performance of the ECON Medicare Centres & Nursing Homes and are confident that we are well positioned to meet the increasing needs of an ageing population for nursing home services both in Singapore and Malaysia.

医疗保健中心及疗养院的平均入住率持续保持高住户率。入住率的增长反映了顾客对我们的护理及服务质量的信任。我们也陆续收到来自于住户与其赞助人的好评，包括在媒体上刊登的感谢信。我们也为一名护士由于奉献精神及优质服务而获颁新加坡2009年的“仁心奖” 而感到自豪。持续不断地提升服务质量也使我们成功获得 ISO 9001:2008质量管理体系再认证。为了进一步提升宜康医疗保健中心为住户们带来的价值，我们坚持承诺，尊重住户、致力于提供高素质、优良的护理服务以及宾至如归的环境。同时，我们也注重培养员工的才能，提高生产力及减低损耗。宜康医疗保健中心及疗养院的整体业绩表现良好，令我们感到鼓舞。我们坚信能够满足新加坡及马来西亚地区人口老化所带来的对疗养院护理服务的需求。

China Healthcare Limited Annual Report 2010 • 13

(cont'd)

MALAYSIA As part of our expansion, the new Medicare Centre in Taman Perling, Malaysia is planned to commence construction by early 2011 and targeted to start operation by 1st quarter of 2012. Just across the Tuas causeway (2nd link), this aged-friendly medicare centre boasts more recreational and outdoor spaces for residents and their families, private rooms and comprehensive facilities to become a choice nursing home for both locals and Singaporeans.

马来西亚作为我们扩展计划的一部分，位于马来西亚柏伶花园的新医疗保健中心计划于2011年初开始施工并于2012年初投入营运。这间以年长者的安全及使用度作为考量的医疗保健中心穿越大仕长堤，为住户及他们的家人提供了更多的休闲及户外空间、个人房间及完善的设备，将成为可供本地居民及新加坡人选择的疗养院之一。

Artist’s impression of the New Medicare Centre in Taman Perling. 位于柏伶花园的医疗保健中心大楼美术设计图。

CHINA Business development in China is a key area we are concentrating on. We received the first batch of 30 senior management staff including CEOs from Changzhou-China who attended a training course on ‘Effective management of nursing home’ conducted by our ECON Careskill Training Centre (ECTC). We expect more students for this course in the next financial year. The concept development of the Retirement Village project for the Suzhou Township has also progressed well. Our associate company, Zhuhai Boxuan Medical Science Co. Ltd which manufactures hospital beds and equipment also continued to do well, exporting to more than 400 cities worldwide.

中国中国的业务发展是一个关键领域，我们对此尤其重视。第一批来自中国常州市医疗机构的30名包括总裁在内的高层代表，参加了由宜康护理培训中心（ECTC）所主办的《养老机构有效管理培训课程》。我们期待在下一个财政年度中有更多的学员参加这个课程。除此之外，在苏州城镇建设管理项目的乐龄村概念发展顺利。合营公司－制造医院配备与器材的珠海伯轩医疗科仪有限公司保持良好的经营。珠海伯轩的产品出口至全世界400多个城市。

Senior management staff including CEOs from Changzhou-China, key management and lecturers from China Healthcare at the graduation ceremony for the “Effective management of nursing Home” training course conducted by ECON Careskill Training Centre (ECTC). 来自中国常州市医疗机构的高层代表包括总裁在内与中国医疗保健有限公司的管理层及讲师在宜康护理培训中心举办的《养老机构有效管理培训课程》结业典礼上合影。

moving forward

展望未来

In addition to the above, we continued with efforts to grow other key services namely, Home Care, Physiotherapy & Rehabilitation and traditional Chinese medicine as part of the company’s integrated care delivery model. Moving forward, we will further build on our strengths, enhance the quality of our services and develop our talents to provide greater value to our customers and shareholders.

除了上述之外，我们继续努力发展其它核心服务，例如登门护理、物理治疗与康复服务以及中医药服务，将是公司综合医疗服务模式的一部分。展望未来，我们将进一步加强我们的优势，提高服务质量并积极培训人才，为我们的顾客及股东创造更大的价值。

14 • China Healthcare Limited Annual Report 2010

Mr Ong Chu Poh Group Executive Chairman Mr Ong is the founder of the Group. He has extensive management experience in both local organisations and MNCs. He set up the Group’s first nursing home in 1987 and has since, under his strong leadership and vision for the industry, witnessed the expansion and growth of the business. Mr Ong is responsible for the overall management, operational efficiency and the charting and reviewing of the Group’s policies, strategies and corporate directions. He holds a Bachelor of Arts degree from the Nanyang University, Singapore and a Diploma in Marketing Management from Ngee Ann Polytechnic. He is also a graduate of the Singapore Staff and Command College.

Dr Koh Hin Ling Executive Director Dr Koh spearheads the development and management of the Traditional Chinese Medicine (“TCM”) Division of the Group. Dr Koh holds a Doctorate in Chinese Medicine from Nanjing University of Chinese Medicine, China, a Diploma in Chinese Medicine from the Singapore College of Traditional Chinese Medicine. She holds a practising certificate for TCM and also a Bachelor of Arts degree from the Nanyang University. She is a member of the Credentials Committee of TCM Practitioners Board, executive council member of the specialty committee of Pediatrics, World Federation of Chinese Medicine Societies.

Mr Wong Kook Fei 许杏莲博士 Independent Director Mr Wong is the Chairman for the Audit Committee and Nominating Committee and he is a Member of the Remuneration Committee. He has extensive working experience in the banking industry with more than 20 years experience in commercial, corporate and investment banking. Mr Wong is contracted to Aareal Bank Asia Limited as Managing Director and Head of Loan Syndication, Asia Pacific, until 30 June 2010. Prior to that, he had worked in both local and foreign banks like United Overseas Bank, Credit Agricole Indosuez, Bank Austria, Bayerische Hypo-und Vereinsbank and Standard Bank. He holds a Bachelor of Commerce (Honours) Degree from McMaster University, Ontario, Canada.

Dr Tan Hung Yong Richard Independent Director Dr Tan Hung Yong Richard is the CEO and Medical Director of Singapore Aeromedical Centre with ST Medical Services Pte Ltd, a wholly owned subsidiary of ST Logistics Ltd. Prior to this, Dr Tan served with the Singapore Armed Forces (“SAF”) for 19 years. Dr Tan holds a Medical Degree in Aviation Medicine and Masters of Medical (Occupational Medicine) from the National University of Singapore. He is a fellow of the Academy of Medicine Singapore and an Academician of the International Academy of Aviation and Space Medicine.

China Healthcare Limited Annual Report 2010 • 15

5 1

16 â&#x20AC;˘ China Healthcare Limited Annual Report 2010

1 Mr Chua Song Khim

Group Chief Executive Officer

Mr Chua has over 20 years of experience in hospital operations and administration with senior management positions at the Singapore General Hospital, Toa Payoh Hospital and the Changi General Hospital, as well as in the USA. He was the Chief Executive Officer of the National University Hospital from 2001 to 2008. Mr Chua has a Bachelor of Science (Computer Science & Information Systems) from National University of Singapore and a Masters in Health Services Administration from The University of Michigan, USA. Mr Chua has received awards such as National Day Commendation, NTUC Commendation and the MOH HEALTH Leader Award.

2 Dr Tay Eng Hseon

East Asia before he joined the National Healthcare Group as the Chief Operating Officer of the Institute of Mental Health. He joined the government sector heading the logistics division of the National Library Board and was a Director of Business Development in Singapore Cooperation Enterprise.

5 Ms Sim Siang Eng

Senior Human Resource Manager

Ms Sim has more than 15 years of Human Resource experience in the healthcare industry. She was the Deputy Director of Human Resource at the Alexandra Hospital. Prior to that, she worked as Human Resource Manager in Tan Tock Seng Hospital for more than 8 years. She is a Professional Member of the Singapore Human Resource Institute.

Group Medical Director

A renowned Gynaecological Oncology surgeon with more than 20 years in the medical field, Dr Tay was the Chairman of the Medical Board of KK Women’s & Children’s Hospital from 2004 to 2008. He currently serves as the Chairman of Gynaecological Oncology, Asia-Oceania Federation of Obstetrics and Gynaecology. Dr Tay obtained his medical degree from National University of Singapore, specialist certification in Obstetrics and Gynaecology from Australia and United Kingdom, as well as subspecialisation certification in Gynaecological Oncology from Royal Australia-New Zealand College of OBGYN.

3 Dr Liew Cheng

Resident Medical Officer

Dr Liew joined China Healthcare Limited as Resident Medical Officer in 2007. He has more than 10 years of clinical experience since graduating from National University of Singapore with an M.B.B.S. in 1993. He also has a Graduate Diploma in Geriatric Medicine from the National University of Singapore, and a Diploma in Occupational Medicine from the Postgraduate School of Medical Studies. Dr Liew brings with him several years of clinical experience in the public healthcare sector namely Tan Tock Seng Hospital, KK Women’s and Children’s Hospital and Singapore General Hospital (Department of Cardiology and A&E Department) as well as experience in handling chronic diseases and chronic geriatric conditions as a Family Physician in various government polyclinics and private GP set-ups.

4 Mr Lee Meng Boon

Director, Operations & Business Development

Mr Lee graduated from the National University of Singapore with Honours in Mechanical Engineering in 1984 and completed his Masters (Industrial Engineering) in 1989. He started his career in project management and procurement of defence material. He joined the logistics industry with portfolios in strategic planning, business development, marketing, sales and operations. He was General Manager of a regional logistics player in South-

6 Ms Tan Meng Guek

Head, Quality Management & Projects

Ms Tan has more than 20 years of clinical experience in Singapore restructured hospitals. Ms Tan is a State Registered Nurse and holds a Bachelor degree of Health Science Nursing from the University of Sydney, as well as a Certificate in Advanced Nursing from National University Hospital / National University of Singapore.

7 Ms Ong Hui Ming

Acting Manager, Marketing and Corporate Affairs

Ms Ong joined China Healthcare Limited in 2006 as a Senior Marketing Executive and was promoted to Assistant Marketing Manager in 2007. In 2008, she left to pursue her postgraduate studies in Marketing and returned to China Healthcare Limited in 2009 after graduating with a Masters of Marketing with Distinction from the Royal Melbourne Institute of Technology (RMIT). Prior to joining China Healthcare Limited, Ms Ong was with DBS Bank Ltd in the consumer banking sector for 2 years. Ms Ong also holds a Bachelor degree in Marketing from Nanyang Technological University.

8 Mr Lim Meng Seng Financial Controller

Mr Lim has extensive financial and administrative experience acquired over the course of his career. Prior to joining China Healthcare Limited, he was Financial Controller of a Japanese MNC. Over his past 20 years' of career, he has been in the audit field as well as the public sector. He is a Fellow Member of The Association of Chartered Certified Accountants U.K., Institute of Certified Public Accountants of Singapore.

China Healthcare Limited Annual Report 2010 • 17

CHINA HEALTHCARE LIMITED continues to be committed to maintaining a high standard of corporate governance within the Group and has put in place self-regulatory corporate practices to protect the interests of its shareholders and enhance long-term shareholder value. The Board of Directors is pleased to report compliance of the Group with the benchmark set by the Code of Corporate Governance 2005 (the “Code”), except where otherwise stated.

BOARD MATTERS The Board’s Conduct of Its Affairs Apart from its statutory duties and responsibilites, the Board oversees the management and affairs of the Group’s business. It focuses on strategies and policies, with particular attention paid to growth and financial performance. The Board has direct responsibility for decision making in the following corporate events and actions: • Approval for the release of the half year and full year results announcements; • Approval of the annual report and financial statements; • Convening of the shareholders’ meetings; • Approval of corporate strategies; • Material acquisitions and disposals of assets; and • Approval of interested person transactions. During the financial year, the Directors received updates on regulatory changes to the Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX-ST”) and changes to the Accounting Standards. The Directors receive appropriate training to develop individual skills in order to discharge his or her duties. The Company also provides extensive information about its history, mission and values to the Directors. All newly appointed Directors will be given an orientation on the Group’s business strategies and operations. The Board meets regularly with at least 2 half yearly scheduled meetings within each financial year. Where necessary, additional meetings may be held to address significant transactions or issues. The Company’s Articles of Association allow Board meetings to be held by way of conference telephone and other electronic communications equipment.

18 • China Healthcare Limited Annual Report 2010

The number of meetings of the Board and Board Committees held in connection with the financial year under review and the attendance of the Directors at such meetings are as follows:

Audit Committee

board

Nominating Committee

Remuneration Committee

No. of meetings

Attendance

No. of meetings

Attendance

No. of meetings

Attendance

No. of meetings

Attendance

Ong Chu Poh

Dr Koh Hin Ling

Wong Kook Fei

Dr Tan Hung Yong Richard

Name

*By invitation

Board Composition & Balance The Board at the date of this report comprises 4 Directors, namely: Ong Chu Poh

(Group Executive Chairman)

Dr Koh Hin Ling

(Executive Director)

Wong Kook Fei

(Independent Director)

Dr Tan Hung Yong Richard

(Independent Director)

The independence of each Director is reviewed annually by the Nominating Committee. The Nominating Committee adopts the Code’s definition of what constitutes an Independent Director in its review. The Board considers that the present Board size facilitates effective decision making and is appropriate for the nature and scope of the Group’s operations. The composition is reviewed annually by the Nominating Committee to ensure that the Board has the appropriate mix of expertise and experience.

Group Executive Chairman The Group Executive Chairman is Mr Ong Chu Poh. He is responsible to the Board for the corporate directions and operational efficiency, development and review of the Group’s policies and strategies and ensuring a cohesive working relationship and timeliness of information flow between the Board and management.

Group Chief Executive Officer The Group Chief Executive Officer is Mr Chua Song Khim. He leads the management team and is responsible for the day-to-day operations of the Group. He also supports the Group Executive Chairman in creating business opportunities and driving the Group’s growth and development both locally and overseas. The Group Chief Executive Officer and the Group Executive Chairman are not related to each other.

China Healthcare Limited Annual Report 2010 • 19

Board Membership The Nominating Committee comprises Mr Wong Kook Fei, Chairman of the Committee, Mr Ong Chu Poh and Dr Tan Hung Yong Richard. The responsibilities of the Nominating Committee are to identify candidates and review all nominations and re-nominations for the appointments of Board members, evaluate the effectiveness and performance of the Board and individual Directors, and review the independence of the Directors annually. All Directors who are appointed by the Board are subject to re-election by shareholders at the next Annual General Meeting (“AGM”). In addition, pursuant to the Company’s Articles of Association, at least one third of the Directors other than the Managing Director, are required to retire by rotation and submit themselves for re-election at each AGM.

Board Performance The Nominating Committee has reviewed the overall performance of the Board in terms of its role and responsibilities and the conduct of its affairs as a whole and is satisfied that the Board has been effective due to the active participation of every Board member at each Board meeting. The Nominating Committee will continue to review the need to establish and implement a formal assessment process for evaluating Board performance, as well as the contribution of individual Directors to the effectiveness of the Board. Each member of the Nominating Committee shall abstain from voting on any resolutions in respect of the assessment of his performance or his renomination as Director.

Access to Information To assist the Board in fulfilling its responsibilities, the Board is provided with complete, adequate and timely information required to support the decision-making process in a timely manner. The Board is provided with the relevant background or explanatory information relating to the business of the meeting, information on major operational, financial and corporate issues. In respect of budgets, any material variances between the projections and actual results are disclosed and explained. The Board has separate and independent access to senior management and the Company Secretary at all times. It is the responsibility of the Company Secretary to attend all Board meetings and to ensure that Board procedures are followed and that applicable rules and regulations are complied with.

REMUNERATION MATTERS Procedures for Developing Remuneration Policies The Remuneration Committee is chaired by Dr Tan Hung Yong Richard with Mr Wong Kook Fei and Dr Koh Hin Ling as members.

20 • China Healthcare Limited Annual Report 2010

The Remuneration Committee reviews and recommends to the Board a framework of remuneration for the Directors and key executives, and determines specific remuneration packages for each Executive Director and the Group Chief Executive Officer. The recommendations of the Remuneration Committee are submitted for endorsement by the entire Board. All aspects of remuneration, including but not limited to Directors’ fees, salaries, allowances, bonuses, options and benefits-in-kind are covered by the Remuneration Committee. Each member of the Remuneration Committee shall abstain from voting on any resolutions in respect of his own remuneration package.

Level & Mix of Remuneration The Group’s remuneration policy is to ensure that it is competitive and sufficient to attract, retain and motivate Directors and senior management of the required experience and expertise. The Independent Directors receive Directors’ fees, in accordance with their contributions, taking into account factors such as effort and time spent and level of responsibilities of the Directors. The Directors’ fees are recommended by the Remuneration Committee and endorsed by the Board for approval by shareholders of the Company at the AGM.

Disclosure on Remuneration The breakdown, showing the level and mix of each individual Director’s remuneration in FY2010 is as follows:

Base/Fixed Salary

Director’s fees

Variable or performance related income/bonuses, benefits-in-kind, stock options, others

87 %

13%

Dr Koh Hin Ling

87%

13%

Wong Kook Fei

100%

Dr Tan Hung Yong,Richard

100%

Remuneration Band & Name of Director S$250,000 to S$499,999 Ong Chu Poh Below S$250,000

China Healthcare Limited Annual Report 2010 • 21

Our top Executives (who are not Directors) of the Company fall within the remuneration bands as follows:

S$500,000 to S$749,999 Group Chief Executive Officer (“GCEO”) - Mr Chua Song Khim Below S$250,000 Group Medical Director - Dr Tay Eng Hseon Financial Controller - Mr Lim Meng Seng Senior Human Resource Manager - Ms Sim Siang Eng Director of Operations - Mr Lee Meng Boon

None of the employees of the Company was an immediate family member of any Director or the GCEO and whose remuneration exceeded S$150,000 during the financial year.

ACCOUNTABILITY AND AUDIT Accountability By presenting the annual financial statements and half yearly announcements to shareholders, it is the aim of the Board to provide the shareholders with a balanced and comprehensible assessment of the Group’s position and prospects.

Audit Committee The Audit Committee consists of three members, two of whom are independent. The Audit Committee is chaired by Mr Wong Kook Fei and has as its members, Dr Tan Hung Yong Richard and Dr Koh Hin Ling who is an Executive Director. The Nominating Committee is of the opinion that as the majority of the Audit Committee members are independent and non-executive, the Audit Committee is able to exercise objective judgement independently. The Audit Committee meets with the Group’s external auditors and its key executives to review accounting, auditing and financial reporting matters so as to ensure that an effective control environment is maintained in the Group. The Audit Committee has full access to Management and also full discretion to invite any Director or executive officer to attend its meeting, as well as reasonable resources to enable it to discharge its functions properly. The Audit Committee met three times during the financial year. By performing its functions, the Audit Committee, meets to, inter alia, discuss and review: • Audit plan presented by Company’s external auditors; • External auditors’ report; • Assistance provided by the Company’s officers to the external auditors; • The scope and results of internal audit procedures; • The financial statements of the Group and of the Company prior to their submission to the Directors of the Company for approval; • The Company’s half-year and full-year results announcements; and • All interested person transactions.

22 • China Healthcare Limited Annual Report 2010

The Audit Committee has reviewed the non-audit services provided by the external auditors and is satisfied that the nature and extent of such services would not prejudice the independence and objectivity of the external auditors. The Audit Committee meets with the external auditors without the presence of management at least annually.

Internal Controls The Board is responsible for ensuring that Management maintains a sound system of internal controls to safeguard shareholder investments and the Group’s assets. The Board believes that, in the absence of any evidence to the contrary and from due enquiry, the system of internal controls maintained by the Company’s management throughout the financial year is adequate to meet the needs of the Company in its current business environment. The system of internal controls is designed to manage rather than to eliminate the risk of failure to achieve business objectives. It can only provide reasonable but not absolute assurance against material misstatement or loss. The Board has adopted a set of internal controls which sets out approval limits for expenditure, investments and cheque signatory arrangements. The effectiveness of the internal control system and procedures is monitored by management and reviewed by the Board. The Board is satisfied that there are adequate internal controls in place in the Company.

Internal Audit The Group outsources its internal audit function to an external consultant firm (“Internal Auditor”) The Internal Auditor meets the professional standards set out in the Code. The Internal Auditor reports directly to the Chairman of the Audit Committee on internal audit matters. The internal audit work programme is prepared by the Internal Auditor with input from management, and is subject to approval by the Audit Committee.

COMMUNICATION WITH SHAREHOLDERS In line with the continuing disclosure obligations of the Company, pursuant to the SGX-ST’s Listing Manual and the Singapore Companies Act, the Board’s policy is that all shareholders should be equally informed of all major developments that impact the Group in a timely manner. Half year and full year results and other major developments of the Group are published via SGXNET and press releases. The Company maintains a corporate website at www.chinahealthcare.com at which shareholders can access information on the Group. The website provides corporate announcements, press releases and disclosures to the SGX-ST.

China Healthcare Limited Annual Report 2010 • 23

The Company encourages its shareholders to attend the AGM to ensure a high level of accountability. The Annual Report, together with the Notice of AGM, are dispatched to the shareholders at least 14 working days prior to the meeting. The Board welcomes the views of shareholders on matters affecting the Company at the AGM and the Chairmen of the Audit, Remuneration and Nominating Committees are normally available at the meeting to answer questions relating to the work of these committees. The external auditors are also present to address shareholders’ queries about the conduct of audit and the preparation and content of the auditors’ report.

DEALING IN SECURITIES The Company has complied with Rule 1204 (18) of Section B: Rules of Catalist of the SGX-ST Listing Manual in relation to dealings in the Company’s securities by Directors and executives of the Company. The Company has advised Directors and all key executives not to deal in the Company’s shares while in possession of price sensitive information and during the period commencing 1 month prior to each announcement of financial results by the Company and ending on the date of the announcement of the results. Directors and executives are also expected to observe insider-trading laws at all times even when dealing in securities within permitted trading periods.

MATERIAL CONTRACTS Except as disclosed in the financial statements, there are no material contracts of the Company or its subsidiaries involving the interests of the Group Executive Chairman, each Director or controlling shareholder of the Company either still subsisting at the end of the financial year or if not then subsisting, entered into since the end of the previous financial year.

INTERESTED PERSON TRANSACTIONS The Company has adopted an internal policy in respect of any transactions with interested persons and has set out the procedures for review and approval of interested person transactions. All interested person transactions are reviewed and approved by the Audit Committee. For the financial year ended 31 March 2010, there were no interested person transactions that required disclosure under Rule 907 of the Rules of Catalist of the SGX-ST Listing Manual.

EMPLOYEE SHARE OPTION SCHEME The China Healthcare Employees’ Share Option Scheme of the Company was approved and adopted by its members at an Extraordinary General Meeting held on 23 October 2002. Please refer to page 28 of the annual report for more details.

NON-SPONSOR FEES There were no non-sponsor fees paid to the Sponsor during the financial year.

TREASURY SHARES There are no treasury shares at the end of the financial year ended 31 March 2010.

24 • China Healthcare Limited Annual Report 2010

Pursuant to Rule 1204 (4) (b) (iv) of Section B: Rules of Catalist of the SGX-ST Listing Manual, the operating and financial risk management policies and processes of the Group are summarised as follows:

OPERATING RISK Management Growth The growth of our Group in the past few years has resulted in added responsibilities for overseeing the expansion and enhancing our service quality. In order to meet the demands of our current and future projects, we will need to attract, motivate and retain a significant number of professionals who have relevant industry experiences to drive the growth. We will continue to attract more talents into our Group and to motivate and retain such professionals at a competitive cost, as well as improve the operational efficiency and financial management of our Group in order to manage and sustain our growth effectively.

Enhancement of Quality Service Our marketing activities are limited as a result of the stringent Ministry of Health promotion guidelines. Consequently, we rely on personal references from our existing network or residents and their family members, relatives, friends and doctors. References are also received from other institutions such as hospitals, voluntary welfare organisations and community clubs. The decline in quality services that we provide may cause cessation or reduction of these referrals. We will continue to train our staff to upgrade their competencies and skills. We jointly collaborate with PSB Corporation in the development and conducting of training programmes in healthcare services and nursing under the National Skill Recognition System (“NSRS”). The system requires organisations to establish work performance standards to consistently deliver quality goods and services.

Competition Despite the high barriers to entry, other healthcare providers have facilities and personnel to provide healthcare services similar to that of our Group. The Group’s continued success depends on the ability to compete effectively with its competitors. We intend to upgrade our existing nursing homes to medicare centres, where feasible, and to build more facilities to meet the increasing demand. Besides the upgrading of the infrastructure, we emphasise on quality services. We conduct in-house training for our nursing staff regularly to ensure our nursing care services provided to our customers are enhanced. Such a strategy has enabled our Group to enjoy significant growth in recent years and we believe we will continue to lead the commercial nursing home market in Singapore.

Risk Associated with Future Acquisitions Besides the acquisition of land to construct new medicare centres, we intend to pursue other strategic acquisitions as part of our plan to provide our Group with complementary services, customer bases, technologies and qualified professionals. Such acquisitions present risks that could potentially have an adverse effect on the Group’s operations and earnings, such as diversion of management’s attention, anticipated returns not being achieved and amortisation of goodwill and intangible assets. We will continue to adopt a cautious approach and to exercise due diligence when considering all material acquisitions.

FINANCIAL RISKS Our Group’s financial risks are set out on page 73 under Note 24 to the financial statements.

China Healthcare Limited Annual Report 2010 • 25

27 Director's Report 31 Statement by Directors 32 Independent Auditors' Report 35 Balance Sheets 36 Consolidated Income Statement 37 Consolidated Statement of Comprehensive Income 38 Consolidated Statement of Changes in Equity 40 Consolidated Cash Flow Statement 42 Notes to the Financial Statements 83 Statistics of Shareholdings 85 Notice of Annual General Meeting 89 Proxy Form

26 â&#x20AC;˘ China Healthcare Limited Annual Report 2010

We submit this annual report to the members of the Company together with the audited financial statements for the financial year ended 31 March 2010.

Directors The directors of the Company in office at the date of this report are as follows: Mr Ong Chu Poh Dr Koh Hin Ling Mr Wong Kook Fei Dr Tan Hung Yong Richard

Directorsâ&#x20AC;&#x2122; interests According to the register kept by the Company for the purposes of Section 164 of the Companies Act, Chapter 50 (the Act), particulars of interests of directors who held office at the end of the financial year (including those held by their spouses and infant children) in shares, debentures, warrants and share options in the Company and in related corporations (other than wholly-owned subsidiaries) are as follows: Number of ordinary shares Shares registered in the name of Director

Shares in which Director is deemed to have an interest

Holdings at beginning of the year

Holdings at end of the year

Holdings at beginning of the year

Holdings at end of the year

Mr Ong Chu Poh

15,749,305

16,879,305

91,592,994

92,705,994

Dr Koh Hin Ling

3,510,022

103,832,277

106,075,277

Mr Wong Kook Fei

100,000

Dr Tan Hung Yong Richard

300,000

9,334,137

429,606

9,334,137

Name of director and corporations in which interests are held The Company China Healthcare Limited

TMI Holdings (1997) Pte Ltd Mr Ong Chu Poh Dr Koh Hin Ling

China Healthcare Limited Annual Report 2010 â&#x20AC;˘ 27

By virtue of Section 7 of the Act, Mr Ong Chu Poh and Dr Koh Hin Ling are deemed to have interests in all the subsidiaries of the Company, at the beginning and at the end of the financial year. Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, debentures, warrants or share options of the Company, or of related corporations, either at the beginning of the financial year or at the end of the financial year. There were no changes in any of the above mentioned interests in the Company between the end of the financial year and 21 April 2010. Except as disclosed under the “Share Options” section of this report, neither at the end of, nor at any time during the financial year, was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. Except for salaries, bonuses and fees and those benefits that are disclosed in this report and in note 27 to the financial statements, since the end of the last financial year, no director has received or become entitled to receive, a benefit by reason of a contract made by the Company or a related corporation with the director, or with a firm of which he is a member, or with a company in which he has a substantial financial interest.

Share options The China Healthcare Employees’ Share Option Scheme (the Scheme) of the Company was approved and adopted by its members at an Extraordinary General Meeting held on 23 October 2002. The Scheme is administered by the Company’s Remuneration Committee comprising of the following directors: Dr Tan Hung Yong Richard, Chairman (Independent Director) Mr Wong Kook Fei (Independent Director) Dr Koh Hin Ling (Executive Director) The Scheme applies to directors of the Company and employees of the Group. Persons who are controlling shareholders or their associates are not eligible to participate in the Scheme. A controlling shareholder is a person who: (i) holds directly or indirectly 15% or more of the nominal amount of all voting shares in the Company. The Singapore Exchange Securities Trading Limited (SGX-ST) may determine that a person who satisfies this paragraph is not a controlling shareholder; or (ii) in fact exercises control over the Company. The size of the Scheme shall not exceed 15 per cent of the issued share capital of the Company on the day preceding the date of grant of options.

28 • China Healthcare Limited Annual Report 2010

Other information regarding the Scheme is set out below: (i)

The subscription price of the options will be: (a)

at the market price, based on the average of the last dealt prices per share determined by reference to the daily official list published by the SGX-ST for a period of 5 consecutive market days immediately prior to the relevant date of grant; or

(b)

at a price which is set at a discount to the market price. The maximum discount shall not exceed 20 per cent of the market price.

(ii)

Options granted with the subscription price set at the market price may be exercised in multiples of 1,000, in whole or in part, as follows:

(a)

up to 50 per cent of the option at any time after 12 months of the date of grant of that option; and

(b)

the balance 50 per cent of the option at any time after 24 months of the date of grant of that option.

Provided always that an option shall be exercised before the end of 120 months (or 60 months where the participant is a nonexecutive director) of the date of grant of that option and subject to such other conditions as may be introduced by the Remuneration Committee from time to time.

Options granted with the subscription price set at a discount to the market price may only be exercised after 2 years from the date of grant, in multiples of 1,000, in whole or in part, as follows:

(a)

up to 50 per cent of such options at any time after 36 months from the date of grant of that option; and

(b)

the balance 50 per cent at any time after 48 months of the date of grant of that option.

Provided always that such option shall be exercised before the end of 120 months (or 60 months where the participant is a nonexecutive director) of the date of grant of that option and subject to such other conditions as may be introduced by the Remuneration Committee from time to time.

(iii)

The Scheme shall continue to be in force at the discretion of the Remuneration Committee, subject to a maximum of 10 years commencing on the date upon which the Scheme is adopted by the shareholders at a general meeting. Provided always that the Scheme may continue beyond the above stipulated period with the approval of the shareholders by way of an ordinary resolution passed at a general meeting and of any relevant authorities which may then be required.

China Healthcare Limited Annual Report 2010 â&#x20AC;˘ 29

During the financial year, there were: (i)

no options granted by the Company or its subsidiaries to any person to take up unissued shares in the Company or its subsidiaries; and

(ii) no shares issued by virtue of any exercise of option to take up unissued shares of the Company or its subsidiaries. As at the end of the financial year, there were no unissued shares of the Company or its subsidiaries under option.

Audit Committee The members of the Audit Committee during the year and at the date of this report are: Mr Wong Kook Fei, Chairman (Independent Director) Dr Tan Hung Yong Richard (Independent Director) Dr Koh Hin Ling (Executive Director) The Audit Committee performs the functions specified in Section 201B of the Companies Act, the SGX Listing Manual, the Best Practices Guide of the Singapore Exchange and the Code of Corporate Governance. The functions performed are detailed in the Report on Corporate Governance. The Audit Committee is satisfied with the independence and objectivity of the external auditors and has recommended to the Board of Directors that the auditors, KPMG LLP, be nominated for re-appointment as auditors at the forthcoming Annual General Meeting of the Company.

Auditors The auditors, KPMG LLP, have expressed their willingness to accept re-appointment.

On behalf of the Board of Directors

Ong Chu Poh Director

7 July 2010

30 â&#x20AC;˘ China Healthcare Limited Annual Report 2010

Dr Koh Hin Ling Director

In our opinion: a)

the financial statements set out on pages 35 to 82 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 March 2010 and the results, changes in equity and cash flows of the Group for the year ended on that date in accordance with the provisions of the Singapore Companies Act, Chapter 50 and Singapore Financial Reporting Standards; and

(b)

at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

The Board of Directors has, on the date of this statement, authorised these financial statements for issue.

On behalf of the Board of Directors

Ong Chu Poh Director

Dr Koh Hin Ling Director

7 July 2010

China Healthcare Limited Annual Report 2010 â&#x20AC;˘ 31

Members of the Company China Healthcare Limited

We have audited the accompanying financial statements of China Healthcare Limited (the “Company”) and its subsidiaries (the “Group”), which comprise the statement of financial position of the Group and the Company as at 31 March 2010, the income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows of the Group for the year then ended, and a summary of significant accounting policies and other explanatory notes as set out on pages 35 to 82. Our audit opinion on the financial statements for the year ended 31 March 2009, which are set out as comparatives in the financial statements for the year ended 31 March 2010, was issued on 13 July 2009 and included a disclaimer of opinion. Management’s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes: a)

devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets;

(b)

selecting and applying appropriate accounting policies; and

(c)

making accounting estimates that are reasonable in the circumstances.

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

32 • China Healthcare Limited Annual Report 2010

Members of the Company China Healthcare Limited

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

Opinion

(i)

Intangible assets: Right to Operate

We draw your attention to Note 8 to the financial statements. In the previous financial year, the Group acquired 51% equity interest in Chengdu Tian Li Group Co., Ltd (”Chengdu Tian Li”), an entity which had previously entered into a contract with a municipal government in the People’s Republic of China (“PRC”) to obtain a 50-year exclusive right to develop and operate a scenic health care park at Mount Jiguan-Jiulonggou (“Park”). The Right to Operate the Park excludes the right to park-wide operation, which is disallowed under certain regulations in PRC.

The carrying value of the Right to Operate the Park was stated at $6.4 million in the consolidated balance sheet as at 31 March 2009. Management had determined then, that the value-in-use exceeded the carrying value of the “right to operate”. As set out in our audit opinion on the financial statements for the year ended 31 March 2009 issued on 13 July 2009, the value-in-use calculations do not reflect the adverse impact of non-compliance with applicable laws and regulations in the PRC, governing the operation of the Park. In addition, we were not provided with sufficient support for certain significant assumptions made in arriving at the value-in-use of the “right to operate”. Hence, we were unable to satisfy ourselves as to the appropriateness of the carrying value of the “right to operate”.

As at 31 March 2010, the development of the Park had not started and based on a legal status review report issued by a law firm in the PRC on 14 May 2010, management believes that Chengdu Tian Li does not have a valid “right to operate” the Park which is approved by appropriate Chinese authorities. As a result, management have decided to impair the entire carrying amount of the “right to operate”, the related property, plant and equipment and trade and other receivables amounting to $9.2 million. This decision was based on grounds that legal proceedings to recover the investment amount are likely to be protracted and the probability of recovering such amount appears to be remote. This impairment loss has been included in the consolidated income statement of the Group for the year ended 31 March 2010.

Consequently, management have also impaired the entire carrying amount of the $7.1 million loan extended by the Company to a subsidiary, to finance the Chengdu Tian Li project, as described in Note 6 to the financial statements. Due to our inability to satisfy ourselves as to the appropriateness of the carrying value of the “right to operate” as at 31 March 2009, we were therefore unable to determine whether, the impairment losses on the “right to operate”, the related property, plant and equipment, and trade and other receivables amounting to $9.2 million should be recognised in its entirety in the consolidated income statement for the current year or; whether part or all of it should have been recognised in the previous financial year. Similarly, we were not able to determine whether the entire impairment loss on the loan of $7.1 million should be recognised in the income statement of the Company for the current year or whether part or all of it should have recognised in the previous financial year.

China Healthcare Limited Annual Report 2010 • 33

Members of the Company China Healthcare Limited

(ii) Investment in associate

The Group’s share of results in the associate, included in the consolidated income statement of the Group, was based on the statutory financial statements of the associate for the financial year ended 31 December 2009, including certain adjustments made to align the accounting policies with those of the Group.

We were not able to ascertain the completeness of information furnished by management with respect to the completeness, existence and accuracy of:

- inventory and trade receivables of the associate as at 31 December 2009 and;

- revenue, expenses and the related tax expenses of the associate for the financial year ended 31 December 2009.

In the absence of alternative audit procedures, we could not ascertain the appropriateness of the Group’s share of results of the associate amounting to $774,787 and the carrying amount of $4,374,079, of the associate in the consolidated financial statement of the Group.

In our opinion, except for the effects of these adjustments, if any, might have been determined to be necessary had we been able to satisfy ourselves as to the financial period in which the impairment losses should have been recorded as described in paragraph (i) above; and the appropriateness of the Group’s share of results of the associate and the carrying value of the associate as described in paragraph (ii) above, the financial statements are properly drawn up in accordance with the provisions of the Act and the Singapore Financial Reporting Standards, to give a true and fair view of the state of affairs of the Group at 31 March 2010, and of the results, changes in equity and cash flows of the Group for the year ended 31 March 2010. In our opinion, the financial statements are properly drawn up in accordance with the provisions of the Act and the Singapore Financial Reporting Standards to give a true and fair view of the state of affairs of the Company as at 31 March 2010. In our opinion, the accounting and other records required by the Act, to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

Going concern Without further qualifying our opinion, we draw your attention to Note 2 to the financial statements. As at 31 March 2010, the Group and the Company recorded net current liabilities of $6,295,245 and $9,768,039 respectively. Notwithstanding this, management believes that it is appropriate to prepare the financial statements on a going concern basis as the Group and the Company expects to: - generate positive operating cash flows during the next twelve-month period; - continue to have the support of its creditor-banks in renewing its short-term loan and revolving credit facilities; and - be able to obtain proceeds from new credit facilities; The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts; and do not include any classification of liabilities that may be necessary if the Group and the Company were unable to continue as a going concern.

KPMG LLP Public Accountants and Certified Public Accountants Singapore 7 July 2010

34 • China Healthcare Limited Annual Report 2010

As at 31 March 2010

Group Note

Company

2010

2009

2010

2009

Non-current assets Property, plant and equipment

43,039,810

46,586,307

29,037,131

29,515,483

Subsidiaries

13,058,845

14,587,375

Associate

4,374,079

3,599,292

Intangible assets

6,368,910

47,413,889

56,554,509

42,095,976

44,102,858

Current assets Inventories

88,282

113,350

Trade and other receivables

3,016,445

3,506,303

1,640,210

8,643,603

Other investments

1,139,987

499,341

1,139,987

499,341

Cash and cash equivalents

2,306,394

1,247,313

1,098,430

531,489

6,551,108

5,366,307

3,878,627

9,674,433

53,964,997

61,920,816

45,974,603

53,777,291

Total assets Equity attributable to equity holders of the Company Share capital

28,456,839

Currency translation reserve

272,632

340,522

Merger deficit

(1,485,364)

(1,985,158)

3,074,267

(10,706,287)

(1,758,846)

25,258,949

30,386,264

17,750,552

26,697,993

956,254

25,258,949

31,342,518

17,750,552

26,697,993

15,361,306

16,466,781

14,562,224

15,186,215

Accumulated (losses)/profits

Minority interest Total equity Non-current liabilities Financial liabilities

Deferred tax liabilities

498,389

479,581

15,161

15,859,695

16,946,362

14,577,385

15,201,376

Current liabilities Trade and other payables

5,035,128

4,869,739

7,534,835

5,574,613

Financial liabilities

7,199,212

8,283,018

6,094,348

6,303,309

612,013

479,179

17,483

12,846,353

13,631,936

13,646,666

11,877,922

Total liabilities

28,706,048

30,578,298

28,224,051

27,079,298

Total equity and liabilities

53,964,997

61,920,816

45,974,603

53,777,291

Current tax payable

The accompanying notes form an integral part of these financial statements.

China Healthcare Limited Annual Report 2010 â&#x20AC;˘ 35

Year ended 31 March 2010

Note

Revenue

2010

2009

24,828,448

Other income Supplies and consumables Staff costs

21,876,169

378,597

156,283

(3,795,266)

(3,169,583)

(11,423,249)

(10,518,457)

Impairment losses on long-lived assets and trade and other receivables in an overseas project

(9,229,314)

Depreciation of property, plant and equipment

(1,713,828)

(1,548,109)

(82,713)

(2,149,385)

(1,971,968)

(867,263)

(822,744)

Other operating expenses

(2,224,789)

(2,567,159)

Results from operating activities

(6,196,049)

1,351,719

Finance income

652,708

26,687

Finance expense

(748,705)

(1,444,861)

(95,997)

(1,418,174)

774,787

1,053,520

(5,517,259)

987,065

Amortisation of intangible assets Operating lease expense Utilities

Net finance expense

Share of profit in associate (net of tax) (Loss)/profit before income tax Income tax expense

(193,493)

(540,671)

(Loss)/profit for the year

(5,710,752)

446,394

(4,829,651)

446,394

(881,101)

(5,710,752)

446,394

Attributable to: Equity holders of the parent Minority interests (Loss)/profit for the year (Loss)/earnings per share (cents) Basic

(2.10)

0.19

Diluted

(2.10)

0.19

The accompanying notes form an integral part of these financial statements.

36 â&#x20AC;˘ China Healthcare Limited Annual Report 2010

Year ended 31 March 2010

(Loss)/profit for the year

2010

2009

(5,710,752)

446,394

Other comprehensive income Translation difference relating to financial statements of foreign subsidiaries and an associate Total comprehensive (loss)/income for the year

(143,043)

337,478

(5,853,795)

783,872

(4,897,541)

783,872

(956,254)

(5,853,795)

783,872

Attributable to: Equity holders of the Company Minority interests Total comprehensive (loss)/income for the year

The accompanying notes form an integral part of these financial statements.

China Healthcare Limited Annual Report 2010 â&#x20AC;˘ 37

Note

At 1 April 2008

Share capital

Currency translation reserve

Merger deficit

Accumulated profits

Total attributable to equity holders of the parent

Minority interests

Total equity

28,456,839

3,044

(1,485,364)

2,627,873

29,602,392

446,394

Translation differences relating to financial statements of subsidiaries and an associate

337,478

Total comprehensive income for the year

337,478

446,394

783,872

956,254

28,456,839

340,522

(1,485,364)

3,074,267

30,386,264

956,254

31,342,518

Total comprehensive income for the year Profit for the year Other comprehensive income

Transaction with owners, recorded directly in equity Contributions by and distribution to owners Acquisition of a subsidiary At 31 March 2009

The accompanying notes form an integral part of these financial statements.

38 â&#x20AC;˘ China Healthcare Limited Annual Report 2010

At 1 April 2009

Share capital

Currency translation reserve

Merger deficit

Accumulated profits/ (losses)

Total attributable to equity holders of the parent

Minority interests

Total equity

28,456,839

340,522

(1,485,364)

3,074,267

30,386,264

956,254

31,342,518

(4,829,651)

(881,101)

(5,710,752)

Translation differences relating to financial statements of subsidiaries and an associate

(67,890)

(75,153)

(143,043)

Total comprehensive loss for the year

(67,890)

(4,829,651)

(4,897,541)

(956,254)

(5,853,795)

(229,774)

28,456,839

272,632

(1,485,364)

(1,985,158)

25,258,949

Total comprehensive income for the year Loss for the year Other comprehensive income

Transaction with owners, recorded directly in equity Contributions by and distribution to owners Final dividend of $0.001 cent per share (one-tier tax exempt) in respect of the previous financial year At 31 March 2010

The accompanying notes form an integral part of these financial statements.

China Healthcare Limited Annual Report 2010 â&#x20AC;˘ 39

Note

2010

2009

Operating activities (Loss)/profit before income tax

(5,517,259)

987,065

Adjustments for: Depreciation of property, plant and equipment

1,713,828

1,548,109

Amortisation of intangible assets

82,713

Impairment losses on: - trade and other receivables

583,274

44,519

- intangible assets

6,368,910

- property, plant and equipment

2,466,846

25,504

(61,322)

Loss/(gain) on disposal of property, plant and equipment Change in fair value of investments held for trading Dividend income Interest income Interest expense Share of profit of associate, net of income tax

(640,646)

579,625

(11,356)

(25,123)

(706)

(1,564)

748,705

851,817

(774,787)

(1,053,520)

4,962,313

2,952,319

25,068

(1,287)

(93,416)

559,325

Changes in working capital: Inventories Trade and other receivables Trade and other payables Cash generated from operations Income taxes paid (net of tax refund) Cash flows from operating activities

165,389

530,987

5,059,354

4,041,344

(41,851)

(381,162)

5,017,503

3,660,182

706

1,564

11,356

25,123

Investing activities Interest received Dividend received Proceeds from sale of property, plant and equipment Purchase of property, plant and equipment Purchase of additional equity interest in associate Purchase of additional equity interest in subsidiary

Deposits refunded for proposed acquisition of a subsidiary and an associate Cash flows from investing activities

The accompanying notes form an integral part of these financial statements.

40 â&#x20AC;˘ China Healthcare Limited Annual Report 2010

8,717

82,032

(817,000)

(1,194,755)

(826,186)

(7,390,567)

1,988,255

(796,221)

(7,314,534)

Note

2010

2009

Financing activities Proceeds from bank loans

2,000,000

3,000,000

(13,628)

(64,608)

(2,702,912)

(2,488,671)

Payment of finance lease liabilities

(294,035)

(292,996)

Dividends paid

(229,774)

Interest paid

(748,705)

(851,817)

(1,989,054)

(698,092)

2,232,228

(4,352,444)

(1,228,937)

3,123,507

5,559

1,008,850

(1,228,937)

Deposit pledged with the bank Repayments of borrowings

Cash flows from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year Effect of exchange rate fluctuations on cash held Cash and cash equivalents at end of the year

The accompanying notes form an integral part of these financial statements.

China Healthcare Limited Annual Report 2010 â&#x20AC;˘ 41

These notes form an integral part of the financial statements.

The financial statements were authorised for issue by the Board of Directors on 7 July 2010.

1 Domicile and activities

China Healthcare Limited (the “Company”) is a company incorporated in the Republic of Singapore. The address of its principal place of business is at 20 Jalan Afifi, #06-02/03/04/05, Certis CISCO Centre II, Singapore 409179.

The principal activities of the Group and the Company are those relating to the operation of medicare centres and nursing homes, provision of hospital extension ward management services, homecare services and ambulance services, letting of properties and investment holding.

The immediate and ultimate holding companies during the financial year are Econ Medicare Centre Holdings Pte Ltd and TMI Holdings (1997) Pte Ltd, respectively. Both are incorporated in the Republic of Singapore.

The consolidated financial statements comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”) and the Group’s interests in an associate.

2 Going concern

As at 31 March 2010, the Company and Group had net current liabilities of $9,768,039 and $6,295,245 respectively. Notwithstanding the above, the directors of the Company are of the opinion that the Company and Group are able to meet their obligations as and when they fall due following their detailed review of the cash flow forecast of the Group and the Company for the twelve months ending 31 March 2011.

In reviewing the cash flow forecast, the directors have considered expected cash flow requirements of the Group and the Company in the following aspects:

(i) Ability of the Company to generate sufficient net operating inflows to satisfy the Group and the Company’s working capital requirements for the next twelve-month period;

(ii) Ability of the Group and the Company to have the continued support of its creditor-banks to renew its short-term loan and revolving credit facilities as and when they fall due.

Based on the dealings with its creditor-banks up to the date of this report, the Group and the Company have been able to renew their short-term loans and revolving credit facilities as and when they fall due. The directors therefore believe that the Group and the Company will continue to have the support of their creditor-banks.

(iii) Ability of the Group and the Company to obtain new credit facilities to finance planned expansion of their hospital and medical care operations.

The directors believe that the assumptions included in the net operating cash flow forecast are reasonable as these assumptions are based on expected occupancy rates and margins which are largely consistent with those achieved historically and no significant changes to its operations are expected.

As disclosed in Note 29, subsequent to the balance sheet date, a subsidiary obtained additional banking facilities amounting to $23.5 million for the redevelopment of West Point Hospital, which is secured by a legal mortgage of West Point Hospital’s property at 235, Corporation Drive, Singapore 619771.

Accordingly, the directors are of the opinion that the Group and the Company will have sufficient cash resources to satisfy the working capital and planned capital expenditure requirements of the Group and the Company for the next financial year, and considers it appropriate to prepare these financial statements on a going concern basis.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to amounts and classification of liabilities that may be necessary if the Group and the Company were unable to continue as a going concern. 42 • China Healthcare Limited Annual Report 2010

3 Basis of preparation 3.1 Statement of compliance

The financial statements are prepared in accordance with Singapore Financial Reporting Standards (FRS).

3.2 Basis of measurement The financial statements have been prepared on the historical cost basis except for certain financial assets and financial liabilities that are carried at fair value and/or amortised cost as disclosed in the accounting policies set out below.

3.3 Functional and presentation currency

These financial statements are presented in Singapore dollars, which is the Company’s functional currency. All financial information is presented in Singapore dollars, unless otherwise stated.

3.4 Use of estimates and judgements

The preparation of financial statements in conformity with FRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements is included in the following notes:

• Note 5 – Impairment assessment, depreciation expense, useful lives and residual values of property, plant and equipment

• Note 6 – Measurement of impairment loss on investment in subsidiaries

• Note 8 – Measurement of impairment loss on goodwill and intangible asset with finite useful life

• Note 10 – Measurement of impairment loss on trade receivables

• Note 21 – Income taxes

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in Note 16 – Utilisation of tax losses.

3.5 Changes in accounting policies

(i) Overview

Starting as of 1 April 2009 on adoption of new/revised FRSs, the Group has changed its accounting policies in the following areas:

• Determination and presentation of operating segments • Presentation of financial statements • Disclosure of financial instruments measured at fair value

(ii) Determination and presentation of operating segments

As of 1 April 2009, the Group determines and presents operating segments based on the information that internally is provided to the Group Executive Chairman and the Group Chief Executive Officer, who are the Group’s Chief Operating Decision Makers (“CODM”). This change in accounting policy is due to the adoption of FRS 108 Operating Segments. Previously operating segments were determined and presented in accordance with FRS 14 Segment Reporting. The new accounting policy in respect of operating segment disclosures is presented as follows.

Comparative segment information has been re-presented in conformity with the transitional requirements of such standard. Since the change in accounting policy only impacts presentation and disclosure aspects, there is no impact on earnings per share. China Healthcare Limited Annual Report 2010 • 43

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by the CODM to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Segment results that are reported to the CODM include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company’s headquarters), head office expenses and income tax assets and liabilities.

Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill.

(iii) Presentation of financial statements

The Group applies revised FRS 1 Presentation of Financial Statements (2008), which became effective as of 1 April 2009. As a result, the Group presents in the consolidated statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the consolidated statement of comprehensive income. Comparative information has been re-presented so that it also is in conformity with the revised standard. Since the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share.

(iv) Disclosure of financial instruments measured at fair value

The Group applies the amendments to FRS 107 Financial Instruments Disclosures, which became effective as of 1 April 2009. As a result, the Group discloses how the fair value of financial instruments are measured using a “three-level” fair value hierarchy, which will inform users of the relative accuracy of each valuation of financial instruments.

FRS 107 does not require comparative information to be restated and therefore, the fair value hierarchy of financial instruments as of 31 March 2009 has not been presented.

4 Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have been applied consistently by Group entities, except as explained in note 3.5, which addresses changes in accounting policies.

4.1 Basis of consolidation

(i) Business combinations

Business combinations are accounted for under the purchase method. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.

The excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is credited to the income statement in the period of the acquisition.

44 • China Healthcare Limited Annual Report 2010

(ii) Subsidiaries Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group.

(iii) Acquisitions from entities under common control Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented or, if later, at the date that common control was established; for this purpose comparatives are restated. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group’s controlling shareholder’s consolidated financial statements.

The components of equity of the acquired entities are added to the same components within Group equity. Any difference between the cash paid for the acquisition and net assets acquired is recognised directly in equity.

(iv) Associates

Associates are those entities in which the Group has significant influence, but not control, over their financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity. Associates are accounted for using the equity method and are recognised initially at cost. The Group’s investments include goodwill identified on acquisition, net of any accumulated impairment losses. The financial statements include the Group’s share of the income and expenses and equity movements of associates, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to nil, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

(v) Transactions eliminated on consolidation

Intra-group balances, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(vi) Accounting for subsidiaries and associate

Investments in subsidiaries and an associate are stated in the Company’s balance sheet at cost less accumulated impairment losses.

(vii) Affiliates An affiliate is defined as one, other than a related corporation, which has common direct or indirect shareholders or common directors with the Company.

Amounts due from affiliates are stated at cost less allowance for doubtful receivables.

China Healthcare Limited Annual Report 2010 • 45

4.2 Foreign currency (i)

Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date on which the fair value was determined.

Foreign currency differences arising on retranslation are recognised in the statement of comprehensive income.

(ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to Singapore dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Singapore dollars at the average exchange rates for the year.

Exchange differences arising on translation are recognised directly in other comprehensive income. When a foreign operation is disposed of, in part or in full, the relevant amount in the foreign currency translation reserve is transferred to income statement as part of gain or loss on disposal.

4.3 Financial instruments

(i) Non-derivative financial assets

The Group initially recognises loans and receivables and deposits on the date they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial asset when the contractual rights to the cash flows from the financial assets expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the balance sheets when the Group has a legal right to offset the recognised amounts and intends either to settle on a net basis or to realise the assets and settle the liabilities simultaneously. The Group has the following non-derivative financial assets: investment at fair value through profit or loss and loans and receivables.

(a) Investment at fair value through profit or loss

A financial asset is classified as fair value through profit or loss if it is classified as held for trading or is designated as such upon initial recognition. Financial assets are designated at fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Groupâ&#x20AC;&#x2122;s documented risk management or investment strategy. Upon initial recognition, attributable transaction costs are recognised in the profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognised in the profit or loss.

46 â&#x20AC;˘ China Healthcare Limited Annual Report 2010

(b) Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Loans and receivables comprise trade and other receivables.

Cash and cash equivalents comprise cash balances and bank deposits. Bank overdrafts that are repayable on demand and that form an integral part of the Groupâ&#x20AC;&#x2122;s cash management are included as a component of cash and cash equivalents for the purpose of the cash flow statement.

(ii) Non-derivative financial liabilities

The Group initially recognises liabilities on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognised on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expired.

Financial assets and liabilities are offset and the net amount presented in the balance sheets when, the Group has a legal right to offset the recognised amounts and intends either to settle on a net basis or to realise the assets and settle the liabilities simultaneously.

The Group has the following non-derivative financial liabilities: loans and borrowings, bank overdrafts, and trade and other payables.

Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method.

(iii) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

(iv) Derivative financial instruments, including hedging accounting

The Group does not hold derivative financial instruments or engage in hedging activities.

China Healthcare Limited Annual Report 2010 â&#x20AC;˘ 47

4.4 Property, plant and equipment

(i) Recognition and measurement

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, the cost of dismantling and removing the items and restoring the site on which they are located and capitalised borrowing cost. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised net within other income in the profit or loss.

Property, plant and equipment acquired through finance leases is capitalised at the lower of its fair value and the present value of the minimum lease payments at the inception of the lease, less accumulated depreciation and impairment losses. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against the profit or loss.

(ii) Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group, and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in the profit or loss as incurred.

(iii) Depreciation

Depreciation is calculated over the depreciation amount, which is the cost of an asset, or other amount substituted for cost, less its residual value.

Depreciation is recognised in the profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Lease assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Freehold land and property under construction are not depreciated.

The estimated useful lives are as follows: Freehold buildings Leasehold buildings Leasehold improvements Nursing homes and hospital equipment Ambulances and medical equipment Furniture and fittings Office and other equipment Computers and accessories Renovations Motor vehicles

50 years remaining lease period shorter of 3% and remaining lease period 10 years 5 years 10 years 5 years 3 years shorter of 20% and remaining lease period 5 years

Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted as appropriate.

48 â&#x20AC;˘ China Healthcare Limited Annual Report 2010

4.5 Intangible asset

An intangible asset that is acquired by the Group, which has a finite useful life, is measured at cost less accumulated amortisation and impairment losses. An intangible asset is amortised in the profit or loss on a straight-line basis over its estimated useful life from the date on which it is available for use.

4.6 Leases (i) When entities within the Group are lessors of an operating lease

Assets subject to operating leases are included in property, plant and equipment. Rental income (net of any incentives given to lessees) is recognised on a straight-line basis over the lease term.

(ii) When entities within the Group are lessees of an operating lease

Where the Group has the use of assets under operating leases, payments made under the leases are recognised in the profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in the profit or loss as an integral part of the total lease payments made. Contingent rentals are charged to the profit or loss in the accounting period in which they are incurred.

(iii) When entities within the Group are lessees of a finance lease

Leased assets in which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, property, plant and equipment acquired through finance leases are capitalised at the lower of its fair value and the present value of minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Leased assets are depreciated over the shorter of the lease term and their useful lives. Lease payments are apportioned between finance expense and reduction of the lease liability.

The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of lease when the lease adjustment is confirmed.

At inception, an arrangement that contains a lease is accounted for as such based on the terms and conditions even though the arrangement is not in legal form of a lease.

4.7 Inventories

Inventories, comprising mainly pharmacy, hospital and surgical supplies, are stated at the lower of cost and net realisable value. Cost is calculated using the first-in, first-out formula and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

4.8 Impairment

(i) Financial assets (including receivables)

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, the disappearance of an active market for a security.

China Healthcare Limited Annual Report 2010 â&#x20AC;˘ 49

The Group considers evidence of impairment for receivables at both a specific asset and collective level. All individually significant receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Receivables that are not individually significant are collectively assessed for impairment by grouping together receivables with similar risk characteristics.

In assessing collective impairment, the Group uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in the profit or loss and reflected in an allowance account against receivables. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through the profit or loss.

Impairment losses on available-for-sale investment securities are recognised by transferring the cumulative loss that has been recognised in other comprehensive income, and presented in the fair value reserve in equity, to the profit or loss. The cumulative loss that is removed from other comprehensive income and recognised in the profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in the profit or loss.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in the profit or loss. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity.

(ii) Non-financial assets

The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated. For goodwill, and intangible assets that have indefinite useful lives, the recoverable amount is estimated at each year at the same time.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in the profit or loss unless it reverses a previous revaluation, credited to equity, in which case it is charged to equity. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

50 • China Healthcare Limited Annual Report 2010

4.9 Employee benefits

(i) Defined contribution plans

Obligations for contributions to post-employment benefits and employeesâ&#x20AC;&#x2122; retirement gratuity under defined contribution plans are recognised as an expense in the profit or loss as incurred.

(ii) Short-term employee benefits

Short-term accumulating compensated absences are recognised when the employees render services that increase their entitlement to future compensated absences.

A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(iii) Share-based payments

The share option programme allows the Groupâ&#x20AC;&#x2122;s employees and non-executive directors to acquire shares of the Company. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. At each balance sheet date, the Company revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates in employee expense and in a corresponding adjustment to equity over the remaining vesting period.

The proceeds received net of any directly attributable transactions costs are credited to share capital when the options are exercised.

No options have been granted during the year.

4.10 Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

4.11 Revenue

(i) Rendering of services

Provided that it is probable that the economic benefits will flow to the Group and the revenue and costs, can be reliably measured, home fees, other ancillary services and sale of pharmacy drug are recognised upon services rendered.

(ii) Rental income

Rental income receivable under operating leases is recognised in the profit or loss on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income to be received. Contingent rentals are recognised as income in the accounting period in which they are earned.

China Healthcare Limited Annual Report 2010 â&#x20AC;˘ 51

4.12 Finance income and finance costs

Finance income comprises interest income on funds invested, dividend income, changes in fair value of financial assets at fair value through profit or loss and foreign currency gains. Interest income is recognised as it accrues, using the effective interest method. Dividend income is recognised on the date that the Group’s right to receive payment is established, which in the case of quoted securities, is the ex-dividend date.

Finance expenses comprise interest expense on borrowings, foreign currency losses and changes in fair value of financial assets at fair value through profit or loss. All borrowing costs are recognised in the profit or loss using the effective interest method, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to be prepared for its intended use or sale.

4.13 Government grants – Jobs Credit Scheme

Cash grants received from the government in relation to the Jobs Credit Scheme are recognised as income upon receipt.

4.14 Income tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in the profit or loss except to the extent that it relates to a business combination, items recognised directly in equity or in other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the temporary differences arising from the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax not recognised for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

4.15 Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares.

4.16 Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incurs expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Group Executive Chairman and Group Chief Executive Officer to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

52 • China Healthcare Limited Annual Report 2010

China Healthcare Limited Annual Report 2010 â&#x20AC;˘ 53

Assets acquired through business combination -

on consolidation

680,446

19,848,391

19,810,767

19,858,467

At 1 April 2008

At 31 March 2010

At 31 March 2009

Carrying amount

At 31 March 2010

Translation differences on consolidation

Disposals

Depreciation charge for the year

Impairment losses

9,391,304

9,601,132

9,810,960

1,100,102

209,828

890,274

209,828

At 31 March 2009

Disposals/write off

10,491,406

Translation differences on consolidation

At 1 April 2008

19,858,467

Depreciation charge for the year

Accumulated depreciation and impairment losses

At 31 March 2010

47,700

Reclassifications

Translation differences

10,491,406

Additions

19,810,767

10,491,406

Freehold buildings

Disposals

At 31 March 2009

(58,829)

Reclassifications

Translation differences on consolidation

21,205

19,848,391

Freehold land

Disposals/write off

Additions

At 1 April 2008

Cost

Group

Note

5 Property, plant and equipment

5,382,836

5,531,802

5,680,495

1,028,062

148,966

879,096

148,693

730,403

6,410,898

Leasehold buildings

372,425

2,975,510

1,080,000

2,380,335

2,752,760

(203,029)

(526,793)

507,072

2,975,510

132,724

2,450,640

(1,485,472)

797,618

1,080,000

Properties under construction

1,153,899 1,079,121

640,921

1,204,189

1,435,145

1,838

(84,256)

206,280

1,311,283

(1,891)

(3,320)

195,034

1,121,460

2,514,266

4,059

(98,749)

143,774

2,465,182

(4,983)

(19,821)

164,337

2,325,649

Nursing homes and hospital equipment

684,022

728,411

177,157

43,101

134,056

44,389

89,667

818,078

Leasehold improvments

714,683

855,173

969,622

549,034

143,165

405,869

114,449

291,420

1,263,717

2,675

1,261,042

Ambulances and medical equipment

291,258

335,090

339,007

590,227

154

(46,826)

1,843

57,295

577,761

(155)

(78)

57,726

520,268

881,485

222

(53,299)

21,711

912,851

(353)

1,896

(1,050)

53,083

859,275

Furniture and fittings

41,800

63,933

80,395

336,751

701

(15,339)

5,126

34,759

311,504

(713)

(613)

50,978

261,852

378,551

511

(17,071)

19,674

375,437

(823)

5,277

(1,344)

30,080

342,247

Office and other equipment

55,650

111,472

92,738

420,028

125

(103)

13,767

61,558

344,681

(143)

65,599

279,225

475,678

(1,034)

(103)

20,662

456,153

600

14,174

69,416

371,963

Computers and accessories

4,839,026

4,898,036

3,963,009

2,232,790

6,873

(35,175)

687,109

1,573,983

(7,527)

541,283

1,040,227

7,071,816

18,270

526,793

(46,698)

101,432

6,472,019

(22,761)

1,485,472

6,072

5,003,236

Renovations

372,319

565,471

326,918

373,049

65,775

121,767

185,507

(147,824)

120,130

213,201

745,368

(5,610)

750,978

3,667

67,718

(150,330)

289,804

540,119

Motor vehicles

43,039,810

46,586,307

44,124,135

10,622,680

9,691

(181,699)

2,466,846

1,713,828

6,614,014

(10,429)

(151,835)

1,548,109

5,228,169

53,662,490

(138,911)

(215,920)

817,000

53,200,321

49,242

2,539,705

(172,545)

1,431,615

49,352,304

Total

54 â&#x20AC;˘ China Healthcare Limited Annual Report 2010

Depreciation charge for the year

Disposals

At 31 March 2009

Depreciation charge for the year

At 31 March 2010

18,138,010

At 1 April 2008

At 31 March 2009

At 31 March 2010

Carrying amount

18,138,010

At 1 April 2008

Accumulated depreciation

At 31 March 2010

Additions

18,138,010

Disposals

At 31 March 2009

18,138,010

Additions

At 1 April 2008

Cost

Company

Freehold land

9,391,304

9,601,132

9,810,960

1,100,102

209,828

890,274

209,828

680,446

10,491,406

Freehold buildings

640,921

684,022

728,411

177,157

43,101

134,056

44,389

89,667

818,078

Leasehold improvements

17,973

21,029

24,085

12,589

3,056

9,533

3,056

6,477

30,562

Furniture and fittings

7,952

11,646

12,362

37,472

3,694

33,778

3,882

29,896

45,424

3,166

42,258

Office and other equipment

10,225

18,403

30,738

200,877

14,881

185,996

20,054

165,942

211,102

6,703

204,399

7,719

196,680

Computers and accessories

458,427

547,155

670,308

525,700

88,728

436,972

123,153

313,819

984,127

Renovations

372,319

494,086

326,918

274,418

121,767

152,651

(147,824)

120,130

180,345

646,737

(150,330)

289,804

507,263

Motor vehicles

29,037,131

29,515,483

29,741,792

2,328,315

485,055

1,843,260

(147,824)

524,492

1,466,592

31,365,446

6,703

31,358,743

(150,330)

300,689

31,208,384

Total

(i) The carrying amount of property, plant and equipment of the Group includes amounts totalling $1,141,995 (2009: $1,369,281) held under finance lease. (ii) Freehold land and buildings of the Group and the Company with total carrying amount of $29,249,771 (2009: $29,411,899) and $27,529,314 (2009: $27,739,142) respectively are mortgaged as security for banking facilities (note 15). (iii) During the previous year, the Group acquired property, plant and equipment with an aggregate cost of $1,431,615 of which $236,860 was acquired by means of finance lease. Cash payment of $1,194,755 was made to purchase property, plant and equipment.

(iv) Particulars of major properties are as follows:Location

Description

Tenure

58 Braddell Road Singapore 359905

4 storey Medicare centre

Freehold

53 Choa Chu Kang Road Singapore 689385

4 storey Medicare centre

Freehold

452 Upper East Coast Road Singapore 466500

4 storey Medicare centre

Freehold

235 Corporation Drive Singapore 619771

2 storey Hospital

30-year from 1 November 2009

H.S. (D) 365597 PTD 26287 Mukim Pulai Daerah Johor Bahru Johor

Currently Vacant

Freehold

(v) The following are the significant accounting estimates on the Group’s property, plant and equipment and judgements in applying accounting policies:

(a) Impairment assessment

The Group assesses the impairment of property, plant and equipment subject to depreciation whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors considered important that could trigger an impairment review include the following:

• Significant under performance relative to historical or projected future operating results;

• Significant changes in the manner of the use of the required assets or the strategy for the overall business; and

• Significant negative industry or economic trends.

The complexity of the estimation process and issues related to the assumptions, risks and uncertainties inherent in the application of the Group’s accounting estimates in relation to property, plant and equipment affect the amounts reported in the financial statements, especially the estimates of the expected useful economic lives and the carrying values of those assets. If business conditions were different, or if different assumptions were used in the application of this and other accounting estimates, it is likely that materially different amounts could be reported in the Group’s financial statements.

(b) Depreciation expense, useful lives and residual value

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives, after taking into account the estimated residual value. The Group reviews the estimated useful lives of the assets regularly in order to determine the amount of depreciation expense to be recorded at each financial year. Useful lives are derived based on management’s estimates of the period that the assets will generate revenue, which are periodically reviewed for continued appropriateness. Due to the long lives of assets, changes to the estimates used can result in significant variations in the carrying value. Changes in the expected level of use of the assets and the Group’s historical experience with similar assets after taking into account anticipated technological changes could impact the economic useful lives and the residual values of these assets; therefore future depreciation charge could be revised. The residual value is reviewed at each reporting date, with any change in estimate accounted for as a change in estimate and therefore prospectively.

China Healthcare Limited Annual Report 2010 • 55

6 Subsidiaries Company 2010

2009

4,961,932

Loans to subsidiaries

15,220,961

9,625,443

Impairment losses

(7,124,048)

8,096,913

9,625,443

13,058,845

14,587,375

Unquoted equity shares, at cost

The loans to subsidiaries are unsecured and interest-free and settlement of these loans is neither planned nor likely to occur in the foreseeable future. As the loans are, in substance, part of the Company’s net investments in the subsidiaries, they are stated at cost less impairment losses.

The Company evaluates whether there is any objective evidence that investments in subsidiaries are impaired and determines the amount of impairment losses based on the recoverable amounts of the subsidiaries. The financial health of and near-term business outlook for the subsidiaries, including factors such as industry performance and operating cashflows to be generated from the provision of services are considered.

Any significant changes in the business environment and estimates of the recoverable amounts of the impaired subsidiaries can affect the profit or loss in the future years.

In the previous financial year, the Company extended an amount of $7,124,048 to a wholly-owned subsidiary, Econ Healthcare & Tourism Development Pte Ltd, which was incorporated primarily to hold the investment in Chengdu Tian Li Group Co., Ltd. (“Chengdu Tian Li”).

56 • China Healthcare Limited Annual Report 2010

As at 31 March 2010, management has assessed the estimated recoverable amount of the loan to the subsidiary to be Nil. Consequently, an impairment loss of $7,124,048 was recognised in “other operating expenses” in the Company’s income statement. (Please refer to Note 8 – Intangible assets for further details). Details of the subsidiaries are as follows:

Name of subsidiary

Country of incorporation

Held by the Company

Effective equity interest held by the Group 2010

2009

Econ Nursing Home Services (1987) Pte Ltd

Singapore

100

Sunnyville Nursing Home (1996) Pte Ltd

Singapore

100

Econ Ambulance Services Pte Ltd

Singapore

100

Econ Medicare Centre Pte Ltd

Singapore

100

Econ Careskill Training Centre Pte Ltd

Singapore

100

Econ Healthcare (China) Pte Ltd

Singapore

100

Econ TCM Services Pte Ltd

Singapore

100

Econ Healthcare (M) Pte Ltd

Singapore

100

West Point Hospital Pte Ltd

Singapore

100

Econ Healthcare (S) Pte Ltd

Singapore

100

Econ Healthcare (Vietnam) Pte Ltd

Singapore

100

Air Ambulance Asia Pte Ltd

Singapore

100

Econ Healthcare & Tourism Development Pte Ltd

Singapore

100

Econ Ambulance Services (JV) Pte Ltd

Singapore

100

Singapore

100

Econ Healthcare (M) Sdn Bhd

Malaysia

100

Econ Medicare Centre Sdn Bhd

Malaysia

100

People’s Republic of China (“PRC”)

Held by Econ Careskill Training Centre Pte Ltd EHL Language Centre Pte Ltd

Held by Econ Healthcare (M) Pte Ltd

Held by Econ Healthcare & Tourism Development Pte Ltd Chengdu Tian Li Group Co., Ltd. (成都天立集团有限公司)

All of the above subsidiaries are audited by KPMG LLP Singapore, except for Econ Healthcare (M) Sdn. Bhd., Econ Medicare Centre Sdn. Bhd. and Chengdu Tian Li Group Co., Ltd. Econ Healthcare (M) Sdn. Bhd. and Econ Medicare Centre Sdn. Bhd. are audited by BDO Binder, Kuala Lumpur. Chengdu Tian Li Group Co., Ltd is not audited. KPMG LLP Singapore is the auditor of all significant Singapore-incorporated subsidiaries. For this purpose, a subsidiary is considered significant as defined under the Singapore Exchange Limited Manual if its net tangible assets represent 20% or more of the Group’s consolidated net tangible assets, or if its pre-tax profits account for 20% or more of the Group’s consolidated pre-tax profits.

China Healthcare Limited Annual Report 2010 • 57

7 Associate Group

Investment in associate

2010

2009

4,374,079

3,599,292

Investment in associate includes goodwill of $811,000 (2009: $811,000). Details of the associate are as follows: Name of associate

Place of incorporation

Held by Econ Healthcare (China) Pte Ltd Boxuan Medical Equipment Pte Ltd and its subsidiary, Acare Medical Equipment Co., Ltd. (珠海伯轩医疗科仪有限公司) incorporated in PRC

Singapore

Effective equity interest held by the Group 2010

2009

Boxuan Medical Equipment Pte Ltd is audited by A.H. Low & Co.. Acare Medical Equipment Co Ltd is audited by 珠海国睿会计师事务所. An associate company is considered significant as defined under the Singapore Exchange Limited Manual if the Group’s share of its net tangible assets represent 20% or more of the Group’s consolidated net tangible assets, or if the Group’s share of its pre-tax profits account for 20% or more of the Group’s consolidated pre-tax profits.

The principal activities of the associate are those relating to investment holding. The principal activities of its wholly-owned subsidiary, incorporated in the People’s Republic of China (“PRC”), are those relating to the manufacture and sale of hospital equipment.

The summarised financial information of the associate not adjusted for the percentage of ownership held by the Group is as follows:

2010

2009

17,897,078

18,480,972

5,976,456

7,370,715

Assets and liabilities Total assets Total liabilities Results Revenue

19,318,222

20,628,785

Expenses

(17,104,544)

(17,568,626)

2,213,678

3,060,159

Profit after taxation

The Group’s share of results in the associate included in the consolidated income statement of the Group was based on the latest audited financial statements of the associate for the financial year ended 31 December 2009, including certain adjustments made to align to the accounting policies with those of the Group. There were no significant transactions or events that have occurred between the financial year-end of the associate and of the Group.

58 • China Healthcare Limited Annual Report 2010

8 Intangible assets Group Note

2010

2009

Cost At 1 April

6,451,623

82,713

Impairment loss

6,398,910

At 31 March

6,451,623

82,713

6,398,910

“Right to Operate” arising from acquisition of a subsidiary At 31 March

Accumulated amortisation and impairment losses At 1 April Amortisation during the year

Carrying amount At 31 March

In the previous financial year, the Group acquired 51% equity interest in Chengdu Tian Li for a cash consideration of $7,395,773 from Chengdu Tian Li Food, Beverage & Entertainment Co., Ltd.(成都天立餐饮娱乐有限公司), Chengdu Tian Li Decoration Engineering Co., Ltd.(成都天立装饰工程有限公司) and Sichuan Chongzhou Industry Development Company-Grains & Oils Trading Company(四川省崇州实业开发总公司粮油贸易公司). The business licence of Chengdu Tian Li is 40 years with effect from 25 September 2007.

Chengdu Tian Li was established for the operation of the 崇州市鸡冠山风景名胜区旅游项目(“Chongzhou Mount Jiguan Scenic Park” or the “Park”) at Mount Jiguan-Jiulonggou(鸡冠山-九龙沟)，located 96km to the west of Chengdu City, and 90km to Chengdu International Airport. Chengdu Tian Li was granted a right to operate the Park by the Chongzhou Municipal Government (崇州市人民政府)for 50 years from 1 June 2004 to 31 May 2054 based on the Operation Franchise Contract of Mount Jiguan Scenic Park Tourism Project (“Franchise Contract”)(经营权出让合同)dated 31 May 2004 signed by Chengdu Tian Li and the Chongzhou Municipal Government.

The right to operate the Park excludes a park-wide operation right which is disallowed by the Regulations on Scenic Spots and Historical Sites (风景名胜区条例) (No. 474 Decree of the State Council) (国务院令第474号) promulgated by the State Council of the People’s Republic of China (中华人民共和国国务院). The right to operate the Park is limited to projects to be specified and approved by the Scenic Spots and Historical Sites Administration Office (风景名胜区管理机构) in accordance with the Regulations on Scenic Spots and Historical Sites and other relevant People’s Republic of China’s (“PRC”) laws and regulations.

China Healthcare Limited Annual Report 2010 • 59

The fair values of the Group’s share of identifiable tangible and monetary assets acquired and liabilities assumed in Chengdu Tian Li amounted to $944,150 and the difference between the purchase consideration and fair value of the Group’s share of assets and liabilities acquired of $6,451,623 was recognised as a “right to operate” the Park. This was included as intangible assets to be amortised in the income statement on a straight line basis over its remaining contractual term. At the date of acquisition, Chengdu Tian Li had not commenced operations. Accordingly, none of the difference between the purchase consideration and fair value of the Group’s share of assets and liabilities acquired constituted goodwill on acquisition. An amortisation charge of $82,713 was made on the intangible assets in the previous financial year.

Valuation of “Right to Operate”

As at 31 March 2009, management carried out an impairment assessment on the recoverable amount of the “right to operate”. The recoverable amount of the “right to operate” was determined using the value-in-use methodology. The value-in-use was based on future cash flow projections, from proposed projects within the Park, which are subject to the approval of the Scenic Spots and Historical Sites Administration Office. Based on management’s assessment, they determined that the value-in-use of the “right to operate” exceeded the carrying amount, and consequently, no impairment loss was recognised for the financial year ended 31 March 2009.

Based on a legal status review report issued by a law firm in the People’s Republic of China on 14 May 2010, the non-fulfilment of certain contractual obligations by the vendors of the 51% equity interest of Chengdu Tian Li had resulted in a breach of the terms and conditions under the Joint Venture Agreement (“the Agreement”).

As at the balance sheet date, the development of the Park had not started. Management carried out an impairment assessment on the entire investment, including the “right to operate” the Park. Based on the legal status review report, management believes that Chengdu Tian Li does not have a valid “right to operate” the Park which is approved by appropriate Chinese authorities. As a result, management has fully impaired the entire carrying amount of the investment comprising property, plant and equipment, trade and other receivables as well as the “right to operate”, amounting to $9,229,314 in the consolidated income statement. The recoverable amount of the investment was determined, using the value-in-use methodology, to be $Nil on the grounds that legal proceedings to recover the investment amount are likely to be protracted and the probability of recovering such amount appears to be remote. The breakdown of the impairment losses for each financial statement caption is summarised below. Note

2010 $

Impairment losses on: - property, plant and equipment

2,466,846

- “right to operate” the Park

6,368,910

- trade and other receivables

393,558 9,229,314

Consequently, the loan extended by the Company to a subsidiary, Econ Healthcare Tourism and Development Pte Ltd, has similarly been fully impaired. See Note 6.

9 Inventories Group 2010

2009

Medical and surgical products

26,190

80,159

Pharmacy drugs

62,092

33,191

88,282

113,350

60 • China Healthcare Limited Annual Report 2010

10 Trade and other receivables Group 2010

Company 2009

2010

2009

Trade receivables

3,093,462

3,023,829

1,930

2,037

Impairment losses

(887,646)

(697,930)

Net receivables

2,205,816

2,325,899

1,930

2,037

115,040

592,246

6,183

10,559

1,450,520

8,453,780

624,263

511,929

151,260

148,306

2,951,302

3,440,633

1,603,805

8,604,123

65,143

65,670

36,405

39,480

3,016,445

3,506,303

1,640,210

8,643,603

Other receivables Staff advances Amounts due from subsidiaries (non-trade) Deposits Loans and receivables Prepayments

The non-trade amounts due from subsidiaries are unsecured, interest-free and repayable on demand. There is no allowance for doubtful debts arising from the outstanding balances.

Concentration of credit risk relating to trade receivables is limited due to the Groupâ&#x20AC;&#x2122;s many varied customers. The Groupâ&#x20AC;&#x2122;s historical experience in the collection of trade receivables fall within the recorded allowances. Due to these factors, management believes that no additional credit risk beyond amounts provided for collection losses is inherent in the trade receivables.

The maximum exposure to credit risk for trade receivables at the reporting date is as follows: Group

Company

2010

2009

2010

2009

By type of customers Individual customers

1,253,800

1,564,859

Corporate customers

952,016

761,040

1,930

2,037

2,205,816

2,325,899

1,930

2,037

By business segment Operating of medicare centres and nursing homes Hospital services Other ancillary services

932,885

893,398

1,222,279

1,382,552

50,652

49,949

1,930

2,037

2,205,816

2,325,899

1,930

2,037

China Healthcare Limited Annual Report 2010 â&#x20AC;˘ 61

Impairment losses The ageing profile of trade receivables at reporting date was: Gross 2010

Impairment losses 2010

Gross 2009

Impairment losses 2009

Group Not past due

1,189,846

1,764,230

Past due 0 – 30 days

492,929

(2,439)

92,867

Past due 30 days – 365 days

437,365

(63,146)

430,815

Past due more than 1 year

973,322

(822,061)

735,917

(697,930)

3,093,462

(887,646)

3,023,829

(697,930)

1,930

2,037

Company Not past due

The Group performs regular evaluation of the recoverability of its trade receivable balances to ascertain if such balances are impaired. This requires an evaluation of the financial standing, historical repayment patterns and historical trends of bad debt occurrences for the individual debtors and related balances.

Significant judgement is required in determining the appropriate impairment loss to be recognised on trade receivable balances. The ultimate recoverability of trade receivables is uncertain and any differences between the impairment losses initially recognised and eventual amounts recovered from the trade receivables will impact the result and carrying values of trade receivables in the period for which such impairment losses were recognised.

Movements in the allowance for impairment in respect of the Group’s trade receivables during the year are as follows: Group 2010

2009

At 1 April

697,930

653,411

Impairment loss recognised

583,274

44,519

(393,558)

887,646

697,930

Impairment loss utilised At 31 March

Based on historical default rates, the Group believes that no further impairment allowance is necessary in respect of the trade receivables. These receivables are mainly arising from existing customers that have a good payment record with the Group.

62 • China Healthcare Limited Annual Report 2010

11 Other investments Group and Company 2010

2009

1,139,987

499,341

Current investments Quoted equity securities, held-for-trading

All equity securities are denominated in Singapore Dollars.

Quoted equity securities, held-for-trading, are stated at fair values determined directly by reference to published price quotations in an active market and accordingly, they are classified under Level 1 fair value hierarchy.

12 Cash and cash equivalents Group Note Cash at bank and in hand Fixed deposits

Deposit pledged Secured bank overdrafts Cash and cash equivalents in the cash flow statement

Company

2010

2009

2010

2009

2,115,247

1,069,794

996,359

430,116

191,147

177,519

102,071

101,373

2,306,394

1,247,313

1,098,430

531,489

(191,147)

(177,519)

(102,071)

(101,373)

(1,106,397)

(2,298,731)

(500,025)

(801,958)

1,008,850

(1,228,937)

496,334

(371,842)

Fixed deposits of the Company and certain subsidiaries are pledged to financial institutions as guarantees on tenancy deposits entered by the Company and these subsidiaries with landlords.

The bank overdrafts are secured by corporate guarantees from its subsidiaries.

The effective interest rates per annum at the reporting date are as follows: Group

Fixed deposits Bank overdrafts

Company

2010

2009

2010

2009

0.65

0.83

0.69

0.90

4.25 – 5.75

4.25

Interest rates reprice yearly.

China Healthcare Limited Annual Report 2010 • 63

13 Share capital Group and Company 2010

2009

No. of shares

229,774,350

Issued and fully-paid ordinary shares with no par value: At 1 April and 31 March

The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.

Capital management

The Board’s policy is to maintain strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The primary objective of the Group’s capital management is to ensure that it maintains healthy capital ratios in order to support its business and maximise shareholders’ value.

The Group manages its capital structure and makes alignment to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may align the dividend payment to shareholders, return capital to shareholders or issue new shares.

There were no changes in the Group’s approach to capital management during the year.

14 Reserves

The currency translation reserve of the Group comprises foreign exchange differences arising from the translation of the financial statements of subsidiaries and the share of currency translation reserve in associate whose functional currencies are different from that of the Company.

The merger deficit arises from the difference between the nominal value of shares issued by the Company and the nominal value of shares of the subsidiaries acquired under a prior reorganisation under common control.

64 • China Healthcare Limited Annual Report 2010

15 Financial liabilities Group Note

Company

2010

2009

2010

2009

Non-current liabilities Secured bank loans

(a)

14,302,327

15,719,702

13,790,616

14,906,181

Unsecured bank loan

(b)

605,929

Finance lease liabilities

(e)

453,050

747,079

165,679

280,034

15,361,306

16,466,781

14,562,224

15,186,215

Current liabilities Secured bank overdrafts

1,106,397

2,298,731

500,025

801,958

Secured bank loans

(a)

2,541,158

2,673,254

2,239,335

2,386,990

Unsecured bank loan

(b)

240,630

Secured revolving credit facility

(c)

1,000,000

Unsecured revolving credit facility

(d)

2,000,000

Finance lease liabilities

(e)

311,027

311,033

114,358

114,361

7,199,212

8,283,018

6,094,348

6,303,309

(a) Bank loans of the Group and the Company amounting to $16,843,485 (2009: $18,392,956) and $16,029,951 (2009: $17,293,171) are secured by corporate guarantees from its subsidiaries, Econ Nursing Home Services (1987) Pte Ltd, Econ Medicare Centre Pte Ltd and West Point Hospital Pte Ltd, and on the Group’s freehold land and buildings and leasehold buildings (note 5). (b) Unsecured bank loan of $1,000,000 is repayable over 48 monthly instalments of approximately $23,030 each, including interest payment, commencing on August 2009.

(d) Unsecured revolving credit facility granted by a bank is refinanced on a monthly basis.

(e) Finance lease liabilities

China Healthcare Limited Annual Report 2010 • 65

The Group and Company had obligations under finance leases that are payable as follows: Principal $

Interest $

Payments $

Group 2010 Repayable within 1 year

311,027

13,547

324,574

Repayable after 1 year but within 5 years

453,050

23,214

476,264

764,077

36,761

800,838

Repayable within 1 year

311,033

13,542

324,575

Repayable after 1 year but within 5 years

747,079

36,762

783,841

1,058,112

50,304

1,108,416

114,358

12,292

126,650

2009

Company 2010 Repayable within 1 year Repayable after 1 year but within 5 years

165,679

23,109

188,788

280,037

35,401

315,438

Repayable within 1 year

114,361

12,287

126,648

Repayable after 1 year but within 5 years

280,034

35,402

315,436

394,395

47,689

442,084

2009

66 â&#x20AC;˘ China Healthcare Limited Annual Report 2010

Terms and debt repayment schedule

The terms and conditions of outstanding loans and borrowings are as follows: 2010 Effective interest rate %

Year of maturity

2.44 - 5.50

2011 - 2020

5.00

2013

Face value

2009 Carrying amount

Face value

Carrying amount

Group Secured bank loans Unsecured bank loans

16,843,484

16,843,485

18,392,956

846,559

Secured revolving credit

5.00

2010

1,000,000

Unsecured revolving credit

2.34

2010

2,000,000

Finance lease liabilities

2.38 - 2.50

2011 - 2014

800,838

764,077

1,108,416

1,058,112

Secured bank overdrafts

4.25 - 5.75

2010

1,106,397

2,298,731

22,597,278

22,560,518

24,800,103

24,749,799

Company 2.44 - 5.50

2013 - 2020

16,029,951

17,293,171

Unsecured bank loans

Secured bank loans

5.00

2013

846,559

Secured revolving credit

5.00

2010

1,000,000

Unsecured revolving credit

2.34

2010

2,000,000

Finance lease liabilities

2.38 - 2.50

2011 - 2014

315,438

280,037

442,084

394,395

Secured bank overdrafts

4.25

2010

500,025

801,958

20,691,973

20,656,572

21,537,213

21,489,524

16 Deferred tax

Movements in deferred tax assets and liabilities of the Group (prior to offsetting of balances) during the year are as follows: At 1 April 2008

Recognised in income statement (note 21)

At 31 March 2009

Recognised in income statement (note 21)

At 31 March 2010

568,922

(74,535)

494,387

4,002

498,389

Trade and other receivables

(8,812)

8,812

Liability for short-term accumulating compensated absences

(8,938)

2,944

(5,994)

5,994

(17,750)

2,944

(14,806)

14,806

Group Deferred tax liabilities Property, plant and equipment Deferred tax assets

China Healthcare Limited Annual Report 2010 â&#x20AC;˘ 67

Deferred tax liabilities of the Company are attributable to the following: At 1 April 2008

Recognised in income statement

At 31 March 2009

Recognised in income statement

At 31 March 2010

59,076

(43,915)

Company Deferred tax liabilities Property, plant and equipment

15,161

Deferred tax liabilities and assets are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same taxation authority. The net amounts, determined after appropriate offsetting, are as follows: Group

Deferred tax liabilities

2010

2009

498,389

479,581

Deferred tax assets have not been recognised in respect of the following items: Group 2010

2009

$ Unutilised wear and tear allowances Tax losses

$ -

659,000

11,115,000

11,370,000

11,115,000

12,029,000

The amount and utilisation of wear and tear allowances and tax losses are subject to agreement by the tax authorities. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits therefrom.

17 Trade and other payables Group 2010

2009

$ Trade payables and accrued operating expenses Liability for short-term accumulated compensated absences Other payables

Company 2010

2009

1,793,919

1,886,674

127,380

145,270

41,306

18,334

1,261,026

1,303,949

42,252

34,544

Non-trade amounts due to: - subsidiaries - affiliates Financial liabilities at amortised cost carried forward

68 â&#x20AC;˘ China Healthcare Limited Annual Report 2010

7,359,803

5,394,799

346,272

3,442,523

3,555,229

7,529,435

5,574,613

Group

Company

2010

2009

2010

2009

Financial liabilities at amortised cost carried forward

3,442,523

3,555,229

7,529,435

5,574,613

Refundable deposits

1,194,392

1,009,463

5,400

Home fees collected in advance

282,577

303,877

Unearned income

115,636

1,170

5,035,128

4,869,739

7,534,835

5,574,613

The non-trade amounts due to subsidiaries and affiliates are unsecured, interest-free and repayable on demand.

The following are the expected contractual undiscounted cash inflows (outflows) of financial liabilities, including interest payments and excluding the impact of netting agreements: Cash flows Carrying amount

Contractual cash flows

Within 1 year

1 to 5 years

More than 5 years

Group 2010 Non-derivative financial liabilities Secured bank overdrafts

1,106,397

(1,170,014)

16,843,485

(23,409,315)

(3,315,450)

(8,737,389)

(11,356,476)

846,559

(1,029,035)

(318,688)

(710,347)

Bank loans: - Secured - Unsecured Revolving credit facilities: - Secured

1,000,000

(1,051,600)

- Unsecured

2,000,000

(2,058,092)

764,077

(800,838)

(324,574)

(476,264)

4,636,915

(4,636,915)

27,197,433

(34,155,809)

(12,875,333)

(9,924,000)

(11,356,476)

2,298,731

(2,430,908)

18,392,956

(21,284,846)

(3,369,380)

(10,798,352)

(7,117,114)

- Secured

1,000,000

(1,051,600)

- Unsecured

2,000,000

(2,058,091)

Finance lease liabilities

1,058,112

(1,108,416)

(324,575)

(783,841)

Finance lease liabilities Trade and other payables*

2009 Non-derivative financial liabilities Secured bank overdrafts Secured bank loans Revolving credit facilities:

Trade and other payables*

4,564,692

(4,564,692)

29,314,491

(32,498,553)

(13,799,246)

(11,582,193)

(7,117,114)

* Exclude home fees collected in advance and unearned income China Healthcare Limited Annual Report 2010 â&#x20AC;˘ 69

Cash flows Carrying amount

Contractual cash flows

Within 1 year

1 to 5 years

More than 5 years

Company 2010 Non-derivative financial liabilities Secured bank overdrafts

500,025

(528,776)

16,029,951

(22,404,776)

(3,011,490)

(8,036,810)

(11,356,476)

846,559

(1,029,035)

(318,688)

(710,347)

- Secured

1,000,000

(1,051,600)

- Unsecured

2,000,000

(2,058,092)

Bank loans: - Secured - Unsecured Revolving credit facilities:

Finance lease liabilities Trade and other payables

280,037

(315,438)

(126,650)

(188,788)

7,534,835

(7,534,835)

28,191,407

(34,922,552)

(14,630,131)

(8,935,945)

(11,356,476)

2009 Non-derivative financial liabilities Secured bank overdrafts

801,958

(848,071)

17,293,171

(18,088,253)

(2,259,460)

(8,711,679)

(7,117,114)

- Secured

1,000,000

(1,051,600)

- Unsecured

2,000,000

(2,058,092)

394,395

(442,084)

(126,648)

(315,436)

5,574,613

(5,574,613)

27,064,137

(28,062,713)

(11,918,484)

(9,027,115)

(7,117,114)

Secured bank loans Revolving credit facilities:

Finance lease liabilities Trade and other payables

18 Revenue Group

Home fees and other ancillary services Sale of pharmacy drugs Rental income

70 â&#x20AC;˘ China Healthcare Limited Annual Report 2010

2010

2009

23,561,848

20,610,965

1,187,167

1,216,604

79,433

48,600

24,828,448

21,876,169

19 (Loss)/Profit for the year

The following items have been included in arriving at (loss)/profit for the year: Group 2010 Contributions to defined contribution plans included in staff costs Government grants in relation to jobs credit scheme included in other income Loss/(gain) on disposal of property, plant and equipment

2009

502,214

458,187

(345,206)

25,504

(61,322)

20 Finance income and expense Group 2010

2009

$ Interest income from bank deposits Gain on fair value of investments held for trading Dividend income from investments held for trading Finance income

706

1,564

640,646

11,356

25,123

652,708

26,687

698,217

818,916

Interest paid and payable to: - Bank - Finance lease creditors

50,488

32,901

748,705

851,817

579,625

Loss on fair value of investments held for trading

13,419

Finance expense

Exchange loss

748,705

1,444,861

Net finance expense

(95,997)

(1,418,174)

21 Income tax expense Group Note

2010

2009

Current tax expense Current year (Over)/under provided in prior years

426,447

311,323

(251,762)

300,939

174,685

612,262

Deferred tax expense Origination and reversal of temporary differences Reduction in tax rate Under/(over) provided in prior years 16 Income tax expense

4,002

1,462

(17,550)

14,806

(55,503)

18,808

(71,591)

193,493

540,671

China Healthcare Limited Annual Report 2010 â&#x20AC;˘ 71

Reconciliation of effective tax rate Group

(Loss)/profit for the year Total income tax expense (Loss)/profit excluding income tax Tax calculated using Singapore tax rate of 17%

2010

2009

(5,710,752)

446,394

193,493

540,671

(5,517,259)

987,065

(937,934)

167,801

Effect of reduction in tax rate

(17,550)

Expenses not deductible for tax purposes

1,767,464

130,618

Tax exempt revenues

(254,759)

(256,352)

Effect of different tax rates in other country

11,058

59,209

(155,380)

(57,139)

Tax benefit of losses not recognised

230,936

Temporary differences not recognised

37,712

(236,956)

245,436

193,493

540,671

Utilisation of tax losses and temporary differences, not recognised previously

(Over)/under provided in prior years

The following are the significant accounting estimates on the Groupâ&#x20AC;&#x2122;s income taxes and judgements in applying accounting policies:

Significant judgement is required in determining the capital allowances, the types and rates of taxes payable, deductibility of certain expenses, and taxability of certain income during the estimation of the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the provision for income tax and deferred income tax provisions in the period in which such determination is made.

22 Earnings per share Group

Basic and diluted earnings per share is based on: Net (loss)/profit attributable to ordinary shareholders

Weighted average number of shares outstanding during the year

2010

2009

(4,829,651)

446,394

No. of shares

229,774,350

The diluted earnings per share is the same as the basic earnings per share as the Company does not have any dilutive potential ordinary shares.

72 â&#x20AC;˘ China Healthcare Limited Annual Report 2010

23 Acquisition of subsidiary

In the previous year, the Group acquired 51% equity interest in Chengdu Tian Li for $7,395,773 satisfied by way of cash. For the year ended 31 March 2009, Chengdu Tian Li did not contribute to the consolidated net profit for the year.

The effect of acquisition of a subsidiary is set out below:

Note

Intangible asset - right to operate Property, plant and equipment Trade and other receivables Cash and cash equivalents Trade and other payables Minority interest Net identifiable assets and liabilities

Carrying amounts 2009

Fair value adjustment 2009

Recognised values 2009

6,451,623

2,539,705

405,182

5,206

(1,098,819)

(907,124)

944,150

6,451,623

7,395,773

Goodwill on consolidation

Consideration paid

7,395,773

Cash acquired

(5,206)

Net cash outflow

7,390,567

24 Financial risk management

Overview

The Group has a system of controls in place to create an acceptable balance between the cost of risks occurring and the cost of managing the risks. The management continually monitors the Groupâ&#x20AC;&#x2122;s risk management process to ensure that an appropriate balance between risk and control is achieved. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Companyâ&#x20AC;&#x2122;s activities.

Credit risk

Credit risk is the potential financial loss resulting from the failure of a customer or a counter party to settle its financial and contractual obligations to the Group, as and when they fall due. Management has a credit policy in place which establishes credit limit for customers and monitors their balances on an ongoing basis. The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main component of this allowance is a specific loss component that relates to individually significant exposures. The allowance account in respect of trade and other receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible. At that point, the financial asset is considered irrecoverable and the amount charged to the allowance amount is written off against the carrying amount of the impaired financial asset.

Cash and fixed deposits are placed with banks and financial institutions which are regulated.

China Healthcare Limited Annual Report 2010 â&#x20AC;˘ 73

Liquidity risk The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows. As at 31 March 2010, the Company and Group had net current liabilities of $9,768,039 and $6,295,245 respectively (2009: net current liabilities of $2,203,489 and $8,265,629 respectively). For the year ended 31 March 2010, the Group recorded a net cash inflow from operating activities of $5,017,503 (2009: net cash inflow of $3,660,182), a net cash outflow from investing activities and financing activities of $2,785,275 (2009: net cash outflow of $8,012,626) and an increase in cash and cash equivalents of $2,232,228 (2009: decrease of $4,352,444). The Group currently uses short term loans to finance long term assets. For the next 12 months, the liquidity of the Company and Group is primarily dependent on its ability to generate adequate cash inflow from operations and its ability to refinance short-term loan and revolving credit facilities when they fall due and to meet its debt obligations as they fall due. Management believes that the Group and the Company will have the continued support of its creditor-banks to renew its short-term loans and revolving credit facilities as and when they fall due.

Market risk Market risk is the risk that changes in market prices, such as interest rates, foreign exchange rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

(i)

Interest rate risk

The Group’s exposure to interest rate risk relates primarily to its interest-bearing financial liabilities. The Group’s objective is to maintain a balance of fixed and floating rate borrowings as well as a balanced maturity period.

The Group does not hedge its exposure to changes in interest rates on interest-bearing borrowings.

Sensitivity analysis

For variable rate financial assets and liabilities, a change of 1% in interest rate at the reporting date would increase/(decrease) profit or loss by the amounts shown below:

Group

Company

1% increase

1% decrease

1% increase

1% decrease

31 March 2010 Profit or loss

(217,964)

217,964

(203,765)

203,765

31 March 2009 Profit or loss

(236,917)

236,917

(210,951)

210,951

74 • China Healthcare Limited Annual Report 2010

(ii) Foreign currency risk

The Group incurs foreign currency risk on transactions that are denominated in a currency other than the respective functional currencies of the entities of the Group. The currency giving rise to this risk is primarily the Singapore dollar. The currency risk arises because the Group has subsidiaries whose functional currency is the Malaysian ringgit but has significant foreign currency receivables denominated in the Singapore dollar as at the balance sheet date. 2010

2009

Singapore dollar $

39,503

47,626

Group Trade and other receivables

The Group does not hedge its exposure to foreign currency risk.

Sensitivity analysis

A 10% strengthening of the Singapore dollar against the Malaysian ringgit at the reporting date would increase/(decrease) profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

2010

2009

Singapore dollar $

Group Income statement

3,950

4,763

A 10% weakening of the Singapore dollar against the Malaysian ringgit would have had the equal but opposite effect, on the basis that all other variables remain constant.

(iii) Equity price risk

Equity security price risk is the risk of changes in fair value of the Group’s investments due to changes in the underlying equity security prices. The risk is concentrated in the Group’s investments in equity securities which are financial assets classified as fair value through profit or loss.

Sensitivity analysis

The Group’s and the Company’s investments in equity instruments are quoted. A 10% increase/(decrease) in the underlying equity prices at the reporting date would increase/(decrease) profit or loss by the following amount.

Group and Company

Profit or loss

2010 $

2009 $

113,999

49,934

This analysis assumes that all other variables remain constant.

China Healthcare Limited Annual Report 2010 • 75

Estimating the fair values Fair value is defined as the value at which positions can be closed or sold in a transaction with a willing counterparty over a time period that is consistent with the Groupâ&#x20AC;&#x2122;s investment and risk management strategies.

Quoted investments held-for-trading The fair value of the investments has been determined based on quoted market prices as at the balance sheet date.

Interest-bearing loans Fair value is calculated based on discounted expected future principal and interest cash flows. The fair values of the interest-bearing loans are not significantly different from their carrying amounts as at the balance sheet dates.

Finance lease liabilities The fair value of finance lease liabilities is estimated as the present value of future cash flows, discounted at market interest rates for homogeneous lease agreements. The estimated fair values reflect change in interest rates. The carrying amount of finance lease liabilities closely approximates the fair value since the market interest rate as at reporting date closely approximates the effective interest rate implicit in the finance lease.

Other financial assets and liabilities The carrying amounts of financial assets and liabilities with a maturity of less than one year (including trade and other receivables, cash and cash equivalents, and trade and other payables) are assumed to approximate their fair values because of the short period to maturity. All other financial assets and liabilities are discounted to determine their fair values.

Fair value hierarchy The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: Level 1 : quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 : inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e., derived from prices) Level 3 : inputs for the assets or liability that are not based on observable market data (unobservable inputs).

Level 1

Level 2

Level 3

Total

Group and Company 31 March 2010 Investments designated at fair value through profit or loss

76 â&#x20AC;˘ China Healthcare Limited Annual Report 2010

1,139,987

25 Operating segments

The Group’s three reportable segments, as described below, are the Group’s strategic business units. The strategic business units are managed separately because they require different operation needs and marketing strategies. For each of the strategic business units, the Group Executive Chairman and the Group Chief Executive Officer, review internal management reports on a monthly basis.

The following summary describes the operations in each of the Group’s reportable segments:

Operation of medicare centres and nursing homes in Malaysia

Operation of one medicare centre

Operation of medicare centres and nursing homes in Singapore

Operation of five medicare centres and two nursing homes.

Hospital services

Provision of hospital extension ward management services.

Other segments include the provision of homecare services, ambulance services, traditional Chinese medicine services and sale and letting of properties.

Information regarding the results of each reportable segments is included below. Performance is measured based on segment profit before income tax, as included in the internal management reports that are reviewed by the CODM. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

China Healthcare Limited Annual Report 2010 • 77

78 â&#x20AC;˘ China Healthcare Limited Annual Report 2010

Interest expense

Reportable segment liabilities

1,961,238

272,621

Investment in quoted shares

Capital expenditure

34,192,657

(85,204)

5,593,236

Investment in associate

Reportable segment assets

- Gain/(loss) on fair value of quoted investment, held for trading

- Impairment loss on trade and other receivables

Other material non-cash items:

Share of profit of equity method investees

Reportable segment (loss)/profit before income tax

(1,006,335)

Dividend revenue

Depreciation

14,807,043

2010 $

2,066,855

978,234

34,740,615

(44,519)

5,175,174

(852,892)

13,656,307

2009 $

106,307

104,057

2,468,965

220,302

(86,321)

122,782

28,557

2,355,533

94,035

(86,753)

887,967

2009 $

Malaysia

979,980

2010 $

Medicare centre and nursing home

Singapore

Inter-segment revenue

External revenue

Information about reportable segments:

1,870,101

427,345

9,767,037

(104,512)

1,048,241

(454,620)

(110,889)

320,198

6,733,528

2010 $

1,626,181

121,948

9,981,885

(47,492)

(420,894)

(146,533)

307,907

5,243,376

2009 $

Singapore

Hospital Services

24,436,743

12,977

1,139,987

4,374,079

3,892,839

640,646

774,787

409,906

(166,552)

(637,816)

11,356

621,518

2,307,897

2010 $

2009 $

26,346,948

302,876

499,341

3,599,292

2,751,918

(579,625)

1,053,520

(389,026)

(187,570)

(705,284)

25,123

577,449

2,088,519

All other segments

28,374,389

817,000

1,139,987

4,374,079

50,321,498

640,646

(189,716)

774,787

7,271,685

(1,713,828)

(748,705)

11,356

941,716

24,828,448

2010 $

2009 $

30,162,766

1,431,615

499,341

3,599,292

49,829,951

(579,625)

(44,519)

1,053,520

4,832,691

(1,548,109)

(851,817)

25,123

885,356

21,876,169

Total

Reconciliations of reportable segments revenue, profit and loss, assets and liabilities and other material items 2010

2009

Revenue Total revenue of reportable segments

25,770,164

22,761,525

Elimination of inter-segment revenue

(941,716)

(885,356)

24,828,448

21,876,169

7,271,685

4,832,691

Consolidated revenue Profit or loss Total profit for reportable segments Material reconciling items: - impairment losses on long-lived assets and trade receivables in an overseas project

(9,229,314)

- loss on fair value of investments held for trading

(579,625)

- other corporate expenses

(4,334,417)

(4,319,521)

Share of profit of associate

774,787

1,053,520

(5,517,259)

987,065

50,321,498

49,829,951

5,057

9,234,371

Investment in associate

4,374,079

3,599,292

Elimination of inter-segments

(735,637)

(742,798)

53,964,997

61,920,816

28,374,389

30,162,766

Other liabilities

1,067,296

1,158,330

Elimination of inter-segments

(735,637)

(742,798)

28,706,048

30,578,298

Unallocated amounts:

Consolidated (loss)/profit before income tax Assets Total assets for reportable segments Other assets

Consolidated total assets Liabilities Total liabilities for reportable segments

Consolidated total liabilities Other material items Interest expense Capital expenditure Depreciation of property, plant and equipment Amortisation of intangible assets

(748,705)

(851,817)

817,000

1,431,615

(1,713,828)

(1,548,109)

(82,713)

(6,368,910)

(583,274)

(44,519)

(2,466,846)

Impairment losses on: - intangible assets - trade and other receivables - property, plant and equipment

China Healthcare Limited Annual Report 2010 â&#x20AC;˘ 79

26 Commitments

As at 31 March 2010, the Group had the following commitments:

(a) The Group leases offices and equipment under operating leases. The leases typically run for an initial period of 1 to 30 years, with an option to renew the lease after that date. Lease payments are usually revised at each renewal date to reflect market rentals. None of the leases include contingent rental.

Future minimum lease payments payable under non-cancellable operating leases: 2010 $

Within 1 year

2,482,473

2,003,945

After 1 year but within 5 years

7,141,628

5,942,680

16,177,481

17,271,859

25,801,582

25,218,484

After 5 years

(b)

2009

The Group leases out certain rooftop areas of its building to telecommunication operators to install and maintain radio antennae with any related equipment. The leases typically run for an initial period of 5 years, with an option to renew the lease after that date. Lease payments are usually revised at each renewal date to reflect market rentals. None of the leases include contingent rental. Non-cancellable operating lease rentals are receivable as follows: 2010

2009

Within 1 year

43,200

49,200

After 1 year but within 5 years

42,550

85,750

134,950

80 â&#x20AC;˘ China Healthcare Limited Annual Report 2010

27 Related parties

Key management personnel compensation

Compensation payable to key management personnel comprises: Group

Short-term employee benefits Post-employment benefits

2010

2009

1,136,446

813,266

22,952

16,441

393,241

1,159,398

1,222,948

Benefits in kind (see note below)

Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the Company. The Board of Directors and senior management team are considered as key management personnel.

In the previous financial year, a director of the Company decided to claim his entitlement for car allowances amounting to $304,064 in accordance with the service agreement entered into between him and the Company in May 2002. This amount was included in benefits in kind.

Other related party transactions

Other than disclosed elsewhere in the financial statements, transactions with related parties are as follows: Group 2010

2009

449,232

145,532

Rental expenses paid to: Immediate holding company Affiliated party

30,940

187,200

480,172

332,732

30,683

Rental and management fee income received from: Affiliated party

28 Comparative information

The following comparative information has been reclassified to better reflect the economic substance of the Group and to be consistent with current year presentation. The effects of the reclassification are as follows: 2009 As previously reported

Effects of reclassification

2009 As restated

Supplies and consumables

(2,874,959)

(294,624)

(3,169,583)

Staff costs Operating lease expenses

(11,301,817)

783,360

(10,518,457)

(1,483,232)

(488,736)

(1,971,968)

A balance sheet as at 31 March 2008 is not presented as the reclassification does not affect items on the balance sheet. China Healthcare Limited Annual Report 2010 â&#x20AC;˘ 81

29 Subsequent events

Subsequent to the balance sheet date, additional banking facilities amounting to $23.5 million was granted to the Group by a financial institution for the redevelopment of West Point Hospital. The additional banking facilities are secured by a legal mortgage of West Point Hospital’s property at 235, Corporation Drive, Singapore 619771.

30 New accounting standards and interpretations not yet adopted

The Group has not applied the following accounting standards (including their consequential amendments) and interpretations that have been issued as of the balance sheet date but are not yet effective:

•

Amendments to FRS 32 Financial Instruments: Presentation – Classification of Rights Issues

Amendments to FRS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items

Amendments to FRS 102 Share-based Payment – Group cash-settled share-based payment transactions

FRS 103 (revised) Business Combinations and FRS 27 (revised) Separate and Consolidated Financial Statements

•

Improvements to FRSs 2009

•

INT FRS 117 Distributions of Non-cash Assets to Owners

•

Amendments to INT FRS 114 Amendments relating to the Prepayment of a Minimum Funding Requirement

•

FRS 24 (revised 2010) Related Party Disclosures

•

INT FRS 119 Extinguishing Financial Liabilities with Equity Instruments

•

Revised FRS 101 First-time adoption of FRS (improved structure)

•

Amendments to FRS 101 Amendments relating to additional exemptions for First-time Adopters

Improvements to FRSs 2009 will become effective for the Group’s financial statements for the year ending 31 March 2011 and 31 March 2012. Improvements to FRS 2009 contain amendments to numerous accounting standards that result in accounting changes for presentation, recognition or measurement and disclosure purposes. The Group is in the process of assessing the impact of these amendments.

Other than the changes arising from Improvements to FRS 2009, the initial application of the above standards and interpretations are not expected to have any material impact on the Group’s financial statements. The Group has not considered the impact of accounting standards issued after the balance sheet date.

82 • China Healthcare Limited Annual Report 2010

As at 21 June 2010

Number of shares issued : 229,774,350 Class of shares : Ordinary shares Voting rights : One vote per ordinary share

Analysis of Shareholdings Size of Shareholdings

No. of Shareholders

1 - 999

No. of Shares

0.12

0.00

1,000 – 10,000

456

57.36

2,019,870

0.88

10,001 – 1,000,000

323

40.63

22,917,700

9.97

1.89

204,836,760

89.15

795

100.00

229,774,350

100.00

No. of Shares

1,000,001 and above Total

Twenty Largest Shareholders No.

Name

Econ Medicare Centre Holdings Private Limited

89,195,972

38.82

Raffles Nominees (Pte) Ltd

52,994,550

23.06

Ong Chu Poh

16,879,305

7.35

UOB Kay Hian Pte Ltd

12,052,000

5.25

Goh Yang Chye

7,981,000

3.47

Lim & Tan Securities Pte Ltd

6,500,000

2.83

Ang Yu Seng

4,887,000

2.13

Koh Hin Ling

3,510,022

1.53

Teo Kee Bock

2,830,000

1.23

Wee Toon Lee

1,880,911

0.82

Ong Siew Keng

1,494,000

0.65

Ong Pang Aik

1,300,000

0.57

Lian Lee Lee

1,180,000

0.51

OCBC Securities Private Ltd

1,122,000

0.49

Ong Heng

1,030,000

0.45

DMG & Partners Securities Pte Ltd

865,200

0.38

Kua Sei Peng Or Kee Puay Kiang

721,000

0.31

Sim Hua Cheng

600,000

0.26

So Foi Chin

594,100

0.26

Ng Siok Keow

578,000

0.25

208,195,060

90.62

Total

China Healthcare Limited Annual Report 2010 • 83

As at 21 June 2010

Substantial shareholders Number of Shares Name

Direct Interest

Econ Medicare Centre Holdings Pte Ltd TMI Holdings (1997) Pte Ltd (1) Ong Chu Poh (2) Koh Hin Ling (Mdm)

(3)

Goi Seng Hui (4)

Deemed Interest

Total

89,195,972

38.82

89,195,972

38.82

16,879,305

92,705,994

109,585,299

47.70

3,510,022

106,075,277

109,585,299

47.70

50,704,550

22.07

Notes:

(1)

Deemed interested by virtue of its 100% shareholding in Econ Medicare Centre Holdings Pte Ltd.

(2)

Mr Ong Chu Poh is deemed to be interested in 89,195,972 shares held by Econ Medicare Centre Holdings Pte Ltd by virtue of Section 7 of the Companies Act, Cap. 50 and 3,510,022 shares held by his spouse, Madam Koh Hin Ling.

(3)

Madam Koh Hin Ling is deemed to be interested in 89,195,972 shares held by Econ Medicare Centre Holdings Pte Ltd by virtue of Section 7 of the Companies Act, Cap. 50 and 16,879,305 shares held by her spouse, Mr Ong Chu Poh.

(4)

Held by Raffles Nominees (Pte) Ltd as nominee for Mr Goi Seng Hui.

Shareholdings held by the public Based on information available to the Company as at 21 June 2010, approximately 30.23% of the issued ordinary shares of the Company is held by the public and therefore, the Company is in compliance with Rule 723 of Section B: Rules of Catalist of the SGX-ST Listing Manual.

84 â&#x20AC;˘ China Healthcare Limited Annual Report 2010

NOTICE IS HEREBY GIVEN that the Eighth Annual General Meeting of the Company will be held at 235, Corporation Drive, West Point Hospital, Singapore 619771 on Friday, 30 July 2010 at 11.00 a.m. to transact the following business:-

AS ORDINARY BUSINESS 1. To receive and adopt the Directors’ Report and Audited Financial Statements for the financial year ended 31 March 2010. Resolution 1 2. To re-elect Dr Tan Hung Yong Richard, who will retire by rotation pursuant to Article 89 of the Company’s Articles of Association and who, being eligible, will offer himself for re-election as a Director of the Company. Resolution 2 Dr Tan Hung Yong Richard will, upon re-election as Director, remain as a member of the Audit Committee, and will be considered independent for the purposes of Rule 704(7) of Section B: Rules of Catalist of the Listing Manual of the Singapore Exchange Securities Trading Limited. He will also remain as Chairman of the Remuneration Committee and a member of the Nominating Committee.

3. To approve proposed Directors’ fees of S$31,500 for the financial year ended 31 March 2010 (31 March 2009: S$30,000). Resolution 3 4. To re-appoint Messrs KPMG LLP as Independent Auditors of the Company and to authorise the Directors to fix their remuneration.

Resolution 4

5. To transact any other ordinary business that may be transacted at an Annual General Meeting.

AS SPECIAL BUSINESS 6. To consider and, if thought fit, to pass, with or without modifications, the following resolutions as Ordinary Resolutions:

6.1 That pursuant to Section 161 of the Companies Act, Cap. 50 and the Rules of Catalist of the Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX-ST”), authority be and is hereby given to the Directors of the Company to: (1) (i) issue shares in the capital of the Company whether by way of rights, bonus or otherwise; and/or

(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) options, warrants, debentures or other instruments convertible into shares; at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may in their absolute discretion deem fit; and (2) (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any

Instrument made or granted by the Directors while this Resolution was in force, provided that:

(a) the aggregate number of shares to be issued pursuant to this Resolution (including shares to be issued in pursuance of

Instruments made or granted pursuant to this Resolution) does not exceed 100% of the total number of issued shares excluding

treasury shares in the capital of the Company (as calculated in accordance with sub-paragraph (b) below, of which the aggregate

number of shares and convertiblesecurities to be issued other than on a pro-rata basis to existing shareholders of the Company

(including shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution) does not exceed 50%

of the total number of issued shares excluding treasury shares in the capital of the Company (as calculated in accordance with

sub-paragraph (b) below;

China Healthcare Limited Annual Report 2010 • 85

(b) (subject to such manner of calculation as may be prescribed by the SGX-ST) for the purpose of determining the aggregate

number of shares that may be issued under sub-paragraph (a) above, the percentage of issued shares excluding treasury shares

shall be based on the total number of issued shares excluding treasury shares in the capital of the Company at the time this

Resolution is passed, after adjusting for:

(i) new shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards

outstanding or subsisting at the time this Resolution is passed, provided the options or awards were granted in compliance

with Part VIII of Chapter 8 of the Rules of Catalist of the SGX-ST; and

(ii) any subsequent bonus issue, consolidation or subdivision of shares;

(c) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Rules of Catalist

of the SGX ST for the time being in force (unless such compliance has been waived by the SGX-ST) and the Articles of

Association for the time being of the Company; and

(d) the authority conferred by this Resolution shall, unless revoked or varied by the Company in general meeting, continue in force

until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting

of the Company is required by law to be held, whichever is the earlier. [See Explanatory Note (1)]

Resolution 5

6.2 That authority be and is hereby given to the Directors of the Company to offer and grant options i n accordance with the provisions

of the China Healthcare Employees’ Share Option Scheme (the “Scheme”) and pursuant to Section 161 of the Companies Act, Cap.

50, to allot and issue such number of shares as may be required to be issued pursuant to the exercise of the options granted under

the Scheme, provided always that the aggregate number of shares to be issued pursuant to the Scheme shall not exceed 15% of the

total number of issued shares excluding treasury shares in the capital of the Company from time to time.

By Order of the Board

Lee Seng Suan Company Secretary Singapore 15 July 2010

86 • China Healthcare Limited Annual Report 2010

Resolution 6

NOTES 1. A Member entitled to attend and vote at the Annual General Meeting is entitled to appoint not more than two proxies to attend and vote in his/her stead. Such proxy need not be a Member of the Company and where there are two proxies, the number of shares to be represented by each proxy must be stated. 2. The instrument or form appointing a proxy, duly executed, must be deposited at the Company’s registered office at 452, Upper East Coast Road, Singapore 466500 not less than 48 hours before the time for holding the above Annual General Meeting.

EXPLANATORY NOTES ON SPECIAL BUSINESS TO BE TRANSACTED (1) The proposed Ordinary Resolution 5, if passed, will empower the Directors from the date of this Annual General Meeting until the next Annual General Meeting, to allot and issue new shares and/or convertible securities in the Company (whether by way of rights, bonus or otherwise) at any time. The number of shares and convertible securities that the Directors may allot and issue under this Resolution must not exceed 100% of the total number of issued shares excluding treasury shares of which the aggregate number of shares and convertible securities issued other than on a pro rata basis to existing shareholders must not be more than 50% of the total of issued shares excluding treasury shares at the time of the passing of this Resolution. (2) The proposed Ordinary Resolution 6, if passed, will empower the Directors of the Company to offer and grant options under the China Healthcare Employees’ Share Option Scheme (the “Scheme”) and to allot and issue shares pursuant to the exercise of such options under the Scheme up to an aggregate number of shares not exceeding 15% of the total number of issued shares excluding treasury shares in the capital of the Company from time to time.

China Healthcare Limited Annual Report 2010 • 87

Board of Directors Mr Ong Chu Poh Group Executive Chairman Dr Koh Hin Ling Executive Director Mr Wong Kook Fei Independent Director Dr Tan Hung Yong Richard Independent Director Audit Committee Mr Wong Kook Fei (Chairman) Dr Tan Hung Yong Richard Dr Koh Hin Ling Remuneration Committee Dr Tan Hung Yong Richard (Chairman) Mr Wong Kook Fei Dr Koh Hin Ling Nominating Committee Mr Wong Kook Fei (Chairman) Dr Tan Hung Yong Richard Mr Ong Chu Poh Company Secretary Mr Lee Seng Suan (FCPA)

88 â&#x20AC;˘ China Healthcare Limited Annual Report 2010

Registered Office 452 Upper East Coast Road Singapore 466500 Tel: (65) 6447 8788 Fax: (65) 6496 1339 Company Registration Number 200202500K Share Registrar & Share Transfer Office M & C Services Private Limited 138 Robinson Road, #17-00 The Corporate Office Singapore 068906 Auditors KPMG LLP Certified Public Accountants 16 Raffles Quay #22-00 Hong Leong Building Singapore 048581 Audit Partner: Ms Ang Fung Fung (Appointed for financial year ended 31 March 2010) Principal Bankers DBS Bank Limited Oversea-Chinese Banking Corporation Limited RHB Bank Berhad

IMPORTANT: 1. For Investors who have used their CPF moneys to buy shares of China Healthcare Limited, the Annual Report 2010 is forwarded to them at the request of their CPF Approved Nominees and is sent solely FOR INFORMATION ONLY. 2. This Proxy Form is not valid for use by CPF Investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

CHINA HEALTHCARE LIMITED (incorporated in the Republic of Singapore) Company Reg. No. 200202500K

3. CPF Investors who wish to vote should contact their CPF Approved Nominees. (Please see notes overleaf before completing this Form)

I/We, of being a member/members of China Healthcare Limited (the “Company”), hereby appoint

Name

Address

NRIC/ Passport No.

Proportion of Shareholdings (%)

(a)

and/or (delete as appropriate) (b)

as my/our proxy/proxies to attend and to vote for me/us and on my/our behalf and, if necessary, to demand a poll, at the 8th Annual General Meeting of the Company to be held at 2 35 Corporation Drive, West Point Hospital, Singapore 619771 on Friday, 30 July 2010 at 11.00 a.m. and at any adjournment thereof. (Please indicate with an “X” in the spaces provided whether you wish your vote(s) to be cast for or against the Resolutions to be proposed at the Annual General Meeting as indicated hereunder. In the absence of specific directions, the proxy/proxies will vote or abstain from voting as he/they may think fit, as he/they will on any other matter arising at the Annual General Meeting.)

No. Resolutions relating to:

For

Adoption of Directors’ Report and Financial Statements.

Re-election of Dr Tan Hung Yong Richard as Director.

Approval of Directors’ fees

Re-appointment of KPMG LLP as Auditors.

Authority to Directors to allot and issue new shares.

Authority to Directors to offer and grant options and issue shares pursuant to the exercise of options under the China Healthcare Employees’ Share Option Scheme.

Dated this

Total number of Shares in: (a) CDP Register (b) Register of Members

day of

Against

2010

No. of Shares Signature of Shareholder(s) or Common Seal of Corporate Shareholder

Notes: 1. A member of the Company entitled to attend and vote at the above meeting is entitled to appoint not more than two proxies to attend and vote in his/her stead. A proxy need not be a member of the Company and where there are two proxies, the number of shares to be represented by each proxy must be stated. 2. This Proxy Form must be signed by the appointor or his/her duly authorised attorney or, if the appointor is a body corporate, signed by a duly authorised officer or his attorney and affixed with its common seal there to. 3. This instrument appointing a proxy [together with the power of attorney (if any) under which it is signed or a certified copy thereof], must be deposited at the registered office of the Company at 452, Upper East Coast Road, Singapore 466500 not less than 48 hours before the time fixed for holding the Annual General Meeting. 4. Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of shares. If you have shares registered in your name in the Register of Members, you should insert that number of shares. If you have shares entered against your name in the Depository Register and shares registered in your name in the Register of Members, you should insert the aggregate number of shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the shares held by you. 5. The Company shall be entitled to reject this instrument of proxy if it is incomplete, not properly completed or illegible or where the true intention of the appointor is not ascertainable from the instructions of the appointor specified in this instrument of proxy. In addition, in the case of members whose shares are deposited with The Central Depository (Pte) Limited (â&#x20AC;&#x153;CDPâ&#x20AC;?), the Company may reject any instrument of proxy lodged if such member is not shown to have shares entered against his name in the Depository Register 48 hours before the time fixed for holding the Annual General Meeting as certified by CDP to the Company. fold along this line (1)

Please affix postage stamp

The Company Secretary China Healthcare Limited 452 Upper East Coast Road Singapore 466500

Please affix postage stamp

fold along this line (1)

Our Services Scrapping Tuina Hand & Foot massage Meridian Health Check

Residential Care 24-Hr Medical Services Short term care Long term care Day care Dietician Planned Meals Traditional Chinese Medicine Physiotherapy & Rehabilitation

Auxiliary Services Home Nursing Ambulance Caregiver Training Healthcare Training & Education

Subacute Nursing Specialty Tracheotomy Care Wound Management Pressure (bed) Sore Management Diabetes Management Post Stroke Nursing Care Paralysis Care

West Point Hospital 24-Hr Outpatient and A&E Services Day Surgery & Endoscopy Inpatient Services Health Screening Services Radiology Services Laboratory Services Physiotherapy & Rehabilitation Specialist Services Traditional Chinese Medicine Pharmacy

Therapy Services Physiotherapy Speech Therapy Occupational Therapy Rehabilitation Services Stroke Rehabilitation Geriatric Rehabilitation Respiratory Rehabilitation Orthopaedic Rehabilitation Incontinence Management

Our locations

Physiotherapy & Rehabilitation Pain Management Stroke Rehabilitation Geriatric Rehabilitation Orthopaedic Rehabilitation Occupational Therapy Speech Therapy Sports Injuries Posture Re-education Fall Prevention Home Visits Group Exercise Class Traditional Chinese Medicine Acupuncture Chinese Medication Cupping

Singapore Econ Medicare Centres & Nursing Homes Braddell 58 Braddell Road Buangkok 10 Buangkok View, Block 5, Basement, Level 1 & 2 Chai Chee 351 Chai Chee Street #03-01 Choa Chu Kang 53 Choa Chu Kang Road Recreation Road 25 Recreation Road

Sunnyville Home 10 Ama Keng Road Upper East Coast Road 452 Upper East Coast Road Econ TCM Services 351 Chai Chee Street #02-06 Tel: (65) 6449 8636 235 Corporation Drive Tel: (65) 6262 5828 Econ Home Care Services 260 Sims Avenue #04-01 Tel: (65) 9688 7902 Econ Careskill Training Centre (ectc) 260 Sims Avenue #04-01 Tel: (65) 6741 8640 Econ Ambulance Services Hotline: (65) 6382 8888 PhysioWorks Physiotherapy & Rehabilitation Services 235 Corporation Drive Tel: (65) 6262 5798 West Point Hospital 235 Corporation Drive Tel: (65) 6262 5858 Malaysia Econ Medicare Centre Kuala Lumpur 6th & 7th Floor Chinese Maternity Hospital No.106 Jalan Pudu 55100 Kuala Lumpur Tel: (603) 2026 7118 Taman Perling (Planned for completion by 1st quarter 2012).

ECON CARE CENTRE 24 HRS HOTLINE: (65) 6226 1188

20 Jalan Afifi, Certis CISCO Centre II, #06-02/03/04/05 Singapore 409179 Tel: (65) 6447 8788 Fax: (65) 6496 1339