The Group strives to maintain a prudent financial structure. Its main sources of operating cashflows came from residential sales, commercial office rental and management fee income. As part of the Group’s financial management, it monitors closely its cashflow position, debt maturity profile and overall liquidity position. To ensure that it has adequate resources to support its funding, investment needs and its growth plans, sufficient undrawn banking facilities and capital market programmes are set up so as to facilitate fund raising at opportunistic windows.

The Group’s financial capacity further strengthened during the year. At the close of the year, gearing was maintained at a comfortable level of 0.57 compared to 0.50 as at end-2005. The Group’s aggregate cash and fixed deposits balance grew by 27% to S$2.69 billion. Part of the cash reserves would be utilised to repay some of the debts that are maturing in 2007.

The overall net debt increased by S$900 million to S$5.45 billion for year ended 2006. The increase in debt was mainly due to borrowings raised to fund the various acquisitions of interests in retail malls in China through its joint venture with Beijing Hualian Group and Shenzhen International Trust & Investment Co., Ltd and its 20% stake in Lai Fung Holdings Limited, a Hong Kong-listed company that has substantial landbank mainly in Shanghai and the Pearl River Delta. The higher debt was partially offset by higher cash reserves recorded by our subsidiary, The Ascott Group Limited, as a result of proceeds received from its divestment of The Ascott Mayfair, a serviced residence property in London.

The finance cost for the Group was S$328 million for financial year ended 2006. This was 19% higher compared to S$275 million in 2005. The higher finance cost was due to higher average cost of borrowings incurred for foreign currency loans taken up during the year.