LOOKING AHEAD Targets The Ascott Group aims to become a significant global serviced residence player within five years, with a portfolio of 15,000 units, compared to its current 6,000 units. In addition to its current dominance in the Asia Pacific, it anticipates a strong presence in Europe and North Asia, and a foothold in the US. By 2005, it targets a return on equity of 10% – 12% and a reduced debt-equity ratio of 0.6 from its current 0.9. Growth Strategies To achieve its goals, The Ascott Group will focus on growing its global network, developing global brands, improving capital productivity and building operational excellence. In expanding its global network, it will fund its growth through the divestment of its non-core assets, with asset value of over S$1.4 billion, in the next two to three years. To develop global brands, it will focus its efforts on transforming its two strongest brands into global icons and rationalise its products under these brands. To maximise its capital productivity, it will • | | Increase its management fee income by growing its stock of managed or leased properties to one-third of its total portfolio | • | | Invest through capital efficient structures such as property funds and partnering strategic investors | | • | | Minimise capital tied-up in projects under development by acquiring only operating or almost completed properties, and accelerating the gestation period for its properties to reach stabilised operations | | • | | Improve operating yields by increasing its non-room revenue | | • | | Improve capital turnover by realising capital gains through selective turnover of its serviced residence assets. | Operational Excellence To achieve operational excellence, The Ascott Group will improve cost management, develop innovative products and services, strengthen its marketing network and bench-mark its processes against the world's best companies. The Ascott Group will drive cost reductions through the right-sizing of its head office functions; by clustering its properties within each city to centralise its marketing and administrative functions; and through bulk procurement. To sustain its competitive edge, e-technology will be used to develop innovative products and strengthen its marketing network. It will also benchmark its processes against the world's best companies. Market Outlook The outlook for the global serviced residence industry is improving, with strong demand in Singapore, Kuala Lumpur, Shanghai and Beijing, and potential markets in China, Korea, Tokyo and Europe. At the same time, multinational companies are increasingly choosing serviced residences over hotels for their expatriate staff. Risks remain, however, with slower growth in the US and political instability in some of the countries it operates in. The Ascott Group is optimistic of improved performance in 2001, and targets revenue growth of 20% – 25% for its serviced residence business. It will see stronger contributions from its newer properties as they become more stabilised in their markets. These will translate into higher occupancy and rental rates for its operational serviced residence inventory. The Ascott Group will also benefit from the likely reduction of interest rates and cost savings from its economies of scale and synergy initiatives. | 
