CapitaLand Limited (Incorporated in the Republic of Singapore) Company Registration Number N

Transcription

1 CapitaLand Limited S$1,000,000, per cent. Convertible Bonds due 2022 Offering Circular dated 18 June 2007 CapitaLand Limited (Incorporated in the Republic of Singapore) Company Registration Number N S$1,000,000, per cent. Convertible Bonds due 2022 Issue price: 100 per cent. The S$1,000,000, per cent. Convertible Bonds due 2022 (the Bonds ) will be issued by CapitaLand Limited (the Issuer or CapitaLand ). Interest on the Bonds will be payable semi-annually in arrear on the interest payment dates falling on 20 June and 20 December of each year (each an Interest Payment Date ). The first interest payment will be made on 20 December The Bonds are convertible by holders into ordinary shares of the Issuer (the Shares ) at any time on or after 20 June 2008 and prior to the close of business (at the place the Bond is deposited for conversion) on 10 June 2022, unless previously redeemed, converted, or purchased and cancelled and except during a Closed Period (as defined herein). The conversion price (subject to adjustment in the manner provided herein) (the Conversion Price ) will initially be S$ per Share. The Shares are listed on the Singapore Exchange Securities Trading Limited (the SGX-ST ) and application has been made for the listing of the Shares to be issued on conversion of the Bonds on the SGX-ST. On 15 June 2007, the closing price of the Shares on the SGX-ST was S$8.10 per Share. See Terms and Conditions of the Bonds Conversion and Information Concerning the Shares. The Bonds may be redeemed, in whole or in part, at the option of the Issuer at any time on or after 20 June 2014 and not less than seven business days prior to 20 June 2022, subject to satisfaction of certain conditions, at the principal amount together with accrued but unpaid interest at the date fixed for such redemption if the closing price (as defined herein) of the Shares for each of 30 consecutive Trading Days (as defined herein), the last day of which occurs no more than 20 Trading Days prior to the notice of redemption, is at least 130 per cent. of the Conversion Price then in effect. The Bonds may also be redeemed in whole at any time at the option of the Issuer at their principal amount together with accrued interest (i) if the aggregate principal amount of the Bonds outstanding is less than 10 per cent. of the aggregate principal amount originally issued (including further issues) or (ii) in the event of certain changes in the laws and regulations relating to taxation in Singapore. Holders of the Bonds will have the right to require the Issuer to redeem the Bonds at their principal amount together with accrued interest (i) on each of 20 June 2017 and 20 June 2019 or (ii) in the event that the Shares cease to be listed or admitted to trading on the SGX-ST. Unless previously converted, redeemed or purchased and cancelled, the Bonds will be redeemed on 20 June 2022 at their principal amount. Approval in-principle has been received for the listing of the Bonds on the SGX-ST. The SGX-ST assumes no responsibility for the correctness of any of the statements made, reports contained or opinions expressed in this Offering Circular. Approval in-principle for the listing of the Bonds and the new Shares to be issued on conversion of the Bonds is not to be taken as an indication of the merits of the Bonds, the Shares, the Issuer or its subsidiaries. For a discussion of certain investment considerations relating to the Bonds, see Risk Factors. The Bonds will be represented by a single Global Certificate (as defined herein) in registered form, deposited with a common depository for, and registered in the name of a nominee of, Euroclear Bank S.A./N.V. ( Euroclear ) and Clearstream Banking, société anonyme ( Clearstream, Luxembourg ) on or about 20 June 2007, being the closing date (the Closing Date ), for the accounts of their respective accountholders. The Bonds and the Shares to be issued upon conversion of the Bonds have not been and will not be registered under the United States Securities Act of 1933, as amended (the Securities Act ) and, subject to certain exceptions, may not be offered or sold within the United States or to, or for the account or benefit of, US persons (as defined in Regulation S under the Securities Act ( Regulation S )). This Offering Circular has not been registered as a prospectus with the Monetary Authority of Singapore ( MAS ). Accordingly, this Offering Circular and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Bonds may not be circulated or distributed, nor may the Bonds be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the SFA ), (ii) to a relevant person, or any other person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provisions of the SFA. Sole Bookrunner and Lead Manager Offering Circular dated 18 June 2007

2 The Issuer accepts full responsibility for the information contained in this Offering Circular and, having made all reasonable enquiries, confirms that this Offering Circular contains all information with respect to the Issuer, its subsidiaries and associated companies (as defined in the SGX-ST Listing Manual) (together, the Group ), the Bonds and the Shares which is material in the context of the issue and offering of the Bonds. Where information contained in this Offering Circular includes extracts from summaries of information and data from various published and private sources, the Issuer accepts responsibility for accurately reproducing such summaries and data. This Offering Circular does not constitute an offer of, or an invitation by or on behalf of the Issuer or J.P. Morgan (S.E.A.) Limited (the Lead Manager ) to subscribe for or purchase any of, the Bonds or Shares and may not be used for the purpose of an offer to, or a solicitation by, anyone in any jurisdiction or in any circumstances in which such offer or solicitation is not authorised or is unlawful. The distribution of this Offering Circular and the offering of the Bonds in certain jurisdictions may be restricted by law. Persons into whose possession this Offering Circular comes are required by the Issuer and the Lead Manager to inform themselves about and to observe any such restrictions. For a description of certain further restrictions on offers and sales of the Bonds and distribution of this Offering Circular, see Subscription and Sale. The Lead Manager has not separately verified the information contained in this Offering Circular. Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the Lead Manager as to the accuracy or completeness of the information contained in this Offering Circular or any other information supplied in connection with the Bonds or the Shares. Each person receiving this Offering Circular acknowledges that such person has not relied on the Lead Manager or on any person affiliated with the Lead Manager in connection with its investigation of the accuracy of such information or its investment decision. This Offering Circular is not intended to provide the basis of any credit or other evaluation nor should it be considered as a recommendation by either the Issuer or the Lead Manager that any recipient of this Offering Circular should purchase the Bonds. Each potential purchaser of the Bonds should determine for himself the relevance of the information contained in this Offering Circular and his purchase of the Bonds should be based upon such independent investigations and consultations with his own tax, legal and business advisers as it deems necessary. No person is authorised to give any information or to make any representation not contained in this Offering Circular and any information or representation not so contained must not be relied upon as having been authorised by or on behalf of the Issuer or the Lead Manager. The delivery of this Offering Circular at any time does not imply that the information contained in it is correct as at any time subsequent to its date. In making an investment decision, investors must rely on their own examination of the Issuer and the terms of the Bonds, including the merits and risks involved. See Risk Factors for a discussion of certain factors to be considered in connection with an investment in the Bonds. i

3 In this Offering Circular, unless otherwise specified or the context otherwise requires, all references to Singapore are references to the Republic of Singapore and all references to the US and United States are references to the United States of America. All references to sqm herein are to square metres and all references to sf are to square feet. All references to the Government herein are references to the government of the Republic of Singapore. References herein to Singapore dollars and S$ are to the lawful currency of Singapore, references to JPY or Japanese Yen are to the lawful currency of Japan, references to RMB or Chinese Renminbi are to the lawful currency of the People s Republic of China and all references to US dollars or US$ are to the lawful currency of the United States of America. For convenience, unless otherwise specified, certain US dollar amounts have been translated into Singapore dollars based on the exchange rate of S$1.53 = US$1.00. Such transactions should not be construed as representations that the US dollar amounts referred to could have been, or could be, converted into Singapore dollars at that or any other rate or at all. Certain monetary amounts in this Offering Circular have been subject to rounding adjustments; accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them. Market data and certain industry forecasts used throughout this Offering Circular have been obtained from internal surveys, market research, publicly available information and industry publications. Industry publications generally state that the information that they contain has been obtained from sources believed to be reliable but that the accuracy and completeness of that information is not guaranteed. Similarly, internal surveys, industry forecasts and market research, while believed to be reliable, have not been independently verified, and neither the Issuer nor the Lead Manager makes any representation as to the accuracy of that information. In connection with the issue of the Bonds, J.P. Morgan (S.E.A.) Limited as the stabilising Lead Manager (the Stabilising Lead Manager ) or any person acting on its behalf may, to the extent permitted by applicable laws and rules, effect transactions with a view to support the market price of the Bonds at a level higher than that which might otherwise prevail. However, there is no assurance that the Stabilising Lead Manager (or any persons acting on its behalf) will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the Bonds is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date of the Bonds and 60 days after the date of the allotment of the Bonds. ii

4 FORWARD-LOOKING STATEMENTS Certain statements in this Offering Circular constitute forward-looking statements. Such forwardlooking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of CapitaLand or the Group, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding CapitaLand s and the Group s present and future business strategies and the environment in which CapitaLand or the Group will operate in the future. Among the important factors that could cause CapitaLand s or the Group s actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others, the condition of and changes in the local, regional or global economy that adversely affect the property market or result in a reduction of the requirement for hospitality services in Singapore and elsewhere, and competition in the real estate and serviced residence industries. Additional factors that could cause actual results, performance or achievements to differ materially include, but are not limited to, those discussed under Risk Factors and Business. These forward-looking statements speak only as of the date of this Offering Circular. Save for its obligations under the SGX-ST Listing Manual, CapitaLand expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in CapitaLand s or the Group s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. iii

5 TABLE OF CONTENTS Page Summary... 1 The Offering Summary Financial Information Use of Proceeds Information Concerning the Shares Capitalisation and Indebtedness Risk Factors Business Directors and Management Principal Shareholder Terms and Conditions of the Bonds Summary of Provisions Relating to the Bonds while in Global Form Clearance and Settlement Description of Shares Taxation Subscription and Sale General Information Index to the Financial Statements... FS-1 iv

6 SUMMARY This summary highlights information contained elsewhere in this Offering Circular. This summary may not contain all of the information that should be considered before deciding to invest in the Bonds. The Issuer recommends reading this entire Offering Circular carefully, including the financial statements and related notes appearing elsewhere in this Offering Circular and Risk Factors. Overview CapitaLand is one of the largest listed real estate companies in Asia, with total assets amounting to S$20.8 billion and market capitalisation of S$22.4 billion as at 31 March Headquartered in Singapore, CapitaLand is a multinational company with core businesses in real estate, hospitality and real estate financial services which are focused in gateway cities in the Asia Pacific region, Europe and the Middle East. CapitaLand s real estate and hospitality portfolio spans more than 90 cities in over 20 countries. CapitaLand also leverages on its significant real estate asset base and market knowledge to develop real estate financial products and services in Singapore and the region. For the three months ended 31 March 2007, CapitaLand had total revenues of S$637 million and recorded a net profit of S$608 million. The Group s total assets as at 31 March 2007 amounted to S$20.8 billion. The listed subsidiaries and associates of CapitaLand in Singapore are The Ascott Group Limited ( Ascott ), CapitaMall Trust ( CMT ), CapitaCommercial Trust ( CCT ), Ascott Residence Trust ( ART ), CapitaRetail China Trust ( CRCT ), and, in Australia, Australand. CapitaLand also jointly manages the Quill Capita Trust ( QCT ) in Malaysia. As at 31 May 2007, Temasek Holdings (Private) Limited ( Temasek ) and the companies under the Temasek group owned approximately 42.7 per cent. of CapitaLand. Temasek is wholly owned by the Minister for Finance (Incorporated). The Group, through its Group Corporate Office, determines overall strategic direction, provides professional and functional leadership and determines corporate governance and corporate social responsibility standards for the Group. CapitaLand also plays the leading role in developing the Group s human resources, identifying major merger and acquisition opportunities, developing new businesses, allocating capital and establishing guidelines with respect to corporate governance and risk management within the Group. The Group operates in the residential, retail, commercial, integrated leisure, entertainment & convention, hospitality and real estate financial services sectors through the following strategic business units: Residential: CapitaLand Residential Limited ( CRL ) develops residential properties for sale. CRL s key markets are in Singapore, Australia, China, Thailand and Malaysia. CRL covers a wide spectrum of the residential market in Singapore with sites catering to a broad spectrum of homebuyers in the super-luxury, high-end and mid-end segments of the market. CRL s business in Australia is carried out through its subsidiary, Australand, which is a stapled group listed on both the Singapore and Australia stock exchanges. In China, CRL has established a strong presence in China s Bohai Economic Rim, Yangtze River Delta and Pearl River Delta regions. In 2006, CRL expanded its operations to cover the central and western regions of China. In Thailand, CRL established a joint venture company with TCC Land Co., Limited ( TCC Land ) to invest, develop and manage properties in the residential, office and retail sectors. The joint venture has launched several high-end residential projects in Bangkok. In addition, CRL has a presence in Malaysia through its listed associated company, United Malayan Land Bhd ( UML ), an established developer of integrated townships and boutique developments in key cities. 1

7 As a platform for its next phase of growth, CRL has entered into new markets in Asia, namely India and Vietnam. In India, CRL is developing its first residential project with 590 apartments in Mumbai with its partner, the Mumbai-based Runwal Group. In Vietnam, CRL has launched the first phase of The Vista Condominium at An Phu Ward, Ho Chi Minh City. The first 273 units released in the 750-unit development were fully booked. In a separate joint venture, CRL will also develop a second condominium comprising about 600 homes in Ho Chi Minh City. Retail: CapitaLand Retail Limited ( CRTL ) has a portfolio of over 50 retail malls in Singapore, China, Japan and Malaysia, making CRTL a leading owner and manager of retail malls in Asia. In Singapore, CRTL manages CMT, the largest listed Real Estate Investment Trust ( REIT ) in Singapore by market capitalisation and asset size. CRTL owned 31.1 per cent. of CMT as at 31 March CRTL also holds a 50 per cent. stake in the Orchard Turn development, a retail-cum-residential project on Singapore s main shopping street, Orchard Road. In China, CRTL has 33 retail malls (some currently under construction) in over 25 cities, of which seven retail malls are held by CRCT. CRCT was listed on the SGX-ST in December In Japan, CRTL manages a portfolio of five retail malls held through its associated company, CapitaRetail Japan Fund Private Limited ( CRJF ). As part of CRTL s overall strategy for the retail mall business, CRTL is also building a presence in India and has plans to grow its retail mall portfolio in India significantly in the next three to five years. Commercial: CapitaLand Commercial Limited ( CCL ) (formerly known as CapitaLand Commercial and Integrated Development Limited) develops, owns and manages an extensive portfolio of offices and mixed use properties both in Singapore and overseas. CCL is one of Singapore s largest owners and managers of office properties. Its portfolio of commercial properties ranges from landmark office buildings in the Central Business District ( CBD ) to car parks and high technology industrial complexes. CCL owns these buildings directly, through joint ventures, private equity funds and its stake in CCT. Overseas, CCL focuses on high growth commercial and integrated property business with approximately five million square feet of gross floor area. It has commercial property investments in Shanghai, Beijing, Hong Kong, London, Bahrain and Kuala Lumpur. In China, CCL s office developments are located in the CBD. Its key overseas assets include Capital Tower Beijing, Raffles City Shanghai and in Hong Kong, the AIG Tower. As at 31 March 2007, CCL beneficially owned 30.4 per cent. of CCT, Singapore s first commercial REIT which owns and invests in real estate and real estate related assets in Singapore and abroad, which are income-producing and used, or predominantly used, for commercial purposes. Integrated Leisure, Entertainment & Convention: CapitaLand ILEC Pte. Ltd. ( ILEC ) is a recently formed business unit to develop integrated developments incorporating leisure, entertainment and conventions as its key themes. ILEC will utilise the Group s real estate competencies, partner relationships and intellectual capital to construct integrated resorts with exceptional design and development concepts. ILEC s maiden project is an integrated development, Macao Studio City ( MSC ), located in Cotai, Macau. ILEC has a 20 per cent. strategic stake in MSC which, when completed, will be Asia s first leisure resort property combining theatre, television and film production facilities, and retail, with gaming, entertainment and world-class hotels. Phase 1 of the MSC development is targeted for completion in

8 Serviced Residences: Ascott is the serviced residence arm of CapitaLand and is a listed company on the SGX-ST. With about 19,000 serviced residence units under management in key cities of the Asia Pacific region, Europe and the Gulf region, Ascott is the largest international serviced residence owner-operator outside the US. As at 31 March 2007, CapitaLand owned 66.8 per cent. of Ascott. In 2006, Ascott established ART, the first Pan-Asian serviced residence REIT, which is a vehicle to acquire and hold stable-yielding serviced residence properties in the Pan-Asian region. Ascott will continue to focus on strengthening its global brand, growing fee-based income and incubating new serviced residences and rental apartment properties. As at 31 March 2007, CapitaLand beneficially owned 37.3 per cent. of ART. Financial Services: CapitaLand Financial Limited ( CFL ) was formed in 2001 to develop fund management and financial advisory services. The financial advisory services include mezzanine financing, credit enhancement advisory and structuring services. The thrust of CFL s business is to combine financial skills and real estate domain knowledge to generate financial products and services. CFL s assets under management totalled S$13.3 billion as at 31 March

9 THE GROUP S BUSINESS STRUCTURE AS AT 31 MARCH 2007 CapitaLand Limited * Real Estate Hospitality Financial Services Residential Retail Commercial Integrated Leisure, Entertainment & Convention Serviced Residences Financial 100% 100% 100% 100% 66.8% 100% CapitaLand Residential Limited CapitaLand Retail Limited CapitaLand Commercial Limited CapitaLand ILEC Pte. Ltd. The Ascott Group Limited * CapitaLand Financial Limited % 31.1% 30.4% 27.7% Australand * CapitaMall Trust * CapitaCommercial Trust * Ascott Residence Trust * 18.8% 20.0% 20.0% CapitaRetail China Trust * CapitaLand Group comprises 7 listed Entities with total Market Capitalisation of more than S$33.0 billion^ * Listed Entities ^ as at 31 March 2007, net of common holdings

10 History The Group was formed in November 2000 following a merger between DBS Land Limited ( DBS Land ) and Pidemco Land Limited ( Pidemco ) (which were incorporated on 31 July 1978 and 5 January 1989, respectively). On 17 April 2000, ST Property Investments Pte Ltd ( STPI ), a shareholder of Pidemco and a company within the Singapore Technologies Group of Companies ( ST Group ), acquired 24.6 per cent. of DBS Land, then a company listed on the SGX-ST. This acquisition resulted in STPI becoming a shareholder of both DBS Land and Pidemco. DBS Land and Pidemco were engaged in similar areas of the property business. Consequently, the management of Pidemco and DBS Land conducted a strategic review of their businesses and concluded that shareholder value would be maximised by merging the two companies. On 12 July 2000, Pidemco and DBS Land announced that they had signed a merger agreement to create CapitaLand, one of the largest listed real estate companies in Asia. The merger was legally completed in November 2000, resulting in the formation of the Group. Strategy The Group s strategy is underpinned by the three principles of focus, balance and scale. Firstly, the Group focuses on its core competencies along the real estate value chain. All the Group s businesses must be anchored by its real estate competencies. Secondly, the Group wants to achieve balance in its business portfolio to ensure sustainable long term growth. To this end, the Group balances its income between trading and investment, and has a diversified multi-sector and multi-geography portfolio. Thirdly, the Group wants to exploit scale, both in terms of having a critical mass for operational efficiency and capital management and in taking advantage of the collective strengths of the Group. The key drivers of the Group s strategy are as follows: Increase capital productivity through active asset management To improve capital efficiency, the priority of the Group in the first five years since the merger has been to lighten its balance sheet and thereby reduce its debt. The Group succeeded in divesting S$12.1 billion worth of assets from 2000 to first quarter Assets monetised include both non-core assets and stable assets that were divested into the Group s property funds and REITs. The Group s subsidiary, Raffles Holdings Limited ( RHL ), divested its hotel business and its interest in Raffles City Singapore in 2005 and 2006, respectively. RHL was delisted from the official list of the SGX-ST on 13 December The divestment of the hotel business gave the Group greater strategic focus while unlocking significant value for shareholders. The Group has been actively re-deploying its capital into higher yielding investments in both Singapore and overseas. Notwithstanding the Group s expansion in the region, the net gearing ratio of the Group improved from 0.92 as at 31 December 2000 to 0.50 as at 31 March The Group plans to continue to keep direct ownership of investment properties low by placing stable properties into funds or REITs that have been or will be set up with external participation. Going forward, new acquisitions of investment properties will be done through property funds or REITs, or directly by CapitaLand with a view to placing them into such vehicles eventually. This strategy to co-invest with financial partners while retaining management of the assets supports the Group s other driver which is to develop fund and asset management services as described below. The second part of the Group s strategy to increase asset productivity is to increase asset turnover. The Group has increased its residential trading business and has taken on a more active buy-and-sell 5

11 strategy for commercial properties. This strategy includes buying third-party properties, enhancing their values and selling them to CapitaLand s managed funds for capital gains. The third part of the Group s effort to increase asset productivity is intensive management, enhancement and redevelopment of the Group s commercial assets. Properties in Singapore that have been redeveloped or upgraded include One George Street (formerly known as Pidemco Centre), Plaza Singapura and Clarke Quay. The Group also seeks to enhance yields through improved positioning, better tenant mix and converting spaces into more productive use. Grow fee-based businesses While real estate development remains one of the core competencies and continues to underpin the Group s real estate businesses, there is scope for the Group to develop fee-based management services as another growth platform. These services include retail asset management, property fund management, real estate based financial services and hospitality management. These services make use of the Group s real estate knowledge, market networks and brands. CapitaLand has seen significant growth in its retail management business over the last five years. The Group plans to expand its retail mall platform aggressively across Asia directly and also through its REITs and funds in Singapore, China, Japan and India in particular. The Group s fund management business has also grown significantly in the last six years. It currently has under its management 11 private equity funds and five listed REITs with retail, residential and office properties spanning key gateway cities in Asia including Singapore, Kuala Lumpur, Beijing, Shanghai and Tokyo. The Group s assets under management have grown to S$14.5 billion as at 31 March The Group aims to achieve total assets under management of S$18 billion by end It will grow its existing REITs and private equity funds through proactive asset enhancement and competitive third party acquisitions, while originating new ones in new markets and real estate sectors to meet investor demand. The Group s serviced residence arm, Ascott, has adopted a management versus ownership focus in its growth strategy. In early 2006, Ascott listed ART, the world s first Pan-Asian serviced residence REIT, which serves as its vehicle to acquire and hold serviced residence properties. Ascott will focus on strengthening its global brand, growing fee-based income, incubating new serviced residence and rental apartment properties. Expand overseas CapitaLand s objectives of expanding overseas are designed to take advantage of the opportunities in Asia s fast growing real estate markets, and to reduce its reliance on the Singapore market. CapitaLand plans to have 75 per cent. of the Group s earnings derived from outside Singapore. To this end, the Group has increased its assets held outside Singapore. Assets located outside Singapore have grown from 25 per cent. of the total assets in 2000 to 54 per cent. of the total assets as at 31 March CapitaLand will focus its overseas growth efforts on China, Thailand, Vietnam and India, some of Asia s fastest growing markets, while maintaining a strong presence in mature markets like Singapore and Australia. While the focus of its real estate businesses is on Asia and Australia where it has the market knowledge, networks and reputation, the Group s serviced residence business has a broader geographical coverage that extends to Europe. CapitaLand plans to launch more property funds and REITs in tandem with its overseas expansion. These funds will enable the Group to access international capital to fund expansion and allow the Group to share risks with co-investors. The Group adopts a multi-local approach in its overseas operations. Each of the Group s overseas operations is expected to operate like a local business. The Group places strong emphasis on building up a local management team, developing in-depth knowledge of the local market, having strong local 6

12 partners and establishing relationships with local players and authorities. This multi-local approach has helped the Group to successfully establish strong footholds in a number of Asian markets. Competitive Strengths CapitaLand is focused on creating shareholder value across the entire real estate value chain. It has comprehensive competencies and a strong track record as a real estate developer, investor, operator, and manager and across multiple real estate sectors including residential, retail, commercial, integrated leisure, entertainment & convention, hospitality and real estate financial services. Its other major competitive strength is its successful multi-local strategy, focused largely in the Asia Pacific region, including countries such as Singapore, Australia, China, Vietnam, India, Japan, Thailand and Malaysia. CapitaLand s other major thrust has been to embrace and extend the real estate capital market trends unfolding across Asia, including the use of securitisation structures, rated commercial mortgagebacked securities and residential sales receivables-backed securities issuances, launch of private equity funds, creation of REITs and others. This has enabled it to transform its business model into one that is very capital efficient and able to access the lowest cost of capital available either domestically or globally, and generate substantially higher liquidity and financial flexibility than a traditional real estate developer by recycling capital quickly once assets are completed and stabilised. A further competitive advantage is that CapitaLand is the first real estate developer in Asia to create a dedicated real estate financial services division focusing on providing real estate financial services and solutions, including private equity, public market fund and asset management, credit enhancement structures and mezzanine investment structures. This division has been focused on achieving the Group s strategy to increase its asset productivity and grow fee-based income, with the primary driving metric being assets under management. As a result of the significant expansion and diversification over the last few years, the Group has been able to achieve a balanced portfolio across selected countries in Asia, and also diversified its income stream to include development profits, investment income, trading gains and fee based income, including asset management fees and other structuring fees and across multiple real estate sectors. With its strong balance sheet, the Group has been able to achieve significant expansion through various strategic joint ventures and minority acquisitions. It has also been able to move quickly to acquire and warehouse real estate assets with attractive potential for enhancement and eventual profitable capital recycling. The Group believes that active capital management adds significant value to a capital intensive business such as real estate. Since 2001, the Group has progressively divested non-core assets to free up capital and achieve higher returns on assets. In 2005, the Group completed two major strategic divestments. These were the divestment of non-strategic businesses, PREMAS International Limited ( PREMAS ) and the hotel business owned by RHL, which was subsequently delisted from the official list of the SGX-ST on 13 December 2006, and unlocking significant value for shareholders. 7

13 THE OFFERING The following is a general summary of the offering of the Bonds. This summary is partly derived from and should be read in conjunction with the full text of the terms and conditions of the Bonds ( Terms and Conditions ), the Trust Deed and the Agency Agreement relating to the Bonds. The Terms and Conditions, the Trust Deed and the Agency Agreement will prevail to the extent of any inconsistency with the terms set out in this summary. Issuer... CapitaLand Limited. Issue... S$1,000,000, per cent. Convertible Bonds due Issue Price... The Bonds will be issued at 100 per cent. of their principal amount. Issue Date June MaturityDate... 20June Rate of Interest... Interest Payment Dates... Status of the Bonds... Negative Pledge... The Bonds will bear interest at the rate of 2.95 per cent. per annum. Interest will be payable semi-annually in arrear on 20 June and 20 December in each year commencing 20 December TheBonds will constitute direct, unsubordinated, unconditional and (subject to the negative pledge discussed below) unsecured obligations of the Issuer and will at all times rank pari passu and without any preference or priority among themselves. The payment obligations of the Issuer under the Bonds shall, save for such exception as may be provided by mandatory provisions of applicable law and subject to the negative pledge discussed below, at all times rank at least equally with all of its other present and future direct, unsubordinated, unconditional and unsecured obligations. So long as any Bond remains outstanding, the Issuer will not create or permit to subsist any mortgage, charge, pledge, lien or other form of encumbrance or security interest ( Security ) upon the whole or any part of its undertaking, assets or revenues, present or future, to secure any International Investment Securities (as defined in Terms and Conditions of the Bonds ) issued by the Issuer or to secure any guarantee or indemnity provided by the Issuer of, or in respect of, any International Investment Securities unless, at the same time or prior thereto, the Issuer s obligations under the Bonds and the Trust Deed (a) are secured equally and rateably therewith to the satisfaction of the Trustee or (b) have the benefit of such other security, guarantee, indemnity or other arrangement as the Trustee in its absolute discretion shall deem to be not materially less beneficial to the Bondholders or as shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Bondholders. For the avoidance of doubt, the restriction in this paragraph does not apply to any Security created by any Subsidiary of the Issuer and certain other instances described in the Terms and Conditions. 8

14 Conversion Right... TheBonds are convertible by holders into Shares at any time on and after 20 June 2008 and up to the close of business (at the place the Bond is deposited for conversion) on 10 June 2022, unless previously redeemed, converted, or purchased and cancelled and except during a Closed Period. The Conversion Price (subject to adjustment in the manner provided herein) will initially be S$ per Share. Final Redemption.... Unless previously redeemed, converted or purchased and cancelled in the circumstances referred to in Terms and Conditions of the Bonds, the Issuer will redeem each Bond at 100 per cent. of its principal amount on the Maturity Date. Redemption at the Option of the Issuer... On or at any time after 20 June 2014 but not less than seven business days prior to the Maturity Date, the Issuer may redeem the Bonds in whole or in part at their principal amount together with accrued interest at the date fixed for such redemption if the closing price of the Shares for each of 30 consecutive Trading Days, the last day of which period occurs no more than 20 Trading Days prior to the date upon which notice of such redemption is given in accordance with the Terms and Conditions of the Bonds Redemption, Purchase and Cancellation Redemption at the Option of the Issuer, was at least 130 per cent. of the Conversion Price in effect on such Trading Day. The Issuer may redeem the Bonds in whole but not in part at their principal amount together with accrued interest at any time if the aggregate principal amount of the Bonds outstanding is less than 10 per cent. of the aggregate principal amount originally issued. See Terms and Conditions of the Bonds Redemption, Purchase and Cancellation Redemption at the Option of the Issuer. Redemption for Taxation Reasons... Early Redemption at the Option of the Bondholders... In the event of certain changes affecting taxes of Singapore, the Issuer may, subject to certain conditions being satisfied, give notice to redeem the Bonds in whole but not in part at their principal amount, together with interest accrued to the date fixed for redemption. See Terms and Conditions of the Bonds Redemption, Purchase and Cancellation Redemption for Taxation Reasons. On each of 20 June 2017 and 20 June 2019, the holder of each Bond will have the right, at such Bondholder s option, to require the Issuer to redeem all or some of the Bonds at their principal amount plus accrued interest. See Terms and Conditions of the Bonds Redemption, Purchase and Cancellation Early Redemption at the Option of the Bondholders. 9

15 DelistingPutRight... Form and Denomination of the Bonds... Further Issues... Clearance... Global Certificates... Cross Default.... ABondholder shall have the right, at such Bondholder s option, to require the Issuer to redeem in whole but not in part such Bondholder s Bonds at their principal amount together with accrued interest upon the Shares ceasing to be listed or admitted to trading on the SGX-ST or, if applicable, the Alternative Stock Exchange. See Terms and Conditions of the Bonds Redemption, Purchase and Cancellation Delisting Put Right. The Bonds will be issued in registered form in denominations of S$250,000 each or integral multiples thereof. The Bonds will be represented by the Global Certificate which will be deposited on or about the Issue Date with a common depository on behalf of Euroclear and Clearstream, Luxembourg (together, the Clearing Systems ) and registered in the name of the common depository. The Global Certificate will be exchangeable for definitive Certificates only in the limited circumstances described in Summary of Provisions Relating to the Bonds While in Global Form. The Issuer may, from time to time, without the consent of Bondholders, create and issue additional Bonds having the same terms and conditions as the Bonds in all respects (save for the date of issue) so that such additional Bonds shall be consolidated and form a single series with the Bonds. TheBonds will be cleared through the Clearing Systems. Each of the Clearing Systems holds securities for their customers and facilitates the clearance and settlement of securities transactions by electronic book-entry transfer between their respective accountholders. For as long as the Bonds are represented by the Global Certificate and the Global Certificate is held by a nominee for the Clearing Systems, payments of principal and interest in respect of the Bonds represented by the Global Certificate will be made against presentation for endorsement and, if no further payment falls to be made in respect of the Bonds, surrender of the Global Certificate to or to the order of the Principal Paying Agent for such purpose. The Bonds which are represented by the Global Certificate will be transferable only in accordance with the rules and procedures for the time being of the relevant Clearing System. TheBonds may be accelerated in the event of, inter alia, a default relating to the Issuer or any of its Principal Subsidiaries in respect of indebtedness which equals or exceeds S$100 million or its equivalent in aggregate. For a description of certain other events that will permit acceleration of repayment of principal and accrued interest of the Bonds, see Terms and Conditions of the Bonds Events of Default. 10

16 Taxation... Selling Restrictions... Listing and Trading of the Bonds. Trustee... Principal Paying, Conversion and Transfer Agent... Registrar... Governing Law... Lock-up... Use of Proceeds... Allpayments of principal and interest made by the Issuer will be made free from any restriction or condition and be made without deduction or withholding for or on account of any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of Singapore or any authority thereof or therein having power to tax, unless deduction or withholding of such taxes, duties, assessments or governmental charges is compelled by law. In such event, the Issuer will pay such additional amounts as will result in the receipt by the Bondholders of the net amounts after such deduction or withholding equal to the amounts which would otherwise have been receivable by them had no deduction or withholding been required, except in the circumstances specified in Terms and Conditions of the Bonds Taxation. There are restrictions on the offer, sale and transfer of the Bonds in, among others, Hong Kong, Singapore, Japan, the United Kingdom and the United States. For a description of the selling restrictions on offers, sales and deliveries of the Bonds, see Subscription and Sale. Approval in-principle has been obtained for the listing of the Bonds on the SGX-ST. The Bonds will be traded on the SGX-ST in a minimum board lot size of S$250,000 for so long as the Bonds are listed on the SGX-ST. The Bank of New York, London Branch. The Bank of New York, London Branch. TheBank of New York, New York. The Bonds will be governed by, and construed in accordance with, the laws of England. TheIssuer has agreed in the Subscription Agreement to a lock-up in relation to the Bonds and Shares for a period of 90 days after the Closing Date. See Subscription and Sale. Thenetproceeds from the issue of the Bonds (after the deduction of fees, commissions and expenses) are expected to be approximately S$986 million and will be used by the Issuer to refinance existing indebtedness of the Issuer, finance new investments and for general working capital purposes of the Group. See Use of Proceeds. 11

17 SUMMARY FINANCIAL INFORMATION The following tables set forth selected (i) audited consolidated financial information for the Group as at and for the years ended 31 December 2004 (restated), 2005 and 2006, and (ii) unaudited consolidated income statements of the Group for the three months ended 31 March 2006 (restated) and 2007, and the unaudited consolidated balance sheets of the Group as at 31 December 2006 (restated) and 31 March This selected financial information should be read in conjunction with the Group s audited consolidated financial statements for the years ended 31 December 2004 (restated), 2005 and 2006, and the unaudited 2007 first quarter financial statements announcement which are included elsewhere in this Offering Circular. The consolidated financial statements of the Group have been prepared in accordance with Financial Reporting Standards ( FRS ). The Group adopted certain new or revised FRS and interpretations of FRS that are applicable to the Group in 2005 and Consequently, the financial statements for the year ended 31 December 2005 and first quarter 2007 have been prepared in accordance with the relevant transitional provisions in these new or revised FRS and their related interpretations and where applicable, the comparative financial statements have been restated to conform with the presentations of the respective periods concerned. For a more detailed description of the effects of adoption of the applicable new or revised FRS and their related interpretations in the specific periods concerned, see Note 39 Changes in accounting policies to the audited consolidated financial statements of the Group for the year ended 31 December 2005 and section 4 of the 2007 first quarter financial statements announcement included elsewhere in this Offering Circular. 12

18 Consolidated Income Statement Data Year ended 31 December audited (in S) (restated) Continuing operations Revenue... 3,179,064 3,845,637 3,147,725 Costofsales... (2,319,895) (3,036,173) (2,234,385) Grossprofit , , ,340 Other operating income , , ,795 Administrative expenses... (291,886) (390,295) (342,021) Other operating expenses... (207,888) (43,632) 90,333 Profit from continuing operations , ,192 1,220,447 Finance costs... (263,612) (274,581) (327,995) Share of results of: associates , , ,445 jointly-controlledentities... 47,773 14, ,152 partnership... 4,541 (114) 125, , ,597 Profit before taxation from continuing operations , ,695 1,494,049 Taxation... (109,174) (152,020) (230,354) Profit after taxation from continuing operations.. 439, ,675 1,263,695 Discontinued operations Profit after taxation from discontinued operations. 26, ,963 26,894 Profit after taxation 465,707 1,175,638 1,290,589 Minorityinterests... (160,026) (425,128) (272,604) Net profit attributable to Equity Holders of the Issuer , ,510 1,017,985 13

19 Consolidated Income Statement Data 3 months ended 31 March unaudited (in S) (restated) Revenue , ,016 Costofsales... (505,230) (420,893) Grossprofit , ,123 Other operating income , ,778 Administrative expenses... (91,183) (95,990) Other operating expenses... (696) (3,124) Profit from operations , ,787 Finance costs... (70,073) (91,103) Share of results of: associates ,763 26,479 jointly-controlledentities... 11,571 24,199 40,334 50,678 Profit before taxation , ,362 Taxation... (11,484) (37,624) Profit after taxation , ,738 Minorityinterests... (12,528) (82,605) Net profit attributable to Equity Holders of the Issuer , ,133 14

20 Consolidated Balance Sheet Data As at 31 December audited (in S) (restated) Non-Current Assets.... 9,924,799 11,038,312 12,314,199 Current Assets... 7,311,004 7,144,741 8,332,860 Less: Current Liabilities... 4,567,859 4,630,695 3,976,188 Net Current Assets... 2,743,145 2,514,046 4,356,672 Less: Non-Current Liabilities... 5,253,652 4,523,990 7,158,121 Net Assets.... 7,414,292 9,028,368 9,512,750 Representing: Share capital... 2,524,795 2,750,503 4,304,907 Reserves... 2,831,030 3,907,207 3,095,239 Equity attributable to Equity Holders of the Issuer.... 5,355,825 6,657,710 7,400,146 MinorityInterests... 2,058,467 2,370,658 2,112,604 Total Equity... 7,414,292 9,028,368 9,512,750 Consolidated Balance Sheet Data As at 31 December 2006 (restated) As at 31 March 2007 unaudited (in S) Non-Current Assets ,265,898 12,340,348 Current Assets... 8,332,860 8,498,100 Less: Current Liabilities... 3,976,188 4,230,534 Net Current Assets... 4,356,672 4,267,566 Less: Non-Current Liabilities... 7,158,121 6,693,299 Net Assets.... 9,464,449 9,914,615 Representing: Share capital... 4,304,907 4,330,056 Reserves... 3,063,392 3,687,380 Equity attributable to Equity Holders of the Issuer.... 7,368,299 8,017,436 MinorityInterests... 2,096,150 1,897,179 Total Equity... 9,464,449 9,914,615 15

21 Financial Ratios As at or for the year ended 31 December audited (restated) Earnings per share (cents) Continuing operations Discontinued operations Gross dividend (1) Ordinary dividend (cents per share) Special dividend (cents per share) Net dividend cover (times) (2) Net tangible assets per share (S$) (3) Debt equity ratio (net of cash) (4) Interest cover (times) (5) Financial Ratios As at or for the period ended 31 March unaudited (restated) Earnings per share (cents) Net tangible assets per share (S$) (3) Debt equity ratio (net of cash) (4) Interest cover (times) (5) (1) The gross dividend rate is calculated by dividing the total gross dividend amount by the total number of issued and paid-up shares. (2) Net dividend cover is calculated by dividing the net profit attributable to equity holders of the Issuer by net dividend payable. (3) Net tangible assets per share is calculated by dividing total net tangible assets by the total number of issued and paid-up shares. (4) Debt equity ratio is calculated by dividing net borrowings by total equity, where net borrowings means the aggregate amount of interest-bearing borrowings, net of cash and cash equivalents, and total equity means the aggregate of the issued and paid-up share capital, reserves and minority interests. (5) Interest cover is calculated using the following formula: Profit before tax + finance costs interest income + depreciation/amortisation Finance costs interest income 16

22 USE OF PROCEEDS The net proceeds from the issue of the Bonds (after the deduction of fees, commissions and expenses) are expected to be approximately S$986 million, which will be used by the Issuer to refinance existing indebtedness of the Issuer, finance new investments and for general working capital purposes of the Group. 17

23 INFORMATION CONCERNING THE SHARES Market Price of the Shares The Shares have been listed on the SGX-ST since November The table below sets forth, for the periods indicated, the high and low prices and the average daily trading volume of the Shares on the SGX-ST and the highs and lows of the Straits Times Index. Price per Share on the SGX-ST Average Daily Trading Volume of Shares Straits Times Index (1) Low (2) High (2) (No. of Shares) Low (2) High (2) 2004 (in S$) FirstQuarter ,983,918 1, , SecondQuarter ,832,651 1, , ThirdQuarter ,440,923 1, , Fourth Quarter ,569,500 1, , FirstQuarter ,470,033 2, , SecondQuarter ,161,429 2, , ThirdQuarter ,186,422 2, , Fourth Quarter ,075,823 2, , FirstQuarter ,604,317 2, , SecondQuarter ,196,065 2, , ThirdQuarter ,566,625 2, , Fourth Quarter ,511,000 2, , FirstQuarter ,467,333 2, , April ,641,500 3, , May ,384,000 3, , June (3) ,824,333 3, , (1) Source: Bloomberg. (2) Based on last closing price. (3) Through to 13 June

24 Dividend Policy The Issuer has distributed cash dividends on its Shares in respect of each of the last two financial years ended 31 December. The following table sets forth the aggregate number of outstanding Shares entitled to dividends, as well as the cash dividends paid on the Shares during each of the financial years indicated. Year Payment Date Ordinary Shares (in issue) Dividend Rate (cents per share) Tax Rate (%) Net Dividend Paid (1) May2001 2,517,349, ,011, May2002 2,517,349, ,905, May2003 2,517,349, ,176, April2004 2,519,197, ,614, May2005 2,635,956, ,525,914 (2) May2006 2,771,449, ,088,787 (3) May2007 2,802,367, ,065,449 (4) (1) Represents the net amount of dividends paid by the Issuer (that is, the cash amount of the dividend received by the shareholders). See Taxation Shares. (2) Comprised first and final dividend of 5 cents per share and special dividend of 1 cent per share, less 20.0 per cent. income tax, for the financial year ended 31 December (3) Comprised first and final dividend of 6 cents per share and special dividend of 12 cents per share, less 20.0 per cent. income tax, for the financial year ended 31 December (4) Comprised first and final dividend of 7 cents per share (comprised 3.81 cents per share franked dividends, less 18.0 per cent. income tax and 3.19 cents per share one tier dividends) and special one tier dividend of 5 cents per share, for the financial year ended 31 December The form, frequency and amount of future dividends on the Shares will depend upon the Issuer s earnings, cash flows, financial condition and other factors and shall be at the discretion of the Board of Directors of the Issuer (the Directors ). No larger dividend shall be declared by the Issuer than is recommended by the Directors. The Directors may pay an interim dividend. No dividend may be paid except out of the profits of the Issuer. See Description of Shares Dividends. For information relating to taxes payable on dividends, see Taxation Shares. Capital Reduction and Distribution In Specie In 2004, the Issuer undertook a capital reduction via a distribution in specie of units in CCT to its shareholders. Share premium amounting to S$886 million was utilised to effect the capital reduction. This is equivalent to a distribution of 36 cents per Share. 19

25 Changes in Issued Shares The table below sets forth changes in the issued Shares in the capital of the Issuer from 31 December 2003 to 31 May 2007: Date Ordinary Shares (in issue) As at 31 December ,517,349,898 As at 31 December ,524,795,481 As at 31 December ,750,502,800 As at 31 December ,779,346,107 As at 31 May ,802,791,421 Share Schemes CapitaLand has three share schemes for its directors and executives, namely the CapitaLand Share Option Plan, the CapitaLand Performance Share Plan and the CapitaLand Restricted Stock Plan. Shares under CapitaLand Share Option Plan As at 31 May 2007, the number of outstanding share options under the CapitaLand Share Option Plan was 35,413,470. Shares under CapitaLand Performance Share Plan As at 31 May 2007, the number of outstanding performance shares under the CapitaLand Performance Share Plan was 9,136,347. The final number of performance shares given will depend on the achievement of pre-determined targets over a three-year performance period. No shares will be released if the threshold targets are not met at the end of the performance period. On the other hand, if superior targets are met, more performance shares than the baseline award could be delivered up to a maximum of 200 per cent. of the baseline award. Shares under CapitaLand Restricted Stock Plan With effect from 2007, CapitaLand has ceased granting share options under the CapitaLand Share Option Plan and has granted awards of shares under the CapitaLand Restricted Stock Plan in place of stock options. This change is part of the Company s efforts to further align the employees performance with the long term shareholders value creation objectives. Under the CapitaLand Restricted Stock Plan, the awards granted are conditional on performance targets set at the start of each performance qualifying period which is currently set at one year. A minimum threshold performance must be achieved before any shares can be awarded and the awards are to be released over a vesting period. The restricted stock awards could be equity or cash settled at the end of each vesting period. Awards to directors and managerial staff are equity settled while awards to non-managerial staff are cash settled. As at 31 May 2007, the number of shares awarded and outstanding under the CapitaLand Restricted Stock Plan was 4,751,572, of which 659,774 are to be cash settled. The final number of shares to be released will depend on the achievement of threshold performance level at the end of one-year performance period and the release shall be over a vesting period of two to three years. No shares will be released if the threshold targets are not met at the end of the one-year performance period. On the other hand, if superior targets are met, more shares than the baseline award could be released up to a maximum of 150 per cent. of the baseline award. 20

26 CAPITALISATION AND INDEBTEDNESS The table below sets forth the Group s capitalisation and indebtedness as at 31 December 2006 and as adjusted to account for the issue of the Bonds, after deducting the commissions and estimated offering expenses payable by the Issuer. This table should be read in conjunction with the consolidated financial statements and related notes appearing elsewhere in this Offering Circular. As at 31 December 2006 (in S) Audited As adjusted Short-Term Borrowings (repayable within 1 year) Short-term bank borrowings and current portion of finance leases... 1,526, ,554 (1) Current portion of debt securities , ,230 Total short-term borrowings.... 1,796, ,784 Long-Term Borrowings (repayable after 1 year) Bankborrowings... 3,919,357 3,919,357 Debt securities... 2,368,802 2,368,802 Finance leases ,685 44,685 The Bonds now being offered ,000 (2) Total long-term borrowings... 6,332,844 7,240,844 Total Borrowings... 8,129,828 8,051,628 Total Equity Issued and fully paid capital 2,779,346,107 shares.... 4,304,907 4,304,907 Reserves... 3,095,239 3,173,439 (2) Equity attributable to Equity Holders of the Issuer.... 7,400,146 7,478,346 Minority Interests... 2,112,604 2,112,604 Total Capitalisation (3)... 9,512,750 9,590,950 Total Capitalisation and Indebtedness (4)... 17,642,578 17,642,578 (1) For illustrative purposes, the Group has assumed that the proceeds from the issuance of convertible bonds of S$986 million will be fully utilised to repay short term borrowings. (2) In accordance with FRS 32 Financial Instruments: Disclosure and Presentation, the proceeds from the issue of the Bonds are accounted for by allocating them separately between long-term borrowing and the value of the conversion right to holders of the Bonds, which is recorded as a capital reserve and a discount on the Bonds. (3) Total capitalisation as at 31 December 2006 includes equity attributable to the equity holders of the Issuer and minority interests. (4) Total Capitalisation and Indebtedness = Total Assets (S$20.6 billion) less Trade & Other Payables and Other Liabilities (S$3.0 billion). 21

27 RISK FACTORS The risks described below should be carefully considered before making an investment decision. The risks described below are not the only ones relevant to the Issuer, the Group, the Bonds or the Shares. Additional risks not presently known to the Issuer or that it currently deems immaterial may also impair the Group s business operations. The Group s businesses, financial condition or results of operations could be materially and adversely affected by any of these risks, which may, as a result, affect the Issuer s ability to pay interest on, and repay the principal of, the Bonds. This Offering Circular also contains forward-looking statements that involve risks and uncertainties. The Group s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the considerations described below and elsewhere in this Offering Circular. Risks Associated with the Group s Business The outbreak of an infectious disease or any other serious public health concerns in Asia and elsewhere could adversely impact the Group s business, results of operations and financial condition In late 2003, outbreaks of avian influenza occurred in several countries in Asia. By February 2004, these countries reported that the outbreak had been contained. However, in June 2004, new outbreaks were being reported in Asia. In 2005 and 2006, outbreaks were reported in other parts of the world including Europe, the Middle East and Africa. Some of the outbreaks noted above severely affected the poultry and related industries and resulted in the culling of large stocks of poultry. Vietnam experienced a resurgence of outbreaks in poultry and Turkey, Thailand, Indonesia and Cambodia reported cases of bird-to-human transmission of avian influenza. The World Health Organisation and other agencies continue to issue warnings of a potential avian influenza pandemic if there are sustained human-tohuman transmissions. More recently, in June 2007, the World Health Organisation reported new cases of human infection of H5N1 avian influenza in each of China and Indonesia. In 2003, Hong Kong, Taiwan, China, Singapore, Malaysia and other places experienced an outbreak of Severe Acute Respiratory Syndrome, which adversely affected the Asian economies, including Singapore. The outbreak of an infectious disease in Asia and elsewhere, together with any resulting restrictions on travel and/or imposition of quarantines, could have a negative impact on the economy, and business activities in Asia and could thereby adversely impact the revenues and results of the Group. There can be no assurance that any precautionary measures taken against infectious diseases would be effective. A future outbreak of an infectious disease or any other serious public health concern in Asia could seriously harm the Group s businesses. Terrorist attacks, other acts of violence or war and adverse political developments may affect the business and results of operations of the Group The terrorist attacks in the US on 11 September 2001, in Bali on 12 October 2002 and in Jakarta on 5 August 2003, together with the military response by the US and its allies in Afghanistan and continuing military activities in Iraq, have resulted in substantial and continuing economic volatility and social unrest in Southeast Asia. On 1 October 2005, bomb blasts in Bali killed at least 23 people and injured at least 101 others. The recent terrorist attacks in Thailand, and other areas of Southeast Asia, have exacerbated this volatility. Further developments stemming from these events or other similar events could cause further volatility. Any additional significant military or other response by the US and/or its allies or any further terrorist activities could also materially and adversely affect international financial markets and the Singapore economy and may adversely affect the operations, revenues and profitability of the Group. The consequences of any of these terrorist attacks or armed conflicts are 22

28 unpredictable, and the Group may not be able to foresee events that could have an adverse effect on their businesses and results of operations. A certain portion of the Group s development projects and assets is located in countries which suffered and continue to suffer from political instability and a certain proportion of its revenues is derived from its operations in these countries. Accordingly, the Group s results of operations and prospects are subject to political developments in these countries. The continued increase in oil prices could have an impact on the Group Future increases in the cost of oil globally may negatively affect the economic growth and stability of certain countries in the Asian region, and as a result, may reduce the ability of consumers to purchase properties. The economic and political conditions in these countries make it difficult to predict whether oil will continue to be available at prices that will not negatively affect economic growth and stability. For example, in October 2005, the Indonesian government implemented a new policy that resulted in a significant increase in fuel prices. In response, several non-violent mass protests were organised in opposition to the increases in domestic fuel prices, and an increase in political tensions has resulted from the Indonesian government s decision. There can be no assurance that future increases in oil prices in the Asian countries where the Group operates will not lead to political, social and economic instability, which in turn could have a material adverse effect on the Group s businesses, financial condition and results of operations. Economic and social conditions in the countries where the Group operates may adversely impact the Group s business and results of operations The economies in the countries where the Group develops projects or owns properties differ from the economies of most developed countries in many respects, including: amount of government involvement; political stability; level of development; growth rate; control of foreign exchange; and allocation of resources. While many of these economies have experienced significant growth in the past twenty years, growth has often been limited to certain geographic regions and limited to certain sectors of the economy. The governments of such countries have implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall economy but may also have a negative effect on the Group. For example, the Group s financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations that are applicable to it or regulatory changes affecting the real estate industry. Several of the economies in which the Group operates have been transforming from planned economies to more market-oriented economies. Although in recent years, the governments of such countries have implemented measures emphasising the utilisation of market forces for economic reform, the reduction in state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of productive assets is still owned by these governments. In addition, these governments continue to play a significant role in regulating industrial development through industrial policies. Accordingly, changes introduced by these governments during this transition may adversely affect the Group s operations and results. 23

29 The Group may also be adversely affected by exchange controls, changes in taxation law, changes in foreign investment policies and other restrictions and controls which may be imposed by the relevant authorities of the countries in which the Group operates. The Group s business is concentrated in the Asia Pacific region Most of the Group s business activities are concentrated in the Asia Pacific region. As a result, the Group s revenue and results of operations and future growth depend, to a large extent, on the continued growth of the markets in the Asia Pacific region. Over the past five years, currency fluctuations, liquidity shortages, fluctuations in interest rates and other factors have materially and adversely affected the economies of many countries in the Asia Pacific region in general, and in Southeast Asia in particular. Many Asia Pacific economies experienced a recession in 1998 and early While most of the affected economies recovered from recession in 2000, certain economies in the Asia Pacific region again suffered an economic recession in In particular, the gross domestic product of Singapore declined by 2.2 per cent. in 2001 as compared to Due to the effect that economic conditions in these markets have on the Group s business, further economic decline in the Asia Pacific region could adversely affect the Group s results of operations and future growth. Further, some of the countries in the Asia Pacific region in which the Group operates and has investments have experienced or continue to experience political instability. The continuation or re-emergence of such political instability in the future could have a material adverse effect on economic or social conditions in those countries. This could lead to outbreaks of civil unrest in the affected areas, which could have an adverse effect on the Group s financial condition and results of operations. Such political instability could also have a material adverse effect on the ownership, control and condition of the Group s assets in those areas. The Group s business is concentrated in Singapore and property prices and yields are subject to volatility As at 31 March 2007, approximately 46 per cent. of the Group s total assets were located in Singapore. Historically, property values in Singapore have experienced cyclical patterns in which periods of price increase were often followed by periods of stagnating or declining prices. A substantial portion of the Group s earnings depends on continued strength in the office, retail, industrial and residential property markets in Singapore, which in turn are affected by general economic and business conditions. In recent years, all of these sectors have been adversely affected due to the economic crisis in the region and recession in Singapore. As a result of these factors, for the financial year ended 31 December 2005, a decrease in the value of the Group s properties in Singapore resulted in the Group making provisions (relating to the net revaluation deficit from investment properties) of S$108 million. In 2006, property prices in Singapore were revalued significantly upwards and the Group did not need to make any provision for any revaluation deficit. Despite property prices continuing this upward trend in 2007, there can be no assurance that the Group will not be required to make similar or higher provisions in the future. In addition, in the event new supply exceeds demand as a result of economic uncertainty, slower growth, increased interest rates (which reduce the ability of the Group s customers to finance real estate purchases and increase the Group s costs of financing) or otherwise, the results of operations and financial condition of the Group could be adversely affected. The Group s property development business may be subject to risks in investing outside Singapore As part of the Group s growth strategy, investment will be made in properties in the Asia Pacific region, which would expose it to the risk of political, economic, regulatory and social uncertainties specific to those countries. These investments may also be adversely affected by a number of local real estate market conditions in these countries, such as oversupply, the performance of other competing 24

30 properties or reduced demand for these properties. Any changes in the political environment and the policies by the governments of these countries, which include, inter alia, restrictions on foreign currency conversion or remittance of earnings, the requirement for approval by government authorities, changes in law, regulations and interpretation thereof and changes in taxation could adversely affect the Group s future results and investments, which will also be exposed to currency fluctuations when they are converted to Singapore dollars. As such, unfavourable events in such foreign countries will have an adverse impact on the Group s distributable income and asset value. The Group has a significant and growing business in China The Group has significant and growing business exposure in China through its wholly owned subsidiaries, associates and joint ventures with local partners. These investments are subject to the risk of uncertainties in the social, political and economic environment in China. Any negative regulatory and policy changes by the Chinese government could adversely affect the Group s future results and investments. In addition, these investments may be adversely affected by a number of local real estate market conditions such as oversupply, reduced demand for these properties and increased competition from foreign and local competitors. Investments in China that involve local partners may also involve specific risks or problems associated with joint venture partners, including, among other things, conflicts of business interests. The Group faces market risks pertaining to supply and demand The Group expects the residential real estate market in Singapore to remain highly competitive, particularly with regard to supply and pricing. Oversupply of developed properties could cause downward pressure on property sale prices. Consequently, while the Group continues to selectively accumulate landbank for development of residential properties, there can be no assurance that the Group will be able to sell the developed properties at a profitable price. To the extent that the Group is unable to sell developed properties at acceptable prices, the Group s financial condition and performance would be adversely affected. The Group faces increasing competition in its key markets In Singapore, the Group faces increasing competition in the real estate and hospitality markets. The Group expects the real estate market in Singapore to remain highly competitive, particularly with respect to the price realised from sales of residential properties and rental rates for commercial properties. Such increased competition may result in an increase in the supply of developed properties that could cause a decrease in property sale prices. As a result, while the Group has selectively accumulated landbank that it plans to develop for residential properties, there can be no assurance that the Group will be able to sell the developed property at a profitable price. To the extent that the Group is unable to develop its landbank and sell the developed property at acceptable prices, the Group s results of operations and financial condition would be adversely affected. The Group s hospitality businesses compete for guests in the highly competitive lodging industry in the countries in which they operate. Competitive factors in the hospitality industry include room rates, quality of accommodation, name recognition, service levels and the convenience of the location of the serviced residence. There can be no assurance that competitive conditions will not increase as a result of changes in economic conditions, changes in local market conditions and the available supply of hospitality space in the relevant market. The Group s overseas real estate and hospitality businesses compete with both domestic and international companies with respect to factors such as location, facilities and supporting infrastructure, services and pricing. Intensified competition between real estate developers may result in increased costs for land acquisition, over-supply of properties and a slowdown in the approval process for new property developments by the relevant government authorities all of which may adversely affect the Group s property development business. Some of these companies have significant financial 25

31 resources, marketing and other capabilities. Domestic companies in the overseas markets have extensive knowledge of the local real estate and hospitality markets and a longer operational track record in their respective domestic markets. International companies are able to capitalise on their overseas experience and greater financial resources to compete in the markets in which the Group has an overseas presence. As a result, there can be no assurance that the Group will be able to compete successfully in the future against its existing or potential competitors or that increased competition with respect to the Group s activities may not have a material adverse effect on the business, financial condition and results of operations. Furthermore, this competition may limit the Group s opportunities to invest in projects that could add value. The Group s business is subject to external factors in foreign countries The Group s property development business has development projects in countries where the projects are dependent on obtaining approvals from various governmental authorities at different levels and the granting of these approvals cannot be assured. These development projects have been, and may in the future be, subject to certain risks, including the cyclical nature of real estate markets, changes in governmental regulations and economic policies, including, among other things, regulations and policies restricting the construction of properties and buildings and related limitations on extensions of credit, building, material shortages, increases in labour and material costs, changes in general economic and credit conditions and the illiquidity of land and other property. There can be no assurance that required approvals will be obtained or that the cost of the Group s developments will not exceed projected costs. Although the Group generally seeks to maintain a sufficient level of control over its projects through ownership of a controlling interest and/or management in order to impose established financial control, management and supervisory techniques, property investment and development in these countries may often involve the participation of local partners in these countries and joint ventures in these countries may involve specific risks or problems associated with joint venture partners, including, among other things, inconsistent business interests or one or more of the partners experiencing financial difficulties. Certain construction risks may arise during the building of any new property Construction of new developments entails significant risks, including shortages of materials or skilled labour, unforeseen engineering, environmental or geological problems, work stoppages, litigation, weather interference, floods and unforeseen cost increases, any of which could give rise to delayed completions or cost overruns. Difficulties in obtaining any requisite licences, permits, allocations or authorisations from regulatory authorities could also increase the cost, or delay the construction or opening of, new developments. All of these factors may affect the Group s businesses, financial condition and results of operations. The Group relies on contractors to provide various services The Group engages third-party contractors to provide various services in connection with its residential and commercial developments, including construction, piling and foundation, building and property fitting-out work, interior decoration, installation of air-conditioning units and lifts, and gardening and landscaping works. The Group is exposed to the risk that a contractor may require additional capital in excess of the price originally tendered to complete a project and the Group may have to bear such additional amounts in order to provide the contractor with sufficient incentives to complete the project. Furthermore, there is a risk that major contractors may experience financial or other difficulties which may affect their ability to carry out construction works, thus delaying the completion of development projects or resulting in additional costs to the Group. There can also be no assurance that the services rendered by the third-party contractors will always be satisfactory or match the Group s targeted quality levels. All of these factors could adversely affect the Group s businesses, financial condition and results of operations. 26

32 The Group could incur significant costs related to environmental matters The Group may be subject to various laws and regulations in the countries where the Group operates relating to protection of the environment that may require a current or previous owner of real estate to investigate and clean up hazardous or toxic substances on a property. Under such laws in Indonesia, for example, owners and operators of real estate may be liable for the costs of removal or remediation of certain hazardous substances or other regulated materials on or in such property. Such laws often impose such liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such substances or materials. The cost of investigation, remediation or removal of these substances may be substantial. Environmental laws may also impose compliance obligations on owners and operators of properties with respect to the management of hazardous materials and other regulated substances. Failure to comply with these laws can result in penalties or other sanctions. Existing environmental reports with respect to any of the Group s properties may not reveal (i) all environmental liabilities, (ii) that prior owners or operators of the properties did not create any material environmental condition not known to the Group or (iii) that a material environmental condition does not otherwise exist in any one or more of the properties. There also exists the risk that material environmental conditions, liabilities or compliance concerns may have arisen after the review was completed or may arise in the future. Finally, future laws, ordinances or regulations and future interpretations of existing laws, ordinances or regulations may impose additional material environmental liability. The Group may be subject to liabilities or penalties relating to environmental matters which could adversely affect the Group s businesses, financial condition and results of operations. The Group faces business risks relating to the serviced residence business In addition to the risks associated with property development in general, the Group s serviced residence businesses are subject to the operating risks inherent in the serviced residence industry. These include cyclical downturns arising from changes in general and economic conditions, decreases in the amount of longer term business travel and corporate executives requiring mid to long term accommodation, oversupply of serviced residences and competition in countries in which its serviced residences are located, the recurring need for renovation, refurbishment and improvement to the properties, increases in operating costs arising from inflation, government regulations, changes in interest rates or currency fluctuations and other factors, including acts of terrorism, riots and civil commotions, natural disasters, extreme weather conditions, labour shortages and work stoppages or disputes. Any such factors could have an adverse effect on the Group s financial condition and results of operations. The Group s success in the future may depend, in part, on the successful implementation of its strategy The Group anticipates its future growth will come partly from the expansion of its operations outside Singapore. The Group s overseas projects are located in both developing and developed countries. Overseas expansion will also include entering into new markets. As a participant in the international real estate and hospitality industries, the Group s business is subject to various risks beyond its control, such as instability of foreign economies and governments and changes in laws and policies in overseas countries affecting trade and investment. The events arising from such risks could potentially affect the Group s overseas business in the future. The Group s ability to further expand its international operations successfully depends on its ability to successfully identify suitable opportunities for investment or acquisition and reach agreement with potential overseas partners on satisfactory commercial and technical terms. There can be no assurance that such opportunities or agreements can be established or that any of the Group s proposed acquisitions or agreements will be completed on the commercial terms contemplated or at all. 27

33 In addition, the Group s strategy to divest its assets in order to lighten its balance sheet may not be successful. The Group may not be able to divest selected assets or may not be able to achieve a satisfactory price for assets divested. The performance of the Group may be affected by the Group s ability to attract and retain employees Future performance of the Group depends largely on the Group s ability to attract, train, retain and motivate high quality personnel, especially for its management and technical teams. The loss of key employees may have a material adverse effect on the Group s businesses, financial condition and results of operations. The Group includes a holding company structure Virtually all of the Issuer s assets are shareholdings in its subsidiaries and associated companies. In order to satisfy its payment obligations, including obligations under the Bonds, the Issuer will rely on dividends and other payments received from its subsidiaries and associated companies. Both the timing and ability of certain subsidiaries and associated companies to pay dividends is limited by applicable laws and may be limited by conditions contained in certain of their agreements. The Group enters into interested person transactions The Group has ongoing contractual arrangements with interested persons. See Principal Shareholder Interested Person Transactions. Such transactions are entered into on normal commercial terms and in accordance with the laws and regulations of the regulatory authorities in the jurisdiction to which the parties to such transactions are subject. Transactions with interested persons may give rise to conflicts of interest, which could lead to transactions being entered into and decisions made which are based on factors other than commercial factors. The Audit Committee of the Issuer reviews every interested person transaction entered into by the Group which has a value amounting to at least three per cent. of the last audited net tangible assets of the Group. The Group has a significant amount of indebtedness As at 31 March 2007, the Group had approximately S$8.0 billion of total indebtedness, including approximately S$2.1 billion which was due to be refinanced or rolled over in While the Group had unutilised facilities and funds available for use, there can be no assurance that the Group will be able to refinance its indebtedness as it becomes due on commercially reasonable terms or at all. The Group may be required to meet its funding needs by procuring financing on terms which restrict it in certain ways, including by limiting its ability to pay dividends or requiring it to procure consents before it can pay dividends to holders of Shares. Additionally, the Group s significant level of indebtedness means that a material portion of its expected cash flow may be required to be dedicated to the payment of interest on its indebtedness, thereby reducing the funds available to the Group for use in its general business operations. The Group s significant level of indebtedness may also restrict its ability to obtain additional financing for capital expenditure, acquisitions or general corporate purposes and may cause it to be particularly vulnerable in the event of a general economic downturn. The Group may experience limited availability of funds The Group may require additional financing to fund working capital requirements, to support the future growth of its business and/or to refinance existing debt obligations. There can be no assurance that additional financing, either on a short-term or a long-term basis, will be made available or, if available, that such financing will be obtained on terms favourable to the Group or that any additional financing will not be dilutive to its shareholders. Factors that could affect the Group s ability to procure financing include the cyclicality of the property market and market disruption risks which could adversely affect the liquidity, interest rates and the availability of funding sources. In addition, further consolidation in the 28

34 banking industry in Singapore and/or elsewhere in Asia may also reduce the availability of credit as the merged banks seek to reduce their combined exposure to one company or sector. The Group is subject to interest rate fluctuations As at 31 March 2007, the Group had consolidated debt of approximately S$8.0 billion. Approximately 69 per cent. of the debt bears fixed interest rates and the balance bears floating interest rates. Consequently, the interest cost to the Group for the floating interest rate debt will be subject to fluctuations in interest rates. The Group has entered into some hedging transactions to partially mitigate the risk of interest rate fluctuations. However, its hedging policy may not adequately cover the Group s exposure to interest rate fluctuations. As a result, its operations or financial condition could potentially be adversely affected by interest rate fluctuations. The Group is subject to exchange rate fluctuations The Group s revenue, costs and capital expenditure are mainly denominated in Singapore dollars, Chinese Renminbi, US dollars, Hong Kong dollars, Malaysian ringgit, Australian dollars, Swiss francs, Euros, and Pounds sterling. Consequently, portions of the Group s costs and its margins are affected by fluctuations in the exchange rates among the above-mentioned currencies. Although the Group engages in certain hedging activities to mitigate currency exchange rate exposure, the impact of future exchange rate fluctuations among the US dollar, the Singapore dollar and other currencies on the Group s cost of sales and margins cannot be accurately predicted. Some of the currencies may not be convertible or exchangeable or may be subject to exchange controls. The reporting currency for the Group is Singapore dollars. Exchange rate fluctuations will arise when the assets and liabilities in foreign currencies are translated into Singapore dollars for financial reporting purposes. If the foreign currencies depreciate against the Singapore dollar, this may adversely affect the consolidated financial statements of the Group. The Group is subject to changes in commodity prices The Group faces risks in relation to changes in commodity prices due to the use of large quantities of building materials, including raw iron, steel, sand, granite and concrete, in its property development operations. As a property developer, in general, the Group enters into fixed or guaranteed maximum price construction contracts with independent construction companies, each of which affects a significant part of its overall development project. These contracts typically cover both the supply of the building materials and the construction of the facility during the construction period. In accordance with industry practice, the Group or its contractors may amend existing construction contracts, including fixed or maximum price terms, to take into account significant price movements of construction materials. Therefore, should the price of building materials increase significantly prior to the Group entering into a fixed or guaranteed maximum price construction contract, or should its existing contractors fail to perform under their contracts, the Group may be required to pay more to its existing or prospective contractors, which could materially and adversely affect the Group s results of operations and financial condition. The Group is subject to government regulation in the countries where it operates The real estate industry in the countries where the Group operates is subject to significant government regulation and regulatory approvals may be required for, among other things, land and title acquisition, development planning and design, construction and mortgage financing and refinancing. In some instances, foreign governments may adopt restrictive policies with respect to the issuance of certain permits or approvals. For example, the Singapore Government has recently sought to regulate or reduce property speculation by adopting a more active regulatory scheme that contemplates the imposition of credit controls, taxes and fees; collectively such schemes may reduce property sales and affect property values. 29

35 Further, in relation to China, in accordance with the Regulations on Administration of Urban Real Estate Development, property developers in China are required to have a qualification certificate to undertake property development. Annual renewal of a qualification certificate is subject to review. Developers are permitted to obtain at least a temporary qualification certificate to undertake property development. A temporary qualification certificate is renewable annually for up to two years with an additional grace period of one year, beyond which a developer must meet certain conditions to upgrade its qualification certificate. The property developer s registered capital, property development investments, history of property development, quality of property construction, expertise of the management or any illegalities on the part of the developer are taken into account by the local authorities in deciding whether to renew or upgrade a qualification certificate. If the Group fails to obtain or renew the requisite qualification certificates or pass the relevant annual examination, or rectify any default, the Group s business operations will be adversely affected. In addition, in order to develop and complete a property development, a property developer must obtain various permits, licences, certificates and other approvals from the relevant administrative authorities at various stages of the property development process, including land use rights certificates, planning permits, construction permits, pre-sale permits and certificates or confirmation of completion and acceptance. Each approval is dependent on the satisfaction of certain conditions. Problems may be encountered in obtaining such government approvals or in fulfilling the conditions required for obtaining the approvals, especially as new laws, regulations or policies may come into effect from time to time with respect to the real estate industry in general or the particular processes with respect to the granting of approvals. If the Group fails to obtain relevant approvals or fulfil the conditions of those approvals for a significant number of its property developments, these developments may not proceed on schedule, and its businesses, financial condition and results of operations may be adversely affected. The Group has one major shareholder As at 31 May 2007, Temasek owned approximately 42.7 per cent. of CapitaLand. Temasek is a wholly owned Singapore government investment holding company with interests in diverse businesses in, among other areas, telecommunications and media, financial services, property, transportation and logistics, energy and resources, infrastructure, engineering and technology, as well as pharmaceuticals and biosciences. Consequently, Temasek s strategic goals may not be aligned with the strategy of the Group and could reduce the level of management flexibility that would otherwise exist with a more diversified shareholder base. The Group s property investments are relatively illiquid Certain of the Group s real estate investments, particularly investments in high value properties such as those in which the Group has, and in which the REITs will invest, are relatively illiquid. Such illiquidity limits the ability of an owner or a developer to convert real estate assets into cash on short notice or may require a substantial reduction in the price that may otherwise be sought for such asset to ensure a quick sale. Such illiquidity also limits the ability of the Group to vary its portfolio in response to changes in economic, real estate market or other conditions. This could have an adverse effect on the REIT s financial condition and results of operations, with a consequential adverse effect on the Group s ability to make expected returns. Moreover, the Group may face difficulties in securing timely and commercially favourable financing in asset-based lending transactions secured by real estate due to its illiquidity. The Group is dependent on the quality of its title to properties in the landbank of the Group Due to the immature nature of property law in some of the countries where the Group operates and the lack of a uniform title system in such countries, there is potential for disputes over the quality of title purchased from previous landowners. In addition, in Indonesia for example, the Group must negotiate each time it acquires land as a licence-holder with the actual owner of the land, which may result in purchases of property (and thereby the obtaining of title to the relevant land) being delayed or not 30

36 proceeding in the event that negotiations are unsuccessful. Such delays in acquiring properties required for the Group s development activities could negatively affect the Group s businesses, financial condition and results of operations. Loss of anchor tenants could directly and indirectly reduce the future cash flows of the Group The Group s ability to sell any unsold properties and the value of such properties could be adversely affected by the loss of an anchor tenant in the event that such anchor tenant files for bankruptcy or insolvency or experiences a downturn in its business. Space that has been vacated by an anchor tenant can reduce the demand for and value of other properties because of the loss of the departed anchor tenant s customer drawing power. In addition, as some of the Group s anchor tenants may be related to each other, the risk of such loss is concentrated and could affect all of the Group s properties if it should occur. Any of these events could materially and adversely affect the Group s businesses, financial condition and results of operations. The Group may suffer an uninsured loss The Group maintains insurance policies covering both its assets and employees in line with general business practices in Singapore in the real estate and hospitality industries, with policy specifications and insured limits which the Group believes are adequate. Risks insured against include fire, business interruption, lightning, flooding, theft, vandalism and public liability. There are, however, certain types of losses (such as from wars, acts of terrorism or acts of God) that generally are not insured because they are either uninsurable or not economically insurable. The Group currently maintains insurance for acts of terrorism for certain of its properties. The Group also maintains property damage, business interruption and general liability insurance in the Asia Pacific region but principally in Singapore, Vietnam, Australia, China, Thailand, Indonesia and Korea. Should an uninsured loss or a loss in excess of insured limits occur, the Group could be required to pay compensation and/or lose capital invested in the property, as well as anticipated future revenue from that property. The Group would also remain liable for any debt that is with recourse to the Group and may remain liable for any mortgage indebtedness or other financial obligations related to the relevant property. Any such loss could adversely affect the results of operations and financial condition of the Group. No assurance can be given that material losses in excess of insurance proceeds will not occur in the future or that adequate insurance coverage for the Group will be available in the future on commercially reasonable terms or at commercially reasonable rates. Some or all of the Group s existing and planned projects may not be completed The Group s success and financial performance will depend on the ability of the Group to identify, develop, market and sell its developments in a timely and cost effective manner. The Group s development activities are subject to the risk of changes in regulations, delays in obtaining required approvals, availability of raw materials, increases in construction costs, natural disasters, any reliance on third party contractors as well as the risk of decreased market demand during the development of a project. As a result of these and other factors described herein, no assurance can be given as to whether or when existing and planned projects will be successfully completed. Although the Group plans to apply many of the same development and marketing strategies that it has employed in the past, new projects may pose unforeseen challenges and demands on the Group s managerial and financial resources. Non-completion of such developments, or any of the Group s other developments, may have a material and adverse effect on the Group s businesses, financial condition and results of operations. 31

37 The Group is subject to risks in relation to its pre-sold properties In the event the Group pre-sells any properties prior to completion of construction, it may be liable for potential losses that purchasers may suffer if there is a failure or delay in the delivery of such pre-sold properties. Failure to complete a property development on time may be attributed to factors such as the time taken and the costs involved in completing construction, which are in turn adversely affected by factors such as delays in obtaining requisite licences, permits or approvals from government agencies or authorities, shortages of labour, adverse weather conditions, natural disasters, labour disputes, disputes with contractors, accidents and changes in government priorities and policies. If the delay in delivery extends beyond the contractually specified period, purchasers may also be entitled to terminate the pre-sale agreements and claim refunds of monies paid, damages and compensation for late delivery. There is no assurance that the Group will not experience significant delays in completion or delivery. The Group may be involved in legal and other proceedings arising from its operations from time to time The Group may be involved from time to time in disputes with various parties involved in the development and sale of its properties such as contractors, sub-contractors, suppliers, construction companies, purchasers and other partners. These disputes may lead to legal and other proceedings, and may cause the Group to suffer additional costs and delays. In addition, the Group may have disagreements with regulatory bodies in the course of its operations, which may subject it to administrative proceedings and unfavourable orders, directives or decrees that result in financial losses and delay the construction or completion of its projects. The Group is exposed to fluctuations in the residential, retail and commercial property markets The real estate development industry in Singapore and the other countries in which the Group operates is cyclical and is significantly affected by changes in general and local economic conditions, including employment levels, availability of financing, interest rates, consumer confidence and demand for developed products, whether residential, retail or commercial. The process of development of a project begins, and financial and other resources are committed, long before a real estate project comes to market, which could occur at a time when the real estate market is depressed. Such a depression in the real estate market could affect the Group s businesses, financial condition and results of operations. The Group is exposed to general risks associated with the ownership and management of real estate Real estate investments are generally illiquid, limiting the ability of an owner or a developer to convert property assets into cash on short notice with the result that property assets may be required to be sold at a discount in order to ensure a quick sale. Such illiquidity also limits the ability of the Group to manage the Group s portfolio in response to changes in economic or other conditions. Moreover, the Group may face difficulties in securing timely and commercially favourable financing in asset-based lending transactions secured by real estate due to this illiquidity or to restrictions arising from the various debt obligations of the Group, including the Bonds. Property investment is subject to risks incidental to the ownership and management of residential and commercial properties including, among other things, competition for tenants, changes in market rents, inability to renew leases or re-let space as existing leases expire, inability to collect rent from tenants due to bankruptcy or insolvency of tenants or otherwise, inability to dispose of major investment properties for the values at which they are recorded in the Group s financial statements, increased operating costs, the need to renovate, repair and re-let space periodically and to pay the associated costs, wars, terrorist attacks, riots, civil commotions, natural disasters and other events beyond the Group s control. The activities of the Group may also be impacted by changes in laws and governmental regulations in relation to real estate, including those governing usage, zoning, taxes and government charges. Such revisions may lead to an increase in management expenses or unforeseen 32

38 capital expenditure to ensure compliance. Rights related to the relevant properties may also be restricted by legislative actions, such as revisions to the laws relating to building standards or town planning laws, or the enactment of new laws relating to government appropriation, condemnation and redevelopment. The Group s real estate financial services business is subject to investment risk and market fluctuations The capital value of the investments in the Group s real estate financial services business may fall as well as rise and the income derived from them may fluctuate. A fall in such capital values may result in a reduction in the level of income which the Group may derive and/or a reduction in the aggregate value of such investments may require additional contributions from investors. The Group s real estate financial services business is subject to changes in general economic conditions such as fluctuations in financial and property markets, increases in inflation and changes in investment returns which may alter the level of demand for such products. Adverse effects on the Group resulting from changes in market conditions could involve reduced returns on investments and an increase in credit defaults. Falls in investment returns could impair the Group s operational capability, including its ability to derive significant volumes of new business. Adverse movements in the market and consequent reductions in the value of assets under management may lead to reduced operating profit within the Group. The Group s real estate financial services business is subject to operational risks The Group s real estate financial services business is subject to operational risks, including the risk of direct or indirect loss resulting from inadequate or failed internal and external processes, systems and human error or from external events. The real estate financial services business is dependent on processing a large number of complex transactions across numerous and diverse products. Furthermore, the long-term nature of the majority of the Group s business means that accurate records have to be maintained for significant periods. The real estate financial services systems and processes are designed to ensure that the operational risks associated with its activities are appropriately controlled, although weaknesses in the systems could have a negative impact on its results of operations during the affected period, result in material damage to its reputation and the loss of customers and have a consequent material adverse effect on the Group s real estate financial services business. The Group s real estate financial services business is subject to competition The Group s real estate financial services business is conducted in highly competitive environments and its continued profitability depends on management s ability to respond to these competitive pressures. There are many factors which affect the Group s ability to sell its products, including price and yields offered, financial strength and ratings, range of product lines and product quality, brand strength and name recognition and investment management performance. Further, heightened competition for talented and skilled employees with local experience may limit the Group s potential to grow its business as quickly as planned. The Group s principal competitors in the real estate financial services business include many of the major financial services businesses. The Group believes that competition will intensify in response to consumer demand, technological advances, the impact of consolidation, regulatory actions and other factors. The Group s ability to generate an appropriate return depends significantly upon its capacity to anticipate and respond appropriately to these competitive pressures. 33

39 The Group s property development business requires substantial capital investments and may require the Group to seek external financing which may not be available on terms favourable to the Group or at all The Group s property development business pursues a strategy of pre-selling its development properties. This had reduced the Group s need to seek external financings, as the Group receives payments in advance from purchasers of its development properties. There can be no assurance that the Group s pre-selling strategy will be sufficient to help cover all of the anticipated financing needs of the Group. The Group s property development business may be required to seek external financing to fund working capital or capital expenditure to support the growth of its businesses. The Group s ability to arrange for external financing and the cost of such financing are dependent on numerous factors, including general economic and capital market conditions, interest rates, credit availability from banks or other lenders, investor confidence in the Group, success of the Group s businesses, provisions of tax and securities laws that may be applicable to the Group s efforts to raise capital, any restrictions imposed by various banking institutions on providing financing to companies operating in the property sector in countries where the Group operates and political and economic conditions. There can be no assurance that additional financing, either on a short-term or a long-term basis, would be available or, if available, that such financing would be obtained on terms favourable to the Group. The Group may encounter problems with its joint ventures that may adversely affect its business The Group has, and expects in the future to have, interests in joint venture entities in connection with its property development plans. Disagreements may occur between the Group and its joint venture partners regarding the business and operations of the joint ventures which may not be resolved amicably. In addition, the Group s joint venture partners may (i) have economic or business interests or goals that are inconsistent with that of the Group; (ii) take actions contrary to the Group s instructions, requests, policies or objectives; (iii) be unable or unwilling to fulfill their obligations; (iv) have financial difficulties; or (v) have disputes with the Group as to the scope of their responsibilities and obligations. Any of these and other factors may materially and adversely affect the performance of the Group s joint ventures, which may in turn materially and adversely affect the Group s financial condition and results of operations. The Group s guarantees may be called upon and put or call options may be exercised which may require funds to be disbursed During the course of the Group s business, it may be required to provide guarantees including in the form of put and call options and corporate and bank guarantees to third parties in respect of its obligations. If a put or call option is exercised or a guarantee is called upon, this may require funds to be disbursed. Such disbursement of funds may also require the Group to source additional financing and/or refinance existing debt obligations. There can be no assurance that additional financing to satisfy the Group s guarantees will be obtained on terms favourable to the Group. Risks Associated with an Investment in the Bonds and the Shares Securities law restrictions on the resale and conversion of the Bonds and the resale of Shares issuable upon their conversion may impact Bondholders ability to sell the Bonds The Bonds and the Shares into which the Bonds are convertible have not been registered under the Securities Act, any state securities laws or the securities laws of any other jurisdiction. Unless and until they are registered, the Bonds and the Shares issuable upon conversion may not be offered, sold or resold except pursuant to an exemption from registration under the Securities Act and applicable state laws or in a transaction not subject to such laws. The Bonds are being offered and sold only to non-us persons outside the US in reliance on Regulation S under the Securities Act. The Issuer is not required to register the Bonds and the Shares into which the Bonds are convertible under the terms of the Bonds. Hence, future resales of the Bonds and the Shares into which the Bonds are convertible may 34

40 only be made pursuant to an exemption from registration under the Securities Act and applicable state laws or in a transaction not subject to such laws. The Issuer may be unable to redeem the Bonds In certain circumstances, including (i) a delisting of the Shares from the SGX-ST or (ii) on each of 20 June 2017 and 20 June 2019, the holders of the Bonds may require the Issuer to redeem all of the holders Bonds. If such an event were to occur, or at maturity of the Bonds, no assurance can be given that the Issuer will have enough funds or would be able to arrange financing to pay the redemption amount for all tendered Bonds. The Issuer s ability to redeem the Bonds in such event may be limited by law or the terms of other debt instruments. The Issuer may be required to refinance its debt in order to make such payments. The Issuer has, and may in the future have, credit agreements or other agreements relating to its indebtedness that contain provisions that provide that a change in control constitutes an event of default or accelerates its payment obligations under that agreement. If such an event were to occur, no assurance can be given that the Issuer will have sufficient funds to or be able to raise sufficient financing to meet its payment obligations under those agreements. Holders of the bonds may be subject to Singapore estate tax Prospective purchasers of Bonds are advised to consult their own tax advisers concerning the overall tax consequences of the acquisition, ownership or disposition (including, in the case of convertible notes, on conversion thereof) of the Bonds or the Shares. Certain differences exist between the tax laws of Singapore and those of other jurisdictions, including in the area of estate tax. Under Singapore laws, estate tax is imposed on the value of most movable and all immovable properties situated in Singapore upon the death of an individual who is not domiciled in Singapore. Interests in the Bonds and the Shares may be regarded as property situated in Singapore. Thus, an individual holder of convertible notes or ordinary shares who is not domiciled in Singapore at the time of his or her death may be subject to Singapore estate tax on the value of the Bonds or the Shares held by the individual upon the individual s death. See Taxation. The trading price of the Shares has been, and may continue to be, volatile The trading price of the Shares has been, and may continue to be, subject to large fluctuations. The price of the Shares may increase or decrease in response to a number of events and factors, including: quarterly variations in operating results; changes in financial estimates and recommendations by securities analysts; the operating and stock price performance of other companies in the real estate industry; developments affecting the Group, its customers or its competitors; changes in government regulation; changes in general economic conditions; changes in accounting policies; and other events or factors described in this Offering Circular. This volatility may adversely affect the price of the Shares regardless of the Group s operating performance. The Singapore Code on Take-overs and Mergers may discourage or prevent certain types of transactions The SFA and the Singapore Code on Take-overs and Mergers (the Take-over Code ) contain certain provisions that may delay, deter or prevent a future take-over or change in control of the Issuer. Any person acquiring an interest (either on his or her own or together with parties acting in concert with him or her) in 30 per cent. or more of the Issuer s voting shares must extend a take-over offer for the 35

41 remaining voting shares in accordance with the provisions of the Take-over Code. A take-over offer may also be required to be made by a person holding (either on his or her own or together with parties acting in concert with him or her) between 30 per cent. or 50 per cent. (both inclusive) of the Issuer s voting shares after having acquired additional voting shares representing more than one per cent. of the Issuer s voting shares in any six-month period. These provisions may discourage or prevent certain types of transactions involving an actual or threatened change of control of the Issuer. Some of the holders of the Shares may, therefore, be disadvantaged as a transaction of that kind might have allowed the sale of Shares at a price above the prevailing market price. See Description of Shares Take-overs. The Singapore securities market is relatively small The SGX-ST is relatively small and more volatile than stock exchanges in certain European and other countries. As of 31 May 2007, there were 718 companies listed on the SGX-ST and the aggregate market capitalisation of listed equity securities of these companies was approximately S$738 billion. As a result, the market price of the Shares may fluctuate more than that of securities listed on larger global stock exchanges. Conversion of the Bonds will dilute the ownership interest of existing shareholders and could adversely affect the market price of the Shares The conversion of some or all of the Bonds will dilute the ownership interests of existing shareholders. Any sales in the public market of the Shares issuable upon such conversion could adversely affect prevailing market prices for the Shares. In addition, the conversion of the Bonds may encourage short selling of the Shares by market participants. Future issues, offers or sales of Shares may adversely affect the value of the Bonds The market price of the Bonds is expected to be affected, among other things, by fluctuations in the market price of the Shares. The future issue of Shares by the Issuer, including the disposal of Shares by any of the substantial shareholders of the Issuer or the perception that such issues or sales may occur may significantly affect the trading price of the Bonds and the Shares. The Issuer has, subject to certain exceptions, undertaken that it will not, and will procure that none of its nominees or subsidiaries will, inter alia, allot or issue or offer to allot or issue, or grant any option, right or warrant to subscribe any Shares or any interests in Shares or any securities convertible or exercisable or exchangeable for or substantially similar to Shares or any interests in Shares for a period of 90 days after the Closing Date, without the prior written consent of the Lead Manager. See Subscription and Sale. Before conversion, Bondholders will not be entitled to any shareholder rights, but will be subject to all changes affecting the Issuer s Shares A Bondholder will not be entitled to any rights with respect to the Issuer s Shares, including voting rights and rights to receive dividends or distributions. However, the Shares which the Bondholder will receive upon conversion of his Bonds will be subject to all changes affecting the Issuer s Shares. Except for limited cases under the adjustments to the conversion price, the Bondholder will be entitled only to rights that the Issuer may grant with respect to its Shares if and when it delivers Shares to the Bondholder upon its election to convert its Bonds into Shares. For example, should the Issuer seek approval from shareholders for a potential merger, or if an amendment is proposed to its Articles of Association which may require shareholder approval, the Bondholders will not be entitled to vote on the merger or amendment. Bondholders will bear the risk of fluctuations in the trading price of the Issuer s Shares The market price of the Bonds is expected to be affected by fluctuations in the market price of the Issuer s Shares. It is impossible to predict whether the price of the Issuer s Shares will rise or fall. Trading prices of its Shares will be influenced by, inter alia, the Issuer s financial condition, results of operations, economic, financial and other factors. Any decline in the price of the Issuer s Shares may adversely affect the market price of the Bonds. 36

42 BUSINESS Overview CapitaLand is one of the largest listed real estate companies in Asia, with total assets amounting to S$20.8 billion and market capitalisation of S$22.4 billion as at 31 March Headquartered in Singapore, CapitaLand is a multinational company with core businesses in real estate, hospitality and real estate financial services which are focused in gateway cities in the Asia Pacific region, Europe and the Middle East. CapitaLand s real estate and hospitality portfolio spans more than 90 cities in over 20 countries. CapitaLand also leverages on its significant real estate asset base and market knowledge to develop real estate financial products and services in Singapore and the region. For the three months ended 31 March 2007, CapitaLand had total revenues of S$637 million and recorded a net profit of S$608 million. The Group s total assets as at 31 March 2007 amounted to S$20.8 billion. The listed subsidiaries and associates of CapitaLand in Singapore are Ascott, CMT, CCT, ART, CRCT and, in Australia, Australand. CapitaLand also jointly manages the QCT in Malaysia. As at 31 May 2007, Temasek and the companies under the Temasek group owned approximately 42.7 per cent. of CapitaLand. Temasek is wholly owned by the Minister for Finance (Incorporated). The Group, through its Group Corporate Office, determines overall strategic direction, provides professional and functional leadership and determines corporate governance and corporate social responsibility standards for the Group. CapitaLand also plays the leading role in developing the Group s human resources, identifying major merger and acquisition opportunities, developing new businesses, allocating capital and establishing guidelines with respect to corporate governance and risk management within the Group. The Group operates in the residential, retail, commercial, integrated leisure, entertainment & convention, hospitality and real estate financial services sectors through the following strategic business units: Residential: CRL develops residential properties for sale. CRL s key markets are in Singapore, Australia, China, Thailand and Malaysia. CRL covers a wide spectrum of the residential market in Singapore with sites catering to a broad spectrum of homebuyers in the super-luxury, high-end and mid-end segments of the market. CRL s business in Australia is carried out through its subsidiary, Australand, which is a stapled group listed on both the Singapore and Australia stock exchanges. In China, CRL has established a strong presence in China s Bohai Economic Rim, Yangtze River Delta and Pearl River Delta regions. In 2006, CRL expanded its operations to cover the central and western regions of China. In Thailand, CRL established a joint venture company with TCC Land to invest, develop and manage properties in the residential, office and retail sectors. The joint venture has launched several high-end residential projects in Bangkok. In addition, CRL has a presence in Malaysia through its listed associated company, UML, an established developer of integrated townships and boutique developments in key cities. As a platform for its next phase of growth, CRL has entered into new markets in Asia, namely India and Vietnam. In India, CRL is developing its first residential project with 590 apartments in Mumbai with its partner, the Mumbai-based Runwal Group. In Vietnam, CRL has launched the first phase of The Vista Condominium at An Phu Ward, Ho Chi Minh City. The first 273 units released in the 750-unit development were fully booked. In a separate joint venture, CRL will also develop a second condominium comprising about 600 homes in Ho Chi Minh City. Retail: CRTL has a portfolio of over 50 retail malls in Singapore, China, Japan and Malaysia, making CRTL a leading owner and manager of retail malls in Asia. In Singapore, CRTL manages CMT, the largest listed REIT in Singapore by market capitalisation and asset size. CRTL owned 31.1 per cent. of CMT as at 31 March CRTL also holds a 50 per cent. stake in the Orchard Turn development, a retail-cum-residential project on Singapore s main shopping street, Orchard Road. In China, CRTL 37

43 has 33 retail malls (some currently under construction) in over 25 cities, of which seven retail malls are held by CRCT. CRCT was listed on the SGX-ST in December In Japan, CRTL manages a portfolio of five retail malls held through its associated company, CRJF. As part of CRTL s overall strategy for the retail mall business, CRTL is also building a presence in India and has plans to grow its retail mall portfolio in India significantly in the next three to five years. Commercial: CCL develops, owns and manages an extensive portfolio of offices and mixed use properties both in Singapore and overseas. CCL is one of Singapore s largest owners and managers of office properties. Its portfolio of commercial properties ranges from landmark office buildings in the CBD to car parks and high technology industrial complexes. CCL owns these buildings directly, through joint ventures, private equity funds and its stake in CCT. Overseas, CCL focuses on high growth commercial and integrated property business with approximately five million square feet of gross floor area. It has commercial property investments in Shanghai, Beijing, Hong Kong, London, Bahrain and Kuala Lumpur. In China, CCL s office developments are located in the CBD. Its key overseas assets include Capital Tower Beijing, Raffles City Shanghai and in Hong Kong, the AIG Tower. As at 31 March 2007, CCL beneficially owned 30.4 per cent. of CCT, Singapore s first commercial REIT which owns and invests in real estate and real estate related assets in Singapore and abroad, which are income-producing and used, or predominantly used, for commercial purposes. Integrated Leisure, Entertainment & Convention: ILEC is a recently formed business unit to develop integrated developments incorporating leisure, entertainment and conventions as its key themes. ILEC will utilise the Group s real estate competencies, partner relationships and intellectual capital to construct integrated resorts with exceptional design and development concepts. ILEC s maiden project is an integrated development, MSC, located in Cotai, Macau. ILEC has a 20 per cent. strategic stake in MSC which, when completed, will be Asia s first leisure resort property combining theatre, television and film production facilities, and retail, with gaming, entertainment and world-class hotels. Phase 1 of the MSC development is targeted for completion in Serviced Residences: Ascott is the serviced residence arm of CapitaLand and is a listed company on the SGX-ST. With about 19,000 serviced residence units under management in key cities of the Asia Pacific region, Europe and the Gulf region, Ascott is the largest international serviced residence owner-operator outside the US. As at 31 March 2007, CapitaLand owned 66.8 per cent. of Ascott. In 2006, Ascott established ART, the first Pan-Asian serviced residence REIT, which is a vehicle to acquire and hold stable-yielding serviced residence properties in the Pan-Asian region. Ascott will continue to focus on strengthening its global brand, growing fee-based income and incubating new serviced residences and rental apartment properties. As at 31 March 2007, CapitaLand beneficially owned 37.3 per cent. of ART. Financial Services: CFL was formed in 2001 to develop fund management and financial advisory services. The financial advisory services include mezzanine financing, credit enhancement advisory and structuring services. The thrust of CFL s business is to combine financial skills and real estate domain knowledge to generate financial products and services. CFL s assets under management totalled S$13.3 billion as at 31 March

44 THE GROUP S BUSINESS STRUCTURE AS AT 31 MARCH 2007 CapitaLand Limited * Real Estate Hospitality Financial Services Residential Retail Commercial Integrated Leisure, Entertainment & Convention Serviced Residences Financial 100% 100% 100% 100% 66.8% 100% CapitaLand Residential Limited CapitaLand Retail Limited CapitaLand Commercial Limited CapitaLand ILEC Pte. Ltd. The Ascott Group Limited * CapitaLand Financial Limited % 31.1% 30.4% 27.7% Australand * CapitaMall Trust * CapitaCommercial Trust * Ascott Residence Trust * 18.8% 20.0% 20.0% CapitaRetail China Trust * CapitaLand Group comprises 7 listed Entities with total Market Capitalisation of more than S$33.0 billion^ * Listed Entities ^ as at 31 March 2007, net of common holdings

45 History The Group was formed in November 2000 following a merger between DBS Land and Pidemco (which were incorporated on 31 July 1978 and 5 January 1989, respectively). On 17 April 2000, STPI, a shareholder of Pidemco and a company within the ST Group, acquired 24.6 per cent. of DBS Land, then a company listed on the SGX-ST. This acquisition resulted in STPI becoming a shareholder of both DBS Land and Pidemco. DBS Land and Pidemco were engaged in similar areas of the property business. Consequently, the management of Pidemco and DBS Land conducted a strategic review of their businesses and concluded that shareholder value would be maximised by merging the two companies. On 12 July 2000, Pidemco and DBS Land announced that they had signed a merger agreement to create CapitaLand, one of the largest listed real estate companies in Asia. The merger was legally completed in November 2000, resulting in the formation of the Group. Strategy The Group s strategy is underpinned by the three principles of focus, balance and scale. Firstly, the Group focuses on its core competencies along the real estate value chain. All the Group s businesses must be anchored by its real estate competencies. Secondly, the Group wants to achieve balance in its business portfolio to ensure sustainable long term growth. To this end, the Group balances its income between trading and investment, and has a diversified multi-sector and multi-geography portfolio. Thirdly, the Group wants to exploit scale, both in terms of having a critical mass for operational efficiency and capital management and in taking advantage of the collective strengths of the Group. The key drivers of the Group s strategy are as follows: Increase capital productivity through active asset management To improve capital efficiency, the priority of the Group in the first five years since the merger has been to lighten its balance sheet and thereby reduce its debt. The Group succeeded in divesting S$12.1 billion worth of assets from 2000 to first quarter Assets monetised include both non-core assets and stable assets that were divested into the Group s property funds and REITs. The Group s subsidiary, RHL, divested its hotel business and its interest in Raffles City Singapore in 2005 and 2006, respectively. RHL was delisted from the official list of the SGX-ST on 13 December The divestment of the hotel business gave the Group greater strategic focus while unlocking significant value for shareholders. The Group has been actively re-deploying its capital into higher yielding investments in both Singapore and overseas. Notwithstanding the Group s expansion in the region, the net gearing ratio of the Group improved from 0.92 as at 31 December 2000 to 0.50 as at 31 March The Group plans to continue to keep direct ownership of investment properties low by placing stable properties into funds or REITs that have been or will be set up with external participation. Going forward, new acquisitions of investment properties will be done through property funds or REITs or directly by CapitaLand with a view to placing them into such vehicles eventually. This strategy to co-invest with financial partners while retaining management of the assets supports the Group s other driver which is to develop fund and asset management services as described below. The second part of the Group s strategy to increase asset productivity is to increase asset turnover. The Group has increased its residential trading business and has taken on a more active buy-and-sell strategy for commercial properties. This strategy includes buying third-party properties, enhancing their values and selling them to CapitaLand s managed funds for capital gains. 40

46 The third part of the Group s effort to increase asset productivity is intensive management, enhancement and redevelopment of the Group s commercial assets. Properties in Singapore that have been redeveloped or upgraded include One George Street (formerly known as Pidemco Centre), Plaza Singapura and Clarke Quay. The Group also seeks to enhance yields through improved positioning, better tenant mix and converting spaces into more productive use. Grow fee-based businesses While real estate development remains one of the core competencies and continues to underpin the Group s real estate businesses, there is scope for the Group to develop fee-based management services as another growth platform. These services include retail asset management, property fund management, real estate based financial services and hospitality management. These services make use of the Group s real estate knowledge, market networks and brands. CapitaLand has seen significant growth in its retail management business over the last five years. The Group plans to expand its retail mall platform aggressively across Asia directly and also through its REITs and funds in Singapore, China, Japan and India in particular. The Group s fund management business has also grown significantly in the last six years. It currently has under its management 11 private equity funds and five listed REITs, with retail, residential and office properties spanning key gateway cities in Asia including Singapore, Kuala Lumpur, Beijing, Shanghai and Tokyo. The Group s assets under management have grown to S$14.5 billion as at 31 March The Group aims to achieve total assets under management of S$18 billion by end It will grow its existing REITs and private equity funds through proactive asset enhancement and competitive third party acquisitions, while originating new ones in new markets and real estate sectors to meet investor demand. The Group s serviced residence arm, Ascott, has adopted a management focus versus ownership in its growth strategy. In early 2006, Ascott listed ART, the world s first Pan-Asian serviced residence REIT, which serves as its vehicle to acquire and hold serviced residence properties. Ascott will focus on strengthening its global brand, growing fee-based income, incubating new serviced residence and rental apartment properties. Expand overseas CapitaLand s objectives of expanding overseas are designed to take advantage of the opportunities in Asia s fast growing real estate markets, and to reduce its reliance on the Singapore market. CapitaLand plans to have 75 per cent. of the Group s earnings derived from outside Singapore. To this end, the Group has increased its assets held outside Singapore. Assets located outside of Singapore have grown from 25 per cent. of the total assets in 2000 to 54 per cent. of the total assets as at 31 March CapitaLand will focus its overseas growth efforts on China, Thailand, Vietnam and India, some of Asia s fastest growing markets, while maintaining a strong presence in mature markets like Singapore and Australia. While the focus of its real estate businesses is on Asia and Australia where it has the market knowledge, networks and reputation, the Group s serviced residence business has a broader geographical coverage that extends to Europe. CapitaLand plans to launch more property funds and REITs in tandem with its overseas expansion. These funds will enable the Group to access international capital to fund expansion and allow the Group to share risks with co-investors. 41

47 The Group adopts a multi-local approach in its overseas operations. Each of the Group s overseas operations is expected to operate like a local business. The Group places strong emphasis on building up a local management team, developing in-depth knowledge of the local market, having strong local partners and establishing relationships with local players and authorities. This multi-local approach has helped the Group to successfully establish strong footholds in a number of Asian markets. Competitive Strengths CapitaLand is focused on creating shareholder value across the entire real estate value chain. It has comprehensive competencies and a strong track record as a real estate developer, investor, operator, and manager and across multiple real estate sectors including residential, retail, commercial, integrated leisure, entertainment & convention, hospitality and real estate financial services. Its other major competitive strength is its successful multi-local strategy focused largely in the Asia Pacific region, including countries such as Singapore, Australia, China, Vietnam, India, Japan, Thailand and Malaysia. CapitaLand s other major thrust has been to embrace and extend the real estate capital market trends unfolding across Asia, including the use of securitisation structures, rated commercial mortgagebacked securities and residential sales receivables-backed securities issuances, launch of private equity funds, creation of REITs and others. This has enabled it to transform its business model into one that is very capital efficient and able to access the lowest cost of capital available either domestically or globally, and generate substantially higher liquidity and financial flexibility than a traditional real estate developer by recycling capital quickly once assets are completed and stabilised. A further competitive advantage is that CapitaLand is the first real estate developer in Asia to create a dedicated real estate financial services division focusing on providing real estate financial services and solutions, including private equity, public market fund and asset management, credit enhancement structures and mezzanine investment structures. This division has been focused on achieving the Group s strategy to increase its asset productivity and grow fee-based income, with the primary driving metric being assets under management. As a result of the significant expansion and diversification over the last few years, the Group has been able to achieve a balanced portfolio across selected countries in Asia, and also diversified its income stream to include development profits, investment income, trading gains and fee-based income, including asset management fees and other structuring fees and across multiple real estate sectors. With its strong balance sheet, the Group has been able to achieve significant expansion through various strategic joint ventures and minority acquisitions. It has also been able to move quickly to acquire and warehouse real estate assets with attractive potential for enhancement and eventual profitable capital recycling. The Group believes that active capital management adds significant value to a capital intensive business such as real estate. Since 2001, the Group has progressively divested non-core assets to free up capital and achieve higher returns on assets. In 2005, the Group completed two major strategic divestments. These were the divestment of non-strategic businesses, PREMAS and the hotel business owned by RHL, which was subsequently delisted from the official list of the SGX-ST on 13 December 2006, and unlocking significant value for shareholders. Strategic Business Units The table below summarises the relative contribution of the various strategic business units to the Group s revenues. 42

48 Year ended 31 December audited Revenue (in S) Continuing operations Residential... 3,036,808 2,354,436 Retail... 50,262 94,614 Commercial , ,804 Financial Services... 70, ,222 Serviced Residences , ,120 Others&Inter-SegmentalElimination ,634 (21,471) Total... 3,845,637 3,147,725 CapitaLand Residential CRL is a developer of premier homes with operations focused primarily in the key cities in Singapore, Australia, China, Thailand and Malaysia. The company has over 30 years of home-building experience and knowledge garnered from its worldwide operations. It has established a dominant presence in its key markets by building and delivering homes that offer lasting value. Its portfolio of condominium apartments and landed housing spans over 20 cities in nine countries, and caters to a broad spectrum of homebuyers across all market segments. In Singapore, CRL is a leading developer with well-designed and award-winning projects including Scotts High Park, The Seafront on Meyer, RiverGate, The Botanic on Lloyd, Glentrees and The Orchard Residences. The Group is also active in Australia through Australand, which is listed on both the Singapore and Australia stock exchanges. After achieving its tenth consecutive year of record profits since it was listed in 1997, Australand remains committed to its strategy to become a diversified property group where a significant proportion of its income will come from property trusts. In China, CRL has a significant presence through its subsidiary, CapitaLand China Holdings Pte Ltd ( CCH ), which builds homes, offices and integrated developments in the cities in Bohai Economic Rim, Yangtze River Delta and Pearl River Delta. In 2006, CCH expanded its operations to the second and third tier cities in the western and central regions of China through two strategic partnerships; one of the partnerships is with Sichuan developer, Chengdu Zhixin Industrial Co. Ltd. and the other is with Henan developer, Central China Holdings Group. In Thailand, CRL established a joint venture company with TCC Land to invest, develop and manage properties in the residential, office and retail sectors. The joint venture has launched several high-end residential projects in Bangkok. In addition, CRL has a presence in Malaysia through its listed associated company, UML, an established developer of integrated townships and boutique developments in key cities. As a platform for its next phase of growth, CRL has entered into new markets in Asia, namely India and Vietnam. In India, CRL is developing its first residential project with 590 apartments in Mumbai with its partner, the Mumbai-based Runwal Group. In Vietnam, CRL has launched the first phase of The Vista Condominium at An Phu Ward, Ho Chi Minh City. The first 273 units released in the 750-unit development were fully booked. In a separate joint venture, CRL will also develop a second condominium comprising about 600 homes in Ho Chi Minh City. 43

49 The Group s major residential projects as at 31 March 2007 include: Country Property Description Percentage (1) owned (%) Total no. of Units Singapore The Seafront on Meyer Seafront condominium in the coveted Meyer Road residential estate. The majority of the apartments enjoy views of the sea or city skyline. Singapore Scotts High Park High-end boutique condominium with a Penthouse Series of apartments. Located along Scotts Road, just minutes from the bustling Orchard Road. Singapore The Metropolitan Condominium tailored for the changing lifestyles of families in the high-mid segment of the market. Located off Tanglin Road, next to the Redhill Mass Rapid Transit ( MRT ) station. China, Shanghai Parc Tresor A 705-unit condominium located in Baoshan District, Shanghai. China, Shanghai Westwood Green Located in Shanghai s exclusive Minhang residential neighbourhood, the development has a total of 426 townhouses and apartments. China, Shanghai Oasis Riviera A 1,964-unit condominium in Shanghai s Changning District which enjoys views of the Suzhou Creek. China, Beijing La Forêt A much sought-after residential development in Beijing s Chaoyang District near the Olympic Park, with 1,807 units. China, Guangzhou Beau Monde Located in Guangzhou s bustling Tianhe District, the development has a total of 386 apartments. China, Ningbo Summit Residences This is CapitaLand s maiden residential project in Ningbo. The development is located in Jiangbei district, Ningbo s city centre , , ,182 (2) (1) Effective ownership (2) Based on estimates 44

50 CapitaLand Retail CRTL has a portfolio of over 50 retail malls in Singapore, China, Japan and Malaysia, making CRTL a leading owner and manager of retail malls in Asia. With a portfolio of 15 retail malls in Singapore, comprising 10 retail malls owned by CMT, three retail malls under CapitaRetail Singapore Limited ( CRS ), and two retail malls held by CRTL, CRTL is the largest retail mall manager in Singapore. As at 31 March 2007, CRTL beneficially owned 31.1 per cent. of CMT which is the largest REIT in Singapore by market capitalisation and asset size. CRTL is also currently developing Orchard Turn, a retail-cum-residential project at the gateway of Singapore s main shopping street, Orchard Road, with a joint venture partner, Sun Hung Kai Properties Limited. In China, CRTL is one of the largest players in the retail mall business. It manages and owns a portfolio of 33 retail malls comprising seven retail malls held by CRCT, 20 retail malls owned by CapitaRetail China Development Fund ( CRCDF ), one retail mall under CapitaRetail China Incubator Fund ( CRCIF ), and five retail malls owned by CRTL. CRTL has a stake in CRCT, CRCDF and CRCIF of 26.2 per cent., 45.0 per cent. and 30.0 per cent., respectively. In December 2006, CRCT was successfully listed on the SGX-ST. CRCT s initial portfolio of seven retail malls is strategically located within large population catchment areas in five cities across China. The quality geographically diversified portfolio, valued at S$689 million, is anchored by major international and domestic retailers, such as Wal-Mart, Carrefour and the Beijing Hualian Group. In addition, CRCT has been given the right of first refusal over properties from CRCDF and CRCIF, for which CRTL has secured a large pipeline of properties. In Japan, CRTL manages and beneficially owns a 22.7 per cent. stake in a portfolio of five retail malls which are held by CRJF. In India, CRTL is in a joint venture with one of India s leading listed retailers, Pantaloon Retail (India) Ltd ( Pantaloon ). CRTL has also invested US$75 million (S$115 million) in Pantaloon s retail product fund and established 50:50 joint ventures for retail and fund management businesses across India. CRTL aims to potentially manage a portfolio of approximately 50 retail malls, across 30 cities and 14 states in India in the next three to five years. The Group s major retail malls as at 31 March 2007 (excluding those held by CMT, CRS and CRCT) include: Country Property Description Percentage owned (%) Net Lettable Area (sqm) Singapore Clarke Quay An integrated retail, entertainment and lifestyle precinct along the Singapore river. China, Chongqing Jiulongpo Mall A retail mall located at Chongqing. China, Hunan YuHuaTing Mall A retail development located at Changsha , ,666 (1) 51 45,441 (1) China, Sichuan Fucheng Mall A retail mall located at Mianyang ,825 (1) China, Guangdong Guicheng Mall A retail mall located at Nanhai ,067 (1) China, Sichuan Jinniu Mall A retail mall located at Chengdu ,446 (1) China, Guangdong Wal-Mart China Headquarters A retail development located at Shenzhen ,274 (1) 45

51 Country Property Description Percentage owned (%) Net Lettable Area (sqm) China, Beijing Xihuan Plaza Retail Mall A retail development comprising a seven-storey retail podium, three main office towers and one ancillary office block, located in the heart of Xizhimen ,909 (1) Japan, Hokkaido Ito-Yokado Chitose A retail mall located at Chitose ,330 Japan, Osaka Izumiya Hirakata A retail mall located at Hirakatashi. Japan, Tokyo La Park Mizue A retail mall located at Mizue, Edogawa-Ku. Japan, Chiba ViVit Square A retail mall located at Funabashi-shi. Japan, Hokkaido Ito-Yokado Eniwa A retail mall located at Eniwa City. (1) Gross rentable area CRCT s major retail properties as at 31 March 2007 include: , , , ,466 Country Property Description Percentage owned (%) Gross Rentable Area (sqm) (1) China, Beijing Wangjing Mall A retail mall located at Wangjing with a four-storey building, twolevel basement, shopping podium and seven-storey tower block. China, Beijing Jiulong Mall A retail mall located at Guangqu Road with a three-storey building and one-level basement. China, Beijing Anzhen Mall A retail mall located at Anzhen Xi Li with a five-storey building and one-level basement. China, Shanghai Qibao Mall A retail mall located at Minhan District with a four-storey building and one-level basement carparking space. China, Henan Zhengzhou Mall A retail mall located at Zhengzhou with a six-storey building and one-level basement , , , , ,356 China, Inner Mongolia Jinyu Mall A retail mall located at Huhehaote with a five-storey building and one-level basement ,938 (1) As at 30 September

52 In addition, as at 31 March 2007, CapitaLand beneficially owned 31.1 per cent. of CMT. Listed in July 2002, CMT is the first listed REIT in Singapore. It invests in quality income-producing assets which are used, or predominantly used, for retail purposes in Singapore. Income is derived from rental payments received from a diverse list of over 1,500 leases from local and international tenants in 10 major shopping malls in both the suburban and central areas. In addition, as at 31 March 2007, CMT owns 27.2 per cent. of CRS (with effect from 1 June 2007, after the acquisition of the remaining 72.8 per cent. of CRS, CMT owns 100 per cent. of CRS) which in turn owns three retail malls, Lot One Shoppers Mall, Bukit Panjang Plaza and Rivervale Mall with about 300 leases in total. In September 2006, CMT completed the acquisition of a 40.0 per cent. interest in Raffles City Singapore, further strengthening its position as the largest REIT by asset size and market capitalisation in Singapore. As at 31 March 2007, its asset size is S$4.8 billion and market capitalisation is S$5.9 billion. In November 2006, CMT invested 20.0 per cent. in CRCT, the first pure-play China retail REIT listed in the SGX-ST. CMT has been assigned an A2 rating by Moody s Investor Services and is managed by CapitaMall Trust Management Limited ( CMTML ), an indirect wholly-owned subsidiary of CapitaLand. CMTML s relationship with CapitaLand has provided it with access to the full capabilities, skills and business network of the Group. The Group s major retail properties as at 31 March 2007 held by CMT and CRS include: Country Location Description Major Properties Held under CMT Percentage owned (%) Net Lettable Area (square feet sf ) Tampines Mall Tampines (Eastern suburban area of Singapore) Family-oriented mall catering to the middle-income sector and it is well patronised by shoppers residing and working in the eastern part of Singapore ,858 Junction 8 Bishan (Central suburban area of Singapore) Family-oriented mall catering to the population residing in the surrounding housing estates, office crowd within the vicinity and students from nearby schools ,613 IMM Building Jurong East (Western suburban area of Singapore) Suburban family mall targeting families and consumers residing and working in the western region of Singapore ,481 (1) Funan DigitaLife Mall North Bridge Road (Downtown Core of Singapore) Digital, information technology, and lifestyle destination catering to a wide array of shoppers ,136 Plaza Singapura Orchard Road (Downtown Core of Singapore) One-stop shopping, dining and entertainment mall catering to a wide cross-section of the population ,575 47

53 Country Location Description Percentage owned (%) Net Lettable Area (square feet sf ) Hougang Plaza Sembawang Shopping Centre Jurong Entertainment Centre Bugis Junction Hougang (Northeastern suburban area of Singapore) Sembawang (Northern suburban area of Singapore) Jurong East (Western suburban area of Singapore) Bugis (Downtown Core of Singapore) Major Properties Held under CRS Lot One Shoppers Mall Bukit Panjang Plaza Rivervale Mall Choa Chu Kang (Northern suburban area of Singapore) Bukit Panjang (Northern suburban area of Singapore) Sengkang (Northeastern suburban area of Singapore) Neighbourhood mall for the community catering to the basic shopping needs and entertainment of residents in the area. One-stop family-oriented necessity mall catering to local residents. Shopping, dining and entertainment destination targeting youths and residents in the west of Singapore. Leading lifestyle mall focusing on fashion, dining, entertainment, targeting young adults, and professionals, managers, executives and businessmen. A leading family mall nestled in the heartland of Choa Chu Kang with focus on fashion, dining and entertainment. A one-stop suburban mall conveniently located beside Bukit Panjang Bus Interchange and situated between Bukit Panjang and Petir Light Rail Transit station. With its accessible location Rivervale Mall is a popular and convenient shopping destination for residents living within the vicinity , (2) , , (3) 204, (3) 150, (3) 81,545 (1) Comprising 397,916 sf for retail, 68,624 sf for office and 421,914 sf for warehouse. (2) Sembawang Shopping Centre is undergoing major asset enhancement works which commenced in March (3) With effect from 1 June 2007, after CMT s acquisition of the remaining 72.8 per cent. in CRS, the Group s effective interest would be revised to 31.1 per cent. (4) Raffles City Singapore is reflected in the list of properties held by CCT. CapitaLand Commercial CCL is one of Singapore s largest owners and managers of office properties. Its portfolio of commercial properties ranges from landmark office buildings in the CBD to car parks and high technology industrial complexes. CCL owns these office buildings directly, through joint ventures, private equity funds and its stake in CCT. As at 31 March 2007, CCL has a commercial portfolio of approximately five million square feet of net lettable area in Singapore and this is primarily located in the CBD and downtown core. The portfolio includes prime Grade A office assets such as One George Street as well as Capital Tower, 6 Battery Road and Raffles City Singapore which are held by CCT. Average occupancy rate of CCL s office 48

54 properties in Singapore as at 31 March 2007 was approximately 98 per cent. The high occupancy rate is primarily due to sought after locations, competent facilities and building management. The tenant base is diverse and includes international and local tenants from a variety of business sectors. Overseas, CCL focuses on high growth commercial and integrated property business with approximately five million square feet of gross floor area. It has commercial property investments in Shanghai, Beijing, Hong Kong, London, Bahrain and Kuala Lumpur. In China, CCL s office developments are located in the CBD. Its key overseas assets include Capital Tower Beijing, Raffles City Shanghai and in Hong Kong, the AIG Tower. The Group s major commercial office properties as at 31 March 2007 (excluding those held by CCT) include: Country Property Description Percentage owned (%) Net Lettable Area (square metres sqm ) Singapore Temasek Tower (1) A 52-storey commercial building with four basement levels, located on the western flank of Shenton Way, bounded by Maxwell Road, Anson Road and Prince Edward Road, within the traffic restricted zone of the CBD. Singapore Hitachi Tower A 37-storey commercial building with three levels of basement car park and an office tower block, located on the eastern side of Raffles Place, within the prime area of the CBD. Singapore Chevron House (formerly known as Caltex House) A 33-storey shopping/office building with three levels of basement car park, located on the eastern side of Raffles Place, within the prime area of the CBD. Singapore One George Street A 23-storey office building with a five-storey podium (three levels of car parking), one basement and ancillary facilities. It is bounded by South Bridge Road, North Canal Road, Pickering Street and George Street approximately 1/2 km from the city centre of Collyer Quay. Singapore PWC Building A 28-storey office building with a four-storey podium car park and covered linkway, located on the northern side of Cross Street, at the fringe of the prime financial and commercial hub of Singapore and within one km from the city centre , , , , ,080 49

55 Country Property Description Percentage owned (%) Net Lettable Area (square metres sqm ) China, Hong Kong AIG Tower A 39-storey Grade A office building, situated in the CBD of Hong Kong. China, Shanghai Raffles City Shanghai A 45-storey office tower and a seven-storey retail podium above a three-storey basement, located at Xizang Middle Road, Huangpu District, Shanghai. China, Beijing Capital Tower Beijing Two 35-storey office towers, namely Tower A and Tower B, and 298 car parking spaces on basement levels, located at Jinguomenwai Dajie, Chaoyang District, Beijing ,929 (2) ,171 (2) ,627 (2) (1) Temasek Tower was divested on 16 April (2) Gross floor area. In addition, as at 31 March 2007, CCL beneficially owned 30.4 per cent. of CCT. Listed in May 2004, CCT is Singapore s first commercial REIT. It owns and invests in real estate and real estate related assets in Singapore and overseas, which are income-producing and used, or predominantly used, for commercial purposes. CCT s portfolio consists of nine prime properties in Singapore s CBD and downtown core, amongst which are landmark buildings such as Raffles City Singapore (through a 60 per cent. interest in RCS Trust). In addition, CCT owns Wisma Technip (1) (through an investment in junior bonds), an office asset in Kuala Lumpur, Malaysia as well as a 30 per cent. stake in QCT, a REIT listed in Malaysia and a 7.4 per cent. stake in Malaysia Commercial Development Fund ( MCDF ). CCT s acquisition of the 60 per cent. interest in Raffles City Singapore increased its total assets size to S$3.9 billion (as at 31 March 2007) and made CCT the largest commercial REIT in Singapore. CCT is managed by CapitaCommercial Trust Management Limited ( CCTML ), an indirect wholly owned subsidiary of CapitaLand. CCTML s relationship with CapitaLand has provided it with access to the full capabilities, skills and business network of the Group. (1) On 8 June 2007, CCT entered into a conditional sale and purchase agreement with QCT on the sale of Wisma Technip. 50

56 CCT s major properties as at 31 March 2007 include: Property Description Net Lettable Area (sqm) Capital Tower A Grade A 52-storey intelligent office building located along Robinson Road in Singapore s prime business district, and is adjacent to the Tanjong Pagar MRT station. There are retail outlets as well as amenities such as conference room facilities, a gymnasium and swimming pool on the first storey and ninth storey and 415 car park lots on the third to eighth storeys. There is also an expansive urban plaza in front of the building with water features, sculptures and extensive landscaping. 6 Battery Road A Grade A 42-storey office building, located in the heart of Raffles Place, Singapore s financial and commercial hub, with a direct basement access to the Raffles Place MRT station. The banking hall of Standard Chartered Bank occupies the first storey of the building. The main entrance lobby has hotel-like features, including a concierge service counter, sofa seating area, water feature and expansive back-lit onyx walls. There are 190 car park lots located over three basement levels. The building was extensively retrofitted between 2000 and 2002 at a cost of approximately S$37.3 million. HSBC Building A prime office building in Raffles Place, the heart of Singapore s financial and commercial hub. Its excellent frontage offers panoramic views of Fullerton Square and Marina Bayfront. The 999-year leasehold property comprises a 21-storey office block and three basement levels. Starhub Centre Robinson Point Bugis Village A 10-storey office building with retail space on the first storey and a food court on the second storey. It is located in the prime Orchard Road shopping belt and is linked to the popular Centrepoint Shopping Centre via a link-bridge on the second storey. 281 car park lots are provided on the second to fifth storeys. A 21-storey office building located near the popular Lau Pa Sat Festival Market. It is within 10 minutes walk to the Raffles Place MRT station. The first storey of the building contains the banking hall of Southern Bank Berhad as well as two food and beverage outlets. There are 57 car park lots located on the third to fifth storeys of the building. Bugis Village comprises 34 three-storey pre-second World War shophouses that were restored in 1991 at a cost of approximately S$7 million. Bugis Village is located in the bustling Bugis Street/Queen Street area, where there are numerous street stalls and a food centre, and is opposite the popular Bugis Junction Shopping Centre. Bugis Village is directly across the road from the Bugis MRT station. It comprises shop units, fast food outlets/restaurants, office units and shophouses. 68,887 46,060 18,624 26,030 12,369 10,964 51

57 Property Golden Shoe Car Park Market Street Car Park Raffles City Singapore (2) Description A 10-storey building located on the western end of Market Street, next to the heart of Raffles Place, Singapore s financial and commercial hub. Commercial developments in the vicinity include UOB Plaza, Republic Plaza, OCBC Centre and OUB Centre. The building is linked to OUB Centre by an overhead pedestrian bridge on the second storey. The Raffles Place MRT station is within a short walking distance. In addition to a food centre, the building has shops/food outlets, 1,067 car park lots on the second to ninth storeys and office units on the tenth storey. An eight-storey building bounded by Market Street, Cross Street and Cecil Street, and is near Raffles Place, Singapore s financial and commercial hub. Commercial developments within the vicinity include Hong Leong Building, City House, Equity Plaza and Republic Plaza. The popular Lau Pa Sat Festival Market is diagonally across the Cross Street/ Robinson Road junction from Market Street Car Park and the Raffles Place MRT station is within walking distance. The building accommodates shops at the first and second storeys and there are about 700 car park lots on the second to eighth storeys and on the roof level. A prime landmark integrated development located in the Downtown Core at the fringe of Singapore s CBD comprising the Raffles City Tower, the Raffles City Shopping Centre, the Hotels and the Convention Centre. Raffles City Singapore is adjacent to and is directly connected to City Hall MRT station, one of Singapore s four major MRT interchange stations. In addition, Raffles City Singapore will have direct connectivity to the proposed Esplanade MRT station on the Circle Line of the MRT system, which is expected to be fully operational by Net Lettable Area (sqm) 3,942 1,970 68,022 (1) (1) Comprising a net lettable area of 35,324 sqm in respect of Raffles City Tower and a net lettable area of 32,698 sqm in respect of Raffles City Shopping Centre. (2) CCT holds 60 per cent. and CMT holds 40 per cent. CapitaLand ILEC ILEC s maiden project is an integrated development, MSC, which sits on a 1.4 million square feet site strategically located on the Cotai in Macau. This area is quickly establishing itself as Macau s main entertainment and gaming hub. The MSC site is located next to the new Lotus Bridge immigration checkpoint linking the development directly to mainland China through Zhuhai. The total gross floor area of the project is expected to reach 6 million square feet or more when the two phases of the project are fully developed. Phase 1 of the MSC development is targeted for completion in ILEC has a 20 per cent. strategic stake in MSC which, when completed, will be Asia s first leisure resort property combining theatre, television and film production facilities, and retail, with gaming, entertainment and world-class hotels. The retail component comprises a 1.4 million square feet Studio Retail TM complex which will be created in partnership with Taubman Centers, Inc. Recently, agreements were signed with The Ritz-Carlton Hotel Company, L.L.C. and Marriott International to manage and operate two hotel properties. The founder of China Clubs and Shanghai Tang, David Tang, is also anticipated to partner MSC to create a luxurious boutique hotel. In due course, other operators will be selected for the rest of the components of the property. 52

58 Ascott Ascott, CapitaLand s listed serviced residence arm, is the largest international serviced residence owner-operator outside the US. Headquartered in Singapore, Ascott has about 19,000 serviced residence units under management in key cities of the Asia Pacific region, Europe and the Gulf region. Listed on the SGX-ST, Ascott pioneered Asia Pacific s first branded luxury serviced residence in 1984 and has a market capitalisation of about S$2.7 billion (as at 31 March 2007). As at 31 March 2007, CapitaLand owned 66.8 per cent. of Ascott. Today, Ascott operates three brands namely Ascott, Somerset and Citadines in 48 cities across 21 countries. These include (i) London, Paris, Brussels, Berlin, Barcelona and Moscow in Europe; (ii) Singapore, Bangkok, Hanoi, Kuala Lumpur, Tokyo, Seoul, Shanghai, Beijing, Xi an, Hong Kong and Chennai in Asia; (iii) Sydney, Melbourne and Auckland in Australia and New Zealand, and (iv) Dubai and Manama in the Gulf region. Ascott s target is to rapidly grow its owned and managed portfolio to 25,000 serviced residence units by Ascott reallocates capital through divesting mature assets and reinvesting the funds into higher-yielding assets. In 2006, Ascott divested more than S$1 billion worth of assets, including the properties divested to ART, yielding cash proceeds of over S$650 million. This was substantially reinvested in China, Hong Kong, India, Singapore, Thailand and Vietnam with a total investment of over S$600 million. Besides strengthening Ascott s foothold in existing markets like China, Indonesia, Thailand and Vietnam, Ascott has expanded its portfolio through investments and management contracts in new cities including Hong Kong, Xi an in Northern China, Bangalore and Chennai in India, Doha in Qatar and Manama in Bahrain. In April 2007, Ascott launched a US$ million private equity fund, the Ascott Serviced Residence (China) Fund, to fund its expansion in China and reach its target of 10,000 serviced residence units in the country by The fund will invest primarily in selected regional cities of China by acquiring and repositioning suitable properties or developing greenfield sites into serviced residences. Ascott also works with partners to build a strong and long-term presence in new markets. In 2006, two master development agreements were signed for the Gulf region and India, with Ascott targeting to launch at least 15 serviced residence properties across the Middle East and North Africa and seven properties in four southern Indian states by Ascott also signed a memorandum of understanding in February 2007 for a joint US$100 million fund to launch 1,000 serviced residence units in Russia by Ascott s major serviced residence assets as at 31 March 2007 include: Country Property Description Effective Investment Held by Ascott (%) Gross Floor Area (sqm) Singapore Singapore Ascott Singapore Raffles Place Citadines Singapore Scotts 20 storeys, between CBD and new Business and Financial Centre. Seven storeys, close to prime Orchard Road. Singapore Somerset Orchard Five storeys, above retail podium, Orchard Road. France Citadines Paris Les Halles Eight storeys, in Forum des Halles, near Centre Pompidou, Châtelet, Notre Dame, lle Saint-Louis. 100 (1) 100 8, ,817 (2) 100 8,500 53

59 Country Property Description Effective Investment Held by Ascott (%) Gross Floor Area (sqm) France Citadines Paris Place d Italie Nine storeys, at Place d Italie, near restaurants in Chinatown, bistros in Butte-aux-Cailles ,845 France Citadines Paris Tour Eiffel Eight storeys, in sophisticated Grenelle district with shops, cafes and brasseries ,398 France Citadines Paris Trocadero In two six and seven-storey buildings, near Trocadero with its gardens ,524 United Kingdom Citadines London Barbican Seven storeys, near Barbican centre, one of Europe s largest cultural complexes and St Paul s Cathedral ,960 (2) United Kingdom Citadines London South Kensington Seven storeys, near chic boutiques, department stores. 65 4,542 United Kingdom Citadines London Trafalgar Square 10 storeys, close to the popular Trafalgar Square, Covent Garden, Oxford Street ,200 United Kingdom Somerset Bayswater, London Six storeys, in Bayswater, near Kensington Garden. 50 6,875 (2) China Ascott Shanghai Pudong 35 storeys, in Lujiazui, near Shanghai Stock Exchange. Ascott owns 124 units and manages the rest ,000 China People s Parade, Wuhan A premier shopping and entertainment centre ,283 (2) China Somerset ZhongGuanCun, Beijing 17 storeys, adjoins two apartment blocks, out of which the Group leases one block, above retail podium, Hai Dian Zhong Road ,979 Spain Citadines Barcelona Ramblas 10-storeys, at the famous Rambias, near Plaza de Catalunya and a cathedral. 65 5,496 (1) Currently undergoing major refurbishment and is expected to open in first half 2008 (2) Net Lettable Area In 2006, Ascott established the first Pan-Asian serviced residence REIT, ART, with the intention of transforming its overall business model into a capital-efficient and integrated platform to facilitate its growth plans, as well as to capture the full serviced residence value chain. As part of its role as the sponsor of ART, Ascott injected 12 serviced residences and rental apartment properties located in Singapore, China, Indonesia, the Philippines and Vietnam into the REIT to form ART s initial asset portfolio. As at 31 March 2007, CapitaLand beneficially owned 37.3 per cent. of ART. Listed in March 2006, ART is the first Pan-Asian serviced residence REIT established with the objective of investing primarily in real estate and real estate related assets which are income-producing and which are used, or predominantly used, as serviced residences or rental housing properties in the Pan-Asian region. 54

60 Since its listing, ART has acquired properties in Melbourne in Australia, Tianjin in China, Tokyo in Japan, Manila in the Philippines and Ho Chi Minh City in Vietnam. This has expanded ART s asset size to S$1.2 billion, comprising 18 properties with 2,904 units in ten cities across seven countries. To fund the above acquisitions, ART has conducted two equity fund raising exercises. The first placement was held in September 2006, raising S$48.4 million through a private placement. The second equity fund raising ( EFR ) exercise held in March 2007 successfully raised gross proceeds of S$199 million, and comprised a private placement, an ATM Offering to retail investors and a preferential offering to existing ART unitholders. In response to the overwhelming demand for ART s EFR exercise, CapitaLand placed out 100 million units of ART in a placement exercise on 13 March Subsequent to the placement, CapitaLand s effective interest in ART was reduced from 61.3 per cent. to 37.3 per cent. after the placement and the EFR. ART is managed by Ascott Residence Trust Management Limited ( ARTML ), which is a wholly owned subsidiary of Ascott. As at 31 March 2007, ART s market capitalisation was about S$1.2 billion. ART s major serviced residence assets as at 31 March 2007 include: Country Property Description Effective Interest Held by ART (%) Net Lettable Area (sqm) Singapore Somerset Grand Cairnhill The 144-unit Somerset Grand Cairnhill, Singapore, is located in the heart of Orchard Road, Singapore s prime shopping and entertainment belt, and is within walking distance to major shopping centres like The Paragon, Ngee Ann City and The Heeren, as well as the Somerset MRT station ,629 Singapore Somerset Liang Court Somerset Liang Court Singapore features 193 units in a 26-storey tower adjoining the Liang Court Shopping Centre and is conveniently located next to Clarke Quay, a bustling world-class dining and entertainment hub with numerous restaurants, bars, clubs and retail outlets. The property is a five-minute walk to the Clarke Quay MRT station, and is easily accessible to Orchard Road and the CBD ,908 Vietnam Somerset Chancellor Court, Ho Chi Minh City The 172-unit Somerset Chancellor Court, Ho Chi Minh City, is an 18- storey building with one basement level and 42 car park lots. Centrally located in District 1 in Ho Chi Minh City s prime commercial, diplomatic and major shopping district, Somerset Chancellor Court, Ho Chi Minh City, is within walking distance of many businesses, consulates and shopping centres ,026 55

61 Country Property Description Effective Interest Held by ART (%) Net Lettable Area (sqm) Vietnam Vietnam Somerset Grand Hanoi Somerset Ho Chi Minh City The 185-unit Somerset Grand Hanoi is centrally located on Hai Ba Trung Street, in the heart of Hanoi s CBD. The tallest serviced residence in Hanoi, this property offers one- to three-bedroom apartments and houses a convention centre and a shopping mall on its lower floors. Somerset Ho Chi Minh City is situated in District 1, the city s prime downtown business and shopping district. It offers 165 fully-furnished units in two- to four-bedroom layouts and is within walking distance to businesses, consulates, shopping centres, the Botanic Gardens and a wide variety of dining and entertainment places. China Ascott Beijing The 272-unit Ascott Beijing is centrally located in the heart of Beijing s prime business, residential and retail districts. Situated in the prime Chaoyang District, the property is diagonally opposite the China World Trade Centre and is close to Wang Fu Jing Da Jie, the renowned shopping belt in Beijing as well as the Financial Street. China Indonesia Japan Somerset Olympic Tower, Tianjin Somerset Grand Citra, Jakarta Somerset Roppongi, Tokyo Set in the heart of Tianjin s prime commercial and entertainment Heping District, the 172-unit Somerset Olympic Tower Property, Tianjin, stands at the junction of Chengdu, Kunming and Guizhou Roads. Within close proximity are international institutions, an upmarket shopping area and the Tianjin railway station. The 203-unit Somerset Grand Citra, Jakarta, is centrally located in Central Jakarta s Golden Triangle business district, and is minutes away from the Jakarta Convention Centre, Plaza Indonesia shopping complex and various embassies. Somerset Roppongi, Tokyo, is a 64-unit serviced residence set in the bustling Roppongi district in the heart of Minato-ku, in the CBD of Tokyo. The property is located within a five-minute walk from the Roppongi subway station and Roppongi I-chome station , , , ,043 (1) 6,194 (2) , ,542 56

62 Country Property Description Effective Interest Held by ART (%) Net Lettable Area (sqm) The Philippines Ascott Makati Located in Glorietta 4 Ayala Center in the heart of Makati City s CBD, the 306-unit Ascott Makati is close to the headquarters of numerous multinational corporations and financial institutions ,282 (1) In respect of the serviced residence portion of Somerset Olympic Tower Property, Tianjin. (2) In respect of the 33-year master lease of the commercial podium of the Somerset Olympic Tower Property, Tianjin between Tianjin Sports Administration Bureau (as lessor) and Tianjin Consco (as lessee) for the period from 1 July 2006 to 30 June CapitaLand Financial CFL is a leading provider of boutique financial services for real estate related investments in Asia. Its platform combines CapitaLand s global real estate domain knowledge with in-depth financial expertise to unlock and enhance the potential of real estate assets for property owners and investors. CFL s comprehensive in-house capabilities include structured financing, property fund and REIT management and advisory services. Dedicated teams in Singapore, Kuala Lumpur, Bangkok, Shanghai, Beijing, Hong Kong, Tokyo, London and Mumbai provide specific market knowledge and balance risks in the context of local legislation and conditions. It offers customers investment opportunities, local intelligence and operational capabilities in the countries where it operates. CFL pioneered the structuring for Singapore s first REIT, CMT and Singapore s first commercial office REIT, CCT. The Group s assets under management have grown to S$14.5 billion as at 31 March CFL aims to achieve total asset under management of S$18 billion by end As at 31 March 2007, the Group has under its management, 11 private equity funds and five listed REITs, with retail, residential and office properties spanning key gateway cities in Asia including Singapore, Kuala Lumpur, Beijing, Shanghai and Tokyo. Among the five listed REITs, QCT is CapitaLand s fifth REIT and the first listed outside of Singapore. It was listed in January 2007 on the Main Board of the Bursa Malaysia Securities Berhad. The investment objectives of QCT include acquiring and investing in commercial properties in Malaysia. The Group has in March 2007, through its wholly owned subsidiary, Capitaland Japan Kabushiki Kaisha, acquired a 13.0 per cent. stake in BLife Investment Corporation ( BLife ),areitlistedonthe Tokyo Stock Exchange and 33.4 per cent. stake in BLife s manager, Morimoto Asset Management Co., Ltd. In May 2007, the Group successfully closed the Raffles City Bahrain Fund ( RCBF ) at US$350 million, a Shariah-compliant product and is the first equity Sukuk of its kind for a real estate project. Sukuk issuances are typically debt instruments, while the RCBF is unique in that it has an equity characteristic. The RCBF which the Group has a beneficial interest of 37.1 per cent., will invest in the landmark Raffles City Bahrain integrated development with residential, retail and serviced residences components. 57

63 CapitaLand currently has the following 11 real estate private equity funds as at 31 March 2007: Fund Fund equity size (in millions, except as otherwise stated) Description Malaysia Commercial Development Fund CapitaRetail China Development Fund CapitaRetail China Incubator Fund CapitaLand China Development Fund ARC-CapitaLand Residences Japan CapitaRetail Japan Fund US$270 US$600 US$425 US$400 JPY12.6 (1) JPY44 (1) A private fund which will invest in real estate development properties primarily in Kuala Lumpur and the Klang Valley. A private fund which invests in retail mall development projects located in China. These would include the pipeline of retail malls, anchored by Wal-Mart, which are jointly owned by CapitaLand and Shenzhen International Trust & Investment Co. Ltd ( SZITIC ). In addition, it would also include other CapitaLand-owned or third party joint venture retail development projects. A private fund that will warehouse retail properties with the potential to generate quality income after the repositioning of the property, enhancing the asset or on completion of leasing activities. The properties which the Incubator Fund could potentially invest in include the prime Xihuan Plaza Retail Mall in Xizhimen, Beijing. A private fund investing in development projects in China. The fund focuses on residential, office, mixed and serviced apartment developments in high density growth centres namely in the Bohai Gulf Region, Yangtze River Delta, Western/Central China and Pearl River Delta. A joint venture with Arcapita Bank B.S.C.(c). This is CapitaLand s first Shari ah compliant property vehicle which invests in rental apartment buildings in the key cities in Japan. It currently has a portfolio of 10 apartment properties. A private retail property fund that has invested JPY45.2 billion in Japan retail malls with secured and steady annuity incomes, and the potential for asset enhancement. The retail properties cover Greater Tokyo and other key cities such as Osaka and Hokkaido. Mezzo Capital US$31 A private investment vehicle focusing on mezzanine investments in the mid to high-end residential segment in the Klang Valley and Penang in Malaysia. CapitaRetail Singapore CapitaLand China Residential Fund S$213 A private retail property fund sponsored by CapitaLand. It owns three Singapore suburban malls, namely Lot One Shoppers Mall, Bukit Panjang Plaza and Rivervale Mall. US$61 A private fund sponsored by CapitaLand with support from corporate investors, financial institutions and high net worth individuals. The Fund invests in the mid to high-end residential market in Shanghai, Beijing and Guangzhou. The fund has been fully invested. Eureka Office Fund S$421 A private fund with ERGO Insurance Group which invests in quality office assets in Singapore. IP Property Fund Asia US$193 A private fund focusing on real estate investments in Southeast Asia and Hong Kong which is co-sponsored and co-managed by CFL and ING. (1) Figures in Japanese Yen are in billions. 58

64 Construction The Group does not itself construct its property developments but generally contracts out the construction of its properties to local and international contractors. Each development project is tendered by the relevant business unit to local and international contractors with the necessary resources and track record. CapitaLand provides guidance on the criteria for selection. To date, the Group has not experienced difficulties in procuring such services. Competition Property Businesses: In Singapore, the Group competes with other real estate companies to attract and retain commercial tenants and to find purchasers for residential properties. The Group considers its major competitors in Singapore to be the publicly-listed real estate companies in Singapore as well as certain international real estate developers and private real estate companies. In the commercial property market, the Group competes on the basis of the location of its commercial properties and the quality of its service offerings. In the residential property market, the Group competes on the basis of the quality and design of its developments. The Group has focused principally on developing prime or centrally located residential properties and selected suburban properties located near transportation and other facilities. While the Group is one of the major real estate companies in Singapore, the real estate market is expected to remain highly competitive. The Group s real estate business is dependent, in part, on the availability of land suitable for development by the Group. To this end, the Group has selectively acquired prime freehold and leasehold lands for future development. Real Estate Financial Services: The Group s real estate financial services business competes for investors in a highly competitive industry. Competitive factors include the performance track record of the business, the track record of the individuals who form the management team, the ability to source good deals and execute them, and the ability to meet or exceed investors expectations. Serviced Residences: The Group s serviced residence businesses compete for guests in the highly competitive lodging industry in the countries in which they operate. Competitive factors in the hospitality industry include room rates, quality of accommodation, name recognition, service levels and the convenience of the location of each serviced residence. Competitive conditions may also be affected by changes in the economic conditions, changes in local market conditions as well as the prevailing supply of hospitality space in the relevant market. Overseas: The Group s overseas real estate and hospitality businesses compete with both domestic and international companies. Some of these companies have significant financial resources, marketing and other capabilities. The domestic companies in the overseas markets have extensive knowledge of the local real estate and hospitality markets and longer operational track records in their respective domestic markets. The international companies are able to capitalise on their overseas experience to compete in the markets in which the Group has overseas presence. Employees As at 31 March 2007, the Group had approximately 6,500 employees. The table below sets forth the percentage of employees in each of the Group s business segments as well as the Group s corporate centre: Business Percentage of Employees Residential

65 Business Percentage of Employees Retail CommercialandILEC Financial Services Serviced Residences Corporate Total The Group believes its employees are critical to its success and is committed to investing in the development of its employees through continuing education, and structured training, as well as the creation of opportunities for career growth. CapitaLand has three share schemes for its directors and executives the CapitaLand Share Option Plan, the CapitaLand Performance Share Plan and the CapitaLand Restricted Stock Plan. See Information Concerning the Shares Share Schemes. Intellectual Property CapitaLand relies on a combination of trade mark, service mark and domain name registrations, copyright protection and contractual restrictions to protect its brand name and logos, marketing designs and internet domain names. The Group owns trade marks and service marks including CapitaLand, CapitaLand Icon, CapitaMall, CapitaRetail, CapitaCommercial, Capita, CapitaCard, CapitaLand Hope Foundation, CapitaLand ILEC, CLIMB, CapitaRetail China Trust, Raffles City, Ascott, Somerset and Citadines. The Group also owns internet domain names including and Insurance The Group is covered by insurance policies arranged with reputable insurance agents which cover loss of rental, fire, flood, riot, strike, malicious damage, other material damage to property and development sites, business interruption, public liability and professional indemnity. The Group believes that it has adequate insurance coverage provided by reputable independent insurance companies, with coverage and financial limits that are commercially reasonable and appropriate for a group of its size and activities in the property business. Notwithstanding the Group s insurance coverage, damage to its facilities, equipment, machinery, buildings or other properties as a result of occurrences such as fire, explosion, power loss, communications failure, intentional unlawful act, human error or natural disaster could nevertheless have a material adverse effect on its financial condition and results of operations to the extent that such occurrences disrupt the normal operation of its businesses. Further, since the attacks on the US on 11 September 2001, many insurance companies have substantially increased their premiums. Insurance companies are also seeking to exclude insurance claims related to terrorism or related activities. Environmental Matters and Compliance The operations of the Group are subject to regulatory requirements and potential liabilities arising under applicable environmental laws and regulations. 60

66 CapitaLand believes that each member of the Group is in compliance in all material respects with applicable environmental regulations in Singapore and the other jurisdictions in which it operates. To date, no environmental incident involving the Group has occurred. CapitaLand is not aware of any environmental proceedings or investigations to which it is, or might become, a party. Legal Proceedings Neither CapitaLand nor any of its subsidiaries is a party to any litigation, arbitration or administrative proceedings which CapitaLand believes would, individually or taken as a whole, have a material adverse effect on the business, financial condition or results of operations of the Group, and, so far as CapitaLand is aware, no such litigation, arbitration or administrative proceedings are pending or threatened. 61

67 DIRECTORS AND MANAGEMENT Directors and Management The Directors of CapitaLand are responsible for the overall management of the Group. The day-to-day operations are entrusted to the President and Chief Executive Officer ( CEO ) of CapitaLand and a team of executive officers who are responsible for the different functions of the Group. Board of Directors Dr Hu Tsu Tau Chairman Dr Hu Tsu Tau, a Non-Executive Independent Director, joined the CapitaLand Board of Directors (the Board ) on 13 April 2004 and was elected as Chairman on the same day. Dr Hu was last re-appointed as Director at CapitaLand s Annual General Meeting on 27 April Dr Hu is also Chairman of CapitaLand s Investment Committee. Dr Hu is presently Chairman of GIC Real Estate Pte Ltd and Asia Financial Holdings Pte Ltd. Dr Hu is also a Member of the Board of the Government of Singapore Investment Corporation Pte Ltd ( GIC ) and a Director of Buildfolio.Com.Inc. Dr Hu was previously Chairman of Mapletree Investments Pte Ltd. From 1985 to 2001, Dr Hu was a Cabinet Minister holding posts in the Trade and Industry, Health and Finance ministries. Prior to his ministerial appointment, Dr Hu held the posts of Managing Director concurrently in MAS and GIC from 1983 to Before his appointments in MAS and GIC, Dr Hu was with the Shell Group of companies in 1960, and his last position in this global company was as Chairman and Chief Executive of the Shell Group of companies in Singapore. Dr Hu is a graduate of the University of California, USA, with a Bachelor of Science in Chemistry. Dr Hu also holds a Postgraduate Diploma (Chemical Engineering) and a Doctorate in Chemical Engineering, both from the University of Birmingham, UK. Mr Hsuan Owyang Deputy Chairman Mr Hsuan Owyang, a Non-Executive Independent Director, joined the Board on 20 November 2000 and was elected as Deputy Chairman on the same day. Mr Owyang was last re-appointed as Director at CapitaLand s Annual General Meeting on 27 April Mr Owyang is Chairman of CapitaLand s Finance and Budget Committee and Deputy Chairman of CapitaLand s Investment Committee. Mr Owyang sits on CapitaLand s Executive Resource and Compensation Committee and Nominating Committee. Mr Owyang is also Chairman of CMTML and CapitaRetail China Trust Management Limited ( CRCTML ). In addition, Mr Owyang is Chairman of East Asian Institute and Ayala International Holdings Limited. He is also a Director of MobileOne Limited which is listed on the SGX-ST. Mr Owyang was the former Chairman of Transpac Industrial Holdings Limited which is listed on the SGX-ST and N.M. Rothschild & Sons (Singapore) Limited; and was also a Director of N.M. Rothschild China Holding AG. Mr Owyang served on the Board of Singapore s Housing & Development Board ( HDB ) from 1977 and was appointed Chairman of HDB in 1983 until his retirement in October Mr Owyang has extensive banking experience and worked on Wall Street for 12 years as an investment advisor. Mr Owyang was also Director and General Manager of Overseas Union Bank which he was associated with for more than 18 years before his appointment as Executive Deputy Chairman of Post Office Savings Bank until

68 Mr Owyang is a graduate of the University of Dubuque, USA, with a Bachelor of Science in Business Administration. Mr Owyang also holds a Master in Business Administration from Harvard University, USA. Mr Liew Mun Leong President and CEO Mr Liew Mun Leong is the President and CEO of CapitaLand. Mr Liew joined the Board as Director on 1 January 1997 and was last re-elected as Director at CapitaLand s Annual General Meeting on 27 April Mr Liew also serves on CapitaLand s Investment Committee, Nominating Committee, Corporate Disclosure Committee and Finance and Budget Committee. Mr Liew is Chairman of CRL, CCL, CRTL and ILEC. Mr Liew is Deputy Chairman of CFL, Ascott as well as the Deputy Chairman of CMTML, CCTML, CRCTML and ARTML. Mr Liew is also a Director of CapitaLand Hope Foundation, the Group s philanthropic entity. Mr Liew has more than 30 years of experience in construction and real estate in Singapore and overseas. Mr Liew has participated in a number of public sector infrastructural development projects in Singapore, including the development and construction of Changi International Airport. For five years, Mr Liew was CEO of Singapore Institute of Standards and Industrial Research ( SISIR ), a statutory board responsible for national standards and industrial research and development to support the manufacturing industry in Singapore. Later, Mr Liew headed a regional public listed engineering and construction company, headquartered in Singapore. Mr Liew currently chairs the Board of the Civil Aviation Authority of Singapore ( CAAS ). Mr Liew was elected the President of International Organisation for Standardisation ( ISO ) from 1997 to In 2006, he was named Outstanding CEO of the Year in the Singapore Business Awards. Mr Liew was also named CEO of the Year in the Singapore Corporate Awards Mr Liew is a graduate of the University of Singapore with a Civil Engineering degree and is a registered professional civil engineer. Mr Lim Chin Beng Director Mr Lim Chin Beng, a Non-Executive Independent Director, joined the Board on 23 February 1998 and was last re-appointed as Director at CapitaLand s Annual General Meeting on 27 April Mr Lim is also the Chairman of CapitaLand s Executive Resource and Compensation Committee and Nominating Committee. Currently, Mr Lim is the Chairman of Ascott, CapitaLand Hope Foundation and Singapore Airshow Pte Ltd. Mr Lim sits on the Boards of StarHub Ltd (listed on the SGX-ST) and Pontiac Land Pte Ltd. Mr Lim is also Chairman of Pontiac Land s Audit Committee and a Member of the Public Service Commission. Mr Lim has 30 years of experience in the aviation industry beginning with the Malaysian Airlines in the 1960s. In the 1970s, Mr Lim helped start up Singapore Airlines and was its Managing Director from 1972 to Mr Lim retired as Deputy Chairman of Singapore Airlines in He was the Chairman of Singapore Tourism Board from 1985 to Between 1991 to 1997, Mr Lim was Singapore s Ambassador to Japan. Mr Lim is a graduate from the University of Malaya with a Bachelor of Arts (Honours) in Economics. Mr Lim also attended an Advanced Management Program at the Harvard Business School, USA, in

69 Mr Jackson Peter Tai Director Mr Jackson Tai, a Non-Executive Independent Director, joined the Board on 20 November 2000 and was last re-elected as Director at CapitaLand s Annual General Meeting on 28 April In addition, Mr Jackson Tai is a Member of CapitaLand s Investment Committee and Finance and Budget Committee. Currently, Mr Tai is Vice Chairman and Chief Executive Officer of DBS Group Holdings (listed on the SGX-ST) and DBS Bank, and also Chairman of the DBS Group Holdings Management Committee. Mr Tai is a Member of Bloomberg Asia Pacific Advisory Board. Prior to joining DBS Bank, Mr Tai was a Managing Director of J P Morgan & Co s Investment Banking Division. Mr Tai was previously a Director of Singapore Telecommunications Limited and Jones Lang LaSalle. Mr Tai graduated with a Bachelor of Science from the Rensselaer Polytechnic Institute, USA. He also holds a Master of Business Administration from Harvard University, USA. Mr Peter Seah Lim Huat Director Mr Peter Seah, a Non-Executive Director, joined the Board on 18 December 2001 and is a Member of CapitaLand s Executive Resource and Compensation Committee and Nominating Committee. Mr Seah was last re-elected as Director at CapitaLand s Annual General Meeting on 27 April Currently, Mr Seah is Chairman of SembCorp Industries Ltd, Singapore Technologies Engineering Ltd and Singapore Computer Systems Limited (all listed on the SGX-ST). Mr Seah is also Deputy Chairman of Singapore Technologies Telemedia Pte Ltd, STT Communications Ltd and Global Crossing Limited, and President Commissioner of PT Indosat Tbk. Mr Seah is a Director of Chartered Semiconductor Manufacturing Ltd, STATS ChipPAC Ltd, Starhub Ltd (all listed on the SGX-ST) as well as Asia Financial Holdings Pte Ltd, EDB Investments Pte Ltd and Siam Commercial Bank Public Company Limited. Mr Seah sits on the Boards of Government of Singapore Investment Corporation Pte Ltd and GIC Special Investments Private Limited, and is a Member of Defence Science and Technology Agency. Mr Seah is also the Honorary Treasurer of the Singapore Business Federation Council and Vice President of Singapore Chinese Chamber of Commerce & Industry. Mr Seah was President & CEO of Singapore Technologies Pte Ltd. Prior to the above appointment, Mr Seah was with Overseas Union Bank ( OUB ) from 1977, holding several senior positions and becoming its President & CEO in Mr Seah retired as Vice Chairman and CEO of OUB on 30 September Mr Seah graduated from the University of Singapore with an Honours Degree in Business Administration in Mr Richard Edward Hale Director Mr Richard Hale, a Non-Executive Independent Director, joined the Board on 10 February 2003 and was appointed as Chairman of CapitaLand s Audit Committee and a Member of CapitaLand s Risk Committee on the same day. Mr Hale was last re-elected as Director at CapitaLand s Annual General Meeting on 27 April

70 Mr Hale sits on the Board of Ascott and is Chairman and Member of its Nominating Committee and Executive Resource and Compensation Committee, respectively. Mr Hale is also the Chairman of CCTML. In addition, Mr Hale is a Fellow of the Singapore Institute of Directors and also sits on the Boards of Sembcorp Industries Ltd and Wheelock Properties (Singapore) Limited, companies listed on the SGX-ST. Mr Hale was previously a Director of Sembcorp Logistics Ltd, a company listed on the SGX-ST. Mr Hale started his career with The Hongkong and Shanghai Banking Corporation Ltd (the Bank ) in October 1958 and served in London, Paris, Hong Kong, Germany, Malaysia, Japan and Singapore before retiring from the Bank as CEO Singapore and Director in March From July 1995 to September 1997, he acted as advisor on environmental matters for HSBC Holdings plc London, based in Singapore. Mr Hale was Executive Chairman of SNP Corporation Ltd from 1 April 1999 to April 2000, and also served as Chairman of the Singapore International Chamber of Commerce for 1993 and He was formerly a Governor of United World College of South East Asia, Singapore. Mr Hale is a Fellow of the Chartered Institute of Bankers, London. Professor Robert Henry Edelstein Director Professor Robert Edelstein, a Non-Executive Independent Director, joined the Board on 5 May 2005, and was re-elected as Director at CapitaLand s Annual General meeting on 28 April Professor Edelstein is a Director of Medenomics, Inc, a private holding company in USA, and Tonti Fund in Ireland. Professor Edelstein also has served as a member of several prestigious Corporate Boards. Professor Edelstein is currently Professor and Co-Chairman of the Fisher Center for Real Estate and Urban Economics. Professor Edelstein joined the University of California in Professor Edelstein also serves on the editorial boards of the Journal of Housing Economics, International Real Estate Review, Journal of Property Research & the Journal of Real Estate Research. Professor Edelstein has been President of the American Real Estate & Urban Economics Association and has served on the Board of Directors of the American Real Estate & Urban Economics Association. Professor Edelstein is a member of the Board of Directors for the Asian Real Estate Society. Professor Edelstein holds a Doctorate in Economics from Harvard University, USA. Dr Victor Fung Kwok King Director Dr Victor Fung, a Non-Executive Independent Director, joined the Board on 5 May 2005, and was re-elected as Director at CapitaLand s Annual General Meeting on 28 April Dr Fung was previously a Member of CapitaLand s International Advisory Panel. Dr Fung is presently the Group Chairman of the Li & Fung Group of companies. Dr Fung is Vice-Chairman of the International Chamber of Commerce from January Dr Fung is also Chairman of the Greater Pearl River Delta Business Council, the Hong Kong Airport Authority, Hong Kong University Council and the Hong Kong Japan Business Co-operation Committee. Dr Fung is a member of Chinese People s Political Consultative Conference and a member of the Executive Committee of the Commission on Strategic Development of the Hong Kong Government. Dr Fung is an independent non-executive Director of Bank of China (Hong Kong) Limited, PCCW Ltd, Orient Overseas (International) Ltd, and Sun Hung Kai Properties Ltd in Hong Kong, and the Baosteel Group Corporation in the People s Republic of China. 65

71 Dr Fung holds Bachelor and Master Degrees in Electrical Engineering from the Massachusetts Institute of Technology, and a Doctorate in Business Economics from Harvard University, USA. Mr James Koh Cher Siang Director Mr James Koh, a Non-Executive Independent Director, joined the Board on 1 July 2005, and was re-elected as Director at CapitaLand s Annual General Meeting on 28 April Mr Koh is also the Chairman of CapitaLand s Risk Committee and Corporate Disclosure Committee, and a Member of CapitaLand s Audit Committee. Mr Koh is presently the Chairman of Singapore Deposit Insurance Corporation Limited and Deputy Chairman of Housing & Development Board and National Kidney Foundation. Mr Koh sits on the Boards of Singapore Airlines Limited, United Overseas Land Ltd and Hotel Plaza Limited, companies listed on the SGX-ST. Mr Koh is also a Director of CapitaLand Hope Foundation and Singapore Co-operation Enterprise. From 1997 to 2005, Mr Koh served as Chief Executive Officer of the Inland Revenue Authority of Singapore. In that capacity, he was both Commissioner of Inland Revenue and Commissioner of Charities. Prior to these appointments, Mr Koh was the Permanent Secretary of National Development, (the then) Ministry of Community Development, and Ministry of Education. Mr Koh has substantial experience in public administration having served in the Ministries of Finance, National Development, Community Development, Education and the Prime Minister s Office. Mr Koh was awarded the Public Administration Medal (Gold) in 1983 and the Meritorious Service Medal in Mr Koh graduated with a Bachelor of Arts (Honours) in Philosophy, Political Science, Economics from Oxford University, UK. Mr Koh also holds a Master of Arts from Oxford University, UK, and a Master in Public Administration from Harvard University, USA. Mrs Arfat Pannir Selvam Director Mrs Arfat Selvam, a Non-Executive Independent Director, was appointed to the Board on 2 January 2006, and was re-elected as Director at CapitaLand s Annual General Meeting on 28 April Mrs Selvam is also a Member of CapitaLand s Audit Committee, Corporate Disclosure Committee, Nominating Committee and Risk Committee. Mrs Selvam is currently the Managing Director of Arfat Selvam Alliance LLC, a boutique corporate finance law practice. With over 35 years in legal practice as a corporate finance lawyer, Mrs Selvam has been involved in some landmark Singapore acquisition transactions. She was also a Member of the Company Law Reform Committee which made major recommendations on changes to the companies and securities laws in Singapore. Mrs Selvam is currently on the Boards of the Accounting and Corporate Regulatory Authority ( ACRA ) and Singapore Health Services Pte Ltd. Mrs Selvam was also a Member of the Senate of the Academy of Law and the Board of Legal Education. Mrs Selvam served as President of the Law Society of Singapore in Mrs Selvam graduated from the University of Singapore with a law degree in 1968 and was admitted to practise as an Advocate & Solicitor of the Supreme Court of Singapore in

72 Professor Kenneth Stuart Courtis Director Professor Kenneth Courtis, a Non-Executive Independent Director, joined the Board on 14 February 2007, and was re-elected as Director at CapitaLand s Annual General Meeting on 27 April Professor Courtis is a Member of CapitaLand s International Advisory Panel. Professor Courtis is a Director of Noble Group Limited, a company listed on the SGX-ST. Professor Courtis is also the Founding Chairman of Next Capital Partners. He was the former Managing Director and Vice Chairman of Goldman Sachs Asia, and the former Managing Director, Chief Economist and Strategist of Deutsche Bank Group Asia. Professor Courtis was also a Director of CNOOC Ltd, Hong Kong. Professor Courtis is one of the world s leading investment bankers and analysts of Asian economies. Professor Courtis has led a number of large, international corporate transactions centered on Asia, and pioneered a number of investment banking areas across the region. Widely sought after for his knowledge of how global market forces, financial and political developments, and corporate strategy interact, Professor Courtis advises major clients throughout the Asia Pacific region, as well as in Europe and North America. Professor Courtis also works closely with central banks, ministries of finance, and heads of government throughout Asia, and has on occasion advised the US President, and the heads of government of several countries in Europe, North America, Asia, and the Middle East. Professor Courtis has lectured at Keio and Tokyo Universities, Japan s two most prestigious educational institutions, l Institut d Etudes Politiques, Paris, and in universities in North America. Professor Courtis is a member of the boards, advisory councils, and trustee of a number of international firms, universities, and research institutes in Asia, Europe and North America. Professor Courtis received his Bachelor degree from Glendon College in Toronto and a Master in International Relations from Sussex University in the UK. Professor Courtis earned a Master of Business Administration from INSEAD (the European Institute of Business Administration), and received a Doctorate with honours and high distinction, from l Institut d Etudes Politiques, Paris. Principal Executive Officers The particulars of the Group s principal executive officers are listed below: Name Age Address Designation Liew Mun Leong Chancery Lane Singapore Kee Teck Koon 50 4A Wimborne Road Singapore Tham Kui Seng 49 3 Fourth Street East Coast Park Singapore Lui Chong Chee Mimosa Crescent Seletar Hills Estate Singapore Olivier Lim Tse Ghow Bukit Timah Road #15-01 Singapore President and CEO, CapitaLand Chief Investment Officer, CapitaLand Deputy Chairman, CCL, CRTL and CFL Chief Corporate Officer, CapitaLand CEO, CRL Group Chief Financial Officer, CapitaLand 67

73 Biographical Information of Principal Executive Officers Mr Liew Mun Leong Mr Liew Mun Leong is the President and CEO of the Group. Concurrently, Mr Liew is Chairman of CRL, CCL, CRTL and ILEC. Mr Liew is Deputy Chairman of CFL, Ascott, as well as the Deputy Chairman for CMTML, CCTML, CRCTML and ARTML. Mr Liew is also a Director of CapitaLand Hope Foundation. Mr Liew also chairs the CAAS. Mr Liew graduated from the University of Singapore with a Civil Engineering degree in 1970 and is a registered professional civil engineer. In 2006, he was named Outstanding CEO of the Year in the Singapore Business Awards. Mr Liew was also named CEO of the Year in the Singapore Corporate Awards Mr Kee Teck Koon Mr Kee Teck Koon is the Chief Investment Officer of CapitaLand. Concurrently, Mr Kee is the Deputy Chairman of CCL, CRTL and CFL. Mr Kee is also a Director of CMTML, CCTML, CRCTML and Ascott. Prior to this, Mr Kee led various strategic business units within the Group, including CCL, CFL and Ascott. Mr Kee holds a Master of Arts in Engineering Science from the University of Oxford, UK. Mr Tham Kui Seng Mr Tham Kui Seng is the Chief Corporate Officer of CapitaLand. He is also a Director of Australand. Mr Tham was formerly the CEO of CRL and Chairman of Australand. Mr Tham holds a Bachelor of Arts (First Class Honours) in Engineering Science from the University of Oxford, UK. Mr Lui Chong Chee Mr Lui Chong Chee is the CEO of CRL. He is also the Chairman of Australand and the joint Deputy Chairman of UML. Mr Lui was formerly the Chief Financial Officer of CapitaLand. Prior to joining CapitaLand, Mr Lui was Managing Director of Citigroup Investment Bank (Singapore) Limited, responsible for debt and equity capital markets and financial advisory business in Singapore. Mr Lui has 15 years of experience in investment banking. Mr Lui holds a Master of Business Administration in Finance and International Economics as well as a Bachelor of Science in Business Administration (Magna cum Laude) from New York University, USA. Mr Olivier Lim Mr Olivier Lim is the Group Chief Financial Officer of CapitaLand. He is also a Director of CMTML, CCTML and CRCTML, and an Alternate Director of Ascott. Prior to joining CapitaLand, Mr Lim was Director and Head of the Real Estate Unit, Corporate Banking in Citibank Singapore. Mr Lim has more than 17 years of work experience in diverse areas including corporate banking, investment banking and real estate financial products. Mr Lim holds a First Class Honours degree in Civil Engineering from the Imperial College of Science, Technology and Medicine, London. In 2007, Mr Lim was named CFO of the Year in the Singapore Corporate Awards. 68

74 PRINCIPAL SHAREHOLDER The following table sets forth details about the interest the substantial shareholder of the Issuer has as at 31 May 2007 as shown in the Issuer s register. Deemed interest is determined in accordance with Section 7(4) of the Companies Act, Chapter 50 of Singapore (the Act ). Name No. of Shares held directly Percentage (1) No. of Shares held indirectly Percentage (1) Total no. of Shares held directly and indirectly Percentage (1) Temasek Holdings (Private) Limited 1,120,469, ,459, ,197,928, (1) Based on an aggregate 2,802,791,421 shares in issue as at 31 May Interested Person Transactions The Group has ongoing contractual arrangements with Temasek and the companies under the Temasek group in the ordinary course of business. Such transactions are entered into on normal commercial terms. The Audit Committee of the Issuer reviews all interested person transactions entered into by the Group to ensure that these are undertaken on normal commercial terms, are properly approved and are not prejudicial to the Group and its minority shareholders. Directors Shareholdings As at 31 May 2007, a total of 3,157,400 shares (direct and deemed) were held by directors of the Issuer. There were a total of 2,376,300 unissued Shares comprised in options granted to directors of the Issuer under the CapitaLand Share Option Plan. Under the Performance Share Plan, Mr Liew Mun Leong has been granted a total of 1,134,487 contingent awards of CapitaLand Shares. The final number of performance shares given will depend on the achievement of pre-determined targets over a three-year performance period. No shares will be released if the threshold targets are not met at the end of the performance period. On the other hand, if superior targets are met, more performance shares than the baseline award could be delivered up to a maximum of 200 per cent. of the baseline award. Under the Restricted Stock Plan, the directors have been granted a total of 347,070 contingent award of CapitaLand Shares. The final number of shares to be released will depend on the achievement of threshold performance level at the end of one-year performance period and the release shall be over a vesting period of two to three years. No shares will be released if the threshold targets are not met at the end of the one-year performance period. On the other hand, if superior targets are met, more shares than the baseline award could be released up to a maximum of 150 per cent. of the baseline award. 69

75 TERMS AND CONDITIONS OF THE BONDS The following, other than the words in italics, is the text of the Terms and Conditions of the Bonds which will appear on the reverse of each of the definitive certificates evidencing the Bonds. The issue of S$1,000,000,000 in aggregate principal amount of 2.95 per cent. Convertible Bonds due 2022 (the Bonds, which term shall include, unless the context requires otherwise, any further Bonds issued in accordance with Condition 15 and consolidated and forming a single series therewith) by CapitaLand Limited (the Issuer ) was authorised by resolutions of the Directors of the Issuer passed on 22 May 2007 and 8 June 2007, and the issue of any Shares (as defined herein) upon conversion of the Bonds has been approved by the shareholders of the Issuer at the annual general meeting held on 27 April The Bonds are constituted by a trust deed (the Trust Deed ) dated 20 June 2007 and made between the Issuer and The Bank of New York as trustee for the holders of the Bonds (the Trustee, which term shall, where the context so permits, include all other persons or companies for the time being acting as trustee or trustees under the Trust Deed). The Issuer has entered into a paying, conversion and transfer agency agreement (the Agency Agreement ) dated 20 June 2007 with the Trustee, The Bank of New York as registrar (the Registrar ), The Bank of New York as principal paying, conversion and transfer agent (the Principal Agent ) and the other paying, conversion and transfer agents appointed under it (each a Paying Agent, Conversion Agent, Transfer Agent and, together with the Registrar and the Principal Agent, the Agents ) relating to the Bonds. References to the Principal Agent, Registrar and Agents below are references to the principal agent, registrar and, agents for the time being for the Bonds. The statements in these terms and conditions (these Conditions ) include summaries of, and are subject to, the detailed provisions of the Trust Deed. Unless otherwise defined, terms used in these Conditions have the meaning specified in the Trust Deed. Copies of the Trust Deed and of the Agency Agreement are available for inspection by the Bondholders at the registered office of the Trustee being, at the date hereof, at One Canada Square, London E14 5AL and at the specified offices of each of the Agents. The Bondholders are entitled to the benefit of the Trust Deed and are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and the Agency Agreement applicable to them. 1. Status The Bonds constitute direct, unsubordinated, unconditional and (subject to the provisions of Condition 4) unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference or priority among themselves. The payment obligations of the Issuer under the Bonds shall, save for such exceptions as may be provided by mandatory provisions of applicable law and subject to Condition 4, at all times rank at least equally with all of its other present and future direct, unsubordinated, unconditional and unsecured obligations. 2. Form, Denomination and Title 2.1 Form and Denomination The Bonds are issued in registered form in the denomination of S$250,000 each or integral multiples thereof. A bond certificate (each a Certificate ) will be issued to each Bondholder in respect of its registered holding of Bonds. Each Bond and each Certificate will be numbered serially with an identifying number which will be recorded on the relevant Certificate and in the register of Bondholders which the Issuer will procure to be kept by the Registrar. Upon issue, the Bonds will be represented by a Global Certificate deposited with a common depository for, and representing Bonds registered in the name of a common nominee of, Euroclear Bank S.A./N.V. and Clearstream Banking, société anonyme. The Conditions are modified by certain provisions contained in the Global Certificate. 70

76 2.2 Title Title to the Bonds passes only by transfer and registration in the register of Bondholders as described in Condition 3. The holder of any Bond will (except as otherwise required by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it or any writing on, or the theft or loss of, the Certificate issued in respect of it) and no person will be liable for so treating the holder. In these Conditions, Bondholder and (in relation to a Bond) holder means the person in whose name a Bond is registered. 3. Transfers of Bonds; Issue of Certificates 3.1 Register The Issuer will cause to be kept at the specified office of the Registrar and in accordance with the terms of the Agency Agreement, a register on which shall be entered the names and addresses of the holders of the Bonds and the particulars of the Bonds held by them and of all transfers of the Bonds (the Register ). Each Bondholder shall be entitled to receive only one Certificate in respect of its entire holding. 3.2 Transfers Subject to Condition 3.5 and the Agency Agreement, a Bond may be transferred by delivery of the Certificate issued in respect of that Bond, with the form of transfer on the back duly completed and signed by the holder or his attorney duly authorised in writing, to the specified office of the Registrar or any of the Transfer Agents. No transfer of title to a Bond will be valid unless and until entered into the Register. Transfers of interests in the Bonds evidenced by the Global Certificate will be effected in accordance with the rules of the relevant clearing systems. 3.3 Delivery of New Certificates Each new Certificate to be issued upon a transfer of Bonds will, within seven business days of receipt by the Registrar or, as the case may be, any other relevant Transfer Agent of the form of transfer duly completed and signed, be made available for collection at the specified office of the Registrar or such other relevant Transfer Agent or, if so requested in the form of transfer, be mailed by uninsured mail at the risk of the holder entitled to the Bonds (but free of charge to the holder) to the address specified in the form of transfer. Except in the limited circumstances described herein (see The Global Certificate ), owners of interests in the Bonds will not be entitled to receive physical delivery of Certificates Where only part of a principal amount of the Bonds (being that of one or more Bonds) in respect of which a Certificate is issued is to be transferred or converted, a new Certificate in respect of the Bonds not so transferred or converted will, within seven business days of delivery of the original Certificate to the Registrar or other relevant Agent, be made available for collection at the specified office of the Registrar or such other relevant Agent or, if so requested in the form of transfer, be mailed by uninsured mail at the risk of the holder of the Bonds not so transferred or converted (but free of charge to the holder) to the address of such holder appearing on the Register. 71

77 3.3.3 For the purposes of these Conditions (except for Conditions 7 and 8.5), business day shall mean a day other than a Saturday or Sunday or a public holiday on which banks are open for business in the city in which the specified office of the Registrar (if a Certificate is deposited with it in connection with a transfer or conversion) or the Agent with whom a Certificate is deposited in connection with a transfer or conversion, is located. 3.4 Formalities Free of Charge Registration of a transfer of Bonds will be effected without charge by or on behalf of the Issuer or any of the Agents, but upon (i) payment (or the giving of such indemnity as the Issuer or any of the Agents may require) in respect of any tax or other governmental charges which may be imposed in relation to such transfer, and (ii) the Issuer or the relevant Transfer Agent being satisfied that the regulations concerning the transfer of Bonds have been complied with. 3.5 Closed Periods No Bondholder may require the transfer of a Bond to be registered (i) during the period of seven days ending on (and including) the dates for redemption pursuant to Condition 8.2 and Condition 8.3, (ii) after a Conversion Notice (as defined in Condition 6.2) has been delivered with respect thereto, (iii) during the period of ten days ending on (and including) any Interest Payment Date (as defined in Condition 7.1) or (iv) after a Put Exercise Notice (as defined in Condition 8.4) has been deposited in respect of such Bond, each such period being a Closed Period. 3.6 Regulations All transfers of Bonds and entries on the Register will be made subject to the detailed regulations concerning the transfer of Bonds scheduled to the Agency Agreement. The regulations may be changed by the Issuer, with the prior written approval of the Trustee and the Registrar. A copy of the current regulations will be mailed (free of charge) by the Registrar to any Bondholder upon request. 4. Negative Pledge 4.1 So long as any Bond remains outstanding (as defined in the Trust Deed), the Issuer will not create or permit to subsist any mortgage, charge, pledge, lien or other form of encumbrance or security interest ( Security ) upon the whole or any part of its undertaking, assets or revenues, present or future, to secure any International Investment Securities (as defined below) issued by the Issuer or to secure any guarantee or indemnity provided by the Issuer of, or in respect of, any International Investment Securities unless, at the same time or prior thereto, the Issuer s obligations under the Bonds and the Trust Deed (a) are secured equally and rateably therewith to the satisfaction of the Trustee, or (b) have the benefit of such other security, guarantee, indemnity or other arrangement as the Trustee in its absolute discretion shall deem to be not materially less beneficial to the Bondholders or as shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Bondholders. For the avoidance of doubt, the restriction in this Condition 4.1 shall not apply to any Security created by any Subsidiary (as defined hereinafter) of the Issuer. 4.2 For the purposes of these Conditions, International Investment Securities means any present or future indebtedness in the form of, or represented by, bonds, debentures, notes or other debt securities which are for the time being, or are intended to be, quoted, listed, ordinarily dealt in or traded on any stock exchange or over-the-counter or other securities market outside Singapore, having an original maturity of more than 365 days from its date of issue. 72

78 PROVIDED THAT nothing in this Condition: shall extend to any Security of the Issuer existing as at 20 June 2007; shall prohibit or restrict the creation by the Issuer of any Security upon any property or assets acquired, purchased or owned or to be acquired, purchased or owned by the Issuer or any one of its Subsidiaries for the purpose of securing the payment of any sum due in respect of the International Investment Securities or any payment under any guarantee of, or indemnity or other like obligation relating to the International Investment Securities, the proceeds of which are to be applied towards financing or refinancing the cost of the acquisition, purchase, development, construction, redevelopment and ownership of such property or assets (including, without limitation, the equipping, alteration or improvement of such property or assets following their redevelopment, development or construction) provided that the Security in respect of any such refinancing undertaken by the Issuer is (a) created or effected no later than six months after such acquisition, purchase, development, construction or redevelopment, as applicable, and the Security is limited to the property or assets acquired, purchased, developed, constructed or redeveloped, or (b) is created or effected only in respect of a refinancing of existing secured indebtedness in the form of International Investment Securities; or shall prohibit or restrict the Issuer from securing any indebtedness evidenced by International Investment Securities existing on (1) any property or asset of any entity at the time the Issuer or any one of its Subsidiaries acquires such entity after 20 June 2007 or (2) any property or asset at the time it is acquired by the Issuer or any one of its Subsidiaries after 20 June 2007 provided that, in each case, (a) such Security shall not have been created in contemplation of or in connection with such acquisition and (b) the principal amount or maturity of such indebtedness is not increased. 5. Interest 5.1 The Bonds bear interest from 20 June 2007 at the rate of 2.95 per cent. per annum of the principal amount of the Bonds. Interest is payable semi-annually in arrear on 20 June and 20 December in each year (each an Interest Payment Date ) commencing 20 December Each Bond will cease to bear interest (a) (subject to Condition 6.2.4) from and including the Interest Payment Date last preceding its Conversion Date (as defined below) subject to conversion of the relevant Bond in accordance with the provisions of Condition 6.2, or (b) from the due date for redemption thereof unless, upon surrender in accordance with Condition 8, payment of the full amount due is improperly withheld or refused or default is otherwise made in respect of any such payment. In such event, interest will continue to accrue at the rate aforesaid (after as well as before any judgment) up to but excluding the date on which all sums due in respect of any Bond are received by or on behalf of the relevant holder. If interest is required to be calculated for a period of less than one year, it will be calculated on the basis of a 365-day year and the actual number of days elapsed. Interest payable under this Condition will be paid in accordance with Condition Save as provided in Condition 6.2.4, no payment or adjustment will be made on conversion for any interest accrued on converted Bonds since the Interest Payment Date last preceding the relevant Conversion Date. 73

79 6. Conversion 6.1 Conversion Right Conversion Period: Subject as hereinafter provided, Bondholders have the right to convert their Bonds into ordinary shares in the capital of the Issuer ( Shares )atanytime during the Conversion Period referred to below. (i) (ii) (iii) The right of a Bondholder to convert any Bond into Shares is called the Conversion Right. Subject to and upon compliance with the provisions of this Condition, the Conversion Right attaching to any Bond may be exercised, at the option of the holder thereof, at any time on and after 20 June 2008 up to the close of business (at the place where the Certificate evidencing such Bond is deposited for conversion) on 10 June 2022 (but, subject to Condition 6.1.4, in no event thereafter) or if such Bond shall have been called for redemption before 20 June 2022, then up to the close of business (at the place aforesaid) on a date no later than seven business days (in the place aforesaid) prior to the date fixed for redemption thereof (the Conversion Period ), provided that the Conversion Right during any Closed Period shall be suspended and the Conversion Period shall not include any such Closed Period. If the final date on which the Conversion Right may be exercised is not a business day at the place aforesaid, then the period for the exercise of the Conversion Right by Bondholders shall end on the immediately following business day at the place aforesaid. Notwithstanding the foregoing, if the Conversion Date in respect of a Bond would otherwise fall during a period in which the register of members of the Issuer is closed generally or for the purpose of establishing entitlement to any dividend or other rights attaching to the Shares (a Book Closure Period ), such Conversion Date shall be postponed to the first Stock Exchange Business Day after the expiry of such Book Closure Period. Any exercise of a Conversion Right shall be deemed to be ineffective and, subject to Condition 6.1.4, shall be deemed to have expired if, as a result of any postponement pursuant to this Condition 6, the Conversion Date would fall on a day after expiry of the Conversion Period or, in the case of the exercise of such rights as aforesaid, after the relevant redemption date. The Issuer undertakes to ensure that the Book Closure Period is as short a period as is reasonably practicable, having regard to applicable Singapore laws. The number of Shares to be issued on conversion of a Bond will be determined by dividing the principal amount of the Bond to be converted by the Conversion Price in effect at the Conversion Date (both as hereinafter defined). Following conversion in accordance with these Conditions, the right of the converting Bondholder to repayment of the principal amount of the Bond (and, subject as provided in Condition 6.2.4, accrued interest thereon) shall be extinguished and released, and in consideration and in exchange therefor, the Issuer shall allot and issue Shares credited as paid-up in full as provided in this Condition 6. A Conversion Right may only be exercised in respect of one or more Bonds. If more than one Bond held by the same holder is converted at any one time by the same holder, the number of Shares to be issued upon such conversion will be calculated on the basis of the aggregate principal amount of the Bonds to be converted Fractions of Shares: Fractions of Shares will not be issued on conversion and no cash adjustments will be made in respect thereof. Notwithstanding the foregoing, in the event of a consolidation or re-classification of Shares by operation of law or otherwise occurring after 20 June 2007 which reduces the number of Shares outstanding, the Issuer will upon conversion of the Bonds pay in cash (in Singapore dollars by means of a Singapore dollar cheque drawn on a bank in Singapore) a sum equal to such portion of the principal amount of the Bond or Bonds evidenced by the Certificate deposited in 74

80 connection with the exercise of Conversion Rights as corresponds to any fraction of a Share not issued as a result of such consolidation or re-classification aforesaid if such sum exceeds S$ Conversion Price: The price at which Shares will be issued upon conversion, as adjusted from time to time (the Conversion Price ) will initially be S$ but will be subject to adjustment in the manner provided in Condition Revival and/or survival after Default: Notwithstanding the provisions of Condition 6.1.1, if (a) the Issuer shall default in making payment in full in respect of any Bond which shall have been called for redemption on the date fixed for redemption thereof, (b) any Bond has become due and payable prior to the Maturity Date by reason of the occurrence of any of the events under Condition 10 or (c) any Bond is not redeemed on the Maturity Date in accordance with Condition 8.1, the Conversion Right attaching to such Bond will revive and/or will continue to be exercisable up to, and including, the close of business (at the place where the Certificate evidencing such Bond is deposited for conversion) on the date upon which the full amount of the moneys payable in respect of such Bond has been duly received by the Principal Agent or the Trustee and notice of such receipt has been duly given to the Bondholders and, notwithstanding the provisions of Condition 6.1.1, any Bond in respect of which the Certificate and Conversion Notice are deposited for conversion prior to such date shall be converted on the relevant Conversion Date (as defined below) notwithstanding that the full amount of the moneys payable in respect of such Bond shall have been received by the Principal Agent or Trustee before such Conversion Date or that the Conversion Period may have expired before such Conversion Date Meaning of Shares : As used in these Conditions, the expression Shares means ordinary shares of the Issuer or shares of any class or classes resulting from any subdivision, consolidation or re-classification of those shares, which as between themselves have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation or dissolution of the Issuer. 6.2 Conversion Procedure Conversion Notice: (i) (ii) To exercise the Conversion Right attaching to any Bond, the holder thereof must complete, execute and deposit at his own expense between 9.00am and 3.00pm on a Business Day in London at the specified office of any Conversion Agent a duly completed notice of conversion (a Conversion Notice ) in duplicate in the form (for the time being current) obtainable from the specified office of each Agent, together with the relevant Certificate and any amounts required to be paid by the Bondholder under Condition The conversion date in respect of a Bond (the Conversion Date ) must fall at a time when the Conversion Right attaching to that Bond is expressed in these Conditions to be exercisable (subject to the provisions of Condition above) and will be deemed to be the Stock Exchange Business Day (as defined below) immediately following the date of the surrender of the Certificate in respect of such Bond and receipt of such Conversion Notice and, if applicable, any payment to be made or indemnity given under these Conditions in connection with the exercise of such Conversion Right. A Conversion Notice once received shall be irrevocable. The Issuer, or the Conversion Agent on its behalf, may reject any Conversion Notice which is, in its opinion, incorrect or incomplete in any material respect. All costs and expenses incurred or caused by a Conversion Notice which is, in the opinion of the Issuer or the Conversion Agent, incorrect or incomplete in any 75

81 material respect shall be for the account of the relevant Bondholder. Stock Exchange Business Day means any day (other than a Saturday or Sunday or a public holiday) on which the SGX-ST or the Alternative Stock Exchange (as defined in Condition 6.4 below), as the case may be, is open for securities trading. Upon exercise of a Conversion Right, a Bondholder converting a Bond shall be required to represent and agree, in the Conversion Notice, certain matters with respect to the beneficial ownership of the Bonds and the Shares Stamp Duty etc.: A Bondholder delivering a Certificate in respect of a Bond for conversion must pay any taxes and capital, stamp, issue and registration duties arising on conversion (other than any taxes or capital or stamp duties payable in Singapore and, if relevant, in the place of the Alternative Stock Exchange, by the Issuer in respect of the allotment and issue of Shares and listing of the Shares on the SGX-ST or Alternative Stock Exchange on conversion) and such Bondholder must pay all, if any, taxes arising by reference to any disposal or deemed disposal of a Bond in connection with such conversion. The Issuer will pay all other expenses arising from the issue of Shares on conversion of Bonds Registration: (i) (ii) As soon as practicable, and in any event not later than twenty-one days after the Conversion Date (or such longer period as may be required to comply with any applicable fiscal or other laws or regulations), the Issuer will, in the case of Bonds converted on exercise of the Conversion Right and in respect of which a duly completed Conversion Notice has been delivered and the relevant Certificate and amounts payable by the relevant Bondholder deposited and paid as required by Conditions and 6.2.2, procure that the relevant number of Shares are allotted to and registered in the name of the Depository (as defined in the Singapore Companies Act) for credit to the securities account designated for the purpose in the Conversion Notice for so long as the Shares are listed on the SGX-ST; or if the Shares are not listed on the SGX-ST, register the person or persons designated for the purpose in the Conversion Notice as holder(s) of the relevant number of Shares in the Issuer s share register and make such certificate or certificates available for collection at the office of the Issuer s share registrar in Singapore (currently, M & C Services Private Limited, 138 Robinson Road, #17-00 The Corporate Office, Singapore ) notified to the Bondholders in accordance with Condition 16 or, if so requested in the relevant Conversion Notice, cause its share registrar to mail (at the risk, and, if sent at the request of such person otherwise than by ordinary mail, at the expense, of the person to whom such certificate or certificates are sent) such certificate or certificates to the person and at the place specified in the Conversion Notice, together (in either case) with any other securities, property or cash required to be delivered upon conversion and such assignments and other documents (if any) as may be required by law to effect the transfer thereof. If the Conversion Date in relation to any Bond shall be on or after a date with effect from which an adjustment to the Conversion Price takes retroactive effect pursuant to any of the provisions referred to in Condition 6.3 and the relevant Registration Date (as defined below) falls on a date when the relevant adjustment has not yet been reflected in the then current Conversion Price, the provisions of this Condition shall be applied mutatis mutandis to such number of Shares as is equal to the excess of the number of Shares which would have been required to be issued on conversion of such Bond if the relevant retroactive adjustment had been effected as at the said Registration Date over the number of Shares previously issued (or which the Issuer was previously bound to issue) pursuant to such conversion. 76

82 (iii) (iv) The person or persons designated in the Conversion Notice will become the holder of record of the number of Shares issuable upon conversion with effect from the date he is or they are registered as such in the Issuer s register of members (the Registration Date ). The Shares issued upon conversion of the Bonds will in all respects rank pari passu with the Shares in issue on the relevant Registration Date. Save as set out in these Conditions, a holder of Shares issued on conversion of the Bonds shall not be entitled to any rights the Record Date for which precedes the relevant Registration Date. Bonds which are duly converted will be cancelled by removal of the Bondholder s name from the Register in respect of such Bonds on the relevant Registration Date. To the extent and as provided for in this Condition 6.2.3(iv), Shares allotted and issued on conversion will with effect from the relevant Conversion Date, rank for any dividends, rights, allotment or other distribution, the Record Date for which is on or after the relevant Conversion Date and (subject as aforesaid) will rank pari passu in all respects with the then existing Shares of the Issuer. For the purpose of these Conditions, Record Date means in relation to any dividends, rights, allotments or other distributions, the date on which shareholders of the Issuer must be registered in order to participate in such dividends, rights, allotment, or other distributions. If the Record Date for the payment of any dividend or other distribution in respect of the Shares is on or after the Conversion Date in respect of any Bond, but before the Registration Date (disregarding any retroactive adjustment of the Conversion Price referred to in this Condition prior to the time such retroactive adjustment shall have become effective), the Issuer will pay to the converting Bondholder or his designee an amount (the Equivalent Amount ) in Singapore dollars equal to any such dividend or other distribution to which he would have been entitled had he on that Record Date been such a shareholder of record and will make the payment at the same time as it makes payment of the dividend or other distribution, or as soon as practicable thereafter, but, in any event, not later than seven days thereafter. The Equivalent Amount shall be paid by means of a Singapore dollar cheque drawn on a bank in Singapore and sent to the address specified in the relevant Conversion Notice Interest Accrual: If any notice requiring the redemption of any Bonds is given pursuant to Condition 8.2 during the period beginning on the fifteenth day prior to the Record Date in respect of any dividend payable in respect of the Shares and ending on the Interest Payment Date next following such Record Date, where such notice specifies a date for redemption falling on or prior to the date which is 14 days after such next following Interest Payment Date, interest shall (subject as hereinafter provided) accrue on Bonds the Certificates for which shall have been delivered for conversion and in respect of which the Conversion Date falls after such Record Date and on or prior to the Interest Payment Date next following such Record Date, in each case from the preceding Interest Payment Date to, but excluding, the relevant Conversion Date; provided that no such interest shall accrue on any Bond in the event that the Shares issued on conversion thereof shall carry an entitlement to receive such dividend or in the event the Bond carries an entitlement to receive an Equivalent Amount. Any such interest shall be paid not later than 14 days after the relevant Conversion Date by Singapore dollar cheque drawn on, or by transfer to a Singapore dollar account maintained by the payee with, a bank in Singapore, in accordance with instructions given by the relevant Bondholder. 77

83 6.3 Adjustments to Conversion Price The Conversion Price will be subject to adjustment in certain events set out in the Trust Deed, including the following events (save and except that no adjustments will be made to the Conversion Price by virtue of the issue of any further Bonds in accordance with Condition 15): (i) Any alteration to the number of issued Shares as a result of consolidation, subdivision, or reclassification. If and whenever there shall be an alteration to the number of issued Shares as a result of consolidation, subdivision or reclassification, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before such alteration by the following fraction: where: A B A is the aggregate number of issued Shares immediately before such alteration; and B is the aggregate number of issued Shares immediately after such alteration. Such adjustment shall become effective on the date the alteration takes effect The issue of Shares by the Issuer credited as fully paid to any persons in whose name Shares are registered (the Shareholders ), by way of capitalisation of profits or reserves (including any share premium account, distributable profits or reserves and/or capital redemption reserve fund), including a free distribution or bonus issue of Shares, other than an issue of Shares paid-up out of profits or reserves and issued in lieu of the whole or part of a specifically declared cash dividend, being a dividend which the Shareholders concerned would or could otherwise have received (a Scrip Dividend ) but only to the extent that the Fair Market Value of such Scrip Dividend does not exceed the amount of such cash dividend by more than 10 per cent. of the amount of such cash dividend or the relevant part thereof. In such an event, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before such issue by the following fraction: where: A is the aggregate number of issued Shares immediately before such issue; and B is the aggregate number of issued Shares immediately after such issue. Such adjustment shall become effective from the date of issue of the Shares The payment or making of any Capital Distribution (as defined below) by the Issuer to the Shareholders (except where the Conversion Price falls to be adjusted under Condition above). A B If and whenever the Issuer shall pay or make any Capital Distribution to the Shareholders (except where the Conversion Price falls to be adjusted under Condition above), the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before such Capital Distribution by the following fraction: 78 A B A

84 where: A is the Current Market Price of one Share on the last Trading Day preceding the date on which the Capital Distribution is publicly announced; and B is the Fair Market Value on the date of such announcement, as determined in good faith by an Independent Bank (as defined hereinafter), of the portion of the Capital Distribution attributable to one Share. Such adjustment shall become effective on the date that such Capital Distribution is made The issue of Shares to all or substantially all Shareholders as a class by the Issuer by way of rights, or issue or grant to all or substantially all Shareholders as a class, by way of rights of options, warrants or other rights to subscribe for or purchase any Shares, in each case at less than 90 per cent. of the Current Market Price (as defined below) per Share on the last Trading Day preceding the date of the announcement of the terms of such issue or grant. In such an event, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before such issue or grant by the following fraction: where: A+B A+C A is the number of Shares in issue immediately before such announcement; B is the number of Shares which the aggregate amount (if any) payable for the Shares issued by way of rights or for the options or warrants or other rights issued by way of rights and for the total number of Shares comprised therein would purchase at such Current Market Price per Share; and C is the aggregate number of Shares issued or, as the case may be, comprised in the issue or grant. Such adjustment shall become effective on the date of issue of such Shares or issue or grant of such options, warrants or other rights (as the case may be) The issue of any securities (other than Shares or options, warrants or other rights to subscribe or purchase Shares) to all or substantially all Shareholders as a class by the Issuer by way of rights, or the grant to all or substantially all Shareholders as a class by way of rights of any options, warrants or other rights to subscribe for or purchase, any securities (other than Shares or options, warrants or other rights to subscribe or purchase Shares). In such an event, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before such issue or grant by the following fraction: where: A B A A is the Current Market Price of one Share on the last Trading Day preceding the date on which such issue or grant is publicly announced; and B is the Fair Market Value on the date of such announcement, as determined in good faith by an Independent Bank (as defined hereinafter), of the portion of the rights attributable to one Share. Such adjustment shall become effective on the date of issue of the securities or grant of such rights, options or warrants (as the case may be). 79

85 6.3.6 The issue (otherwise than as mentioned in Condition above) by the Issuer wholly for cash of any Shares (other than Shares issued on the exercise of Conversion Rights or on the exercise of any other rights of conversion into, or exchange or subscription for, Shares) or the issue or grant of (otherwise as mentioned in Condition above) options, warrants or other rights to subscribe or purchase Shares in each case at a price per Share which is less than 90 per cent. of the Current Market Price on the last Trading Day preceding the date of announcement of the terms of such issue. In such an event, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before such issue by the following fraction: where: A+B C A is the number of Shares in issue immediately before the issue of such additional Shares or the grant of such options, warrants or other rights to subscribe for or purchase any Shares; B is the number of Shares which the aggregate consideration receivable for the issue of such additional Shares would purchase at such Current Market Price per Share; and C is the number of Shares in issue immediately after the issue of such additional Shares. References to additional Shares in the above formula shall, in the case of an issue by the Issuer of options, warrants or other rights to subscribe or purchase Shares, mean such Shares to be issued assuming that such options, warrants or other rights are exercised in full at the initial exercise price on the date of issue of such options, warrants or other rights. Such adjustment shall become effective on the date of issue of such additional Shares or, as the case may be, the issue of such options, warrants or other rights Save in the case of an issue of securities arising from a conversion or exchange of other securities in accordance with the terms applicable to such securities themselves falling within the provisions of this Condition 6.3.7, the issue wholly for cash by the Issuer or any Subsidiary (otherwise than as mentioned in Conditions 6.3.4, or above) or (at the direction or request of or pursuant to any arrangements with the Issuer or any Subsidiary) any other company, person or entity of any securities (other than the Bonds) which by their terms of issue carry rights of conversion into, or exchange or subscription for, Shares to be issued by the Issuer upon conversion, exchange or subscription at a consideration per Share which is less than 90 per cent. of the Current Market Price on the last Trading Day preceding the date of announcement of the terms of issue of such securities. In such an event, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before such issue by the following fraction: where: A+B A+C A is the number of Shares in issue immediately before such issue; B is the number of Shares which the aggregate consideration receivable by the Issuer for the Shares to be issued on conversion or exchange or on exercise of the right of subscription attached to such securities would purchase at such Current Market Price per Share; and 80

86 C is the maximum number of Shares to be issued on conversion or exchange of such securities or on the exercise of such rights of subscription attached thereto at the initial conversion, exchange or subscription price or rate. Such adjustment shall become effective on the date of issue of such securities Any modification of the rights of conversion, exchange or subscription attaching to any such securities as are mentioned in Condition above (other than in accordance with the terms applicable to such securities) so that the consideration per Share (for the number of Shares available on conversion, exchange or subscription following the modification) is less than 90 per cent. of the Current Market Price on the last Trading Day preceding the date of announcement of the proposals for such modification. In such an event, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before such modification by the following fraction: where: A+B A+C A is the number of Shares in issue immediately before such modification; B is the number of Shares which the aggregate consideration receivable by the Issuer for the Shares to be issued on conversion or exchange or on exercise of the right of subscription attached to the securities, in each case so modified, would purchase at such Current Market Price per Share or, if lower, the existing conversion, exchange or subscription price of such securities; and C is the maximum number of Shares to be issued on conversion or exchange of such securities or on the exercise of such rights of subscription attached thereto at the modified conversion, exchange or subscription price or rate but giving credit in such manner as an Independent Bank considers appropriate (if at all) for any previous adjustment under this Condition or Condition above. Such adjustment shall become effective on the date of modification of the rights of conversion, exchange or subscription attaching to such securities The issue, sale or distribution by or on behalf of the Issuer or any Subsidiary or (at the direction or request of or pursuant to any arrangements with the Issuer or any Subsidiary) any other company, person or entity of any securities in connection with an offer by or on behalf of the Issuer or any Subsidiary or such other company, person or entity pursuant to which offer the Shareholders generally (meaning for these purposes the holders of at least 60 per cent. of the Shares outstanding at the time such offer is made) are entitled to participate in arrangements whereby such securities may be acquired by them (except where the Conversion Price falls to be adjusted under Conditions 6.3.4, 6.3.5, and above). In such an event, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before such issue by the following fraction: where: A B A A is the Current Market Price of one Share on the last Trading Day preceding the date on which such issue is publicly announced; and B is the Fair Market Value on the date of such announcement, as determined in good faith by an Independent Bank, of the portion of the rights attributable to one Share. Such adjustment shall become effective on the date of issue of the securities. 81

87 If the Issuer determines that an adjustment should be made to the Conversion Price as a result of one or more events or circumstances not referred to in this Condition 6.3, the Issuer shall at its own expense request a leading independent investment bank of international repute (acting as expert), selected by the Issuer and approved in writing by the Trustee (an Independent Bank ) to determine as soon as practicable what adjustment to the Conversion Price is fair and reasonable to take account thereof, if the adjustment would result in a reduction in the Conversion Price, and the date on which such adjustment should take effect and upon such determination such adjustment (if any) shall be made and shall take effect in accordance with such determination, provided that where the circumstances giving rise to any adjustment pursuant to this Condition 6.3 have already resulted or will result in an adjustment to the Conversion Price or where the circumstances giving rise to any adjustment arise by virtue of circumstances which have already given rise or will give rise to an adjustment to the Conversion Price, such modification (if any) shall be made to the operation of the provisions of this Condition 6.3 as may be advised by an Independent Bank to be in their opinion appropriate to give the intended result If the Issuer issues or distributes an Extraordinary Dividend in the form of cash (as described below). For the purpose of this Condition 6, an Extraordinary Dividend is the amount by which the Total Current Dividend exceeds on a per Share basis for a Dividend declared in respect of the financial year ending 31 December 2007 to 31 December 2022, the amount per Share as follows: In respect of the financial year ending Amount (S$) 31 December December December December December December December December December December December December December December December December In such an event, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before the Extraordinary Dividend is issued or distributed by the following fraction: 82 A B A

88 where: A is the Current Market Price of one Share on the last Trading Day preceding the date on which the Extraordinary Dividend is publicly announced; and B is the Extraordinary Dividend payable on one Share. For the purposes of this Condition 6.3, Total Current Dividend for a financial period means any and all Dividends declared by the Issuer on the Shares (including any Capital Distribution (as defined below)), prior to the deduction of any withholding tax plus any corporate tax attributable to that Dividend, for that financial period (including the dividend that may result in an adjustment), other than any Dividend or portion thereof which previously resulted in an adjustment under this Condition 6.3; PROVIDED THAT where the circumstances giving rise to any adjustment pursuant to this Condition 6.3 have already resulted or will result in an adjustment to the Conversion Price or where the circumstances giving rise to any adjustment arise by virtue of circumstances which have already given rise or will give rise to an adjustment to the Conversion Price, such modification (if any) shall be made to the operation of the provisions of this Condition 6.3 as may be advised by an Independent Bank to be in its opinion appropriate to give the intended result. 6.4 For the purposes of these Conditions: Alternative Stock Exchange means at any time, in the case of the Shares, if they are not at that time listed and traded on the SGX-ST, the principal stock exchange or securities market on which the Shares are then listed or quoted or dealt in Capital Distribution means: (i) (ii) (a) any distribution of assets in specie by the Issuer for any financial period (whenever paid or made and however described) but excluding a distribution of assets in specie in lieu of, and to a value not exceeding, a cash Dividend during that financial period where the Fair Market Value of such assets (when taken together with any other Dividends previously made or paid in respect of that financial period) would not have constituted an Extraordinary Dividend (as defined above) for that financial period (and for these purposes a distribution of assets in specie includes without limitation an issue of Shares or other securities credited as fully or partly paid (other than Shares credited as fully paid) by way of capitalisation of reserves); and (b) any cash dividend or distribution of any kind by the Issuer for any financial period (whenever paid and however described), excluding any dividend or distribution for that financial period to the extent that it is not (when taken together with any other Dividends previously made or paid in respect of that financial period) an Extraordinary Dividend for that financial period; or a purchase of capital by or on behalf of the Issuer (or a purchase of Shares by or on behalf of a Subsidiary of the Issuer) where the weighted average price (before expenses) for such purchase of one Share, being a Share carrying full entitlement to dividend, on any one day in respect of such purchase, exceeds the closing price of the Shares by more than 10 per cent. either (a) on that date, or (b) where an announcement has been made of the intention to purchase Shares at some future date at a specified price, on the Trading Day immediately preceding the date of such announcement and, if in the case of either (a) or (b), the relevant day is not a Trading Day, the immediately preceding Trading Day, in which case such purchase shall be deemed to constitute a Capital Distribution in the amount of the aggregate price paid (before expenses) in respect of such Shares purchased by the Issuer. 83

89 6.4.3 closing price for the Shares for any Trading Day shall be the average closing market price quoted on the SGX-ST or, as the case may be, as quoted by an Alternative Stock Exchange for the last five Trading Days before such Trading Day Current Market Price means, in respect of a Share at a particular time on a particular date, the average of the closing prices quoted on the SGX-ST or an Alternative Stock Exchange for one Share (being a Share carrying full entitlement to dividend) for the ten consecutive Trading Days ending on the Trading Day immediately preceding such date; PROVIDED THAT if at any time during the said ten Trading Day period, the Shares shall have been quoted ex-dividend and during some other part of that period, the Shares shall have been quoted cum-dividend then: (i) (ii) if the Shares to be issued in such circumstances do not rank for the dividend in question, the quotations on the dates on which the Shares shall have been quoted cum-dividend shall for the purpose of this definition be deemed to be the amount thereof reduced by an amount equal to the amount of that dividend per Share; or if the Shares to be issued in such circumstances rank for the dividend in question, the quotations on the dates on which the Shares shall have been quoted ex-dividend shall for the purpose of this definition be deemed to be the amount thereof increased by such similar amount, and provided further that if the Shares on each of the said ten Trading Days have been quoted cum-dividend in respect of a dividend which has been declared or announced but the Shares to be issued do not rank for that dividend, the quotations on each of such dates shall for the purpose of this definition be deemed to be the amount thereof reduced by an amount equal to the amount of that dividend per Share Dividend means any dividend or distribution, whether of cash, assets or other property (including a distribution of assets in specie), and whenever paid or made and however described (and for these purposes a distribution of assets includes, without limitation, an issue of Shares or other securities credited as fully or partly paid up) provided that: (i) (ii) where a cash Dividend is announced which is to be, or may at the election of a holder or holders of Shares be, satisfied by the issue or delivery of Shares or other property or assets, then, the Dividend in question shall be treated as a Dividend of (a) the cash Dividend so announced or (b) the Current Market Price on the date of announcement of such Dividend, of such Shares or the Fair Market Value of other property or assets to be issued or delivered in satisfaction of such Dividend (or which would be issued if all holders of Shares elected therefor, regardless of whether any such election is made) if the Current Market Price of such Shares or the Fair Market Value of other property or assets is greater than the cash Dividend so announced; and any issue of Shares falling within Condition shall be disregarded Fair Market Value means, with respect to any assets, security, option, warrants or other right on any date, the fair market value of that asset, security, option, warrant or other right as determined by an Independent Bank acting as an expert; provided that (i) the fair market value of a cash Dividend paid or to be paid per Share shall be the amount of such cash Dividend per Share determined as at the date of announcement of such Dividend; and (ii) where options, warrants or other rights are publicly traded in a market of adequate liquidity (as determined by such investment bank) the fair market value of such options, warrants or other rights shall equal the arithmetic mean of the daily closing prices of such options, warrants or other rights during the period of five trading days on the relevant market commencing on the first such trading day on which such options, warrants or other rights are publicly traded. 84

90 6.4.7 Market Capitalisation means on any date, the product of (i) the Current Market Price and (ii) the number of Shares issued by the Issuer Trading Day means a day when the SGX-ST or, as the case may be, an Alternative Stock Exchange is open for dealing business, provided that if no closing price is reported in respect of the relevant Shares on the SGX-ST or, as the case may be, the Alternative Stock Exchange for one or more consecutive dealing days, such day or days will be disregarded in any relevant calculation and shall be deemed not have existed when ascertaining any period of dealing days On any adjustment, the relevant Conversion Price shall be rounded down to the nearest S$ No adjustment shall be made to the Conversion Price where such adjustment (rounded down if applicable) would be less than one per cent. of the Conversion Price unless the Issuer deems it necessary. Any adjustment not made, and any amount by which the Conversion Price has not been rounded down, shall be carried forward and taken into account in any subsequent adjustment. Notice of any adjustment shall be given to Bondholders in accordance with Condition 16 as soon as practicable after the determination thereof In making any calculation for the purposes of Conditions 6.3 and 6.4, such adjustments (if any) shall be made as an Independent Bank may consider appropriate to reflect (i) any consolidation or subdivision of the Shares, (ii) issues of Shares by way of capitalisation of profits or reserves, or any like or similar event or (iii) the modification of any rights to Dividends of Shares Where more than one event which gives or may give rise to an adjustment to the Conversion Price occurs within such a short period of time that in the opinion of the Independent Bank the foregoing provisions would need to be operated subject to some modification in order to give the intended result, such modification shall be made to the operation of the foregoing provisions as may be advised by the Independent Bank to be in their opinion appropriate in order to give such intended result No adjustment will be made to the Conversion Price when Shares or other securities (including rights or options) are issued, offered or granted to employees (including directors) of the Issuer or any Subsidiary of the Issuer pursuant to any existing Employee Share Scheme (as defined in the Trust Deed) (and which Employee Share Scheme is in compliance with the listing rules of the SGX-ST or, if applicable, those of an Alternative Stock Exchange) or pursuant to the conversion of the Bonds No adjustment involving an increase in the Conversion Price will be made, except in the case of a consolidation of the Shares as referred to in Condition above or to correct an error If the Issuer fails to select an Independent Bank when required for the purposes of Conditions 6.3 and 6.4, the Trustee may select such a bank. 6.5 Undertakings The Issuer has undertaken in the Trust Deed, inter alia, that so long as any Bond remains outstanding, save with the approval of an Extraordinary Resolution (as defined in the Trust Deed) of the Bondholders or with the approval of the Trustee where, in the opinion of the Trustee, it is not materially prejudicial to the interests of Bondholders to give such approval: (i) it will use all reasonable endeavours (a) to maintain a listing for all the issued Shares on the SGX-ST, (b) to obtain and maintain a listing for all the Shares issued on the exercise of the Conversion Rights attaching to the Bonds on the SGX-ST and (c) if the Issuer is unable to obtain or maintain such listing, to obtain and maintain a listing for all the Shares issued on the exercise of the Conversion Rights 85

91 on an Alternative Stock Exchange as the Issuer may from time to time (with the written consent of the Trustee) determine and will forthwith give notice to the Bondholders in accordance with Condition 16 below of the listing or delisting of the Shares (as a class) by any of such stock exchanges; (ii) (iii) it will pay the expenses of the issue of, and all expenses of obtaining listing for, Shares arising on conversion of the Bonds; and it will use all reasonable endeavours to maintain the listing of the Bonds on the SGX-ST In the Trust Deed, the Issuer has undertaken with the Trustee that so long as any Bond remains outstanding, it will ensure that all Shares liable to be issued on conversion of the Bonds will be duly and validly issued as fully-paid, provided always that the Issuer shall not be prohibited from purchasing its Shares to the extent permitted by law The Issuer has also given certain other undertakings in the Trust Deed for the protection of the Conversion Rights. 6.6 Notice of Change in Conversion Price The Issuer shall give notice to the Bondholders in accordance with Condition 16 of any change in the Conversion Price. Any such notice relating to a change in the Conversion Price shall set forth the event giving rise to the adjustment, the Conversion Price prior to such adjustment, the adjusted Conversion Price and the effective date of such adjustment. 7. Payments 7.1 Principal and interest Payment of principal and interest due other than on an Interest Payment Date, will be made by transfer to the registered account of the Bondholder or by Singapore dollar cheque drawn on a bank in Singapore mailed to the registered address of the Bondholder if it does not have a registered account. Payment of principal will only be made after surrender of the relevant Certificate at the specified office of any of the Agents Interest on the Bonds due on an Interest Payment Date will be paid on the due date for the payment of interest to the holder shown on the Register at the close of business on the tenth day before the due date for the payment of interest (the Interest Record Date ). Payments of interest on each Bond will be made by transfer to the registered account of the Bondholder or by Singapore dollar cheque drawn on a bank in Singapore mailed to the registered address of the Bondholder if he does not have a registered account. 7.2 Registered Accounts For the purposes of this Condition, a Bondholder s registered account means the Singapore dollar account maintained by or on behalf of it with a bank in Singapore, details of which appear on the Register at the close of business on the second business day (as defined below) before the due date for payment, and a Bondholder s registered address means its address appearing on the Register at that time. 7.3 Fiscal Laws All payments are subject in all cases to any applicable laws and regulations, but without prejudice to the provisions of Condition 9. No commissions or expenses shall be charged to the Bondholders in respect of such payments. 86

92 7.4 Payment Initiation Where payment is to be made by transfer to a registered account, payment instructions (for value on the due date or, if that is not a business day (as defined below), for value on the first following day which is a business day) will be initiated and, where payment is to be made by cheque, the cheque will be mailed (at the risk and, if mailed at the request of the holder otherwise than by ordinary mail, expense of the holder) on the due date for payment (or, if it is not a business day, the immediately following business day) or, in the case of a payment of principal, if later, on the business day on which the relevant Certificate is surrendered at the specified office of an Agent. 7.5 Delay in Payment Bondholders will not be entitled to any interest or other payment for any delay after the due date in receiving the amount due if the due date is not a business day, if the Bondholder is late in surrendering his Certificate (if required to do so) or if a cheque mailed in accordance with this Condition arrives after the due date for payment. 7.6 Business Day In this Condition, business day means a day other than a Saturday or Sunday or a public holiday on which commercial banks are open for business in London and Singapore and, in the case of the surrender of a Certificate, in the place where the Certificate is surrendered. If an amount which is due on the Bonds is not paid in full, the Registrar will annotate the Register with a record of the amount (if any) in fact paid. 8. Redemption, Purchase and Cancellation 8.1 Maturity Unless previously redeemed, converted or purchased and cancelled as provided herein, the Issuer will redeem each Bond at 100 per cent. of its principal amount on 20 June 2022 (the Maturity Date ). The Issuer may not redeem the Bonds at its option prior to that date except as provided in Condition 8.2 or Condition 8.3 below (but without prejudice to Condition 10). 8.2 Redemption at the Option of the Issuer On or at any time after 20 June 2014 but not less than seven business days prior to the Maturity Date, the Issuer may, having given not less than 30 nor more than 60 days notice to the Bondholders, the Trustee and the Principal Agent (which notice will be irrevocable), redeem the Bonds in whole or in part, provided that no such redemption may be made unless the closing price of the Shares for each of 30 consecutive Trading Days, the last day of which period occurs no more than 20 Trading Days prior to the date upon which notice of such redemption is given pursuant to Condition 16, was at least 130 per cent. of the Conversion Price in effect on such Trading Day. If there shall occur an event giving rise to a change in the Conversion Price during any such 30 Trading Day period, appropriate adjustments for the relevant days shall be made for the purpose of calculating the closing price for such days Upon the expiry of any such notice, the Issuer will be bound to redeem the Bonds at the principal amount together with accrued interest at the date fixed for such redemption If at any time the aggregate principal amount of the Bonds outstanding is less than 10 per cent. of the aggregate principal amount originally issued (including any Bonds issued pursuant to Condition 15), the Issuer shall have the option to redeem such outstanding Bonds in whole but not in part at their principal amount together with 87

93 accrued interest. The Issuer will give at least 30 days but not more than 60 days prior notice to the holders for such redemption In the case of a partial redemption of Bonds, the Bonds to be redeemed will be selected individually by lot, or such other method in such place as the Trustee shall approve and in such manner as the Trustee shall deem to be appropriate and fair when the Bonds are in definitive form (and in accordance with the rules of the relevant clearing system when the Bonds are represented by the Global Certificate), not more than 60 and not less than 30 days prior to the date fixed for redemption and the redemption date, the identifying numbers of the Bonds drawn for redemption and the Conversion Price will be published in accordance with Condition 16 by the Issuer not less than 30 days prior to such date. 8.3 Redemption for Taxation Reasons At any time the Issuer may, having given not less than 30 nor more than 60 days notice to the Bondholders (which notice shall be irrevocable) redeem all, but not some, of the Bonds at the principal amount together with accrued interest, if (i) the Issuer satisfies the Trustee immediately prior to the giving of such notice that the Issuer has or will become obliged to pay additional amounts as referred to in Condition 9 as a result of any change in, or amendment to, the laws or regulations of Singapore or any political subdivision or any authority thereof or therein having power to tax, or any change in the general application or official interpretation of such laws or regulations, which change or amendment becomes effective on or after 20 June 2007, and (ii) such obligation cannot be avoided by the Issuer taking reasonable measures available to it, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay such additional amounts in respect of the Bonds then due. Prior to the publication of any notice of redemption pursuant to this Condition 8.3, the Issuer shall deliver to the Trustee (a) a certificate signed by two directors of the Issuer stating that the obligation referred to in (i) above cannot be avoided by the Issuer (taking reasonable measures available to it) and (b) an opinion of independent legal or tax advisers of recognised standing to the effect that such change or amendment has occurred (irrespective of whether such amendment or change is then effective) and the Trustee shall be entitled to accept such certificate and opinion as sufficient evidence thereof in which event it shall be conclusive and binding on the Bondholders Upon the expiry of any such notice, the Issuer will be bound to redeem the Bonds at the principal amount plus accrued interest. 8.4 Early Redemption at the Option of the Bondholders On each of 20 June 2017 and 20 June 2019 (the Put Option Dates ), the holder of each Bond will have the right at such holder s option, to require the Issuer to redeem all or some only of such holder s Bonds on the Put Option Dates at their principal amount together with accrued interest, if any. To exercise such right, the holder of the relevant Bond must complete, sign and deposit at the specified office of any Paying Agent a duly completed and signed notice of redemption, in the form for the time being current, obtainable from the specified office of any Paying Agent (the Put Exercise Notice ) together with the Certificate evidencing the Bonds to be redeemed by not later than 60 days prior to the Put Option Dates A Put Exercise Notice, once delivered, shall be irrevocable and the Issuer shall redeem the Bonds, the subject of Put Exercise Notices delivered as aforesaid on the Put Option Dates. 88

94 8.5 Delisting Put Right In the event the Shares cease to be listed or admitted to trading on the SGX-ST (a Delisting ), each Bondholder shall have the right (the Delisting Put Right ), at such Bondholder s option, to require the Issuer to redeem all (but not less than all) of such Bondholder s Bonds on the twentieth business day after notice has been given to Bondholders regarding the Delisting referred to under Condition below (the Delisting Put Date ) at 100 per cent. of its principal amount together with accrued interest (the Delisting Put Price ) Promptly after becoming aware of a Delisting, the Issuer shall procure that notice regarding the Delisting Put Right shall be given to Bondholders (in accordance with Condition 16) and the SGX-ST stating: (i) (ii) (iii) (iv) (v) (vi) the Delisting Put Date; the date of such Delisting and, briefly, the events causing such Delisting; the date by which the Purchase Notice (as defined below) must be given; the Delisting Put Price and the method by which such amount will be paid; the names and addresses of all Paying Agents; briefly, the Conversion Right and the then current Conversion Price; (vii) the procedures that Bondholders must follow and the requirements that Bondholders must satisfy in order to exercise the Delisting Put Right or Conversion Right; and (viii) that a Purchase Notice, once validly given, may not be withdrawn To exercise its rights to require the Issuer to purchase its Bonds, the Bondholder must deliver a written irrevocable notice of the exercise of such right (a Purchase Notice ), in the then current form obtainable from the specified office of any Agent, to any Paying Agent on any business day prior to the close of business at the location of such Paying Agent on such day and which day is not less than 10 business days prior to the Delisting Put Date For the purposes of this Condition, business day shall mean a day on which commercial banks are open for business in London and Singapore. 8.6 Redemption following exercise of a Put Option Upon the exercise of any put option specified in Conditions 8.4 or 8.5, payment of the applicable redemption amount shall be conditional upon delivery of the Bondholder s Certificate (together with any necessary endorsements) to any Paying Agent on any business day together with the delivery of any other document(s) required by these Conditions, and will be made promptly following the later of the date set for redemption and the time of delivery of such Certificate. If the Paying Agent holds on the Put Date (as defined below) money sufficient to pay the applicable redemption monies of Bonds for which notices have been delivered in accordance with the provisions hereof upon exercise of such right, then, whether or not such Certificate is delivered to the Paying Agent, on and after such Put Date, (i) such Bond will cease to be outstanding; (ii) such Bond will be deemed paid; and (iii) all other rights of the Bondholder shall terminate (other than the right to receive the applicable redemption monies). Put Date shall mean the Put Option Date or the Delisting Put Date, as applicable. 8.7 Purchases The Issuer or any of its Subsidiaries may at any time and from time to time purchase Bonds at any price in the open market or otherwise. Such Bonds may, at the option of the Issuer or the 89

95 relevant Subsidiary, be held, resold or cancelled. The Bonds so acquired, while held on behalf of the Issuer or any Subsidiary, shall not entitle the holders thereof to convert the Bonds in accordance with these Conditions nor exercise any voting rights with respect to such Bonds. 8.8 Cancellation All Bonds which are redeemed or converted by the Issuer or any of its Subsidiaries, will forthwith be cancelled. Certificates in respect of all Bonds cancelled will be forwarded to or to the order of the Registrar and such Bonds may not be reissued or resold. 8.9 Redemption Notices All notices to Bondholders given by or on behalf of the Issuer pursuant to this Condition will specify the Conversion Price as at the date of the relevant notice, the closing price of the Shares (as quoted on the SGX-ST) as at the latest practicable date prior to the publication of the notice, the date for redemption, the manner in which redemption will be effected and the aggregate principal amount of the Bonds outstanding as at the latest practicable date prior to the publication of the notice. 9. Taxation 9.1 All payments of principal and/or interest made by the Issuer will be made free from any restriction or condition and be made without deduction or withholding for or on account of any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of Singapore or any authority thereof or therein having power to tax, unless deduction or withholding of such taxes, duties, assessments or governmental charges is compelled by law. In such event, the Issuer will pay such additional amounts as will result in the receipt by the Bondholders of the net amounts after such deduction or withholding equal to the amounts which would otherwise have been receivable by them had no such deduction or withholding been required except that no such additional amount shall be payable in respect of any Bond: to a holder (or to a third party on behalf of a holder) who is subject to such taxes, duties, assessments or governmental charges in respect of such Bond by reason of his having some connection with Singapore otherwise than merely by holding the Bond or by the receipt of amounts in respect of the Bond or where the withholding or deduction could be avoided by the holder making a declaration of non-residence or other similar claim for exemption to the appropriate authority which such holder is legally capable and competent of making but fails to do so; or (in the case of a payment of principal) if the Certificate in respect of such Bond is surrendered more than 30 days after the relevant date except to the extent that the holder would have been entitled to such additional amount on surrendering the relevant Certificate for payment on the last day of such period of 30 days; or where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to European Council Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council meeting of November 2000 on taxation of savings income or any law implementing or complying with, or introduced in order to conform to, such Directive; or presented for payment by or on behalf of a holder who would have been able to avoid such withholding or deduction by presenting the relevant Bond to another Payment Agent or Conversion Agent in a Member State of the European Union. 90

96 9.2 For the purposes hereof, relevant date means the date on which such payment first becomes due except that if the full amount payable has not been received by the Trustee or the Principal Agent on or prior to such due date, the date on which, the full amount having been so received, notice to that effect shall have been given to the Bondholders and cheques despatched or payment made. 9.3 References in these Conditions to principal shall be deemed also to refer to any additional amounts which may be payable under this Condition or any undertaking or covenant given in addition thereto or in substitution therefor pursuant to the Trust Deed. 10. Events of Default 10.1 The Trustee at its discretion may, and if so requested in writing by the holders of not less than 25 per cent. in principal amount of the Bonds then outstanding or if so directed by an Extraordinary Resolution shall (subject to its rights under the Trust Deed to be indemnified to its satisfaction), give notice to the Issuer that the Bonds are, and they shall accordingly thereby become, immediately due and repayable at their principal amount plus accrued interest (subject as provided below and without prejudice to the right of Bondholders to exercise the Conversion Right in respect of their Bonds in accordance with Condition 6) if any of the following events has occurred and is continuing: a default in the payment of any principal due in respect of the Bonds is subsisting for a period of more than 10 days; a default is made for a period of 20 days or more in the payment of any interest due in respect of the Bonds; the Issuer does not perform or comply with one or more of its other obligations in the Bonds or the Trust Deed which default is incapable of remedy or, if in the opinion of the Trustee, is capable of remedy and is not, in the opinion of the Trustee, remedied within 21 days after written notice of such default shall have been given to the Issuer by the Trustee; the Issuer or any Principal Subsidiary is (or is deemed by law or a court to be) insolvent or bankrupt or unable to pay its debts, stops payment of all or a material part of its debts, proposes or makes any agreement for the deferral, rescheduling or other readjustment of all of its debts (or of any material part which it will or might otherwise be unable to pay when due), proposes or makes a general assignment or an arrangement or composition with or for the benefit of the relevant creditors in respect of any material part of such debts or a moratorium is agreed or declared in respect of or affecting all or any material part of the debts of the Issuer or any of its Principal Subsidiaries; (i) any other present or future indebtedness of the Issuer or any of its Principal Subsidiaries for or in respect of moneys borrowed or raised becomes due and payable prior to its stated maturity by reason of any actual or potential default, event of default or the like (howsoever described), (ii) any such indebtedness is not paid when due or, as the case may be, within any applicable grace period, or (iii) the Issuer or any of its Principal Subsidiaries fails to pay when due any amount payable by it under any present or future guarantee for, or indemnity in respect of, any moneys borrowed or raised, provided that the aggregate amount of the relevant indebtedness, guarantees and indemnities in respect of which one or more of the events mentioned above in this Condition have occurred equals or exceeds S$100,000,000 or its equivalent (on the basis of the middle spot rate for the relevant currency against the Singapore dollar as quoted by any leading bank selected by the Trustee on the day on which such indebtedness becomes due and payable or is not paid or any such amount becomes due and payable or is not paid under any such guarantees or indemnity); 91

97 a distress, attachment, execution or other legal process is levied, enforced or sued on or against any material part of the property, assets or revenues of the Issuer or any of its Principal Subsidiaries and is not discharged or stayed within 30 days; an order is made or an effective resolution passed for the winding-up or dissolution, judicial management or administration of the Issuer or any of its Principal Subsidiaries, or the Issuer or any of its Principal Subsidiaries ceases or threatens to cease to carry on all or substantially all of its business or operations, except for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or consolidation (i) on terms approved by the Trustee (such approval not to be unreasonably withheld or delayed) or by an Extraordinary Resolution of the Bondholders, or (ii) in the case of a Principal Subsidiary, whereby the undertaking and assets of such Principal Subsidiary are transferred to or otherwise vested in the Issuer or any of its Subsidiaries; an encumbrancer takes possession or an administrative or other receiver or an administrator is appointed of the whole or any substantial part of the property, assets or revenues of the Issuer or any of its Principal Subsidiaries (as the case may be) and is not discharged within 30 days; it is or will become unlawful for the Issuer to perform or comply with any one or more of its obligations under any of the Bonds or the Trust Deed or any consent or approval required to make the Issuer s obligations under the Bonds or the Trust Deed legally binding and enforceable is not obtained; or any event occurs which under the laws of any relevant jurisdiction has an analogous effect to any of the events referred to in any of the foregoing Conditions, PROVIDED THAT, in the case of any such event other than those described in Conditions , , , , and (in the case of the Issuer) the Trustee shall have certified in writing to the Issuer that such event is in its opinion materially prejudicial to the interests of Bondholders For the purpose of these Conditions, Principal Subsidiary means any Subsidiary of the Issuer: whose profit after tax and minority interests or (in the case of a Subsidiary which itself has subsidiaries) consolidated profit after tax and minority interests, as shown by its latest audited income statement are at least 20 per cent. of the consolidated profit after tax and minority interests, as shown by the latest published audited consolidated profit and loss account of the Issuer and its Subsidiaries including, for the avoidance of doubt, the Issuer and its consolidated Subsidiaries share of profits of associated companies and after adjustments for minority interests. In calculating the profit after tax and minority interests of the Issuer in any period for the purpose of this Condition, the effect of any provisions being made by the Issuer with respect to (i) its investment in Subsidiaries to the extent the same is not also the subject of a provision made at the Subsidiary level shall be ignored and not taken into account; and (ii) its other investments shall be ignored, to the extent that such provisions for the same period do not amount to more than S$20,000,000, provided that any excess shall be reflected fully in the calculation of such profit after tax and minority interests; or whose gross assets or (in the case of a Subsidiary which itself has subsidiaries) gross consolidated assets, as shown by its latest balance sheet (whether audited or unaudited), are at least 20 per cent. of the amount which equals the amount included in the consolidated gross assets of the Issuer and its Subsidiaries as shown by the latest published consolidated balance sheet of the Issuer and its Subsidiaries (whether audited or unaudited), PROVIDED THAT, in relation to Conditions and above: 92

98 (i) (ii) (iii) (iv) in the case of a corporation or other business entity becoming a Subsidiary after the end of the financial period to which the latest audited consolidated accounts of the Issuer relate, the reference to the then latest published consolidated accounts of the Issuer for the purposes of the calculation above shall be deemed to be a reference to the then latest audited consolidated accounts of the Issuer compared against the gross assets and the profit after tax and minority interests of such new Subsidiary; if, at any relevant time in relation to the Issuer or any Subsidiary which itself has Subsidiaries, no consolidated accounts are prepared and, audited, total assets of the Issuer and/or any such Subsidiary shall be determined on the basis of pro forma consolidated accounts prepared for this purpose by the Issuer and reviewed by the Auditors (as defined in the Trust Deed) for the purposes of preparing a certificate thereon to the Trustee; if, at any relevant time in relation to any Subsidiary, no accounts are audited, its total assets (consolidated, if appropriate) shall be determined on the basis of pro forma accounts (consolidated, if appropriate) of the relevant Subsidiary, prepared for this purpose by the Issuer and reviewed by the Auditors for the purposes of preparing a certificate thereon to the Trustee; and if, the accounts of any subsidiary (not being a Subsidiary referred to in proviso (i) above) are not consolidated with those of the Issuer, then the determination of whether or not such subsidiary is a Principal Subsidiary shall be based on a pro forma consolidation of its accounts (consolidated, if appropriate) with the consolidated accounts (determined on the basis of the foregoing) of the Issuer, prepared for this purpose by the Issuer and reviewed by the Auditors for the purposes of preparing a certificate thereon to the Trustee; or any Subsidiary of the Issuer to which is transferred the whole or substantially the whole of the assets of a Subsidiary which immediately prior to such transfer was a Principal Subsidiary will be deemed to be a Principal Subsidiary, provided that the Principal Subsidiary which so transfers its assets shall forthwith upon such transfer cease to be a Principal Subsidiary and the Subsidiary to which the assets are so transferred shall become a Principal Subsidiary at the date on which the first published accounts (consolidated, if appropriate) of the Issuer (whether audited or unaudited) prepared as of a date later than such transfer are issued unless such Subsidiary would continue to be a Principal Subsidiary on the basis of such accounts by virtue of the provisions of Condition above Subsidiary or subsidiary has the meaning ascribed to subsidiary in Section 5 of the Companies Act, Chapter 50 of Singapore. 11. Prescription Claims in respect of amounts due in respect of the Bonds will become prescribed unless made within 10 years (in the case of principal) and five years (in the case of interest) from the relevant date (as defined in Condition 9) in respect thereof. 12. Enforcement At any time after the Bonds have become due and repayable, the Trustee may, at its discretion and without further notice, take such proceedings against the Issuer as it may think fit to enforce repayment of the Bonds and to enforce the provisions of the Trust Deed, but it will not be bound to take any such proceedings unless (i) it shall have been so requested in writing by the holders of not less than 25 per cent. in principal amount of the Bonds then outstanding or shall have been so directed by an Extraordinary Resolution of the Bondholders and (ii) it shall have been 93

99 indemnified to its satisfaction. No Bondholder will be entitled to proceed directly against the Issuer unless the Trustee, having become bound to do so, fails to do so within a reasonable period and such failure shall be continuing. 13. Meetings of Bondholders, Modification, Waiver and Substitution 13.1 Meetings The Trust Deed contains provisions for convening meetings of Bondholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of the Bonds or the provisions of the Trust Deed. The quorum at any such meeting for passing an Extraordinary Resolution will be two or more persons holding or representing over 50 per cent. in principal amount of the Bonds for the time being outstanding or, at any adjourned such meeting, two or more persons being or representing Bondholders whatever the principal amount of the Bonds so held or represented unless the business of such meeting includes consideration of proposals, inter alia, (i) to modify the due date for any payment in respect of the Bonds, (ii) to reduce or cancel the amount of principal or Equivalent Amount or the rate of interest payable in respect of the Bonds, (iii) to change the currency of payment of the Bonds, (iv) to modify or cancel the Conversion Rights or (v) to modify the provisions concerning the quorum required at any meeting of the Bondholders or the majority required to pass an Extraordinary Resolution, in which case the necessary quorum for passing an Extraordinary Resolution will be two or more persons holding or representing not less than 66 per cent., or at any adjourned such meeting not less than 33 per cent. in principal amount of the Bonds for the time being outstanding. An Extraordinary Resolution passed at any meeting of Bondholders will be binding on all Bondholders, whether or not they are present at the meeting. The Trust Deed provides that a written resolution signed by or on behalf of the holders of not less than 90 per cent. of the aggregate principal amount of Bonds outstanding shall be as valid and effective as a duly passed Extraordinary Resolution Modification and Waiver The Trustee may agree, without the consent of the Bondholders, to (i) any modification (except as mentioned in Condition 13.1 above) to, or the waiver or authorisation of any breach or proposed breach of, the Bonds, the Agency Agreement or the Trust Deed which is not, in the opinion of the Trustee, materially prejudicial to the interests of the Bondholders or (ii) any modification to the Bonds or the Trust Deed which, in the Trustee s opinion, is of a formal, minor or technical nature or to correct a manifest error or to comply with mandatory provisions of law. Any such modification, waiver or authorisation will be binding on the Bondholders and, unless the Trustee agrees otherwise, any such modifications will be notified by the Issuer to the Bondholders as soon as practicable thereafter. Any material modification to the terms of the Bonds which is for the benefit of the Bondholders but is materially prejudicial to the interests of the shareholders of the Issuer shall not be effected without the prior approval of the shareholders of the Issuer at a general meeting of the shareholders, unless such modification is made pursuant to the terms of the Bonds Substitution The Trust Deed contains provisions permitting the Trustee to agree, subject to such amendment of the Trust Deed and such other conditions as the Trustee may require, but without the consent of the Bondholders, to the substitution of any other company in place of the Issuer, or of any previous substituted company, as principal debtor under the Trust Deed and the Bonds. 94

100 13.4 Interests of Bondholders In connection with the exercise of its functions (including but not limited to those in relation to any proposed modification, authorisation, waiver or substitution) the Trustee shall have regard to the interests of the Bondholders as a class and shall not have regard to the consequences of such exercise for individual Bondholder and the Trustee shall not be entitled to require, nor shall any Bondholder be entitled to claim, from the Issuer or the Trustee, any indemnification or payment in respect of any tax consequences of any such exercise upon individual Bondholder except to the extent provided for in Condition 9 and/or any undertakings given in addition thereto or in substitution therefor pursuant to the Trust Deed. 14. Replacement of Certificates If any Certificate is mutilated, defaced, destroyed, stolen or lost, it may be replaced at the specified office of the Registrar or any Agent upon payment by the claimant of such costs as may be incurred in connection therewith and on such terms as to evidence and indemnity as the Issuer and such Agent may reasonably require. Mutilated or defaced Certificates must be surrendered before replacements will be issued. 15. Further Issues The Issuer may from time to time, without the consent of the Bondholders, create and issue further bonds having the same terms and conditions as the Bonds in all respects and so that such further issue shall be consolidated and form a single series with the Bonds. Such further bonds may, with the consent of the Trustee, be constituted by a deed supplemental to the Trust Deed. 16. Notices All notices to Bondholders shall be validly given if mailed to them at their respective addresses in the register of Bondholders maintained by the Registrar or published in a leading newspaper having general circulation in Asia (which is expected to be the Asian Wall Street Journal) and, so long as the Bonds are listed on the SGX-ST and the rules of that exchange so require, published in a leading English language newspaper having general circulation in Singapore (which is expected to be the Business Times). Such notices shall be deemed to have been given on the later of the date of such publication and the seventh day after being so mailed, as the case may be. 17. Agents The names of the initial Agents and the Registrar and their specified offices are set out below. The Issuer reserves the right, subject to the prior written approval of the Trustee, at any time to vary or terminate the appointment of any Agent or the Registrar and to appoint additional or other Agents or a replacement Registrar. The Issuer will at all times maintain (i) a Principal Agent, (ii) a Registrar, (iii) an Agent having a specified office in a major financial centre in Europe, (iv) a Paying Agent and Conversion Agent with a specified office in a European Union member state that will not be obliged to withhold or deduct tax pursuant to any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of November 2000 or any law implementing or comprising with, or introduced in order to conform to, such Directive and (v) an Agent in Singapore. Notice of any such termination or appointment, of any changes in the specified offices of any Agent or the Registrar and of any change in the identity of the Registrar or the Principal Agent will be given promptly by the Issuer to the Bondholders and, in any event, not less than 45 days notice will be given. 95

101 18. Indemnification The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility, including provisions relieving it from taking proceedings to enforce repayment unless indemnified to its satisfaction. The Trustee is entitled to enter into business transactions with the Issuer without accounting for any profit. 19. Contracts (Rights of Third Parties) Act 1999 No person shall have any right to enforce any term or condition of this Bond under the Contracts (Rights of Third Parties) Act Governing Law The Bonds, the Trust Deed and the Agency Agreement are governed by, and shall be construed in accordance with, the laws of England. In relation to any legal action or proceedings arising out of or in connection with the Trust Deed or the Bonds, the Issuer has in the Trust Deed irrevocably submitted to the courts of England and in relation thereto has appointed Hackwood Secretaries Limited, now at One Silk Street, London EC2Y 8HQ, United Kingdom, as its agent for service of process in England. 96

102 SUMMARY OF PROVISIONS RELATING TO THE BONDS WHILE IN GLOBAL FORM The Global Certificate contains provisions which apply to the Bonds while they are in global form, some of which modify the effect of the terms and conditions of the Bonds set out in this Offering Circular. The following is a summary of certain of those provisions: Exchange Owners of interests in the Bonds in respect of which the Global Certificate is issued will be entitled to have title to the Bonds registered in their names and to receive individual definitive Certificates if either Euroclear or Clearstream, Luxembourg (or any other clearing system as shall have been designated by the Issuer and approved by the Trustee on behalf of which the Bonds evidenced by the Global Certificate may be held) is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so. In such circumstances, the Issuer will cause sufficient individual definitive Certificates to be executed and delivered to the Registrar for completion, authentication and despatch to the relevant holders of the Bonds. A person with an interest in the Bonds in respect of which the Global Certificate is issued must provide the Registrar with a written order containing instructions and such other information as the Issuer and the Registrar may require to complete, execute and deliver such individual definitive Certificates. Meetings The holder of the Global Certificate will be treated as being two persons for the purposes of any quorum requirements of a meeting of Bondholders and, at any such meeting, as having one vote in respect of each S$250,000 in principal amount of Bonds for which the Global Certificate is issued. The Trustee may allow a person with an interest in Bonds in respect of which the Global Certificate has been issued to attend and speak at a meeting of Bondholders on appropriate proof of his identity and interest. Cancellation Cancellation of any Bond by the Issuer following its redemption, conversion or purchase will be effected by a reduction in the principal amount of the Bonds in the register of Bondholders. Trustee s Powers In considering the interests of Bondholders while the Global Certificate is registered in the name of a nominee for a dealing system, the Trustee may, without being obliged to do so, have regard to any information provided to it by such clearing system or its operator as to the identity (either individually or by category) of its accountholders with entitlements to Bonds and may consider such interests as if such accountholders were the holders of the Bonds. Conversion Subject to the requirements of Euroclear and Clearstream, Luxembourg, the Conversion Right attaching to a Bond in respect of which the Global Certificate is issued may be exercised by the presentation to or to the order of the Principal Agent of one or more Conversion Notices duly completed by or on behalf of a holder of a book-entry interest in the Bond. Deposit of the Global Certificate with the Principal Agent together with the relevant Conversion Notice shall not be required. In such a case, the delivery of the Conversion Notice will constitute or be deemed to constitute confirmation by the beneficial owner of the Bonds to be converted and that the information and representations in the Conversion Notice are true and accurate on the date of delivery. The exercise of the Conversion Right shall be notified by the Principal Agent to the Registrar and the holder of the Global Certificate. 97

103 Payment Payments of principal in respect of Bonds represented by the Global Certificate will be made without presentation or, if no further payment is to be made in respect of the Bonds, against presentation and surrender of the Global Certificate to or to the order of the Principal Agent or such other Paying Agent as shall have been notified to the Bondholders for such purpose. Notices So long as the Bonds are represented by the Global Certificate and the Global Certificate is held on behalf of Euroclear or Clearstream, Luxembourg or the Alternative Clearing Systems, notices to Bondholders may be given by delivery of the relevant notice to Euroclear or Clearstream, Luxembourg or the Alternative Clearing System, for communication by it to entitled accountholders in substitution for notification as required by the Conditions. Call option No drawing of Bonds will be required in the event that the Issuer exercises its call option pursuant to Condition 8.2 in respect of less than the aggregate principal amount of Bonds in respect of which the Global Certificate is issued. Instead, there will be a pro rata allocation of the Bonds to be redeemed among the accounts in Euroclear and Clearstream, Luxembourg, in accordance with the rules of those clearing systems. Put options The Bondholders put options in Conditions 8.4 and 8.5 may be exercised by the holder of the Global Certificate giving notice to the Principal Agent of the principal amount of Bonds in respect of which the option is exercised and presenting the Global Certificate for endorsement or exercise within the time limits specified in such Conditions. Transfers Transfers of interests in the Bonds will be effected through the records of Euroclear and Clearstream, Luxembourg and their respective participants in accordance with the rules and procedures of Euroclear and Clearstream, Luxembourg and their respective direct and indirect participants. Enforcement For the purposes of enforcement of the provisions of the Trust Deed against the Trustee, the persons named in a certificate of the holder of the Bonds in respect of which the Global Certificate is issued shall be recognised as the beneficiaries of the trusts set out in the Trust Deed, to the extent of the principal amounts of their interests in the Bonds set out in the certificate of the holder, as if they were themselves the holders of the Bonds in such principal amounts. 98

104 CLEARANCE AND SETTLEMENT Custodial and depository links have been established with Euroclear and Clearstream, Luxembourg, to facilitate the initial issue of the Bonds and transfers of the Bonds associated with secondary market trading. The Clearing Systems Euroclear and Clearstream, Luxembourg Euroclear and Clearstream, Luxembourg, each holds securities for participating organisations and facilitates the clearance and settlement of securities transactions between their respective participants through electronic book-entry of changes in the accounts of their participants. Euroclear and Clearstream, Luxembourg, provide their respective participants with, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Euroclear and Clearstream, Luxembourg participants are financial institutions throughout the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organisations. Indirect access to Euroclear or Clearstream, Luxembourg is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Euroclear or Clearstream, Luxembourg participant, either directly or indirectly. Distributions of principal with respect to book-entry interests in the Bonds held through Euroclear or Clearstream, Luxembourg, will be credited, to the extent received by the Paying Agent, to the cash accounts of Euroclear or Clearstream, Luxembourg participants in accordance with the relevant system s rules and procedures. Registration and Form Book-entry interests in the Bonds held through Euroclear and Clearstream, Luxembourg, will be evidenced by the Global Certificate, registered in the name of a nominee of the common depository of Euroclear and Clearstream, Luxembourg. The Global Certificate will be held by a common depository for Euroclear and Clearstream, Luxembourg. Beneficial ownership in Bonds will be held through financial institutions as direct and indirect participants in Euroclear and Clearstream, Luxembourg. The aggregate holdings of book-entry interests in the Bonds in Euroclear and Clearstream, Luxembourg, will be reflected in the book-entry accounts of each such institution. Euroclear and Clearstream, Luxembourg, as the case may be, and every other intermediate holder in the chain to the beneficial owner of book-entry interests in the Bonds, will be responsible for establishing and maintaining accounts for their participants and customers having interests in the book-entry interest in the Bonds. The Paying Agent will be responsible for ensuring that payments received by it from the Issuer for holders of interests in the Bonds holding through Euroclear and Clearstream, Luxembourg, are credited to Euroclear or Clearstream, Luxembourg, as the case may be. The Issuer will not impose any fees in respect of the Bonds. However, holders of book-entry interest in the Bonds may incur fees normally payable in respect of the maintenance and operation of accounts in Euroclear and Clearstream, Luxembourg. 99

105 Global Clearance and Settlement Procedures Initial Settlement Interests in the Bonds will be in uncertificated book-entry form. Purchasers electing to hold book-entry interests in the Bonds through Euroclear and Clearstream, Luxembourg, accounts will follow the settlement procedures applicable to conventional eurobonds. Book-entry interests in the Bonds will be credited to Euroclear participant securities clearance accounts on the business day following the Issue Date against payment (for value the Issue Date), and to Clearstream, Luxembourg participant securities custody accounts on the Issue Date against payment in same-day funds. Secondary Market Trading Secondary market sales of book-entry interests in the Bonds held through Euroclear or Clearstream, Luxembourg, to purchasers of book-entry interests in the Bonds through Euroclear or Clearstream, Luxembourg, will be conducted in accordance with the normal rules and operating procedures of Euroclear and Clearstream, Luxembourg and will be settled using the procedures applicable to conventional participants. General Although the foregoing sets out the procedures of Euroclear and Clearstream, Luxembourg, in order to facilitate the transfers of interests in the Bonds among participants of Euroclear and Clearstream, Luxembourg, none of Euroclear or Clearstream, Luxembourg is under any obligation to perform or continue to perform such procedures and such procedures may be discontinued at any time. None of the Issuer or any of its agents will have any responsibility for the performance by Euroclear or Clearstream, Luxembourg, or their respective participants of their respective obligations under the rules and procedures governing their operations. 100

106 DESCRIPTION OF SHARES The following statements are brief summaries of the capital structure of the Issuer and of the more important rights and privileges of shareholders conferred by the laws of Singapore and the Memorandum and Articles of Association of the Issuer. These statements summarise the material provisions of the Memorandum and Articles of Association of the Issuer but are qualified in their entirety by reference to the said Memorandum and Articles of Association and Singapore law. Objects The objects of the Issuer are contained in Clause 3 of the Memorandum of Association of the Issuer and include but are not limited to: acquiring interests in and managing various developed commercial and industrial properties; acquiring land, buildings, apartments and any rights connected therewith and to manage and develop any such property; carrying on all or any of the business of developers, property consultants and advisers; and carrying on the business of investment holding and to acquire for investment any immovable property of any tenure or description whatsoever. Shares As at 31 May 2007, the issued share capital of the Issuer is S$4,344,054,040 consisting of 2,802,791,421 fully paid ordinary shares. The Shares, which have identical rights in all respects, rank equally with one another. The Articles of Association of the Issuer provide that the Issuer may issue shares of a different class with preferential, deferred, qualified or special rights, privileges or conditions as the Directors may think fit, and may issue preference shares which are, or at the option of the Issuer are, redeemable, subject to certain limitations. All of the Shares are in registered form. The Issuer may, subject to the provisions of the Act and the listing rules of the SGX-ST, purchase its own Shares. However, it may not, except in the circumstances permitted by the Act, grant any financial assistance for the acquisition or proposed acquisition of the Shares. New Shares The Issuer may only issue new Shares with the prior approval of its shareholders in a general meeting. General approval may be sought from the shareholders in general meeting for the issue of Shares. The shareholders have given the Directors a general authority to issue new Shares, and 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) warrants, debentures or other instruments convertible into Shares, prior to the Issuer s next annual general meeting or if earlier the date by which the Issuer s next annual general meeting is required by the Act to be held, and to issue Shares in pursuance to any Instrument made or granted by the Directors while such general authority is in force. The aggregate number of Shares to be issued pursuant to such general authority (including Shares to be issued pursuant to Instruments made or granted pursuant to such general authority) may not exceed 50 per cent. of the issued Shares in the capital of the Issuer, of which the aggregate number of Shares to be issued other than on a pro rata basis to shareholders (including Shares issued pursuant to Instruments made or granted pursuant to such general authority) may not exceed 20 per cent. of the issued Shares in the capital of the Issuer. For the purpose of computing such numerical limits, the percentage of issued Shares is calculated based on the number of issued Shares at the time that the general authority is given, after adjusting for new Shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time that the general authority is given, and adjusted 101

107 for any subsequent consolidation or subdivision of Shares. Subject to the foregoing, the provisions of the Act, the listing rules of the SGX-ST and any special rights attached to any class of shares currently issued, the Directors control the allotment and issue of all new Shares and, subject to shareholders approval, may impose such rights and restrictions as they think fit. Shareholders The Issuer only recognises the persons who are registered in its register of members and, in cases in which the person so registered is The Central Depository (Pte) Limited (the CDP ), the Issuer recognises the persons named as the depositors in the depository register maintained by CDP for the Shares as holders of the Shares. The Issuer s register of members is kept by its share registrar, M & C Services Private Limited, 138 Robinson Road, #17-00 The Corporate Office, Singapore The Issuer will not, except as required by law, recognise any equitable, contingent, future or partial interest in any of the Shares, or any interest in any fractional part of a Share, or other rights for any Share other than the absolute right thereto of the registered holder of that Share or of the person whose name is entered in our register of members or the depository register maintained by CDP for that Share. The Issuer may close its register of members at any time or times if it provides the ACRA with at least 14 days notice and the SGX-ST with at least 10 clear market days notice. However, its register of members may not be closed for more than 30 days in aggregate in any calendar year. The Issuer typically closes its register of members to determine shareholders entitlements to receive dividends and other distributions. Transfer of Shares There is no restriction on the transfer of fully paid-up Shares except where required by law or the Articles of Association of the Issuer or the listing rules or the rules or by-laws of any stock exchange on which the Issuer is listed. The Directors may decline to register any transfer of Shares which are not fully paid-up Shares or on which the Issuer has a lien. A shareholder may transfer Shares registered in its own name by means of a duly signed instrument of transfer in a form approved by any stock exchange on which the Issuer is listed. The Directors may also decline to register any instrument of transfer unless, among other things, it has been duly stamped and is presented for registration together with the share certificate and such other evidence of title as they may require. A shareholder may transfer any Shares held through the SGX-ST book-entry settlement system by way of a book-entry transfer without the need for any instrument of transfer. The Issuer will replace lost or destroyed certificates for Shares provided that the applicant pays a fee which will not exceed S$2, together with the amount of the proper stamp duty payable, if any, and furnishes any evidence and a letter of indemnity that the Directors may require. General Meetings of the Shareholders The Issuer is required to hold an annual general meeting every year. The Directors may convene an extraordinary general meeting whenever they think fit and must do so if shareholders representing not less than 10 per cent. of the total voting rights of all shareholders request in writing that such a meeting be held. Unless otherwise required by law or by the Articles of Association of the Issuer, voting at general meetings is by ordinary resolution, requiring an affirmative vote of a simple majority of the votes cast at that meeting. An ordinary resolution suffices, for example, for the appointment of directors. A special resolution, requiring the affirmative vote of at least 75 per cent. of the votes cast at the meeting, is necessary for certain matters under Singapore laws, including: voluntary winding-up; amendments to the Memorandum and Articles of Association of the Issuer; 102

108 a change of the corporate name; and a reduction in the share capital. The Issuer must give at least 21 days notice in writing for every general meeting convened for the purpose of passing a special resolution. Ordinary resolutions generally require at least 14 days notice in writing. The notice must be given to every shareholder who has supplied the Issuer with an address in Singapore for the giving of notices and must set forth the place, the day and the hour of the meeting and, in the case of special business, the general nature of that business. Voting Rights A shareholder is entitled to attend, speak and vote at any general meeting, in person or by proxy. A proxy need not be a shareholder. A person who holds shares through the SGX-ST book-entry settlement system will only be entitled to vote at a general meeting as a shareholder if his name appears on the depository register maintained by CDP 48 hours before the general meeting. Except as otherwise provided in the Articles of Association of the Issuer, two or more shareholders must be present in person or by proxy to constitute a quorum at any general meeting. Under the Articles of Association of the Issuer: on a show of hands, every shareholder present in person and by proxy shall have one vote (provided that in the case of a shareholder who is represented by two proxies, only one of the two proxies as determined by that shareholder or, failing such determination, by the chairman of the meeting (or by a person authorised by the chairman) in his sole discretion shall be entitled to vote on a show of hands); and on a poll, every shareholder present in person or by proxy shall have one vote for each Share which he holds or represents. A poll may be demanded in certain circumstances, including: by the chairman of the meeting; by any two shareholders present in person or by proxy and entitled to vote; or by any shareholder present in person or by proxy and representing not less than 10 per cent. of the total voting rights of all shareholders having the right to attend and vote at the meeting. However, no poll may be demanded on a question of the choice of the chairman of the meeting or on a question of adjournment of the meeting. In the case of a tied vote, whether on a show of hands or a poll, the chairman of the meeting shall be entitled to a casting vote. Dividends The Issuer may, by ordinary resolution of its shareholders, declare dividends at a general meeting, but it may not pay dividends in excess of the amount recommended by the Directors. The Directors may also declare an interim dividend without the approval of shareholders. In making its determinations, the Directors will consider, inter alia, future earnings, results of operations, capital requirements, the general financial condition of the Issuer, general business conditions and other factors which they may deem relevant. The Issuer must pay all dividends out of its profits pursuant to Section 403 of the Act. However, it may capitalise its reserves or profits and apply it to pay dividends, if such dividends are satisfied by the issue of Shares to shareholders. See Bonus and Rights Issues. All dividends the Issuer pays are pro rata in amount to the shareholders in proportion to the number of shares held by shareholders, unless the rights attaching to an issue of any Share provides otherwise. 103

109 Unless otherwise directed, dividends are paid by cheque or warrant sent through the post to each shareholder at his registered address appearing in the register of members or (as the case may be) the depository register. However, payment by the Issuer to CDP of any dividend payable to a shareholder whose name is entered in the depository register shall, to the extent of payment made to CDP, discharge the Issuer from any liability to that shareholder in respect of that payment. The Issuer paid a first and final dividend of 7 cents per share (comprised 3.81 cents per share franked dividends, less tax 18.0 per cent. and 3.19 cents per share one tier dividends) and a special one-tier dividend of 5 cents per share, for the financial year ended 31 December For information relating to taxes payable on dividends, see Taxation Shares. Bonus and Rights Issues The Directors may, with approval by the shareholders at a general meeting, capitalise any reserves or profits and distribute the same as bonus Shares credited as paid-up to the shareholders in proportion to their shareholdings. The Directors may also issue rights to take up additional Shares to shareholders in proportion to their shareholdings. Such rights are subject to any conditions attached to such issue and the regulations of any stock exchange on which the Issuer is listed. Take-overs The Take-over Code regulates the acquisition of voting shares of public companies and contains certain provisions that may delay, deter or prevent a future take-over or change in control of the Issuer. Any person acquiring an interest, either on his or her own or together with parties acting in concert with him or her, in 30 per cent. or more of the voting Shares of the Issuer or if such person holds either on his or her own or together with parties acting in concert with him, between 30 per cent. and 50 per cent. (both inclusive) of the voting Shares of the Issuer and acquires additional voting Shares representing more than 1 per cent. of the Issuer s voting Shares in any six-month period, must, except with the consent of the Securities Industry Council, extend a general offer for the remaining voting Shares of the Issuer in accordance with the provisions of the Take-over Code. Parties acting in concert comprise individuals or companies who, pursuant to an arrangement or understanding (whether formal or informal), co-operate, through the acquisition by any of them of shares in a company, to obtain or consolidate effective control of that company. Certain persons are presumed (unless the presumption is rebutted) to be acting in concert with each other. They are as follows: a company and its related and associated companies and companies whose associated companies include any of these companies and any person who has provided financial assistance (other than a bank in the ordinary course of business) to any of the aforesaid companies for the purchase of voting rights; a company and its directors (including their close relatives, related trusts and companies controlled by any of the directors, their close relatives and related trusts); a company and its pension funds and employee share schemes; a person and any investment company, unit trust or other fund whose investment such person manages on a discretionary basis; a financial or other professional adviser and its clients in respect of shares held by the adviser and persons controlling or controlled by or under the same control as the adviser and all funds managed by the adviser on a discretionary basis, where the shareholdings of the adviser and any of those funds in the client total 10 per cent. or more of the client s equity share capital; directors of a company (including their close relatives, related trusts and companies controlled by any of the directors, their close relatives and related trusts) which is subject to an offer or where the directors have reason to believe a bona fide offer for the company may be imminent; 104

110 partners; and an individual and his close relatives, related trusts, any person who is accustomed to act in accordance with his instructions and companies controlled by the individual, his close relatives, his related trusts or any person who is accustomed to act in accordance with his instructions, and any person who has provided financial assistance (other than a bank in the ordinary course of business) to any of the aforementioned persons for the purchase of voting rights. Subject to certain exceptions, a general offer must be in cash or be accompanied by a cash alternative at not less than the highest price paid by the offeror or parties acting in concert with the offeror within the preceding six months. Where a general offer is made for the voting shares of a company, and that company has instruments convertible into, rights to subscribe for and options in respect of shares being offered for or which carry voting rights outstanding, the Take-over Code requires the offeror to make an appropriate offer or proposal to the holders of such instruments convertible into, rights to subscribe for and options in respect of shares being offered for or which carry voting rights. Therefore, where a person on his or her own or together with parties acting in concert with him or her, makes a general offer for the voting Shares of the Issuer, and there are Bonds outstanding, that person must, on his or her own or together with parties acting in concert with him or her, as the case may be, in accordance with the Take-over Code, make an appropriate offer or proposal to the holders of the outstanding Bonds. Under the Take-over Code, an appropriate offer to the holders of outstanding Bonds is at least the higher of the see-through price (the offer price of the voting Shares multiplied by the conversion ratio of the Bonds) and the highest price paid by the person making the general offer and parties acting in concert with him or her for the Bonds, depending on the type of general offer, within six months or three months of commencement of the general offer. Under the Take-over Code, where effective control of a company is acquired or consolidated by a person, or persons acting in concert, a general offer to all other shareholders is normally required. An offeror is required to treat all shareholders of the same class in an offeree company equally. A fundamental requirement is that shareholders in the company subject to the general offer must be given sufficient information, advice and time to consider and decide on the general offer. Liquidation or Other Return of Capital If the Issuer liquidates or in the event of any other return of capital, holders of the Shares will be entitled to participate in any assets in proportion to their shareholdings, subject to any special rights attaching to any other class of Shares. Indemnity As permitted by Singapore law, the Articles of Association of the Issuer provide that, subject to the Act, the Directors and officers shall be entitled to be indemnified by the Issuer against any liability incurred in defending any proceedings, whether civil or criminal: which relate to anything done or omitted to have been done as an officer, director or employee; and in which judgment is given in their favour or in which they are acquitted or in connection with any application under any statute for relief from liability in respect thereof in which relief is granted by the court. The Issuer may not indemnify its directors and officers against any liability which by law would otherwise attach to them in respect of any negligence, default, breach of duty or breach of trust of which they may be guilty in relation to the Issuer. However, the Issuer may purchase and maintain for its directors and officers insurance against any such liability. 105

111 Limitations on Rights to Hold or Vote Shares Except as described in Voting Rights and Take-overs above, Singapore law and the Articles of Association of the Issuer do not impose any limitations on the rights of shareholders to hold the Shares or to vote. Substantial Shareholdings Under the Act, a person has a substantial shareholding in a company if he or she has an interest (or interests) in one or more voting shares in the company and the total votes attached to that share or those shares is not less than 5 per cent. of the total votes attached to all the voting shares in the company. A person having a substantial shareholding in a company is required to make certain disclosures to the company, and if that company is listed on the SGX-ST, the SGX-ST, under the Act and the SFA, including the particulars of his interests in that company, any change in the percentage level of that interest and the circumstances by which he or she has such interests. Percentage level, in relation to a substantial shareholder, means the percentage figure ascertained by expressing the aggregate of the nominal amount of the voting shares in which the substantial shareholder has an interest (or interests) immediately before or (as the case may be) immediately after the relevant time as a percentage of the nominal amount of all the voting shares in the Issuer, and if it is not a whole number, rounding that figure down to the next whole number. Minority Rights Section 216 of the Act protects the rights of minority shareholders of Singapore incorporated companies by giving the Singapore courts a general power to make any order, upon application by any of the shareholders, as they think fit to remedy any of the following situations: if the affairs of the Issuer are being conducted or the powers of the Directors are being exercised in a manner oppressive to, or in disregard of the interests of, one or more of the shareholders; or if the Issuer takes any action, or threatens to take any action, or the shareholders pass a resolution, or propose to pass a resolution, which unfairly discriminates against, or is otherwise prejudicial to, one or more of the shareholders, including the applicant. The Singapore courts have wide discretion as to the reliefs they may grant and those reliefs are in no way limited to those listed in the Act itself. Without prejudice to the foregoing, the Singapore courts may: direct or prohibit any act or cancel or vary any transaction or resolution; regulate the conduct of the affairs of the Issuer in the future; authorise civil proceedings to be brought in the name of the Issuer, or on behalf of the Issuer, by a person or persons and on such terms as the courts may direct; direct the Issuer or some of the shareholders to purchase a minority shareholder s Shares and, in the case of the Issuer s purchase of Shares, a corresponding reduction of the Shares; direct that the Memorandum and Articles of Association of the Issuer be amended; and direct that the Issuer be wound up. 106

112 TAXATION Singapore Taxation The statements made herein regarding taxation are general in nature and based on certain aspects of the tax laws of Singapore, the announced 2007 budget measures and administrative guidelines issued by the relevant authorities in force as of the date of this Offering Circular and are subject to the enactment of such budget measures, and any changes in such laws or administrative guidelines, or in the interpretation of these laws or guidelines, occurring after such date, which changes could be made on a retrospective basis. These laws and guidelines are also subject to various interpretations and the relevant tax authorities or the courts could later disagree with the explanations or conclusions set out below. The following is a summary of the material Singapore tax consequences to a holder of the Bonds and a holder of Shares. The statements below are not to be regarded as advice on the tax position of any holder of the Bonds or Shares or of any person acquiring, selling or otherwise dealing with the Bonds or Shares or on any tax implications arising from the acquisition, sale or other dealings in respect of the Bonds or Shares. The statements made herein do not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase, own or dispose of the Bonds or Shares and do not purport to deal with the tax consequences applicable to all categories of investors some of which (such as dealers in securities) may be subject to special rules. Prospective holders of the Bonds or Shares are advised to consult their own tax advisers as to the Singapore or other tax consequences of the acquisition, ownership or disposition of the Bonds or Shares including, in particular, the effect of any foreign state or local tax laws to which they are subject. General Individual Taxpayers An individual is a tax resident in Singapore in a year of assessment if in the preceding year he was physically present in Singapore or exercised an employment in Singapore (other than as a director of a company) for 183 days or more or if he resides in Singapore. Individual taxpayers who are Singapore tax residents are subject to Singapore income tax on income accruing in or derived from Singapore. All foreign-sourced income received in Singapore on or after 1 January 2004 by a Singapore tax resident individual (except for income received through a partnership in Singapore) is exempt from Singapore income tax if the Comptroller of Income Tax (the Comptroller ) is satisfied that the tax exemption would be beneficial to the individual. Certain Singapore-sourced investment income derived by individuals from financial instruments is exempt from tax, including (a) interest from debt securities and (b) discount income (not including discount income arising from secondary trading) from debt securities except where such income is derived through a partnership in Singapore or is derived from the carrying on of a trade business or profession in Singapore. A Singapore tax resident individual is taxed at progressive rates ranging from 0 per cent. to 20 per cent. for the year of assessment Non-resident individuals, subject to certain exemptions, are subject to Singapore income tax on income accruing in or derived from Singapore. A non-resident individual is taxed at the tax rate of 20 per cent. Corporate Taxpayers A company is tax resident in Singapore if the control and management of its business is exercised in Singapore. Corporate taxpayers who are Singapore tax residents are subject to Singapore income tax on income accruing in or derived from Singapore and, subject to certain exceptions, on foreign-sourced income 107

113 received or deemed to be received in Singapore. Foreign-sourced income in the form of dividends, branch profits and services income received or deemed to be received in Singapore by Singapore tax resident companies on or after 1 June 2003 are exempt from tax if certain prescribed conditions are met. Non-resident corporate taxpayers, with certain exceptions, are subject to Singapore income tax on income accruing in or derived from Singapore, and on foreign-sourced income received or deemed to be received in Singapore. For year of Assessment ( YA ) 2008, the corporate tax rate in Singapore is 18 per cent. In addition, three-quarters of up to the first S$10,000, and one-half of up to the next S$290,000, of a company s chargeable income otherwise subject to normal taxation is exempt from corporate tax. This new exemption was announced in the 2007 Budget but has not been enacted yet. From YA 2008 onwards, subject to certain conditions, a qualified new start-up company is granted 100 per cent. tax exemption on the first S$100,000 and 50 per cent. on the next S$200,000 of the normal chargeable income, excluding Singapore franked dividends for any of its first three consecutive years of assessment. The first YA refers to the YA relating to the basis period during which the company is incorporated. This new exemption was announced in the 2007 Budget but has not been enacted yet. Convertible Bonds Interest Payments Under tax laws currently effective in Singapore, payments falling within Section 12(6) of the Income Tax Act, Chapter 134 of Singapore (the ITA ) (including interest) are deemed to be derived from Singapore where the payments are: (a) (b) (c) borne, directly or indirectly, by a person resident in Singapore (except in respect of a business carried on outside Singapore through a permanent establishment outside Singapore) or a permanent establishment in Singapore; deductible against any income accruing in or derived from Singapore; or income derived from loans where the funds provided by such loans are brought into or used in Singapore. Further, where such payments are made to a person not known to be a resident in Singapore for tax purposes, such payments are subject to withholding tax in Singapore at the rate of 18 per cent. for companies and 20 per cent. for individuals (effective from 1 January 2007). However, if the payment is derived by a person not resident in Singapore from sources other than its trade business profession or vocation carried on or exercised in Singapore and is not effectively connected with any permanent establishment in Singapore of that person, the withholding tax rate is 15 per cent. The rate of 15 per cent. may, however, be reduced by applicable tax treaties. However, as the issue of the Bonds is lead-managed by J.P. Morgan (S.E.A.) Limited, a Financial Sector Incentive (Bond Market) Company (as defined in the ITA), the Bonds would be qualifying debt securities for the purposes of the ITA to which the following treatments apply: (a) subject to certain conditions having been fulfilled (including the submission by or on behalf of the Issuer of a return on debt securities to the MAS and the Comptroller within one month from the date of issue of the Bonds and subject to the Issuer including in all offering documents relating to the Bonds a statement to the effect that where interest or, if any, discount income (not including discount income from secondary trading) ( Discount ) is derived from the Bonds by any person who is not resident in Singapore and who carries on any operation in Singapore through a permanent establishment in Singapore, the tax exemption in this paragraph does not apply if such person acquires the Bonds using funds from Singapore operations), interest and Discount, if any, on the Bonds received by a holder who is not resident in Singapore and who does not have a 108

114 permanent establishment in Singapore is exempt from Singapore income tax. Non-residents who have permanent establishments in Singapore can also benefit from this exemption provided that they do not acquire the Bonds using any funds from Singapore operations. Funds from Singapore operations means, in relation to a person, the funds and profits of that person s operations through a permanent establishment in Singapore; (b) (c) (d) subject to certain conditions having been fulfilled (including the submission by or on behalf of the Issuer of a return on debt securities to the MAS and the Comptroller within one month from the date of issue of the Bonds) interest and Discount, if any, on the Bonds received by any company in Singapore is subject to income tax at a concessionary rate of 10 per cent.; interest and Discount, if any, on the Bonds received by any body of persons (as defined in the ITA) in Singapore is subject to income tax at a concessionary rate of 10 per cent.; and subject to: (i) (ii) the Issuer including in all offering documents relating to the Bonds a statement to the effect that any person whose interest or Discount, if any, derived from the Bonds is not exempt from tax shall include such interest or Discount, if any, in a return of income made under the ITA; and the Issuer or such other person as the Comptroller may direct, furnishing to the Comptroller a return on the debt securities within one month from the date of issue of the Bonds and such other particulars in connection with those Bonds as the Comptroller may require, interest or Discount, if any, derived from the Bonds is not subject to the withholding of tax by the Issuer. However, notwithstanding the foregoing: (a) (b) if during the primary launch of the Bonds, the Bonds are issued to fewer than four persons and 50 per cent. or more of the principal amount of the Bonds is beneficially held or funded, directly or indirectly, by related parties of the Issuer, the Bonds would not qualify as qualifying debt securities; and even though the Bonds are qualifying debt securities, if, at any time during the tenure of the Bonds, 50 per cent. or more of the principal amount of the Bonds is held beneficially or funded, directly or indirectly, by any related party(ies) of the Issuer, interest and Discount, if any, derived from the Bonds held by: (i) (ii) any related party of the Issuer; or any other person where the funds used by such person to acquire the Bonds are obtained, directly or indirectly from any related party of the Issuer, shall not be eligible for the tax exemption or concessionary rate of tax of 10 per cent. The term related party, in relation to a person, means any other person who, directly or indirectly, controls that person, or is controlled, directly or indirectly, by that person, or where he and that other person directly or indirectly are under the control of a common person. Notwithstanding that we are permitted to make payments under the Bonds without deduction or withholding of tax under Sections 45 and 45A of the ITA, any person whose interest or discount income derived from the Bonds is not exempt from tax is required under the ITA to include such interest or discount income in a return of income made under the ITA. Interest from debt securities and Discount from debt securities derived by individuals (excluding income that is derived through a partnership or is considered as gains or profits from any trade, business or profession) will be exempted from Singapore income tax. In the 2007 Budget, the Minister for Finance announced that the Qualifying Debt Securities Scheme will be extended to accord tax exemption or concessionary tax rates on prepayment fee, redemption 109

115 premium and break cost that are derived by investors from qualifying debt securities issued on or after 15 February 2007, subject to conditions to be announced. Gains on disposal (including by way of conversion) of the Bonds Singapore does not impose tax on capital gains. However, there are no specific laws or regulations which deal with the characterisation of capital gains, and hence, gains arising from the disposal of the Bonds may be construed to be of an income nature and subject to income tax, especially if they arise from activities which the Comptroller would regard as the carrying on of a trade or business in Singapore. Certain tax consequences of a conversion of Bonds A conversion of Bonds into Shares may be regarded as a disposal of the Bonds for Singapore income tax purposes and that a Bondholder may consequently need to recognise a gain or loss. Such gain or loss may be income or capital in nature depending on the circumstances of the holder (e.g. whether he is trading in securities) and may or may not be taxable or deductible accordingly. In addition, it is not entirely clear whether the value of the Shares at the relevant time would be regarded as the proceeds of such disposal to be used to compute the gain or loss. Investors are advised to seek their own tax advice on the tax consequences to them of a conversion of the Bonds into Shares. Holders of the Bonds who are adopting Financial Reporting Standards 39 ( FRS 39 ) for Singapore income tax purposes may be required to recognise gains or losses on the Bonds, irrespective of disposal, in accordance with FRS 39. Please see the section on Adoption of FRS 39 treatment for Singapore income tax purposes. Adoption of FRS 39 treatment for Singapore income tax purposes With effect from financial period beginning on or after 1 January 2005, companies have to comply with Financial Reporting Standard 39-Financial Instruments: Recognition and Measurement (hereinafter referred to as FRS 39 ) for accounting purposes. On 30 December 2005, the Inland Revenue Authority of Singapore issued a circular entitled Income Tax Implications arising from the adoption of FRS 39-Financial instruments: Recognition and Measurement (the FRS 39 Circular ). The FRS 39 Circular noted that to minimise tax adjustments, the income tax treatment of financial assets and liabilities would be changed so as to more closely follow the accounting treatment (although the tax treatment will continue to differ from the accounting treatment in various respects). Legislative amendments to give effect to the FRS 39 Circular have been enacted in Section 34A of the ITA. The FRS 39 Circular and section 34A of ITA generally apply, subject to certain opt-out provisions, to taxpayers who are required to comply with FRS 39 for financial reporting purposes. Under FRS 39, the holder of a financial instrument with an embedded derivative may be required to separately account for the embedded derivative if certain conditions are fulfilled. This would typically include the equity conversion option in a convertible bond although a derivative which is embedded in a financial asset which as a hybrid instrument is itself reported at fair value through profit or loss is generally not required to be separated. If a convertible bond must be separately accounted for, it would typically also include as the host contract a discount financial instrument which, in the case of a holder required to measure the value of the financial instrument on an amortised cost basis, yields to the holder interest income computed on the basis of the effective interest method set out in FRS 39 (which is described in the FRS 39 Circular as an accounting concept on interest income (which) includes the interest based on the coupon/contractual rate, amortised discount/premium and transaction cost of the debt instrument/ loan ). In the FRS 39 Circular, it is also stated that for assets which are held to maturity or loans and 110

116 receivables measured on an amortised cost basis and which are on revenue account, the interest income calculated using the effective interest method will be brought to tax and that for assets on capital account, interest income will be brought to tax based on the contractual interest rate. The FRS 39 Circular does not expressly deal with how interest income on assets which are available-for-sale or reported at fair value through profit or loss is to be computed for tax purposes, but presumably it would be on the basis of the contractual interest rate. In this regard, Section 34A of the ITA provides that where interest from debt securities is chargeable to tax under Section 10(1)(d) of the ITA (i.e. as passive income rather than as income from a trade or business), such interest will be computed based on the contractual interest rate and not the effective interest rate. (In this section, contractual interest rate in relation to any financial instrument, means the interest rate specified in the financial instrument.) As such, holders of the Bonds who may be subject to the tax treatments under the FRS 39 Circular should consult their own accounting and tax advisers regarding the amount of income from the Bonds to be reported for Singapore income tax purposes, but presumably it would be on the basis of the contractual interest rate. The FRS 39 Circular also does not specifically deal with the consequences of conversion of a convertible bond (whether or not any embedded derivative has to be separately accounted for) although generally speaking, FRS 39 provides that if, as a result of a transfer, a financial asset is derecognised in its entirely but the transfer results in the entity obtaining a new financial asset, the entity shall recognise the new financial asset at fair value. Notwithstanding the above, holders of the Bonds who may be subject to the tax treatment under the FRS 39 Circular should consult their own accounting and tax advisers regarding the Singapore income tax consequences of their acquisition holding or conversion of the Bonds. Shares Dividend Distributions Dividends received in respect of the Shares by either a resident or non-resident of Singapore are not subject to Singapore withholding tax. Dividend Distributions New One-tier Corporate Tax System A new one-tier corporate tax system became effective from 1 January 2003 (subject to certain transitional rules). The transitional period will end on 31 December 2007 and with effect from January 2008, all companies will be on the one-tier corporate tax system. Under this new system, the tax on corporate profits is final and dividends paid by a Singapore resident company will be tax exempt in the hands of a shareholder, regardless of whether the shareholder is a company or an individual and whether or not the shareholder is a Singapore tax resident. Dividend Distributions Imputation System Before 1 January 2003 (and to a certain extent between 1 January 2003 and 31 December 2007 pursuant to transitional rules for the new one-tier corporate tax system), the imputation system of corporate taxation applied in Singapore. Under this system, tax paid by a Singapore resident company on income subject to tax would be imputed to and deemed to be paid on behalf of the company s shareholders upon distribution of such income as dividends. The effect of this is that shareholders would receive dividends ( franked dividends ) net of such tax and would be taxed on the gross amount of dividends (that is, on the amount of net dividends plus an amount equal to the amount of gross dividends multiplied by the prevailing corporate tax rate of 18 per cent.) with the tax paid being available to the shareholders as a tax credit to offset their tax liability on their overall income subject to Singapore income tax (including the gross amount of dividends). 111

117 A non-resident corporate shareholder is generally taxed on franked dividends at the corporate income tax rate. However, because tax deducted from the dividend and paid by the company at the corporate income tax rate is imputed to, and deemed paid on behalf of, shareholders (as discussed in the preceding paragraph), no further Singapore income tax will be imposed on net dividends received by a non-resident corporate shareholder. Further, the non-resident shareholder which does not have a permanent establishment in Singapore with deductible expenses attributed to such dividend income would normally not receive any tax refund from the IRAS. A non-resident individual shareholder is currently taxed on the franked dividends at the rate of 20 per cent. However, because the tax deducted from the dividend is currently 18 per cent., strictly the company would be required to withhold and remit 2 per cent. of the gross dividends to the Comptroller. However, to alleviate this administrative burden, the Minister has reduced this rate of tax on franked dividends received to 18 per cent. which will be a final tax. Dividend Distributions Income Exempted from Tax or Taxed at Concessionary Rate Where a Singapore resident company pays dividends on its ordinary shares out of income received that is exempt from tax or out of income received that is subject to tax at a concessionary rate, if any, such dividends will generally be free from Singapore tax in the hands of the holders of the shares. The Issuer has fully utilised its Section 44 balance as of May 2007 and has moved to the one-tier corporate tax regime. Gains on Disposal of Shares Singapore does not impose tax on capital gains. However, there are currently no specific laws or regulations which address the characterisation of capital gains and hence gains arising from the disposal of the Shares may be construed to be of an income nature and subject to tax especially if they arise from activities which the Comptroller regards as the carrying on of a trade or business in Singapore. Holders of the Shares who are adopting FRS 39 for Singapore income tax purposes may be required to recognise gains or losses on the Shares, irrespective of disposal, in accordance with FRS 39. Please see the section on Adoption of FRS 39 treatment for Singapore income tax purposes. Stamp Duty There is no stamp duty payable in respect of the issuance and holding of Shares. Where Shares evidenced in certificated form are acquired in Singapore, stamp duty is payable on the instrument of transfer of the Shares at the rate of S$2 for every S$1,000 or part thereof of the consideration for, or market value of, the Shares, whichever is higher. The stamp duty is borne by the purchaser unless there is an agreement to the contrary. Where an instrument of transfer is executed outside Singapore or no instrument of transfer is executed, no stamp duty is payable on the acquisition of Shares. However, stamp duty may be payable if the instrument of transfer is executed outside Singapore and is received in Singapore. Stamp duty is not applicable to electronic transfers of the Shares through the scripless trading system operated by CDP. Estate Duty Singapore estate duty is imposed on the value of most immovable property situated in Singapore and on most movable property wherever it may be situated passing on the death of individuals who are domiciled in Singapore, subject to specific exemption limits. Movable property (whether situated in Singapore or elsewhere) passing on the death of an individual not domiciled in Singapore is not subject to Singapore estate duty. 112

118 Individuals, whether or not domiciled in Singapore, should consult their own tax advisers regarding Singapore estate duty consequences of their ownership of the Bonds or Shares. Accordingly, where property passing upon the death of an individual domiciled in Singapore includes the Bonds or the Shares, Singapore estate duty is payable to the extent that the value of the Bonds or the Shares aggregated with any other assets subject to Singapore estate duty exceeds S$600,000. Unless other exemptions apply to the other assets, for example, the separate exemption limit for residential properties, any excess beyond S$600,000 will be levied at 5 per cent. on the first S$12,000,000 of the individual s chargeable assets and at a rate of 10 per cent. thereafter. 113

119 SUBSCRIPTION AND SALE The Lead Manager has, pursuant to a subscription agreement dated 28 May 2007 (the Subscription Agreement ), agreed with the Issuer, subject to the satisfaction of certain conditions, to subscribe, or procure subscribers for the S$1,000,000,000 principal amount of the Bonds at a price equal to 100 per cent. of their principal amount less a combined management and underwriting commission of 1.30 per cent. of such principal amount, which is subject to expense reimbursement. The Subscription Agreement entitles the Lead Manager to terminate it in certain circumstances prior to payment being made to the Issuer. The Issuer has undertaken to the Lead Manager that, for a period of 90 days after the Closing Date, neither the Issuer nor any of its subsidiaries or other affiliates over which it exercises management or voting control, nor any person acting on its or their behalf, shall, without the prior written consent of the Lead Manager (such consent not to be unreasonably withheld), issue, offer, sell, contract to sell, pledge or otherwise dispose of (or publicly announce any such issuance, offer, sale or disposal) securities issued by the Issuer and having a maturity of more than one year from the date of issue, any Shares of the Issuer or securities convertible or exchangeable into or exercisable for Shares of the Issuer or warrants or other rights to purchase Shares of the Issuer or any security or financial product whose value is determined directly or indirectly by reference to the price of the Shares, including equity swaps, forward sales and options representing the right to receive any Shares save for Shares issued pursuant to the conversion provisions of the Bonds or options granted or awards made, or Shares issued pursuant to any share option or share award of the Issuer which are implemented. The distribution of this Offering Circular or any offering material and the offering, sale or delivery of the Bonds is restricted by law in certain jurisdictions. Therefore, persons who may come into possession of this Offering Circular or any offering material are advised to consult with their own legal advisers as to what restrictions may be applicable to them and to observe such restrictions. This Offering Circular may not be used for the purpose of an offer or invitation in any circumstances in which such offer or invitation is not authorised. The Lead Manager and certain of its subsidiaries or affiliates have performed certain investment banking and advisory services for the Issuer and/or its subsidiaries from time to time for which they have received customary fees and expenses. The Lead Manager may, from time to time, engage in transactions with and perform services for the Issuer and/or its subsidiaries in the ordinary course of their business. General No action has been or will be taken by the Issuer or the Lead Manager that would permit a public offering of the Bonds, or possession or distribution of this Offering Circular or any offering or publicity material relating to the Bonds, in any country or jurisdiction where action for that purpose is required. No offers, sales or deliveries of any Bonds, or distribution or publication of any offering material relating to the Bonds, may be made in or from any jurisdiction except in circumstances which will result in compliance with any applicable laws and regulations and will not impose any obligations on the Issuer or the Lead Manager. United States The Bonds have not been registered under the Securities Act and may not be offered or sold within the US or to, or for the account or benefit of, US persons except in accordance with Regulation S or pursuant to an exemption from the registration requirements of the Securities Act. Terms used in this section have the meanings given to them by Regulation S. 114

120 The Lead Manager represented and agreed that neither it nor any of its affiliates (as defined in Rule 501(b) of Regulation D), nor any person acting on their behalf has engaged or will engage in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with any offer and sale of the Bonds in the US. United Kingdom The Lead Manager represented, warranted and agreed that: (i) (ii) it has only communicated or caused to be communicated, and will only communicate or cause to be communicated, any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 ( FSMA ) received by it in connection with the issue or sale of any Bonds in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer; and it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Bonds in, from or otherwise involving the United Kingdom. Hong Kong The Bonds may not be offered or sold in Hong Kong, by means of any document, other than (a) to professional investors, as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a prospectus, as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the Bonds may be issued whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the Bonds which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors, as defined in the Securities and Futures Ordinance and any rules made under that Ordinance. Japan The Lead Manager represented and agreed that the Bonds have not been and will not be registered under the Securities and Exchange Law of Japan (the Securities and Exchange Law ) and that the Bonds which it subscribes will be subscribed by it as principal and that, in connection with the offering of the Bonds, it will not, directly or indirectly, offer or sell any Bonds in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organised under the laws of Japan), except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Securities and Exchange Law and other applicable laws and regulations of Japan. Singapore The Lead Manager acknowledged that this Offering Circular has not been registered as a prospectus with the MAS. Accordingly, the Lead Manager represented, warranted and agreed that it has not offered or sold any Bonds or caused the Bonds to be made the subject of an invitation for subscription or purchase and will not offer or sell any Bonds or cause the Bonds to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this Offering Circular or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Bonds, whether directly or indirectly, to persons in Singapore other than (1) to an institutional investor under Section 274 of the SFA, (2) to a relevant person pursuant to Section 275(1) of the SFA, or to any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions, specified in Section 275 of the SFA or (3) otherwise pursuant to, and in accordance with the conditions of, any other applicable provisions of the SFA. 115

121 Where the Bonds are subscribed or purchased under Section 275 of the SFA by a relevant person which is: (i) (ii) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of which is an accredited investor; or a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries rights and interest (howsoever described) in that trust shall not be transferable within six months after that corporation or that trust has acquired the Bonds pursuant to an offer made under Section 275 of the SFA, except: (i) (ii) (iii) (iv) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (in the case of a corporation) where the transfer arises from an offer referred to in Section 275(1A) of the SFA, or (in the case of a trust) where the transfer arises from an offer that is made on terms that such rights or interests are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets; where no consideration is given for the transfer; or by operation of law. 116

122 GENERAL INFORMATION (1) The Issuer is incorporated in Singapore under the Act as a public company limited by shares and its registration number is N. The registered office of the Issuer is 168 Robinson Road, #30-01, Capital Tower, Singapore (2) The terms of the Offering and the issue of the Bonds were approved by resolutions of the Directors of the Issuer passed on 22 May 2007 and 8 June (3) Approval in-principle has been received for the listing of the Bonds and the Shares to be issued on the conversion of the Bonds on the SGX-ST. Approval in-principle for the listing of the Bonds and the new Shares to be issued on Conversion of the Bonds is not to be taken as an indication of the merits of the Bonds, the Shares, the Issuer or its subsidiaries. (4) Copies of the Memorandum and Articles of Association of the Issuer and copies of the Trust Deed and the Agency Agreement will be available for inspection during usual business hours on any weekday (except Saturdays, Sundays and public holidays) at the Issuer s registered office for so long as any of the Bonds are outstanding. (5) The Bonds have been accepted for clearance through Euroclear and Clearstream, Luxembourg, with a Common Code of The International Securities Identification Number for the Bonds is XS (6) The Issuer has obtained all consents, approvals and authorisations in Singapore required in connection with the issue and performance of the Bonds. (7) Except as disclosed in this Offering Circular up to date hereof, there has been no significant change in the financial position of the Issuer since 31 December 2006 and no material adverse change in the financial position of the Issuer since 31 December (8) Except as disclosed in this Offering Circular up to the date hereof, the Issuer is not involved in any litigation or arbitration proceedings or any regulatory investigations relating to claims or amounts which are material in the context of the issue of the Bonds nor, so far as the Issuer is aware, is any such litigation or arbitration pending or threatened. (9) The Trustee is entitled under the Trust Deed to rely, without liability to the Bondholders, on certificates prepared by the Directors of the Issuer and any certificate or report of the Issuer s auditors or any other expert appointed pursuant to the Conditions and/or the Trust Deed, whether or not addressed to the Trustee and whether or not the liability of such auditors or expert in respect thereof is limited by a monetary cap or otherwise limited or excluded. (10) Copies of the Agency Agreement and the published financial statements of the Issuer will be available at the specified offices of each of the Paying Agents during normal business hours, so long as any of the Bonds are outstanding. (11) KPMG have audited and rendered an unqualified audit report on the Group s consolidated financial statements (i) as at and for the year ended 31 December 2006 (which includes 31 December 2005 comparative financial information) and (ii) as at and for the year ended 31 December 2005 (which includes the restated 2004 comparative financial information) and have given and not withdrawn their consent to the issue of this document with the inclusion in it, where relevant, of references to them and their report in the form and context in which they are included. (12) Submission by the Issuer to the jurisdiction of the English courts and the appointment of an agent for service of process, are valid and binding under Singapore law. The choice of English laws as the governing laws, under the laws of Singapore, is a valid choice of law and should be honoured by the courts of Singapore, subject to proof thereof and considerations of public policy. 117

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124 INDEX TO THE FINANCIAL STATEMENTS Annual Report for the Year Ended 31 December Report of the Auditors... Balance Sheets as at 31 December 2004 and Profit and Loss Accounts for the years ended 31 December 2004 and Statements of Changes in Equity for the years ended 31 December 2004 and Consolidated Statement of Cash Flows for the years ended 31 December 2004 and Notes to the Financial Statements... Annual Report for the Year Ended 31 December Independent Auditors Report... Balance Sheets as at 31 December 2005 and Income Statements for the years ended 31 December 2005 and Statements of Changes in Equity for the years ended 31 December 2005 and Consolidated Statement of Cash Flows for the years ended 31 December 2005 and Notes to the Financial Statements... FS-2 FS-3 FS-4 FS-5 FS-6 FS-10 FS-12 FS-96 FS-97 FS-99 FS-100 FS-101 FS-106 FS First Quarter Financial Statements Announcement... FS-185 FS-1

125 Registration Number: N Annual Report Year Ended 31 December 2005 FS-2

126 KPMG 16 Raffles Quay #22-00 Hong Leong Building Singapore Telephone Fax Internet Report of the Auditors to the Members of CapitaLand Limited We have audited the consolidated financial statements of the Group and the financial statements of the Company for the year ended 31 December 2005 as set out on pages FS-4 to FS-95. These financial statements are the responsibility of the Company s directors. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion: (a) (b) the financial statements are properly drawn up in accordance with the provisions of the Companies Act, Chapter 50 (the Act) and Singapore Financial Reporting Standards to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2005 and of the results and changes in equity of the Group and of the Company and of the cash flows of the Group for the year ended on that date; and 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. KPMG Certified Public Accountants Singapore 28 February 2006 FS-3

127 Balance Sheets as at 31 December 2005 Note 2005 The Group 2004* 2005 The Company 2004* Non-Current Assets Property, Plant and Equipment 3 201,465 1,379,624 1,588 1,433 Intangible Assets 4 35,394 64,669 Investment Properties 5 5,914,905 4,237,498 Properties Under Development 6 634, ,124 Interests in Subsidiaries 7 3,773,558 4,873,383 Interests in Associates 8 2,749,732 2,642,689 Interests in Jointly-Controlled Entities 9 1,178,938 1,049,015 Interests in Partnership 10 64,245 Financial Assets ,253 58,300 Deferred Tax Assets 37 39,084 38,284 3,955 Other Non-Current Assets 12 8, , ,038,312 9,924,799 3,779,357 4,875,029 Current Assets Development Properties for Sale 13 3,542,494 4,283,021 Consumable Stock 1,085 14,445 Trade and Other Receivables 14 1,417,790 1,092,079 1,101, ,954 Financial Assets 11 72,095 3,737 Cash and Cash Equivalents 19 2,111,277 1,917, , ,970 7,144,741 7,311,004 2,088,854 1,667,924 Less: Current Liabilities Bank Overdrafts 19 6,262 12,891 Trade and Other Payables 20 2,005,739 2,001, , ,842 Short Term Loans , , , ,074 Current Portion of Term Loans , , ,109 Current Portion of Debt Securities , , , ,927 Current Portion of Finance Leases 30 3,448 3,376 Provision for Taxation 237, ,838 4,630,695 4,567, ,617 1,129,843 Net Current Assets 2,514,046 2,743,145 1,189, ,081 Less: Non-Current Liabilities Term Loans 28 2,946,266 3,388, ,554 Debt Securities 29 1,281,745 1,442, , ,000 Finance Leases 30 48,683 53,652 Deferred Tax Liabilities 37 74,230 48,621 1,061 Deferred Income 31 30,959 32,011 Other Non-Current Liabilities , , , ,595 4,523,990 5,253, ,097 1,280,210 Net Assets 9,028,368 7,414,292 4,693,497 4,132,900 Representing: Share Capital 33 2,750,503 2,524,795 2,750,503 2,524,795 Reserves 34 3,907,207 2,831,030 1,942,994 1,608,105 Equity attributable to Equity Holders of the Company 6,657,710 5,355,825 4,693,497 4,132,900 Minority Interests 2,370,658 2,058,467 Total Equity 9,028,368 7,414,292 4,693,497 4,132,900 * Please refer to note 51. The accompanying notes form an integral part of these financial statements. FS-4

128 Profit and Loss Accounts for the year ended 31 December 2005 Note 2005 The Group 2004* 2005 The Company 2004* Continuing operations Revenue 35 3,845,637 3,179, , ,100 Cost of sales (3,036,173) (2,319,895) Gross profit 809, , , ,100 Other operating income 361, ,488 94, ,029 Administrative expenses (390,295) (291,886) (38,607) (33,583) Other operating expenses (43,632) (207,888) 5,444 (61) Profit from continuing operations 737, , , ,485 Finance costs 36(f) (274,581) (263,612) (55,041) (96,253) Share of results of: associates 108,905 73,202 jointly-controlled entities 14,293 47,773 partnership (114) 4, , ,516 Profit before taxation from continuing operations , , , ,232 Taxation 37 (152,020) (109,174) (9,132) (4,761) Profit after taxation from continuing operations 433, , , ,471 Discontinued operations Profit after taxation from discontinued operations 39(c) 741,963 26,094 Profit for the year 1,175, , , ,471 Attributable to: Equity holders of the Company 750, , , ,471 Minority interests 425, ,026 Profit for the year 1,175, , , ,471 Basic earnings per share (cents) from: continuing operations discontinued operations Total Fully diluted earnings per share (cents) from: continuing operations discontinued operations Total * Please refer to note 51. The accompanying notes form an integral part of these financial statements. FS-5

129 Statements of Changes in Equity for the year ended 31 December The Group 2004* 2005 The Company 2004* Share Capital At 1 January 2,524,795 2,517,350 2,524,795 2,517,350 Issue of shares under share option plan 33,887 7,445 33,887 7,445 Issue of shares under performance share plan 1,535 1,535 Conversion of convertible bonds 190, ,286 At 31 December 2,750,503 2,524,795 2,750,503 2,524,795 Share Premium At 1 January 2,544,823 3,429,376 1,276,591 2,161,144 Issue of shares under share option plan 16,081 1,283 16,081 1,283 Capital reduction and distribution in specie (885,836) (885,836) Conversion of convertible bonds 219, ,343 At 31 December 2,780,247 2,544,823 1,512,015 1,276,591 Capital Reserve At 1 January 95, ,834 30,381 30,381 Transfer from/(to) accumulated profits 497 (5,869) Conversion of convertible bonds (30,381) (30,381) Others (7,028) (15) At 31 December 59,038 95,950 30,381 Capital Redemption Reserve At 1 January 3,120 3, Transfer to profit and loss account on disposal of subsidiaries (788) Others 12 At 31 December 3,132 3, The accompanying notes form an integral part of these financial statements. FS-6

130 Statements of Changes in Equity for the year ended 31 December 2005 (cont d) Note 2005 The Group 2004* 2005 The Company 2004* Revaluation Reserve At 1 January 55,568 89,839 Net deficit on revaluation of investment properties/ properties under development (31,455) (124,551) Realisation of revaluation deficit transferred to profit and loss account 7,585 3,899 Share of associates and jointly-controlled entities revaluation surplus 183,031 30,013 Net deficit on revaluation of investment properties/ properties under development charged to profit and loss account 32,192 56,368 At 31 December 246,921 55,568 Net gains/(losses) recognised directly in equity 183,768 (38,170) Foreign Currency Translation Reserve At 1 January, as previously reported (21,393) 7,012 Effects of change in accounting policy 39 (2,832) (3,648) (24,225) 3,364 Effects of adopting FRS ,559 At 1 January, restated (7,666) 3,364 Exchange differences arising from consolidation of foreign operations and translation of foreign currency loans 28,587 (24,985) Realisation of foreign exchange reserves from dilution/disposal of subsidiaries and associates (43,761) (2,604) At 31 December (22,840) (24,225) Net gains/(losses) recognised directly in equity 28,587 (24,985) Equity Compensation Reserve At 1 January, as previously reported Effects of adopting FRS ,520 2,586 7,776 2,198 At 1 January, restated 9,520 2,586 7,776 2,198 Transfer from accumulated profits Transfer to share capital (1,535) (1,535) Transfer to minority interests (1,369) Cost of share-based payment 17,517 6,934 12,799 5,578 At 31 December 24,534 9,520 19,441 7,776 The accompanying notes form an integral part of these financial statements. FS-7

131 Statements of Changes in Equity for the year ended 31 December 2005 (cont d) Note 2005 The Group 2004* 2005 The Company 2004* Hedging Reserve At 1 January Effects of adopting FRS (21,695) At 1 January, restated (21,695) Effective portion of changes in fair value of cash flow hedges 21,100 At 31 December (595) Net gains recognised directly in equity 21,100 Available-for-sale Reserve At 1 January Effects of adopting FRS ,429 At 1 January, restated 23,429 Changes in fair value of available-for-sale investments 62,902 At 31 December 86,331 Net gains recognised directly in equity 62,902 Accumulated Profits/(Losses) At 1 January, as previously reported 179,631 (57,240) 292, ,678 Effects of changes in accounting policy and adoption of FRS (33,357) (26,006) 974 (75) 146,274 (83,246) 293, ,603 Effects of adopting FRS (38,921) At 1 January, restated 107,353 (83,246) 293, ,603 Net profit for the year , , , ,471 Dividends paid 40 (126,526) (80,614) (126,526) (80,614) Transfer (to)/from capital reserve (497) 5,869 Transfer to equity compensation reserve (401) (401) Expenses in connection with capital reduction and distribution in specie (1,416) (1,416) At 31 December 730, , , ,044 Net gains recognised for the year 750, , , ,471 Equity attributable to Equity Holders of the Company 6,657,710 5,355,825 4,693,497 4,132,900 Total recognised gains for the year 1,046, , , ,471 The accompanying notes form an integral part of these financial statements. FS-8

132 Statements of Changes in Equity for the year ended 31 December 2005 (cont d) Note 2005 The Group 2004* 2005 The Company 2004* Minority Interests At 1 January, as previously reported 2,079,235 2,045,106 Effects of changes in accounting policy and adoption of FRS (20,768) (18,456) 2,058,467 2,026,650 Effects of adopting FRS (6,902) At 1 January, restated 2,051,565 2,026,650 Net profit for the year 425, ,026 Dividends paid to minority interests (497,179) (156,999) Capital contribution 314,630 34,256 Effects of acquisition/disposal/dilution and liquidation of subsidiaries 28,089 49,562 Foreign currency translation differences 222 2,817 Transfer from equity compensation reserve 1,369 Share of revaluation surplus/(deficit) of investment properties 40,796 (57,845) Others 6,038 At 31 December 2,370,658 2,058,467 Net gains recognised for the year 472, ,998 Total Equity 9,028,368 7,414,292 4,693,497 4,132,900 * Please refer to note 51. The accompanying notes form an integral part of these financial statements. FS-9

133 Consolidated Statement of Cash Flows for the year ended 31 December * Operating activities Profit before taxation from continuing operations 585, ,787 Profit before taxation from discontinued operations 751,362 36,217 1,337, ,004 Adjustments for: Amortisation and impairment of: intangible assets 1,102 4,991 leasehold investment properties 1, Negative goodwill on acquisition (820) (44,974) (Write back of)/allowance for: foreseeable losses on development properties for sale (36,805) (32,823) loans to associates and jointly-controlled entities 11,853 non-current financial assets 4,130 40,837 Share-based expenses 19,374 7,274 Changes in fair value of financial derivatives and assets (29,998) Depreciation of property, plant and equipment 71,781 89,740 (Gain)/Loss on disposal/write off of property, plant and equipment (23,635) 3,860 Gain on disposal of investment properties (13,141) (108,770) Write down in value of investment properties and properties under development 33,074 17,946 Gain on disposal of non-current financial assets (2,101) (1,469) (Gain)/Loss on disposal/dilution of subsidiaries and associates (812,218) 110,686 Share of results of associates, jointly-controlled entities and partnership (123,180) (125,611) Accretion of deferred income (4,913) (5,357) Reversal of provision for obligation no longer required (11,140) Interest expense 280, ,075 Interest income (108,099) (83,913) (754,595) 156,872 Operating profit before working capital changes 582, ,876 Decrease/(Increase) in working capital: Inventories, trade and other receivables (46,334) (348,627) Development properties for sale 683,575 (5,245) Trade and other payables 43,896 34,146 Amount due from related corporations (3,232) 122 Financial assets (44,224) 143,190 Changes in working capital 633,681 (176,414) Cash generated from operations 1,216, ,462 Income tax paid (86,255) (166,199) Customer deposits and other non-current payables received/(refunded) 6,943 (740) Net cash generated from operating activities carried forward 1,136, ,523 The accompanying notes form an integral part of these financial statements. FS-10

134 Consolidated Statement of Cash Flows for the year ended 31 December 2005 (cont d) Note * Net cash generated from operating activities brought forward 1,136, ,523 Investing activities Proceeds from disposal of property, plant and equipment 173,767 9,439 Purchase of property, plant and equipment (77,503) (49,726) Increase in associates, jointly-controlled entities and partnership (70,841) (272,619) (Increase)/Decrease in amounts owing by investee companies and other non-current receivables (5,252) 1,859 Deposits paid for new investments (184,368) (65,978) Acquisition of investment properties and properties under development (1,042,486) (63,536) Proceeds from disposal of investment properties 101,922 1,083,267 (Acquisition of)/proceeds from disposal of non-current financial assets (151,892) 39,498 Dividends received from associates and jointly-controlled entities 161,470 56,571 Acquisition of remaining interest in a subsidiary (21,315) Disposal/(Acquisition) of subsidiaries (net) 41 1,182,480 (162,395) Interest income received 96,981 67,830 Settlement of derivatives (15,849) Net cash generated from investing activities 147, ,210 Financing activities Proceeds from issue of shares under share option plan 49,968 8,728 Repayment of loans from related corporations (714) Proceeds from loans from minority shareholders 36,448 41,830 Contribution from minority shareholders 314,630 34,256 (Repayment of)/proceeds from sale of future receivables (277,640) 257,643 Proceeds from term loans 2,332,441 1,819,226 Repayment of term loans (2,835,406) (1,788,400) Proceeds from debt securities 540, ,468 Repayment of debt securities (299,548) (858,597) Repayment of finance lease payables (3,447) Dividends paid to minority shareholders (497,179) (156,999) Dividends paid to shareholders (126,526) (80,614) Interest expense paid (319,902) (316,843) Net cash used in financing activities (1,086,028) (616,016) Net increase in Cash and Cash Equivalents 197, ,717 Cash and Cash Equivalents at beginning of the year 1,904,831 1,475,766 Effect of Exchange Rate Changes on Cash Balances Held in Foreign Currencies 2,267 2,348 Cash and Cash Equivalents at end of the year 19 2,105,015 1,904,831 * Please refer to note 51. The accompanying notes form an integral part of these financial statements. FS-11

135 Notes to the Financial Statements These notes form an integral part of the financial statements. The financial statements were authorised for issue by the directors on 28 February Domicile and Activities CapitaLand Limited (the Company) is incorporated in the Republic of Singapore and has its registered office at 168 Robinson Road, #30-01, Capital Tower, Singapore The principal activities of the Company during the financial year are those relating to investment holding and consultancy services as well as the corporate headquarter which gives direction, provides management support services and integrates the activities of its subsidiaries. The principal activities of the significant subsidiaries are set out in note 46 to the accompanying financial statements. The consolidated financial statements relate to the Company and its subsidiaries (referred to as the Group) and the Group s interests in associates, joint ventures and partnership. 2 Summary of Significant Accounting Policies (a) Basis of preparation The financial statements are prepared in accordance with Singapore Financial Reporting Standards (FRS) including related Interpretations promulgated by the Council on Corporate Disclosure and Governance. In 2005, the Group adopted the following revised or new FRS that are applicable in the current financial year: FRS 1 (revised) FRS 2 (revised) FRS 8 (revised) FRS 10 (revised) FRS 16 (revised) FRS 17 (revised) FRS 21 (revised) FRS 24 (revised) FRS 27 (revised) FRS 28 (revised) FRS 31 (revised) FRS 32 (revised) FRS 33 (revised) FRS 39 FRS 102 FRS 105 Presentation of Financial Statements Inventories Accounting Policies, Changes in Accounting Estimates and Errors Events After the Balance Sheet Date Property, Plant and Equipment Leases The Effects of Changes in Foreign Exchange Rates Related Party Disclosures Consolidated and Separate Financial Statements Investments in Associates Interests in Joint Ventures Financial Instruments: Disclosure and Presentation Earnings Per Share Financial Instruments: Recognition and Measurement Share-based Payment Non-current Assets Held for Sale and Discontinued Operations The effects of adopting the above new or revised FRS in 2005 are set out in note 39. FS-12

136 The financial statements, which are expressed in Singapore dollars, are prepared on the historical cost basis except that investment properties and certain financial assets and financial liabilities are stated at fair value. Non-current assets and disposal groups held for sale are stated at the lower of carrying amount and fair value less costs to sell. The preparation of financial statements in conformity with FRS requires management to exercise its judgement in the process of applying the Group s accounting policies. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying amounts of assets and liabilities that are not readily apparent from other sources. The 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, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods. FRS yet to be adopted Certain new accounting standards and interpretations have been issued and are mandatory for accounting periods beginning on or after 1 January The Group has assessed those standards and interpretations issued. The initial application of these standards and interpretations is not expected to have any material impact on the Group s financial statements, except for FRS 40 Investment Property. Under FRS 40, investment properties are permitted to be stated at either their fair value or cost less accumulated depreciation and impairment loss. Investment properties held under operating leases are required to be measured at fair value. The Group expects to measure all its investment properties at fair value. As a result of adopting FRS 40, the Group expects to reclassify its revaluation reserve to accumulated profits at 1 January At this juncture, the impact of adoption cannot be reasonably determined as the Group is unable to estimate with reasonable accuracy the changes in fair value of the investment properties in the period to 1 January (b) Functional currency Items included in the financial statements of each entity in the Group are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to that entity (the functional currency ). The consolidated financial statements and the financial statements of the Company are presented in Singapore dollars, which is the functional currency of the Company. (c) 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 and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identified assets acquired, liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values on the date of acquisition, irrespective of the extent of any minority interest. Any excess or deficiency of the purchase consideration over the net fair value of the identifiable assets, liabilities and contingent liabilities is accounted as goodwill or negative goodwill [see accounting policy 2(f)]. FS-13

137 For acquisition of subsidiaries prior to 1 January 2004 which previously met the criteria for merger of businesses such that the assets, liabilities and results are accounted for under the pooling of interests method, the classification and accounting treatment of these business combinations have not been reconsidered or restated in preparing the Group s financial statements. (ii) Subsidiaries Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. In the Company s balance sheet, investments in subsidiaries are stated at cost less impairment losses. (iii) Associates Associates are entities in which the Group has significant influence, but not control, over the financial and operating policies. The consolidated financial statements include the Group s share of the total recognised gains and losses of associates on an equity accounting basis, 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 associate, the Group s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. (iv) Jointly-controlled entities A jointly-controlled entity is an entity over whose activities the Group has joint control established by contractual agreement. The consolidated financial statements include the Group s share of the total recognised gains and losses of jointly-controlled entities on an equity accounting basis, from the date that joint control commences until the date that joint control ceases. (v) Partnership A partnership is one where the Group has an interest and share in the profit or loss and the net assets of the partnership. The consolidated financial statements include the Group s share of the post-acquisition accumulated profits and reserves of the partnership from the date that the partnership was acquired until the date that the Group s interest in the partnership ceases. (vi) Transactions eliminated on consolidation Intragroup balances and any significant unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements. Significant unrealised gains arising from transactions with associates, jointlycontrolled entities and partnership are eliminated to the extent of the Group s interest in the entity. Significant unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. FS-14

138 (vii) Accounting for associates, joint ventures and partnership In the Company s balance sheet, investments in associates, joint ventures and partnership are stated at cost less impairment losses. In the Company s profit and loss account, the results from these entities are included to the extent of dividends received and receivable, provided the Company s right to receive the dividend is established before the balance sheet date. (d) Foreign currencies (i) Foreign currency transactions Monetary assets and liabilities denominated in foreign currencies are translated into Singapore dollars at rates of exchange approximate to those ruling at the balance sheet date. Transactions in foreign currencies are translated at rates ruling on transaction dates. Foreign exchange differences arising from translation are recognised in the profit and loss account. Non-monetary assets and liabilities measured at cost in foreign currencies are translated to Singapore dollars at rates ruling on transaction dates. Non-monetary assets and liabilities measured at fair value in foreign currencies are translated to Singapore dollars at foreign exchange rates ruling at the dates the fair value was determined. (ii) Net investment in a foreign operation Exchange differences arising from monetary items that in substance form part of the Company s net investment in a foreign operation, are recognised in the Company s profit and loss account. Such exchange differences are reclassified to equity in the consolidated financial statements only when the loan is denominated in the functional currency of the foreign operation. Deferred exchange differences are released to the consolidated profit and loss account upon disposal of the investment. (iii) Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising from the acquisition of foreign operations, are translated to Singapore dollars at the rates of exchange ruling at the balance sheet date. Revenue and expenses of foreign operations are translated at exchange rates ruling at the dates of the transactions. Exchange differences arising from translation are recognised directly in equity. On disposal, the accumulated translation differences are recognised in the consolidated profit and loss account as part of the gain or loss on sale. (e) Property, plant and equipment (i) Owned assets Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. (ii) Subsequent expenditure Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the Group. All other subsequent expenditure is recognised as an expense in the period in which it is incurred. FS-15

139 (iii) Depreciation Depreciation is provided on a straight-line basis so as to write off items of property, plant and equipment over their estimated useful lives as follows: Freehold land and long leasehold land (exceeding 99 years) - no depreciation Freehold and long leasehold buildings years Leasehold hotel land and buildings - remaining lease period ranging from 38 to 99 years Other leasehold land and buildings - remaining lease period ranging from 6 to 32 years but capped at a maximum of 50 years Freehold buildings - 20 to 50 years Hospitality plant, machinery, improvements, furniture, fittings and equipment - 1 to 15 years Other plant, machinery and improvements - 3 to 10 years Other furniture, fittings and equipment - 2 to 5 years Motor vehicles - 5 years Assets under construction are stated at cost. Expenditure relating to assets under construction (including borrowing costs) are capitalised when incurred. Depreciation will commence when the development is completed. The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. (f) Intangible assets (i) Goodwill Goodwill in a business combination represents the excess of the cost of acquisition over the fair value of the Group s share of the identifiable assets acquired and liabilities and contingent liabilities assumed. Goodwill is stated at cost less impairment losses and is tested annually for impairment [see accounting policy 2(j)]. Goodwill on the acquisition of subsidiaries is presented as intangible assets. In respect of associates and jointly-controlled entities, the carrying amount of goodwill is included in the carrying amount of the investment in the associates or jointly-controlled entities. (ii) Negative goodwill Negative goodwill in a business combination represents 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. It is recognised directly to the profit and loss account. FS-16

140 (g) Investment properties and investment properties under development (i) Investment properties Investment properties, which are not held with the intention of sale in the ordinary course of business, are stated at fair value. The fair value is determined by the directors on an annual basis based on internal valuation or independent professional valuation. Independent professional valuation is made at least once every 3 years. The net surplus or deficit on revaluation is taken to revaluation reserve except when the total of the reserve is not sufficient to cover a deficit on an aggregate basis within the same geographical segment, in which case the amount by which the deficit exceeds the amount in the revaluation reserve is charged to the profit and loss account. Surplus on revaluation is released to the profit and loss account upon the sale of investment properties. The value of investment properties with remaining lease period of 20 years or less are amortised over their remaining leasehold lives. (ii) Major retrofitting or redevelopment Investment properties under or awaiting major retrofitting or redevelopment are stated at fair value immediately prior to the commencement of retrofitting or redevelopment. Major retrofitting or redevelopment expenditure is stated at cost less impairment losses. Upon completion of major retrofitting or redevelopment, the carrying amounts are stated at fair value on the basis stated in 2(g)(i). An impairment loss is recognised in the same way as a deficit on revaluation. (iii) Properties under development Properties under development are stated at specifically identified cost less impairment losses. Cost of property under development includes borrowing costs and other related expenditure which are capitalised as and when activities that are necessary to get the asset ready for its intended use are in progress. An impairment loss is recognised in the same way as a deficit on revaluation. Upon completion of the development, the amount is reclassified to investment properties. This will be stated at fair value on the basis stated in 2(g)(i). (h) Financial assets Financial instruments held for trading are classified as current assets and are stated at fair value, with any resultant gain or loss recognised in the profit and loss account. Other financial instruments held by the Group are classified as being available-for-sale and are stated at fair value, with any resultant gain or loss being recognised directly in equity. The exceptions are impairment losses and foreign exchange gains and losses on monetary items such as debt instruments, which are recognised in the profit and loss account. When these investments are derecognised, the cumulative gain or loss previously recognised directly to equity is recognised in the profit and loss account. Where these investments are interest-bearing, interest calculated using the effective interest method is recognised in the profit and loss account. FS-17

141 The fair value of financial instruments classified as held-for-trading and available-for-sale is determined based on the quoted bid price for quoted instruments and acceptable valuation techniques for unquoted instruments at the balance sheet date. Purchases and sales of financial instruments are recognised on trade date the date on which the Group commits to purchase or sell the assets. (i) Development properties for sale Development properties for sale are stated at the lower of cost plus, where appropriate, a portion of the attributable profit, and estimated net realisable value, net of progress billings. Cost of development properties include borrowing costs and other related expenditure which are capitalised as and when activities that are necessary to get the assets ready for their intended use are in progress. Net realisable value represents the estimated selling price less costs to be incurred in selling the property. (j) Impairment The carrying amounts of the Company and the Group s assets, other than investment properties [see accounting policy 2(g)], development properties for sale [see accounting policy 2(i)] and deferred tax assets [see accounting policy 2(o)], are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset s recoverable amount is estimated. Goodwill, intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually and as and when indicators of impairment are identified. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the profit and loss account 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 allotted to cash-generating units (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro-rata basis. When a decline in the fair value of an available-for-sale financial asset has been recognised directly to equity and there is objective evidence that the value of the asset is impaired, the cumulative loss that had been recognised directly in equity is recognised in the profit and loss account. The amount of the cumulative loss that is recognised in the profit and loss account is the difference between the acquisition cost and current fair value, less any impairment loss on the financial asset previously recognised in the profit and loss account. (i) Calculation of recoverable amount The recoverable amount of receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate. Receivables with a short duration are not discounted. The recoverable amount of other assets is the greater of the asset s net selling price and value in use. 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. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs. FS-18

142 (ii) Reversal of impairment loss An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. However, an impairment loss in respect of goodwill is not reversed. 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. An impairment loss in respect of an investment in an equity instrument classified as availablefor-sale is not reversed through the profit and loss account. If the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the profit and loss account, the impairment shall be reversed, with the amount of the reversal recognised in the profit and loss account. (k) Employee benefits (i) Short term employee benefits All short term employee benefits, including accumulated compensated absences, are recognised in the profit and loss account in the period in which the employees render their services. (ii) Defined contribution plans Contributions to post-employment benefits under defined contribution plans are recognised as an expense in the profit and loss account as incurred. (iii) Long service leave Liabilities for other employee entitlements which are not expected to be paid or settled within twelve months of the balance sheet date are accrued in respect of all employees at the present value of the future amounts expected to be paid based on a projected weighted average increase in wage and salary rates. Expected future payments are discounted using interest rates on relevant government securities with terms to maturity that match, as closely as possible, the estimated future cash outflows. (iv) Share-based payment The share option programme allows the Group employees to acquire shares of the Company. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity compensation reserve. 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 transaction costs are credited to share capital (nominal value) and share premium when the options are exercised. FS-19

143 (v) Performance shares An initial estimate is made for the cost of compensation under the Company s Performance Share Plan based on the number of shares expected to be awarded at the end of the performance period, valued at market price at the date of the grant of the award. The cost is charged to the profit and loss account on a basis that fairly reflects the manner in which the benefits will accrue to the employee under the plan over the service period to which the performance criteria relate. At each reporting date, the compensation cost is remeasured based on the latest estimate of the number of shares that will be awarded based on non-market vesting conditions. Any increase or decrease in compensation cost over the previous estimate is recorded in that reporting period. The final measure of compensation cost is based on the number of shares ultimately awarded at the date the performance criteria are met. (l) Provisions A provision is recognised in the balance sheet when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. A provision for onerous contract is recognised when the expected benefits from a contract are lower than the unavoidable cost of meeting the obligation under the contract. (m) Liabilities and interest-bearing liabilities Trade and other payables are recognised initially at fair value, and subsequently at amortised cost, using the effective interest method. Interest-bearing liabilities are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing liabilities are stated at amortised cost with any difference between cost and redemption value being recognised in the profit and loss account over the period of the borrowings on an effective interest basis. (n) Convertible bonds Convertible bonds that can be converted to share capital where the number of shares issued does not vary with changes in the fair value of the bonds are accounted for as compound financial instruments. The gross proceeds from the bond issue are allocated separately between the liability component which represents the fair value of the financial liability and equity component which represents the implied fair value of the conversion rights. (o) Deferred tax Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Temporary differences are not recognised for goodwill not deductible for tax purposes and the initial recognition of assets or liabilities that affect neither accounting nor taxable profit. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. FS-20

144 Deferred tax is provided on taxable temporary differences arising on investments in subsidiaries, associates and jointly-controlled entities, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not be reversed in the foreseeable future. (p) Revenue recognition (i) Rental income Rental income is recognised on an accrual basis. (ii) Development properties for sale The Group recognises income on property development projects when the risks and rewards of ownership have been transferred to the buyer through either the transfer of legal title or equitable interest in a property. In cases where the Group is obliged to perform any significant acts after the transfer of legal title or equitable interest, revenue is recognised as the acts are performed based on the percentage of completion method, which is an allowed alternative method under Recommended Accounting Practice 11 Pre-completion Contracts for the Sale of Development Property ( RAP 11 ) issued by the Institute of Certified Public Accountants of Singapore in October Under the percentage of completion method, profit is brought into the financial statements only in respect of sales procured and to the extent that such profit relates to the progress of construction work. The progress of construction work is measured by the proportion of the construction costs incurred to date to the estimated total construction costs for each project. Depending on the selling conditions associated with each development project, revenue is generally not recognised if the Group provides various guarantees and other financial support to the buyers ( continuing involvement ) during the period of property development. Such continuing involvement by the Group would then require revenue to be deferred until the Group s continuing involvement ceases on completion of the property development. (iii) Technical consultancy and management fee Technical consultancy and management fee is recognised in the profit and loss account as and when services are rendered. (iv) Dividends Dividend income is recognised in the profit and loss account when the shareholder s right to receive payment is established. (v) Interest income Interest income is recognised on an accrual basis using the effective interest method. (vi) Club memberships Entrance fees from club memberships are recognised in the profit and loss account when the amounts are due to be received. 50% of the entrance fees is set aside and included in deferred income. Deferred income is amortised over the remaining membership period. FS-21

145 (q) Borrowing costs Borrowing costs are expensed in the profit and loss account using effective interest method in the period in which they are incurred, 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 get ready for its intended use or sale. Interest on borrowings capitalised is arrived at by reference to the actual rate of interest on borrowings for development purposes and, with regard to that part of the development cost financed out of general funds, at the average rate of interest. (r) Operating leases Rental payable under operating leases are accounted for in the profit and loss account on a straight-line basis over the periods of the respective leases. (s) Cash and cash equivalents Cash and cash equivalents comprise cash balances and bank deposits. For the purpose of the statement of cash flows, cash and cash equivalents are presented net of bank overdrafts which are repayable on demand and which form an integral part of the Group s cash management. (t) Trade and other receivables Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less allowance for impairment. (u) Segment reporting A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. Segment information is presented in respect of the Group s business and geographical segments and is based on the Group s internal reporting structure. The primary format, business segments, is based on the Group s principal activities. Inter-segment pricing is determined on an arm s length basis. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise income-generating assets and revenue, interest expenses and borrowings, as well as corporate assets and expenses. Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period. (v) Derivatives and hedging Derivative financial instruments are used to manage exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities. Derivative financial instruments are not used for trading purposes. FS-22

146 Derivative financial instruments are initially recognised at fair value and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates its derivative financial instruments as either: (1) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); (2) hedges of highly probable forecast transactions (cash flow hedge); or (3) hedges of net investments in foreign operations (net investment hedge). The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. (i) Fair value hedge Changes in the fair value of derivatives that are designated and qualified as fair value hedges are recorded in the profit and loss account, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. (ii) Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualified as cash flow hedges are recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the profit and loss account. Amounts accumulated in equity are recycled in the profit and loss account in the periods when the hedged item will affect profit or loss (for instance when the forecast sale that is hedged takes place). However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, inventory) or a liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the profit and loss account. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the profit and loss account. (iii) Net investment hedge Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in equity; the gain or loss relating to the ineffective portion is recognised immediately in the profit and loss account. Gains and losses accumulated in equity are included in the profit and loss account when the foreign operation is being disposed off. (iv) Derivative financial instruments that do not qualify for hedge accounting Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised immediately in the profit and loss account. FS-23

147 (w) Recognition and derecognition of financial assets and liabilities The Group recognises financial assets or liabilities on its balance sheet when it becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the rights to receive cash flows from the assets have expired; or where the Group has transferred its contractual rights to receive the cash flows of the financial assets and has transferred substantially all the risks and rewards of ownership; or where control is not retained. Financial liabilities are derecognised when they are extinguished, i.e. when the obligation is discharged, cancelled or expired. (x) Non-current assets/liabilities held for sale and discontinued operations Immediately before classification as held for sale, the measurement of the relevant assets (or all assets and liabilities in a disposal group) is brought up-to-date in accordance with applicable FRS. Then, on initial classification as held for sale, non-current assets and disposal group are measured at the lower of carrying amount and fair value less cost to sell. Any differences are taken to the profit and loss account. Impairment losses on initial classification as held for sale are included in the profit and loss account, even when there is a revaluation. The same applies to gains and losses on subsequent measurement. A discontinued operation is a component of the Group s business that represents a separate major line of business or geographical area of operations or is a subsidiary acquired exclusively for resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. A disposal group that is to be abandoned may also qualify. FS-24

148 3 Property, Plant and Equipment The Group Freehold land Freehold buildings Leasehold land Leasehold hotel buildings Other leasehold buildings Assets under construction Plant, machinery and improvements Motor vehicles Furniture, fittings and equipment Total Cost FS-25 At 1 January , , , ,539 35,284 13, ,232 8, ,136 1,946,990 Translation differences 8,022 13,295 (992) 5,698 (2,053) 22 (490) (69) 5,308 28,741 Additions 1,648 1, ,210 10, ,206 49,726 Assets of subsidiaries (disposed)/acquired (168) , , ,071 Disposals (468) (2,789) (2,184) (1,075) (67,820) (74,336) Written off (205) (86) (1,776) (9,322) (11,389) Reclassification 6,049 4, (14,250) (12,175) 15,752 Transfer from investment properties 4,656 40,680 45,336 At 31 December , , , ,423 33,632 2, ,762 8, ,869 2,101,139 At 1 January , , , ,423 33,632 2, ,762 8, ,869 2,101,139 Translation differences (7,035) (7,041) 1,349 (6,551) 2,054 (40) (698) 39 (4,266) (22,189) Additions ,091 2,796 30, ,082 77,503 Assets of subsidiaries (disposed)/acquired (195,858) (412,356) (81,372) (296,122) 409 (218) (188,135) (3,019) (335,942) (1,512,613) Disposals (22,864) (134,099) (36) (3,181) (1,013) (26,751) (187,944) Written off (438) (593) (524) (1,555) Reclassification (33) (336) (969) (3,032) 3,094 1,276 At 31 December ,709 44,722 24,040 35,743 2,431 83,927 5, , ,341

149 The Group Freehold land Freehold buildings Leasehold land Leasehold hotel buildings Other leasehold buildings Assets under construction Plant, machinery and improvements Motor vehicles Furniture, fittings and equipment Total Accumulated Depreciation FS-26 At 1 January ,054 8,474 78,461 32, ,569 6, , ,975 Translation differences (678) (195) (53) 1,407 1,982 Depreciation charge for the year 9,982 1,015 4, ,192 1,064 54,031 89,740 Assets of subsidiaries (disposed)/acquired (30) 25, ,415 73,244 Disposals (4) (1,791) (981) (62,589) (65,365) Written off (772) (6,289) (7,061) Reclassification 430 (3,705) 3,275 At 31 December ,921 9,532 83,833 33, ,097 6, , ,515 At 1 January ,921 9,532 83,833 33, ,097 6, , ,515 Translation differences (415) (51) (612) 462 (152) 37 (2,185) (2,916) Depreciation charge for the year 6, ,632 1,029 16, ,198 71,781 Assets of subsidiaries (disposed)/acquired (42,115) (10,545) (86,853) 409 (121,549) (2,987) (234,080) (497,720) Disposals (15,212) (36) (3,138) (827) (19,488) (38,701) Written off (457) (424) (202) (1,083) Reclassification (311) 311 (274) 275 (1) At 31 December ,876 34,269 42,808 3, , ,876

150 The Group Freehold land Freehold buildings Leasehold land Leasehold hotel buildings Other leasehold buildings Assets under construction Plant, machinery and improvements Motor vehicles Furniture, fittings and equipment Total Carrying Amount At 1 January , ,008 96, ,078 2,523 13,698 97,663 1, ,364 1,318,015 At 31 December , ,230 93, , ,925 91,665 1, ,847 1,379,624 At 1 January , ,230 93, , ,925 91,665 1, ,847 1,379,624 At 31 December ,709 41,846 24,040 1,474 2,431 41,119 1,366 78, ,465 FS-27 (i) (ii) (iii) At 31 December 2005, certain property, plant and equipment with carrying value totalling approximately $52.1 million (2004: $689.6 million) were mortgaged to banks to secure credit facilities for the Group (notes 27 and 28). Depreciation charged for continuing and discontinued operations are $36.09 million (2004: $39.48 million) and $35.69 million (2004: $50.26 million) respectively. In 2004, an owner-occupied overseas property was transferred to property, plant and equipment as a significant portion of the said property was occupied by subsidiaries of the Group.

151 The Company Note Plant, machinery and improvements Motor vehicles Furniture, fittings and equipment Total Cost At 1 January , ,419 7,102 Additions ,222 Disposals/Written off (59) (59) At 31 December , ,174 8,265 At 1 January , ,174 8,265 Additions Disposals/Written off (2) (71) (73) At 31 December , ,916 9,090 Accumulated Depreciation At 1 January , ,227 5,615 Depreciation charge for the year 36(c)(ii) ,047 1,276 Disposals/Written off (59) (59) At 31 December , ,215 6,832 At 1 January , ,215 6,832 Depreciation charge for the year 36(c)(ii) Disposals/Written off (2) (71) (73) At 31 December , ,682 7,502 Carrying Amount At 1 January ,192 1,487 At 31 December ,433 At 1 January ,433 At 31 December ,234 1,588 FS-28

152 4 Intangible Assets The Group Goodwill on consolidation Others Total At 1 January ,179 1,507 48,686 Additions 2,416 2,416 Acquisitions through business combinations 46,920 4,785 51,705 Translation differences (232) (12) (244) At 31 December ,867 8, ,563 At 1 January ,867 8, ,563 Additions Disposal of subsidiaries (29,047) (4,517) (33,564) Translation differences (847) (452) (1,299) At 31 December ,973 4,423 68,396 Accumulated Amortisation and Impairment Loss At 1 January , ,084 Amortisation charge for the year Impairment loss 4, ,531 Acquisitions through business combinations 22,360 4,379 26,739 Translation differences At 31 December ,748 5,146 37,894 At 1 January ,748 5,146 37,894 Amortisation charge for the year Impairment loss Disposal of subsidiaries (3,783) (1,365) (5,148) Translation differences (401) (445) (846) At 31 December ,940 4,062 33,002 Carrying Amount At 1 January ,318 1,284 42,602 At 31 December ,119 3,550 64,669 At 1 January ,119 3,550 64,669 At 31 December , ,394 Amortisation charge for continuing and discontinued operations are $42,000 (2004: $Nil) and $684,000 (2004: $460,000) respectively. FS-29

153 Impairment testing for goodwill The Group s goodwill on consolidation has principally been allocated to the respective cash-generating units ( CGU ) for the purpose of annual impairment test as described below. (a) Serviced residences management companies in Europe The recoverable amount of the management companies in Europe is determined using cash flow projections covering the remaining terms of those management contracts. The cash flow projections represent the management fee income net of related costs which the Group will earn and these are based on past experience and expectations for these management companies in general. Cash flows are projected over the remaining terms of the management contracts, which are beyond five years. Cash flows beyond the five-year period are extrapolated using the estimated growth rate of 4% per annum. The growth rate used is based on historical growth and past experience and does not exceed the currently estimated long-term average growth rate for the business in which the CGU operates. The discount rate used is 7% (pre-tax) and has been applied to the cash flow projections. At 31 December 2005, the carrying value of goodwill on consolidation is approximately $23.9 million (2004: $24.6 million). The Group believes that any reasonably possible changes in the above key assumptions applied are not likely to materially cause the recoverable amount to be lower than its carrying amount. (b) Serviced residences in Australia The recoverable amount of the serviced residences in Australia is determined using cash flow projections covering the remaining lease terms of those leased properties. The growth rate used is based on historical growth and past experience and does not exceed the currently estimated long-term average growth rate for the business in which the CGU operates. The discount rate used is 12% and has been applied to the cash flow projections. Based on the above assessment, an impairment loss of $0.4 million (2004: $4.5 million) was provided in the financial year ended 31 December At 31 December 2005, the carrying value of goodwill on consolidation is approximately $4.7 million (2004: $4.8 million). The Group believes that any reasonably possible changes in the above key assumptions applied are not likely to materially cause the recoverable amount to be lower than its carrying amount. FS-30

154 5 Investment Properties Note 2005 The Group 2004 (a) Freehold investment properties, at valuation 1,190, ,409 Leasehold investment properties, at valuation 4,662,773 3,477,176 5,853,323 4,172,585 Leasehold investment properties, at cost 63,654 67,414 Less: Accumulated amortisation: At 1 January (2,501) (1,897) Amortisation charge for the year 36(c)(ii) (1,720) (527) Amount utilised during the year 2,021 Translation differences 128 (77) At 31 December (2,072) (2,501) 61,582 64,913 5,914,905 4,237,498 (b) Investment properties are stated at directors valuation based on independent professional valuations carried out by the following valuers, on the basis of open market valuations: Valuers Valuation Date BI Appraisals Ltd (Hong Kong) December 2005 CB Richard Ellis December 2005 Colliers International December 2005 DTZ Debenham Tie Leung June/December 2005 HVS International December 2005 Jones Lang LaSalle December 2005 Debenham Tie Leung International Property Advisors December 2005 Knight Frank Savills Property Services (Shanghai) Company Ltd December 2004/June/ September/December 2005 June/September/October/ November/December 2005 (c) (d) (e) At 31 December 2005, certain investment properties with carrying value totalling approximately $3,681.4 million (2004: $2,470.5 million) were mortgaged to banks to secure credit facilities for the Group (note 27, 28 and 29). Investment properties of the Group are held mainly for use by tenants under operating leases. Certain leases contain an initial non-cancellable period of up to 15 years, with an option to renew at which time all terms are renegotiated. The value of investment properties of the Group held under finance leases at 31 December 2005 was $61.6 million (2004: $64.9 million). FS-31

155 6 Properties Under Development 2005 The Group 2004 Cost 643, ,853 Less: Allowance for anticipated valuation deficiencies on completion (9,698) (65,729) 634, ,124 During the financial year, interest capitalised as cost of properties under development amounted to approximately $7,983,000 (2004: $513,802). 7 Interests in Subsidiaries 2005 The Company 2004 (a) Unquoted shares, at cost 2,557,131 2,520,991 Less: Allowance for impairment loss (46,837) (54,312) Add: Amounts owing by subsidiaries: 2,510,294 2,466,679 Loan accounts interest free 19,465 interest bearing 1,275,371 2,436,887 1,275,371 2,456,352 Less: Allowance for doubtful receivables (12,107) (49,648) 1,263,264 2,406,704 3,773,558 4,873,383 (b) (c) The interest free loans to subsidiaries formed part of the Company s net investment in subsidiaries. The loans are unsecured and settlement is neither planned nor likely to occur in the foreseeable future. (d) Details of the subsidiaries are set out in note 46. FS-32

156 8 Interests in Associates Note 2005 The Group 2004 (a) Investment in associates 2,046,209 1,791,781 Amounts owing by associates: Loan accounts interest free 310, ,857 interest bearing 392, , , ,908 2,749,732 2,642,689 Amounts owing by/(to) associates: Current accounts (unsecured) interest free (trade) 3,676 3,780 interest free (non-trade) 99,247 30,945 interest bearing (non-trade) 98,169 14, ,092 49,093 Less: Allowance for doubtful receivables (22,371) (22,164) ,721 26,929 Current accounts (non-trade and unsecured) interest free (73,980) (6,349) interest bearing (2,326) 20 (73,980) (8,675) (b) (c) (d) Of the loan accounts, there are approximately $494.9 million (2004: $530.0 million) subordinated to the repayment of borrowings of certain associates and approximately $133.6 million (2004: $133.6 million) secured by way of a charge on the associate s investment property. The interest free loans to associates formed part of the Group s net investment in associates. The loans are unsecured [except for those disclosed in note 8 (b)] and settlement is neither planned nor likely to occur in the foreseeable future. (e) Details of the associates are set out in note 47. (f) The financial information of the associates is as follows: Balance sheet 2005 The Group 2004 Total assets 11,735,245 10,203,100 Total liabilities 4,900,669 4,349,055 Profit and loss account Revenue 1,019,865 1,090,627 Expenses (820,086) (995,815) Profit after taxation 199,779 94,812 (g) The Group s share of capital commitments of the associates is $34.9 million (2004: $22.5 million). FS-33

157 9 Interests in Joint Ventures (a) Jointly-Controlled Entities Note 2005 The Group 2004 (i) Investment in jointly-controlled entities 611, ,708 Amounts owing by jointly-controlled entities: Loan accounts interest free 292, ,950 interest bearing 275, ,357 Amounts owing by/(to) jointly-controlled entities: 567, ,307 1,178,938 1,049,015 Current accounts (non-trade and unsecured) interest free 68,884 69,086 interest bearing 126,813 93, , ,260 interest free 20 (49,000) (11,694) (ii) (iii) (iv) Loan accounts include an amount of approximately $414.5 million (2004: $410.3 million) which is subordinated to the repayment of borrowings of certain jointly-controlled entities. The interest free loans to jointly-controlled entities form part of the Group s net investment in jointly-controlled entities. The loans are unsecured and settlement is neither planned nor likely to occur in the foreseeable future. (v) Details of the jointly-controlled entities are set out in note 48. (vi) The Group s share of the jointly-controlled entities results, assets and liabilities are as follows: The Group Balance sheet Investment properties 1,206, ,067 Properties under development 309, ,347 Other non-current assets 67,249 78,703 1,583,379 1,686,117 Current assets 497, ,967 Less: Current liabilities (135,576) (511,359) Net current assets 361, ,608 1,944,972 1,850,725 Less: Non-current liabilities (619,337) (651,144) 1,325,635 1,199,581 FS-34

158 The Group Profit and loss account Revenue 119, ,291 Expenses (88,982) (281,247) Profit before taxation 30,629 64,044 Taxation (16,336) (16,271) Profit after taxation 14,293 47,773 The Group s share of the capital commitments of the jointly-controlled entities is $89.9 million (2004: $102.3 million). (b) Jointly-Controlled Operations (i) Details of jointly-controlled operations entered into by the Group are as follows: A joint venture arrangement with NSW Land and Housing Corporation to acquire and develop a site at Quakers Hill, N.S.W., Australia. Under the terms of the Co-venture Agreement, the Group is entitled to receive 50% of the profits. A joint venture arrangement with Morton Homestead Pty. Limited, the principal activity of which is property development. Under the terms of the Co-venture Agreement, the Group is entitled to receive 50% of the profits. (ii) Interests in jointly-controlled operations included in the financial statements are shown under the classifications below: The Group Property, plant and equipment 11 Current assets Development properties for sale 5,187 Trade and other receivables 16,708 21,895 Total assets 21,906 Less: Current liabilities Trade and other payables (9,197) Share of net assets employed in jointly-controlled operations 12,709 Share of profits from jointly-controlled operations 4,797 8,619 FS-35

159 10 Interests in Partnership 2005 The Group 2004 (a) Investment in partnership 63,805 Loan account interest free ,245 (b) The Group s share of the partnership s results, assets and liabilities are as follows: 2005 The Group 2004 Balance sheet Investment properties 60,794 Other non-current asset ,590 Current assets 3,964 Less: Current liabilities (1,309) Net current assets 2,655 64,245 Profit and loss account Revenue 489 1,597 Expenses (603) 2,944 (Loss)/Profit before taxation (114) 4,541 Taxation (Loss)/Profit after taxation (114) 4,541 (c) The Group held an effective interest of 50% in Moorgate Investment Partnership, a limited partnership registered in the United Kingdom. The principal activity of the partnership was that of property investment and development. The partnership was disposed off in May Financial Assets 2005 The Group 2004 (a) Non-current financial assets Equity securities available-for-sale 276,253 56,300 Debt securities available-for-sale 2, ,253 58,300 (b) Current financial assets Equity securities held for trading 72,095 3,737 With the adoption of FRS 39 on 1 January 2005, the Group s financial assets are stated at fair value. These investments were stated at cost less impairment in FS-36

160 12 Other Non-Current Assets 2005 The Group The Company 2004 Club memberships 687 1, Derivative assets 1,157 Loan to staff (unsecured and interest free) 270 2, Loan owing by investee companies: interest free 79 25,788 interest bearing 2,087 48,621 Loan owing by minority interests (interest free) 113,452 Loan owing by third parties: interest free 4,257 16,919 interest bearing 18,144 8, , The balances with investee companies and minority interests are unsecured and have no fixed terms of repayment. However, the management of the parties involved do not intend for the amounts to be repaid within the next 12 months. In 2004, the interest-bearing loans owing by third parties consisted of a secured loan which was the resultant of the extension and conversion of an unquoted debentures agreement and was repayable on 31 December This loan was secured over a freehold land in France. The loan was disposed off together with the divestment of hotel operations by a subsidiary during the year. 13 Development Properties for Sale 2005 The Group 2004 (a) Properties in the course of development, at cost 3,934,600 5,243,094 Less: Allowance for foreseeable losses (310,776) (530,045) 3,623,824 4,713,049 Add: Attributable profit 114, ,447 3,738,580 5,033,496 Less: Progress billings (502,089) (1,094,835) 3,236,491 3,938,661 (b) Completed units, at cost 342, ,945 Less: Allowance for foreseeable losses (36,371) (66,585) 306, ,360 3,542,494 4,283,021 FS-37

161 (c) During the financial year, there were the following interest and securitisation costs capitalised as cost of development properties for sale: Note 2005 The Group 2004 Interest and securitisation costs paid and payable 36(f) 65,077 86,257 Less: Interest received and receivable from fixed deposit project accounts 36(a) (1,911) (826) 63,166 85,431 (d) At 31 December 2005, certain development properties for sale amounting to approximately $1,917.6 million (2004: $1,518.3 million) were mortgaged to banks to secure credit facilities of the Group (notes 27 and 28). (e) (f) (g) At 31 December 2005, certain properties in Australia amounting to approximately A$104.6 million (2004: A$15.6 million) were acquired through unconditional exchange contracts with various land vendors. The related amount owing to land vendors is secured over the title to the properties being purchased (notes 22 and 25). At 31 December 2005, there were certain development properties for sale amounting to $223.2 million (2004: $414.5 million) whose future receivables were sold to third parties. As part of the arrangement of the sale, the Group has provided a fixed and floating charge over assets relating to the projects (including the land on which the projects are being built and the unsold units) to the third parties (note 25). If the Group had adopted the completion of construction method, the effects on the financial statements for the financial year ended 31 December 2005 would have been as follows: The Group Increased/(Decreased) by Revenue 680,269 Profit attributable to the equity holders of the Company 69,999 Accumulated profits as at 1 January 2005 (112,844) Development properties for sale as at 1 January ,580 Development properties for sale as at 31 December ,035 FS-38

162 14 Trade and Other Receivables Note 2005 The Group The Company 2004 Trade receivables , , Accrued receivables 16 66,962 62,356 Derivative assets 3,274 Other receivables, deposits and prepayments , ,032 23,234 31,978 Funds held in trust 18 21,156 Contract work-in-progress 24 9,262 Amounts owing by: associates 8 178,721 26,929 jointly-controlled entities 9 195, ,260 related corporations 26 2,940 1,077, ,975 minority interests (unsecured and interest free) 182,828 11,672 Loan to a third party (interest bearing) 59,015 1,417,790 1,092,079 1,101, ,954 At 31 December 2005, certain trade receivables and other receivables amounting to approximately $67.5 million (2004: $372.3 million) and $156.0 million (2004: $210.6 million) respectively were mortgaged to banks to secure credit facilities of the Group (note 27 and 28). In 2004, the loan to a third party was secured by pledge of shares of a company not related to the Group. The loan was fully repaid during the year. 15 Trade Receivables 2005 The Group The Company 2004 Trade receivables 178, , Less: Allowance for doubtful receivables (8,379) (24,409) 169, , FS-39

163 16 Accrued Receivables In accordance with the Group s accounting policy, income is recognised on the progress of the construction work for certain development properties for sale. Upon receipt of Temporary Occupation Permit, the balance of sales consideration to be billed is included as accrued receivables. 17 Other Receivables, Deposits and Prepayments 2005 The Group The Company 2004 Prepayments 51,098 26, Deposits 194,898 76, Other receivables 312, ,296 3,516 3,197 Less: Allowance for doubtful receivables (18,991) (17,747) 293, ,549 3,516 3,197 Tax recoverables 81,096 76,967 19,425 27, , ,032 23,234 31,978 The other receivables included staff loans, interest receivable, deferred sales consideration and loan receivable relating to disposal of a subsidiary and other recoverables. At 31 December 2005, deposits included an amount of $184 million (2004: $66 million) in relation to acquisition of new investments. 18 Funds Held in Trust Funds held in trust comprised fixed deposits and bank balances with banks and finance companies held on behalf of the Commissioner of Land, Public Utilities Board, the HDB Corporation and related corporations: Note 2005 The Group 2004 Fixed deposits 13,335 Cash at banks 7, ,156 In 2004, funds held in trust included an amount of $788,000 held on behalf of related corporations. FS-40

164 19 Cash and Cash Equivalents 2005 The Group The Company 2004 Amounts held under Project Account Rules 1997 Ed withdrawals from which are restricted to payments for expenditure incurred on development projects 40, ,949 Fixed deposits 1,772,840 1,405, , ,933 Cash at banks and in hand 297, , ,037 2,111,277 1,917, , ,970 Bank overdrafts: Secured (6,262) (7,054) Unsecured (5,837) (6,262) (12,891) Cash and cash equivalents in the statement of cash flows 2,105,015 1,904, , ,970 (a) (b) (c) Amounts held under Project Account Rules 1997 Ed of $0.1 million (2004: $92.0 million) were pledged as securities for term loans (note 28). Pledge of fixed deposits of a subsidiary of $18.5 million as at 31 December 2004 has been discharged during the year. At 31 December 2005, there was a charge over all monies from time to time standing to the credit of the project accounts amounting to $10.7 million (2004: $41.1 million) in respect of certain development properties for sale whose future receivables were sold (note 25). 20 Trade and Other Payables The Group The Company Note Trade payables 91, , Accrued development expenditure 654, ,058 Accruals , ,680 50,204 37,399 Other payables , , Rental and other deposits ,074 55, Funds held in trust 18 21,156 Contract work-in-progress 24 1,780 Derivative liabilities 6,387 Provisions 25(a) 20,736 34,947 Liability for employee benefits 32 16,787 13,023 1,524 1,127 Amounts owing to: associates 8 73,980 8,675 jointly-controlled entities 9 49,000 11,694 related corporations 26 6, , ,016 Amounts owing to minority interests (unsecured): interest free 137,353 42,400 interest bearing 67,341 2,939 Proceeds from sale of future receivables 25(b) 199, ,036 2,005,739 2,001, , ,842 FS-41

165 21 Accruals Accruals included accrued interest payable, accrued property, plant and equipment purchases and accrued administrative expenses. 22 Other Payables Other payables included the following: (a) (b) (c) A$46.8 million (2004: A$10.0 million), equivalent to $58.4 million (2004: $12.3 million), owing to land vendors from certain unconditional contracts which the Group has concluded with them to purchase properties for future developments. The total acquisition cost of the properties has been included in development properties for sale and the amount payable is secured over the relevant development properties. Advance payment received of A$Nil (2004: A$320.4 million), equivalent to $Nil (2004: $392.6 million), relating to the sale of commercial properties under development for which the Group provided various forms of guarantee and other financial support during the course of property development. Retention sums and amounts payable in connection with capital expenditure incurred. 23 Rental and Other Deposits Rental and other deposits included an amount of approximately $Nil (2004: $260,000) received from related corporations. 24 Contract Work-in-Progress 2005 The Group 2004 Cost incurred and provided for 213, ,752 Less: Allowance for anticipated losses (6,363) (6,363) 207, ,389 Less: Progress payments received and receivable (209,273) (198,127) (Progress billings in excess of work-in-progress)/work-in-progress (1,780) 9, Other Non-Current Liabilities Note 2005 The Group The Company 2004 Amounts owing to related corporations , ,471 Amounts owing to minority interests (unsecured): interest free 5,205 interest bearing 38,026 63,978 Liability for employee benefits 32 8,150 6,173 2,597 2,124 Derivative liabilities 2,339 Customer deposits and other non-current payables 80,687 18,065 Provisions 25(a) 7,700 9,625 Proceeds from sale of future receivables 25(b) 190, , , , ,595 FS-42

166 The other non-current payables included an amount of A$57.8 million (2004: A$5.6 million) equivalent to $72.2 million (2004: $6.9 million), owing to land vendors on terms similar to those described in note 22(a). (a) Movements in provisions are as follows: Income support and profit warranty Balance as at 1 January ,572 Provision made during the year 177 Provision utilised during the year (16,313) Balance as at 31 December ,436 The Group Note Current 20 20,736 34,947 Non-current 7,700 9,625 28,436 44,572 The provisions for income support and profit warranty were made in conjunction with the sale of equity interests in subsidiaries which own investment properties. Under the Sale and Purchase agreement made in 2001, the Group is obligated to pay the buyers the following: (i) (ii) certain pre-determined sum of income support from 13 June 2001 to 12 June 2005; and compensation for any shortfall in earnings over a period of 10 years from 2001 to 2010 subject to a maximum cap of approximately $75.1 million. Any income shortfall is determined by reference to a pre-determined rental yield and income level over a specified period. (b) These relate to the sale of future receivables in respect of certain residential projects in Singapore and Australia by the Group. Note 2005 The Group 2004 Current , ,036 Non-current 190, , ,728 The terms of the arrangement for the sale of future receivables include: (i) a fixed and floating charge over assets of the subsidiaries undertaking the projects (note 13); (ii) (iii) a charge over all monies from time to time standing to the credit of the related project accounts (note 19); an assignment of all the subsidiaries present and future rights, title to and interest in, and all benefits accrued and accruing to the subsidiaries under the contracts for sale entered into with buyers of units of the projects which form the pool of sold future receivables; and FS-43

167 (iv) an assignment on all the subsidiaries present and future rights, title to and interest in: (a) (b) all contracts and agreements entered into by the subsidiaries with consultants and contractors and all construction guarantees issued in favour of the subsidiaries; and all the policies and contracts of insurance taken out by the subsidiaries. 26 Amounts Owing by/(to) Related Corporations 2005 The Group The Company 2004 Note Current Amounts owing by: Current accounts Subsidiaries mainly non-trade: interest bearing 36,820 42,787 current loan: interest free interest bearing 1,040, ,188 1,041, ,904 Less: Allowance for doubtful receivables (716) (716) 1,040, ,188 Other related corporations trade 2, ,940 1,077, ,975 Amounts owing (to): Current accounts Subsidiaries mainly non-trade: interest bearing (503) (7,043) current loan: interest free (112,302) (87,119) interest bearing (42,119) (99,041) Other related corporations trade (5,200) (4,813) non-trade: interest free (976) 20 (6,176) (154,924) (198,016) Non-current Amounts owing to subsidiaries (interest bearing) 25 (147,000) (793,471) (a) (b) All balances with related corporations are unsecured and have no fixed terms of repayment. However, the management of the parties involved do not intend for the non-current loan balances to be repaid within the next 12 months. With effect from 11 August 2005, Temasek Holdings (Private) Limited, a company incorporated in Singapore, ceased to be the immediate and ultimate holding company. FS-44

168 27 Short Term Loans The Group The Company Short term loans from banks secured 60, ,004 unsecured 890, , , , , , , ,074 The secured short term loans from banks are generally secured by: (i) (ii) mortgages on the borrowing subsidiaries investment properties, land and buildings, development properties for sale and trade and other receivables; and assignment of all rights and benefits with respect to the properties. 28 Term Loans The Group The Company Term loans from banks secured 1,780,807 1,881,714 unsecured 1,914,560 2,219, , ,554 3,695,367 4,101, , ,554 Repayable: within 1 year 749, , ,109 after 1 year 2,946,266 3,388, ,554 3,695,367 4,101, , ,554 (i) Secured Term Loans These comprised loans repayable: The Group Within 1 year 74, ,807 From 1 to 5 years 1,424,599 1,520,907 More than 5 years 281,552 After 1 year 1,706,151 1,520,907 1,780,807 1,881,714 FS-45

169 Details of the secured term loans as at 31 December 2005 are as follows: (a) Secured term loans include an amount of $100 million (2004: $100 million) which is maturing in January The loan is secured by a legal mortgage over a residential project of a subsidiary, assignment of the sale and rental proceeds of the project, assignment of construction contract, guarantees and insurance policies relating to the project and a charge on the monies in the Project Account of the project. (b) A bank loan of HK$114 million (2004: HK$300 million), equivalent to $25 million (2004: $65 million), secured by a mortgage over an investment property of the borrowing subsidiary. The loan is repayable on 30 November (c) (d) A subsidiary, Australand, maintains a syndicated multi-option facility (including performance bank guarantee facility) of A$600 million (2004: A$600 million), which is a two-year evergreen facility subject to review annually in March. The facility is secured by fixed and floating charges over the assets of Australand. Other term loans are generally secured by: mortgages on the borrowing subsidiaries property, plant and equipment, investment properties, properties under development, development properties for sale and trade receivables; pledge of shares of subsidiaries; and assignments of all rights, titles and benefits with respect to the properties. (ii) Unsecured Term Loans These comprised loans repayable: The Group The Company Within 1 year 674, , ,109 From 1 to 5 years 1,030,319 1,867, ,554 More than 5 years 209,796 After 1 year 1,240,115 1,867, ,554 1,914,560 2,219, , ,554 FS-46

170 29 Debt Securities Debt securities comprised fixed rate notes, floating rate notes, hybrid rate notes and bonds issued by the Group and the Company. The Group The Company Convertible bonds (unsecured) 375, ,177 Notes issued 2,633,969 2,533, , ,750 Less: Notes purchased (but not cancelled) (674,591) (742,664) (338,500) (349,000) Notes outstanding 1,959,378 1,791, , ,750 1,959,378 2,166, , ,927 Secured notes 809, ,970 Unsecured notes/bonds 1,149,878 1,780, , ,927 1,959,378 2,166, , ,927 Repayable: Within 1 year 677, , , ,927 From 1 to 5 years 1,132,048 1,262, , ,000 More than 5 years 149, ,000 After 1 year 1,281,745 1,442, , ,000 1,959,378 2,166, , ,927 (a) Convertible Bonds (unsecured) The Group and The Company Note Face value of convertible bonds 380,000 Less: Bond discount At January 4,823 19,290 Amount utilised upon the conversion (752) Amortisation 36(f) (4,071) (14,467) 4,823 At 31 December 375,177 The Company issued $380 million principal amount of Convertible Bonds due 2007 which carry interest rate at 0.625% per annum. The Convertible Bonds are convertible by holders into new ordinary shares of $1.00 each in the capital of the Company at the conversion price of $ with effect from 15 May 2004 (previously $2.3358) for each new ordinary share (subject to adjustment in certain events) at any time on or after 3 June 2002 and prior to the close of business (at the place the FS-47

171 Convertible Bonds are deposited for conversion) on 3 April Unless previously redeemed by way of exercise of the option by the holder on 3 May 2005 or by the Company at any time on or after 3 May 2005, the final redemption date of the Convertible Bonds is 3 May The redemption price is equal to the principal amount of the Convertible Bonds being redeemed. The Convertible Bonds were fully converted as of 19 September (b) Secured Debt Securities (i) A subsidiary, Australand, issued Commercial Mortgage-backed Securities ( CMBS ) amounting to A$413 million (2004: A$315 million), equivalent to $516 million (2004: $386 million), which matures on 25 June These notes are secured by a first ranking real property mortgage over specific investment properties and by a fixed and floating charge over some of the assets of Australand. (ii) During the financial year, Australand issued Unrated Floating Rate Notes amounting to A$236 million, equivalent to $294 million, maturing on 31 March The notes are fully secured by a first ranking real property mortgage over specific investment properties and by a fixed and floating charge over some of the assets of Australand. (c) Unsecured Debt Securities The holders of some of the above debt securities have the option to have all or any of their notes purchased by the Group at their principal amounts on interest payment dates. In determining the repayment dates of the debt securities, it is assumed that the option will be exercised. Unless previously redeemed or purchased and cancelled, the debt securities are redeemable at the principal amounts on their respective maturity dates. 30 Finance Leases The Group had obligations under finance leases that are repayable as follows: Principal Interest Payments The Group 2005 Within 1 year 3,448 1,796 5,244 From 1 to 5 years 15,597 5,719 21,316 More than 5 years 33,086 4,435 37,521 After 1 year 48,683 10,154 58,837 52,131 11,950 64, Within 1 year 3,376 1,969 5,345 From 1 to 5 years 15,730 6,472 22,202 More than 5 years 37,922 5,751 43,673 After 1 year 53,652 12,223 65,875 57,028 14,192 71, Deferred Income Deferred income represents mainly 50% of entrance fees from club memberships which has been set aside to match any possible excess operating costs over operating revenue in the remaining membership period, and certain deferred profits on project management services rendered to a jointly-controlled entity. FS-48

172 32 Employee Benefits The Group The Company Note Liability for short term accumulating compensated absences 9,848 6, Liability for long service leave entitlement 3,932 3,438 Liability for retirement gratuity 1,621 1,948 Liability for staff incentive 9,536 7,559 3,895 3,187 24,937 19,196 4,121 3,251 Current 20 16,787 13,023 1,524 1,127 Non-current 25 8,150 6,173 2,597 2,124 24,937 19,196 4,121 3,251 (a) Long service leave This liability relates principally to provision made by a foreign subsidiary in relation to employees leave entitlement granted after certain qualifying periods based on duration of employees services rendered. (b) Retirement gratuity A subsidiary of the Group operates an unfunded, defined benefit Retirement Gratuity Scheme for its senior executives. Benefit is payable based on the last drawn salary of the executive and the number of years of service with the Group, including those with certain predecessor corporations. The provision for retirement gratuity scheme at 31 December 2005, comprises present value of obligations under the scheme of $1,621,000 (2004: $2,052,000), net of unrecognised past service cost of $Nil (2004: $104,000). The amounts recognised in the profit and loss accounts comprise current service costs of $229,000 (2004: $96,000), amortisation of past service costs of $182,000 (2004: $53,000) and interest cost of $109,000 (2004: $57,000). The principal assumptions used were discount rate of 4.0% (2004: 4.0%) and future salary increases of 5.5% up to age 57 and 2.0% thereafter (2004: 5.5% up to age 57 and 2.0% thereafter). (c) Staff incentive This relates to other staff incentive payable which is connected with the Group s financial performance achieved over a period of time. (d) Equity compensation benefits The Share Option Plan, Performance Share Plan and Restricted Stock Plan (collectively referred to as the Share Plans ) of the Company were approved and adopted by its members at an Extraordinary General Meeting held on 16 November The Share Plans are administered by the Company s Executive Resource and Compensation Committee ( Committee ) comprising Mr Peter Seah Lim Huat, Mr Hsuan Owyang and Mr Lim Chin Beng. FS-49

173 Other statutory information regarding the Share Plans are set out below: (i) The exercise price of the options is set either at: A price equal to the volume-weighted average price on the Singapore Exchange Securities Trading Limited over the three consecutive trading days immediately preceding the grant of the option (the Market Price ), or such higher price as may be determined by the Committee in its absolute discretion; or A discount not exceeding 20% of the Market Price in respect of that option. (ii) (iii) The options vest between 1 year to 4 years from the grant date. The options granted expire after 5 or 10 years from the dates of the grant. Movements in the number of share options and their related weighted average exercise prices are as follows: Weighted average exercise price Number of options Weighted average exercise price Number of options $ ( 000) $ ( 000) At 1 January , ,372 Granted , ,200 Forfeited/Expired 1.61 (5,805) 1.52 (8,241) Exercised* 1.47 (33,887) 1.16 (7,446) At 31 December , ,885 Exercisable at 31 December , ,347 * This includes share options granted to staff of Premas International Limited and certain staff of Raffles Holdings Limited which were fully vested upon the divestments of Premas International Limited and Raffles Holdings Limited s hotel business. Options exercised in 2005 resulted in 33,886,913 (2004: 7,445,683) shares being issued at a weighted average market price of $2.67 (2004: $1.78) each. Options were exercised on a regular basis throughout the year. The weighted average share price during the year was $2.78 (2004: $1.78). Share options outstanding at the end of the year are summarised below: Options outstanding 2005 Weighted average contractual life Options outstanding 2004 Range of Exercise Price ( 000) ( 000) Weighted average contractual life $1.00 to $ , , $1.15 to $ , , $1.21 to $1.79 3, , $1.80 to $ , , $2.35 to $ , ,060 81,885 FS-50

174 Of the outstanding options as at 31 December 2005, there were 7,393,120 (2004: 9,177,210) options held by the directors of the Company. This included 4,181,000 (2004: 4,535,000) options held by Mr Liew Mun Leong, the President and Chief Executive Officer of the Company. The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. The estimate of the fair value of the services received is measured based on Enhanced Trinomial (Hull and White) Valuation Model. The fair value of share options and assumptions are set out below: Year of grant of options Weighted average fair value of share options and assumptions Fair value at measurement date $0.26 $0.51 $0.60 Share price based on volume-weighted average share price for 5 consecutive trading days prior to the grant date $1.03 $1.74 $2.46 Exercise price at grant date $1.00 $1.22 $2.44 Expected volatility calculated based on 250 days adjusted closing price prior to the specific grant date 42.13% 38.47% 27.62% Risk free interest rate based on 5/10 years zero-coupon Singapore Government bond yield on grant date for option with 5/10 years contractual life 2.41% 3.54% 3.14% Expected dividend yield based on expected dividend of 5% over 1-year volume-weighted average share price prior to the grant date 3.51% 3.54% 2.67% Post-vesting forfeiture rate representing resignation after vesting period 1.87% 1.85% 1.87% Pre-vesting forfeiture rate representing resignation prior to vesting period 5.62% 5.54% 5.62% Exercise multiple which is the expected ratio of share price to exercise price based on assumed employee early exercise behaviour On 11 May 2004, the Company distributed in specie of units in CapitaCommercial Trust to existing shareholders of the Company by way of a capital reduction. Correspondingly, the exercise prices of outstanding options granted under the Share Option Plan and the number of performance shares granted under the Performance Share Plan were adjusted to compensate for the drop in values of the said options and performance shares. In cases where it is not possible to fully adjust the exercise prices of share options due to the constraint of the par value, additional options were granted. The share price is based on volume-weighted average share price for 3 consecutive trading days prior to the grant date. The expected volatility is based on the historic volatility and calculated based on 36 months prior to the date of grant. The Company uses 10 (or 5) years risk free rate for options with a 10 (or 5) years contractual term. Expected dividend yield is based on expected 5 cents dividend payout over the 1-year volume-weighted average share price prior to the grant date. Pre-vesting forfeiture rates and post-vesting forfeiture rates are based on historical option forfeiture and employee turnover rates. Exercise multiple is estimated based on historical employee exercise behaviour. FS-51

175 (e) Performance shares This relates to provision for compensation costs of the Group s Performance Share Plans reflecting the benefits accruing to the employees over the service period to which the performance criteria relate. Movements in the number of performance shares are as follows: ( 000) ( 000) At 1 January 6,836 3,649 Granted 2,975 3,207 Forfeited/Cancelled (282) (20) Released (1,535) At 31 December 7,994 6,836 The fair value of the performance shares are determined using Monte Carlo simulation method at the measurement date which project future share price assuming log normal distribution based on Geometric Brownian Motion Theory. The fair value and assumptions are set out below: Year of awards Weighted average fair value of performance shares and assumptions Weighted average fair value at measurement date $0.62 $0.59 $0.15 $2.00 Expected volatility based on 36 months closing share price prior to the grant date 37.68% 37.80% 37.80% 27.88% MSCI Asia Pacific ex Japan Industrial Index annualised volatility based on 36 months prior to the grant date 20.11% 20.14% 20.14% 16.00% Share price at grant date $1.47 $1.46 $1.46 $2.41 Risk free interest rate equal to the implied yield on zerocoupon Singapore Government Sovereign with a term equal to the length of performance period 1.69% 1.68% 1.68% 2.10% Expected dividend yield of 5% over 12 months volumeweighted share price prior to the grant date 3.22% 3.22% 3.22% 2.38% Correlation of return between MSCI AC Asia Pacific Free ex Japan Industrial Index and the Company s share price measured over 36 months prior to the grant date 64.06% 64.20% 64.20% 55.86% 33 Share Capital The authorised share capital of the Company as at 31 December 2005 and 31 December 2004 was $4,000,000,000 comprising 4,000,000,000 Ordinary Shares of $1 each and US$172,500 comprising 172,500 Redeemable Convertible Cumulative Preference Shares of US$1 each. The issued and fully paid-up share capital of the Company as at 31 December 2005 was $2,750,502,800 (31 December 2004: $2,524,795,481) comprising 2,750,502,800 (31 December 2004: 2,524,795,481) Ordinary Shares of $1 each. 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 meeting of the Company. All shares rank equally with regards to the Company s residual assets. During the financial year, the Company issued 35,421,913 (2004: 7,445,683) Ordinary Shares of $1 each arising from the issue of 33,886,913 (2004: 7,445,683) Ordinary Shares under the Company s Share Option Plan and 1,535,000 (2004: Nil) Ordinary Shares under the Performance Share Plan. FS-52

176 At the end of the financial year, there were 64,060,479 share options (2004: 81,885,678) and a maximum of 15,988,600 performance shares (2004: 13,673,400) relating to the Company s Share Option Plan and Performance Share Plan for unissued Ordinary Shares of the Company, details of which are disclosed in note 32(d) and (e). As at 31 December 2005, all $380 million Convertible Bonds due 2007 which are convertible by holders into 190,285,406 new Ordinary Shares of $1 each in the capital of the Company at the adjusted conversion price of $ were converted into new Ordinary Shares. 34 Reserves The Group The Company Share premium 2,780,247 2,544,823 1,512,015 1,276,591 Capital reserve 59,038 95,950 30,381 Equity compensation reserve 24,534 9,520 19,441 7,776 Hedging reserve (595) Available-for-sale reserve 86,331 Capital redemption reserve 3,132 3, Revaluation reserve 246,921 55,568 Foreign currency translation reserve (22,840) (24,225) Accumulated profits 730, , , ,044 3,907,207 2,831,030 1,942,994 1,608,105 The Group and the Company The capital reserve comprises mainly capital gains on disposal of properties and share of associates capital reserve. The equity compensation reserve comprises the cumulative value of employee services received for the issue of the share options and performance shares. The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging instruments related to hedged transactions that have not yet occurred. The available-for-sale reserve comprises the cumulative net change in the fair value of available-for-sale investment until the investment is derecognised. The capital redemption reserve is required by Section 70(5) of the Companies Act, Chapter 50, and it relates to the nominal amount of the redeemable preference shares redeemed by the Company and its subsidiaries. The revaluation reserve comprises the net cumulative increase in the fair value of investment properties and share of associates and jointly-controlled entities surpluses and deficits on revaluation of properties. The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations, as well as from the translation of foreign currency loans used to hedge the Group s net investments in foreign operations. FS-53

177 35 Revenue Revenue of the Group and of the Company is analysed as follows: The Group The Company Commercial 997, ,956 Residential 2,190,899 2,075,243 Serviced residences 416, ,055 Consultancy and management services 29,266 27,808 Dividend income from subsidiaries 218, ,292 Others 240, ,810 3,845,637 3,179, , ,100 Revenue of the following business segments comprise mainly: Commercial : Gross rental, car park and other related income from investment properties and leased properties. Residential : Income on property development projects. Serviced residences : Rental and other related income from serviced residences. Others : Fund management fee, advisory fee and services rendered in connection with hotel operations. 36 Profit Before Taxation Profit before taxation includes the following: The Group The Company Note (a) Other operating income Interest income fixed deposits 39,494 22,397 12,463 4,790 subsidiaries 81,504 43,802 associates, jointly-controlled entities and partnership 59,353 57,007 investee companies and others 10,434 3,627 interest capitalised in development properties for sale 13(c) (1,911) (826) 107,370 82,205 93,967 48,592 Dividend income from investments 6,838 47,933 Mark-to-market gain on financial assets held for trading 21,583 Mark-to-market gain on derivative instruments 8,069 Gain on disposal/dilution/ liquidation of subsidiaries and associates 100, ,790 Gain on disposal of property, plant and equipment 23, Gain on foreign exchange 8,336 2, Gain on disposal of investment properties 13, ,770 FS-54

178 (b) The Group The Company Staff costs Wages and salaries 337, ,005 31,812 10,873 Contributions to defined contribution plans 22,389 15,841 1, Share-based expenses 17,356 7,274 12,799 5,578 Increase/(Decrease) in liability for short term accumulating compensated absences (202) Increase in liability for retirement gratuity Increase in liability for long service leave entitlement Staff benefits, training/development cost and others 56,616 38,881 1, , ,303 46,947 17,878 Less: Staff costs capitalised in development properties for sale (57,760) (69,019) 377, ,284 46,947 17,878 The Group The Company Note (c) (i) Cost of sales Write back of foreseeable losses on development properties for sale (36,805) (32,823) Operating lease expenses 64,669 34,760 (ii) Administrative expenses Allowance for/(write back of) doubtful receivables 2,461 12,237 (18,076) (157) Amortisation of: intangible assets 42 leasehold investment properties 5(a) 1, Auditors remuneration: auditors of the Company 1,216 1, other auditors 2,846 2,820 Non-audit fees: auditors of the Company other auditors 1, Depreciation of property, plant and equipment 3 36,092 39, ,276 Impairment loss made on intangible assets ,531 Reversal of provision for obligation no longer required (11,140) Negative goodwill on acquisition (820) (44,974) Operating lease expenses 43,731 52,894 1,335 1,234 FS-55

179 (iii) The Group The Company Note Other operating expenses Impairment of/(write back of allowance for): current financial assets (681) non-current financial assets 4,096 40,837 Loss on disposal/dilution/ liquidation of subsidiaries and associates 110,686 Property, plant and equipment written off 491 4,328 Allowance made on provisions 25(a) 177 7,916 Write back of impairment loss for subsidiaries (5,475) Write down in value of investment properties and properties under development 33,074 17,946 (d) Remuneration of key management personnel The key management personnel compensations are as follows: The Group The Company Short term employee benefits 10,626 9,573 4,036 3,621 Equity compensation benefits 4,818 2,537 1, ,444 12,110 5,549 4,554 (e) Professional fees Fees paid and payable to firms in which certain directors (including former directors) of the Company are members: The Group The Company Charged to profit and loss account 2,020 1, Included as cost of development properties for sale and property, plant and equipment 1 92 Charged to accumulated profits for capital reduction and distribution in specie expenses FS-56

180 (f) Finance costs Interest and securitisation costs paid and payable to: The Group The Company Note subsidiaries 12,392 15,173 bank loans and overdrafts 260, ,224 37,117 24,966 debt securities 85,670 89,476 14,921 21,762 Convertible bonds interest expense 324 2, ,377 amortisation of bond discount 29(a) 4,071 14,467 4,071 14,467 Mark-to-market of derivative instruments (13,484) 14,750 (14,750) 14,750 Others 10,688 3, ,758 Total borrowing costs 347, ,383 55,041 96,253 Less: Borrowing costs capitalised in: properties under development 6 (7,983) (514) development properties for sale 13(c) (65,077) (86,257) (73,060) (86,771) 274, ,612 55,041 96,253 The finance costs have been capitalised at interest rates ranging from 1.34% to 8.50% (2004: 0.88% to 6.80%) per annum for properties under development and development properties for sale. 37 Taxation (a) Deferred Taxation At 1/1/2005 Effects of change in accounting policy Profit and loss account Equity Acquisition/ Disposal of subsidiaries Translation differences At 31/12/2005 The Group Deferred tax liabilities Accelerated tax depreciation 15,483 1,358 (5,927) (1,448) 9,466 Discounts on compound financial instruments 1,061 (1,061) Accrued income and interest receivable 29,817 (26,408) (500) 565 3,474 Claw-back of capital allowances of assets in investment properties 11, (1,505) (1) 10,906 Properties recognised on percentage of completion 30,388 (24,765) 9,033 (3,174) 8 11,490 Revaluation gains arising from investment properties and business combinations 22,344 3,049 35,480 (13,745) 21 47,149 Others 5,736 (3,130) (801) 643 2,448 Total 116,559 (24,765) (16,477) 35,480 (25,652) (212) 84,933 FS-57

181 At 1/1/2005 Effects of change in accounting policy Profit and loss account Equity Acquisition/ Disposal of subsidiaries Translation differences At 31/12/2005 The Group Deferred tax assets Unutilised tax losses (22,338) 8,975 (4,285) 91 (17,557) Unutilised capital allowances (4,776) (252) 5,164 (271) (135) Provisions and expenses (49,247) 20,399 (944) (1,373) (31,165) Others (5,096) (4,828) 4,224 4, (930) Total (81,457) 24,294 4,224 4,600 (1,448) (49,787) At 1/1/2005 Profit and loss account At 31/12/2005 The Company Deferred tax liabilities Discounts on compound financial instruments 1,061 (1,061) Deferred tax assets Provisions (3,955) (3,955) 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 Group The Company Deferred tax liabilities 74,230 48,621 1,061 Deferred tax assets (39,084) (38,284) (3,955) At 31 December 35,146 10,337 (3,955) 1,061 Deferred tax liabilities of $Nil (2004: $3.9 million) have not been recognised for withholding and other taxes that would be payable upon the remittance of earnings of certain subsidiaries, as such amounts have been permanently reinvested. The total unremitted earnings as at 31 December 2005 amounted to $Nil (2004: $31.4 million). FS-58

182 (b) Tax Charge The Group The Company Current tax expense Based on current year s results 110, ,867 4,500 7,944 Under/(Over) provision in respect of prior years 33,474 (129) 1,122 Group relief 8, , ,738 14,148 7,944 Deferred tax expense Movements in temporary differences 7,817 (27,056) (5,016) (3,183) Reduction in tax rates (2,407) Overprovision in respect of prior years (1,101) Taxation from: continuing operations 152, ,174 discontinued operations 9,399 10,123 Total 161, ,297 7,817 (30,564) (5,016) (3,183) 152, ,174 9,132 4,761 Reconciliation of effective tax rate The Group Profit before tax (continuing and discontinued operations) 1,337, ,004 Income tax using Singapore tax rate of 20% 267, ,001 Adjustments: Effects of reduction in tax rates on deferred tax (2,407) Expenses not deductible for tax purposes 71, ,793 Income not subject to tax (227,140) (113,564) Under/(Over) provision in respect of prior years 33,474 (1,230) Utilisation of unrecognised tax losses and other deductible temporary differences (21,243) (23,092) Effects of different tax rates in foreign jurisdictions 41,895 32,564 Others (4,525) 1, , ,297 FS-59

183 The Company Profit before tax 254, ,232 Income tax using Singapore tax rate of 20% 50,848 38,846 Adjustments: Expenses not deductible for tax purposes 1,872 5,788 Income not subject to tax (44,710) (39,873) Under provision in respect of prior years 1,122 Consideration paid for losses transferred 8,526 Tax benefit received on losses arising from group relief (8,526) 9,132 4,761 Deferred tax assets have not been recognised in respect of the following: The Group Deductible temporary differences 382, ,408 Tax losses 223, ,273 Unutilised capital allowances , ,941 1,022,375 Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profits will be available against which the subsidiaries of the Group can utilise the benefits. 38 Earnings Per Share (a) Basic earnings per share The Group Basic earnings per share is based on: Net profit attributable to shareholders from: continuing operations 307, ,057 discontinued operations 442,875 14,624 Net profit attributable to shareholders 750, ,681 Number of shares ( 000) Weighted average number of ordinary shares in issue during the year 2,653,921 2,520,289 FS-60

184 (b) Fully diluted earnings per share In calculating diluted earnings per share, the net profit attributable to shareholders and weighted average number of ordinary shares in issue during the year are adjusted for the effects of all dilutive potential ordinary shares: The Group Net profit attributable to shareholders 750, ,681 Adjustment resulting from conversion of bonds 4,406 18,906 Adjusted net profit attributable to shareholders 754, ,587 Attributable to: continuing operations 312, ,963 discontinued operations 442,875 14, , ,587 Number of shares ( 000) Weighted average number of ordinary shares used in calculation of basic earnings per share 2,653,921 2,520,289 Number of ordinary shares arising from conversion of bonds 190,285 Weighted average number of unissued shares from: share options 44,796 77,091 performance shares 15,053 13,674 Number of ordinary shares that would have been issued at fair value (22,666) (63,140) 37, ,910 Weighted average number of ordinary shares in issue (diluted) 2,691,104 2,738, Changes in Accounting Policies (a) FRS 39 Financial Instruments: Recognition and Measurement FRS 39 sets out the new requirements for the recognition, derecognition and measurement of the Group s financial instruments and hedge accounting. The adoption of FRS 39 has resulted in the Group recognising available-for-sale investments and all derivative financial instruments as assets or liabilities at fair value. In accordance with the transitional provisions of FRS 39, the comparative financial statements for 2004 are not restated. Instead, the changes have been accounted for by restating the following opening balances in the balance sheet as at 1 January 2005: The Group Increased/(Decreased) by Balance Sheet Items Other assets 23,790 Other payables (mainly derivative liabilities) 51,320 Available-for-sale reserve 23,429 Foreign currency translation reserve 16,559 Hedging reserve (21,695) Accumulated profits (38,921) Minority interests (6,902) FS-61

185 (b) FRS 102 Share-based Payment FRS 102 requires an entity to recognise share-based payment transactions in its financial statements, including transactions with employees or other parties to be settled in cash, other assets, or equity instruments of the entity. The Company and certain of its subsidiaries currently have share-based incentive plans such as Share Option Plan, Performance Share Plan and/or Restricted Stock Plan, whereby share options have been granted and/or performance shares have been conditionally awarded. Under the transitional provisions of FRS 102, this FRS must be applied to shares, share options or other equity instruments that were granted after 22 November 2002 and had not yet vested on 1 January The application is retrospective and accordingly, the comparative financial statements for 2004 have been restated and the opening balance of accumulated profits has been adjusted. Prior to adoption of FRS 102, no compensation expense was charged to the profit and loss account for share options granted. In respect of performance shares, the Group s accounting policy was to make a provision based on the latest estimate of the number of shares that will be awarded and the market price of the shares at the reporting date. With the adoption of FRS 102, the compensation expenses relating to both share options and performance shares are taken to the profit and loss account over the vesting periods of the grants. The compensation expenses are based on the respective fair values of share options and performance shares at grant dates computed using the Enhanced Trinomial (Hull and White) Valuation Model and Monte Carlo simulation method respectively, adjusted by the incremental value, if any, arising from modifications to the plans. The financial impact on the Group arising from the adoption of FRS 102 is as follows: The Group Increased/(Decreased) by Accumulated profits as at 1 January 2004 (276) Accumulated profits as at 1 January 2005 (309) Equity compensation reserve as at 1 January ,586 Equity compensation reserve as at 1 January ,520 Minority interests as at 1 January Minority interests as at 1 January Other payables (provision for performance shares) (9,476) There is no material impact on the basic and fully diluted earnings per share for 2005 and 2004 arising from the adoption of FRS 102. FS-62

186 (c) FRS 105 Non-current Assets Held for Sale and Discontinued Operations Under this FRS, an entity shall disclose a single amount on the face of profit and loss account comprising profit after tax of discontinued operations and the gain after tax from the disposal of the discontinued operations. The comparative profit and loss account for previous year is also represented to conform with the current year s presentation. The results of the discontinued operations are as follows: The Group Revenue 458, ,878 Cost of sales (237,388) (358,525) Gross profit 220, ,353 Other operating income 6,233 9,464 Administrative expenses (179,807) (248,479) Other operating expenses (1,952) (7,753) Profit from operations 45,257 44,585 Finance costs (5,693) (8,463) Share of results of associates Profit before taxation 39,660 36,217 Taxation (9,399) (10,123) Profit after taxation before gain on sale of discontinued operations 30,261 26,094 Gain on sale of discontinued operations 711,702 Profit after taxation 741,963 26,094 The impact of the discontinued operations on the consolidated cash flow of the Group is as follows: The Group Operating cash flows 131,008 80,608 Investing cash flows 1,426,366 4,581 Financing cash flows (42,781) (53,876) Total cash flows from discontinued operations 1,514,593 31,313 FS-63

187 (d) Revenue Recognition Policy for Sale of Development Properties in Australia Australand, the Group s Australian subsidiary, had previously recognised revenue and profits in respect of pre-sold residential units and land subdivision using the percentage of completion method. With effect from 1 January 2005, Australian companies, including Australand, have adopted the Australian equivalent of the International Financial Reporting Standards ( IFRS ) issued by the Australian Accounting Standards Board ( AASB ). Based on guidance issued by AASB, Australand has deferred the recognition of revenue and profits on the development of pre-sold residential properties to upon settlement of the sale of the properties ( settlement accounting basis ), rather than progressively on the percentage of completion basis. As a result of adopting RAP 11 issued by the Institute of Certified Public Accountants of Singapore in October 2005, the Group had reassessed the appropriateness of applying the percentage of completion method on all its property development projects and concluded that pre-completion contracts for the sale of residential properties in Australia fail to meet the necessary criteria for the percentage of completion method to be applied, as the risks and rewards of ownership is only transferred to buyers on completion of the property development projects. Accordingly, the completion of construction method, which is similar to the settlement accounting basis, is applied for pre-sold residential properties in Australia. In the process of the preparation and presentation of its financial statements, Australand has fulfilled the requirements to comply with the applicable Australian IFRS and other mandatory financial reporting requirements in Australia. This included certain transitional provisions granted for the first-time adoption of Australian IFRS, which allowed for exemptions on the disclosure of the current year financial statement impact arising from the change from the percentage of completion method to settlement accounting basis for revenue and profits recognised in respect of the development of pre-sold residential units and land subdivision. Since the above information is not mandated under the prevailing Australian accounting standards and Australand has already complied with the applicable Australian IFRS and other financial reporting requirements in Australia, there is no necessity for Australand to maintain a separate set of accounting records to quantify the current year financial impact. As such, it is impracticable for the Group to quantify the current year financial statement impact of the change in revenue recognition policy for pre-sold residential properties in Australia for disclosure in the Group s financial statements. The financial impact on the Group arising from the change in accounting policy is as follows: The Group Decreased by Accumulated profits as at 1 January 2004 (25,730) Accumulated profits as at 1 January 2005 (33,048) Foreign currency translation reserve as at 1 January 2004 (3,648) Foreign currency translation reserve as at 1 January 2005 (2,832) Minority interests as at 1 January 2004 (18,555) Minority interests as at 1 January 2005 (21,033) FS-64

188 Arising from the change in revenue recognition policy, certain balance sheet items as at 31 December 2004 have also been restated as follows: Previously Restated reported Development properties for sale 4,283,021 4,062,370 Trade and other receivables 1,080,407 1,415,355 Deferred tax liabilities 48,621 73,386 (e) Effect of Changes in Accounting Policies The Group The Company Net profit before changes in accounting policies 739, , , ,422 Effects of adopting FRS 102 (16,650) (33) (12,799) 1,049 Effects of adopting FRS 39 27,858 Revenue recognition policy for pre-sold residential properties in Australia * (7,318) Profit for the year 750, , , ,471 *Please see note 39 (d). 40 Dividends The directors proposed a first and final dividend of 6 cents and a special dividend of 12 cents per share less tax at 20%, amounting to net dividends of $396,072,403 based on the number of issued shares as at 31 December The dividends have not been provided for and are subject to shareholders approval at the forthcoming Annual General Meeting of the Company. For the previous financial year 2004, the directors proposed a first and final dividend of 5 cents and a special dividend of 1 cent per share less tax at 20%. The said dividends of $126,525,914 had been paid in May 2005 upon the approval of shareholders. 41 Notes to the Consolidated Statement of Cash Flows (a) Acquisitions of Subsidiaries (i) The list of significant subsidiaries acquired during the year is as follows: Name of Subsidiary Date Acquired Equity Interest Acquired Hemliner Pte Ltd 31/12/ % CapitaLand Retail (SI) Investment Pte Ltd 15/04/ % Foshan City Nanhai SZITIC Commercial Property Co., Ltd 10/01/ % Hunan SZITIC Commercial Property Co., Ltd 08/02/ % Australand Property Trust No. 4 01/10/ % Australand Property Trust No. 5 01/10/ % RiverEdge Development Pte Ltd 01/03/ % FS-65

189 The total related acquisition costs for the above-mentioned subsidiaries and other subsidiaries acquired which individually was not significant, amounted to $540.4 million. From the date of acquisition to 31 December 2005, the above-mentioned acquisitions contributed net profit of $4.0 million to the Group s results for the year, before accounting for financing costs attributable to the acquisitions. If the acquisitions had occurred on 1 January 2005, the Group s revenue for the year ended 31 December 2005 would have increased by $79.2 million and net profit would have increased by $14.8 million, before accounting for financing costs attributable to the acquisitions. (ii) The Oriville Group On 29 October 2004, the Group acquired the remaining 50% equity interest in Oriville Group SAS for $181.3 million, (including related acquisition costs of $1.0 million), satisfied in cash. The Oriville Group owns and manages a serviced residence and property portfolio under the Citadines brand. In the two months to 31 December 2004, the subsidiary contributed net profit after tax of $0.9 million to the consolidated net profit for the year. If the acquisition had occurred on 1 January 2004, the Group s revenue and net profits would have increased by $192.0 million and $8.6 million respectively. (iii) Acquisition of Australand Property Trust No. 3 ( APT 3 ) On 28 May 2004, Australand acquired the remaining units and control of APT 3 for A$97.0 million, satisfied in cash. APT 3 owns certain commercial properties for investment. In the eight months to 31 December 2004, the subsidiary contributed net profit after tax of $13.1 million to the consolidated net profit for the year. If the acquisition had occurred on 1 January 2004, the Group s revenue and net profits would have been increased by $8.7 million and $3.9 million respectively. (b) Effects of Acquisitions The cash flow and the net assets of subsidiaries acquired are provided below: Recognised values Fair value adjustments Carrying amount The Group 2005 Property, plant and equipment 4,473 4,473 Investment properties 917,109 4, ,134 Other non-current assets 272, , ,511 Current assets 133, ,537 Current liabilities (293,498) (293,498) Interest bearing liabilities (418,794) (418,794) Minority interests (51,055) (51,240) (102,295) 564,712 57, ,068 Amounts previously accounted for as associates, jointly-controlled entities and financial assets (87,598) Net assets acquired 534,470 Negative goodwill arising from acquisition (820) Reserve arising from stapling 7,028 Purchase consideration 540,678 Less: Deposit paid in 2004 (65,978) Cash of subsidiaries acquired (21,310) Cash outflow on acquisition of subsidiaries 453,390 FS-66

190 Recognised values Fair value adjustments Carrying amount 2004 Property, plant and equipment 45,881 45,881 Investment properties 763, ,384 1,173,970 Intangible assets 24,966 24,966 Non-current assets 9,006 9,006 Current assets 211,420 33, ,762 Current liabilities (166,258) (166,258) Interest bearing liabilities (604,756) (604,756) Minority interests (38,111) (19,358) (57,469) 245, , ,102 Amounts previously accounted for as jointlycontrolled entities and financial assets (287,132) Net assets acquired 382,970 Negative goodwill recognised on consolidation (44,974) Purchase consideration 337,996 Less: Cash of subsidiaries acquired (73,978) Cash outflow on acquisition of subsidiaries 264,018 (c) Effects of Disposals (i) During the year, the Group disposed off the following significant subsidiaries for a total consideration of $1,817 million: Shanghai Huteng Real Estate Co., Ltd CL Moorgate Limited CapitaLand Ningbo Commercial Holdings Pte Ltd CapitaLand Ningbo Holdings Pte Ltd RiverEdge Development Pte Ltd Raffles Holdings Limited s hotel business Premas International Limited The disposed subsidiaries previously contributed net profits of $27.5 million for the year ended 31 December 2004 and $20.4 million from 1 January 2005 to the respective dates of disposal. (ii) In 2004, the Group disposed off the following subsidiaries for a total consideration of $140 million: RE Properties Pte Ltd Capital Tower Pte Ltd Cuppage Centre Pte Ltd Robinson Point Pte Ltd Rochor Square Pte Ltd Golden Square Pte Ltd CapitaLand Market Street Pte Ltd PT Regency Laguna Jasamedika CapitaRetail LPM Toutei Mokuteki Kaisha Canary Riverside Estate Management Pte Ltd The disposed subsidiaries previously contributed net profits of $5.2 million for the year ended 31 December 2003 and $19.1 million from 1 January 2004 to the respective dates of disposal. FS-67

191 (iii) The cash flow and the net assets of subsidiaries disposed are provided below: The Group Property, plant and equipment 1,019,366 3,054 Investment properties 196,987 2,327,093 Other non-current assets 217,271 Current assets 572,931 61,851 Current liabilities (426,794) (89,017) Interest bearing liabilities (345,499) (660,892) Non-current liabilities (44,454) (19,550) Minority interests (45,991) (1,125) Net assets 1,143,817 1,621,414 Less: Equity interest retained as associates and jointly-controlled entities (18,450) (589,308) Net assets disposed 1,125,367 1,032,106 Capital reduction via distribution in specie (885,836) Realisation of reserves (66,024) 125,130 Gain/(Loss) on disposal of subsidiaries 757,440 (131,300) Sale consideration 1,816, ,100 Less: Deferred payment (78,800) Cash of subsidiaries disposed (102,113) (38,477) Cash inflow on disposal of subsidiaries 1,635, ,623 (d) Net effects on acquisitions and disposals of subsidiaries The Group Net cash inflow/(outflow) on acquisitions and disposals of subsidiaries 1,182,480 (162,395) FS-68

192 42 Commitments As at the balance sheet date, the Group and the Company had the following commitments: (a) Operating Lease Future minimum lease payments for the Group and the Company on non-cancellable operating leases with a term of more than one year are as follows: The Group The Company Lease payments payable: Within 1 year 45,728 96, ,197 From 1 to 5 years 134, , After 5 years 138, , , , ,810 The Group leases out its investment properties. Non-cancellable operating lease rentals are receivable as follows: The Group The Company Lease payments receivable: Within 1 year 219, ,720 From 1 to 5 years 774, ,345 After 5 years 910, ,766 1,904, ,831 (b) Commitments The Group The Company Commitments in respect of: capital expenditure contracted but not provided for in the financial statements 69, ,741 capital expenditure authorised but not committed 89,441 48,432 Commitments in respect of: development expenditure contracted but not provided for in the financial statements 1,210, ,064 development expenditure authorised but not committed 281, ,454 capital contribution/acquisition of associates, jointly-controlled entities and investee companies 140, ,178 FS-69

193 The Group The Company Commitments in respect of: shareholders loan committed to associates, jointly-controlled entities and investee companies 684,835 6,761 forward foreign exchange contracts 462, ,411 2,939,335 2,071,041 (c) As at the balance sheet date, the Group and the Company had entered into financial instruments with notional principal values as follows: The Group The Company Interest rate caps 320, ,457 Interest rate swaps 2,263,782 2,783, ,000 Forward start interest rate swaps 998,640 Cross currency swaps 61,265 Non-delivery swaps 69, ,982 3,651,829 3,437, ,000 The maturity dates of these financial instruments are: The Group The Company Within 1 year 891, , ,000 From 1 to 5 years 1,761,574 2,673,569 85,000 After 5 years 998, ,530 3,651,829 3,437, , Contingent Liabilities (Unsecured) (a) The Group The Company Guarantees and undertaking issued on behalf of: subsidiaries 798, ,400 associates 229, ,523 jointly-controlled entities 14,832 11,356 Others 3,065 3, , , , ,400 FS-70

194 (b) (c) (d) A subsidiary of the Group provided a completion undertaking, cost overrun undertaking and an interest shortfall undertaking, to the extent of its share of investment, in respect of a $460 million (2004: $300 million) term loan facility granted to a jointly-controlled entity. A subsidiary of the Group provided a completion undertaking, cost overrun undertaking and an interest shortfall undertaking, to the extent of its share of investment, in respect of a $230 million (2004: $230 million) revolving credit facility and term loan facility granted to certain associates. In addition, the subsidiary provided a cash cover undertaking of approximately $0.77 million (2004: $0.77 million) in respect of a bank guarantee for these associates. A stapled entity of the Group, Australand, provided rental guarantee arrangements to tenants and owners of various residential buildings, which Australand is developing or has completed development. These arrangements require Australand to guarantee the rental income of these properties for certain periods of time. As at the date of this report, the management is of the opinion that based on the current sub-lease proposals and forecasted sub-lease commitments, together with the allowances made within the development budgets for these property developments, adequate allowance has been made in the financial statements for these potential obligations. 44 Significant Related Party Transactions Identity of related parties For the purposes of these financial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. In addition to the related party information disclosed elsewhere in the financial statements, there were the following significant related party transactions which were carried out in the normal course of business on terms agreed between the parties during the financial year: The Group The Company Subsidiaries Management fee income 29,266 27,808 Rental expense (264) (541) Other Related Corporations Rental income 1,253 6,097 Management and agency fee income 1,262 5,446 Management consultancy services 777 (44) (44) Management fee expense (5,687) (5,687) Purchase of air-tickets, IT related services and others (7,778) (10,710) (722) (949) Rooms, food and beverage and other incidental income 6,246 12,076 Ultimate Holding Company* Rental income 948 FS-71

195 The Group The Company Associates and Joint Ventures Management fee income 85,387 58,894 Management consultancy services 1,500 Rental expense (46,095) (55,494) (1,071) (683) Accounting service fee, marketing income and others 8,355 7,125 (76) (54) Construction and project management income 1, ,072 Directors and their associates Sale of a residential property 1,215 * Pursuant to the placement of the Company s shares by Temasek Holdings (Private) Limited ( Temasek ) during the financial year, Temasek ceased to be the ultimate holding company with effect from 11 August Financial Instruments (a) Financial risk management objectives and policies The Group and the Company are exposed to interest rate, foreign currency, credit and liquidity risks arising from its diversified portfolio business. The Group s risk management approach seeks to minimise the potential material adverse effects from these exposures. As a whole, the Group has implemented risk management policies and guidelines which set out its tolerance of risk and its general risk management philosophy. In connection with this, the Group has established a framework and process to monitor the exposures so as to ensure appropriate measures can be implemented on a timely and effective manner. (b) Interest rate risk The Group s exposure to market risk for changes in interest rate environment relates mainly to its investment in financial products and debt obligations. The investments in financial products are mainly short term in nature and they are not held or issued for trading or speculative purposes but were mainly placed in fixed deposits or short term commercial papers which yield better returns than cash at bank. The Group manages its interest rate exposure by maintaining a prudent mix of fixed and floating rate borrowings. The Group actively reviews its debt portfolio, taking into account the investment holding period and nature of its assets. This strategy allows it to capitalise on cheaper funding in a low interest rate environment and achieve certain level of protection against rate hikes. The Group also uses hedging instruments such as interest rate swaps and caps to minimise its exposure to interest rate volatility. (c) Foreign currency risk The Group operates internationally and is exposed to various currencies, mainly Australian dollars, Chinese renminbi, Euros, Hong Kong dollars, Japanese yen, Sterling pounds, Swiss francs and United States dollars. The Group maintains a natural hedge, whenever possible, by borrowing in the currency of the country in which the property or investment is located or by borrowing in currencies that match the future revenue stream to be generated from its investments. Foreign exchange exposures in transactional currencies other than functional currencies of the operating entities are kept to an acceptable level. FS-72

196 In relation to its overseas investments in its foreign subsidiaries whose net assets are exposed to currency translation risk and which are held for long term investment purposes, the differences arising from such translation are recorded under the foreign currency translation reserve. These translation differences are reviewed and monitored on a regular basis. (d) Credit risk The Group has guidelines governing the process of granting credit as a service or product provider in its respective segments of business. Investments and financial transactions are restricted to counterparties that meet the appropriate credit criteria and of high credit standing. The Group has a diversified portfolio of businesses and at balance sheet date, there were no significant concentration of credit risk to any entity. The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, in the balance sheet. (e) Liquidity risk The Group actively manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that all refinancing, repayment and funding needs are met. As part of its overall prudent liquidity management, the Group maintains sufficient level of cash or cash convertible investments to meet its working capital requirement. In addition, the Group strives to maintain available banking facilities of a reasonable level to its overall debt position. As far as possible, the Group will constantly raise committed funding from both capital markets and financial institutions and prudently balance its portfolio with some short term funding so as to achieve overall cost effectiveness. FS-73

197 (f) Effective interest rates and repricing analyses In respect of interest-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at balance sheet date and the periods in which they reprice Effective interest rate Within 1to5 After Within 1to5 After Total 1 year years 5 years Total 1 year years 5 years The Group Note % % Effective interest rate FS-74 Financial assets Interest bearing loans/amounts owing by: associates , , , ,093 96, ,701 jointly-controlled entities , ,115 23, , , , ,797 investee companies ,087 2, ,621 1,680 11,027 35,914 third parties 12, ,159 59,015 13,008 5,136 Cash and cash equivalents ,813,659 1,813, ,573,071 1,573,071 Total 2,708,652 2,192,356 23, ,862 2,499,475 1,969,892 24, ,548 Financial liabilities Bank overdrafts ,262 6, ,891 12,891 Short term loans: fixed rate ,299 60, ,550 9,550 floating rate , , , ,486 Term loans: fixed rate , , , , , ,271 floating rate ,290,959 3,290, ,330,131 3,330,131 effects of interest rate swaps (2.36) 1.32 (971,124) 846, ,830 (2.32) 2.45 (1,931,978) 1,809, ,530 Debt securities: fixed rate ,103, , , , ,677, , , ,000 floating rate , , , ,966 effects of interest rate swaps 0.15 (460,623) 335, , (209,527) 209,527 Finance leases ,131 3,448 48, ,028 3,376 15,730 37,922 Interest bearing loan from minority interests 20, , , ,917 66,917 Total 6,769,353 4,137,059 2,232, ,357 7,320,803 3,392,432 3,587, ,452

198 Effective interest rate Effective interest rate Within 1to5 Within 1to5 Total 1 year years Total 1 year years The Company Note % % Financial assets Fixed deposits , , , ,933 Interest bearing loans to subsidiaries 7, ,352,859 1,077,488 1,275, ,167, ,975 2,436,887 Total 3,340,503 2,065,132 1,275,371 4,071,795 1,634,908 2,436,887 FS-75 Financial liabilities Short term loans: fixed rate ,202 46,202 floating rate , , , ,074 Term loans: floating rate , , , ,554 Debt securities: fixed rate ,000 77, , , , ,000 floating rate ,000 62, ,500 94,500 Interest bearing loans from subsidiaries ,622 42, , , , ,471 Total 1,007, , ,500 2,276,110 1,279, ,471

199 (g) Sensitivity analysis In managing its exposure to interest rate, foreign currency, credit and liquidity risks, the Group strives to prudently balance its portfolio so as to minimise its impact on earnings. As at balance sheet date, it is estimated that a 1 percentage point change in interest rates would affect the Group s profit before tax by approximately $40.3 million (2004: $36.7 million). (h) Fair values The aggregate net fair values of financial assets and liabilities which are not carried at fair value in the balance sheet as at 31 December are presented in the following table: Carrying Carrying amount Fair value amount Fair value The Group Financial assets* Quoted equity securities NA NA 12,862 13,222 Quoted debt securities NA NA 2,000 1,985 14,862 15,207 Financial liabilities Fixed rate long term liabilities secured bank loans 173, , , ,702 unsecured bank loans 62,147 62, , ,625 secured debt securities 354, , , ,443 unsecured debt securities 561, , , ,500 1,151,864 1,168,100 1,733,214 1,838,270 The Company Fixed rate long term unsecured debt securities 125, , , ,446 * With the adoption of FRS 39 on 1 January 2005, all the Company s financial assets are stated at fair value. The fair value of long term quoted securities is their quoted bid price at the balance sheet date. For other financial instruments, fair value has been determined by discounting the relevant cash flows using current interest rates for similar instruments at the balance sheet date. At the balance sheet date, there are no (2004: Nil) financial instruments measured at fair value using a valuation technique that is not supported by observable market prices or rates. The following methods and assumptions are used to estimate fair values of the following significant classes of financial instruments not included in note 45(h) above: (i) Floating Interest-Bearing Loans No fair value is calculated as the Group believes that the carrying amounts of floating interest-bearing loans which are repriced within 6 months from the balance sheet date reflect the corresponding fair values. (ii) Cash and Cash Equivalents, Trade and Other Receivables, Short Term Borrowings, Trade and Other Payables The carrying amounts approximate fair values due to the relatively short term maturity of these financial instruments. FS-76

200 (iii) Financial Assets Fair value is based on quoted market prices at the balance sheet date without any deduction for transaction costs. (iv) Non-Current Loans Due from/to Subsidiaries, Associates, Jointly-Controlled Entities, Investee Companies, Third Parties and Minority Shareholders Fair value is estimated as the present value of future cash flows discounted at current interest rates for similar instruments at the balance sheet date. 46 Subsidiaries (a) The significant subsidiaries directly held by the Company set out below are incorporated and conducting business in the Republic of Singapore: Subsidiaries Areca Investment Pte Ltd Principal Activities Property development and investment holding Percentage Held by the Company % % CapitaLand Asia Pte Ltd Investment holding CapitaLand Commercial and Integrated Development Limited Investment holding and provision of management services CapitaLand Corporate Investments Pte Ltd Investment holding CapitaLand Financial Limited Investment holding CapitaLand Raffles Investment Pte Ltd Investment holding CapitaLand Residential Limited CapitaLand Retail Limited CapitaLand Treasury Limited Investment holding and provision of management services Investment holding and provision of management services Provision of financial and treasury services to related corporations CapitaLand Retail China Pte Ltd Investment holding pfission Pte Ltd Investment holding Somerset Capital Pte Ltd Investment holding Somerset Land Pte Ltd Investment holding and investment trading FS-77

201 (b) Other significant subsidiaries in the Group are: Name of Company Principal Activities Place of Incorporation/ Business Effective Interest Held by the Group % % (i) 2 Jointly held by Areca Investment Pte Ltd and CapitaLand Corporate Investments Pte Ltd: Raffles Holdings Limited Investment holding Singapore (ii) Jointly held by Areca Investment Pte Ltd, Somerset Capital Pte Ltd and Somerset Land Pte Ltd: The Ascott Group Limited Investment holding, property investment and the management of commercial, residential and serviced apartments Singapore (iii) Directly or indirectly held by CapitaLand Residential Limited: Ausprop Holdings Limited Investment holding Singapore Aust Holdings Ltd Investment holding Singapore Australand ASSETS Trust Special purpose entity for issuance of hybrid security Australia Australand Holdings Limited Property investment, development and investment holding Australia Australand Property Trust Property trust Australia Australand Property Trust No. 4 Australand Property Trust No. 5 Property trust Australia Property trust Australia Austvale Holdings Ltd Investment holding Singapore CapitaLand China Holdings Pte Ltd Investment holding Singapore CapitaLand Management & Consulting (China) Co., Ltd Management services The People s Republic of China Central Hill Limited Property investment Hong Kong CRL Realty Pte Ltd Property development Singapore Hua Sheng Holdings Pte Ltd Investment holding Singapore Hua Yuan Holdings Pte Ltd Investment holding Singapore Imperial Reality Limited Property development Singapore Leonie Court Pte Ltd Property development Singapore Prime Equities Pte Ltd Investment holding Singapore FS-78

202 Name of Company Principal Activities Place of Incorporation/ Business Effective Interest Held by the Group % % 1 Shanghai Pudong Xinxiang Real Estate Development Co., Ltd Property development The People s Republic of China Shanghai Ning Xin Real Estate Development Co., Ltd Property development The People s Republic of China Shanghai Xin Xu Property Development Co., Ltd Property development The People s Republic of China (iv) Directly or indirectly held by CapitaLand Commercial and Integrated Development Limited: CapitaLand China Holdings (Commercial) Pte Ltd CapitaLand Investment Pte Ltd Investment holding Singapore Investment holding Singapore CapitaLand (U.K.) Pte Ltd Investment holding Singapore E-Pavilion Pte Ltd Investment holding Singapore Huteng Investment (Shanghai) Pte Ltd Investment holding Singapore Prasiolite Pte Ltd Investment holding Singapore Somerset Mall Pte Ltd Investment holding Singapore Tmall Ltd Dormant Singapore Victoria City Pte Ltd Investment holding Singapore (v) Directly held or indirectly held by CapitaLand Retail Limited: Albert Complex Pte Ltd Investment holding Singapore CapitaLand Retail (BJ) Investments Pte Ltd CapitaLand Retail (BJ1) Holdings Pte Ltd CapitaLand Retail BJ1 (M) Limited CapitaLand Retail (SI) Investments Pte Ltd CapitaLand Retail Hong Kong Investments Pte Limited Investment holding Singapore 100 Investment holding Singapore 100 Investment holding Mauritius 100 Investment holding Singapore 100 Investment holding Singapore CapitaRetail Beijing Anzhen Real Estate Co., Ltd Property investment The People s Republic of China 100 FS-79

203 Name of Company Principal Activities Place of Incorporation/ Business Effective Interest Held by the Group % % 1 SZITIC (Chengdu) Commercial Property Co., Ltd Property investment The People s Republic of China 65 1 Chongqing Zhangshan Huihua Investment Co., Ltd Property investment The People s Republic of China 51 Clarke Quay Pte Ltd Property investment Singapore Hunan SZITIC Commercial Property Development Co., Ltd Property investment The People s Republic of China 51 Plaza Singapura (Private) Limited Premier Healthcare Services International Pte Ltd Pyramex Investments Pte Ltd Dormant Singapore Investment holding Singapore Investment holding Singapore Wuhu SZITIC Commercial Property Co., Ltd Property investment The People s Republic of China 51 (vi) Directly held or indirectly held by CapitaLand Financial Limited: CapitaCommerical Trust Management Limited CapitaLand Financial Services Limited Property fund management, investment and related services Investment holding and advisory services Singapore Singapore CapitaLand Hong Kong Investment (BVI) Limited Investment holding British Virgin Islands 100 CapitaMall Trust Management Limited Property fund management, investment and related services Singapore (vii) Directly or indirectly held by The Ascott Group Limited: 1 Ascott Hospitality Management (UK) Limited Management of serviced apartments United Kingdom Ascott International Management (2001) Pte Ltd Investment holding and management of serviced apartments Singapore Ascott International Management (Japan) Co Ltd Management of serviced apartments Japan Ascott International Management (Thailand) Limited Management of serviced apartments Thailand FS-80

204 Name of Company Principal Activities Place of Incorporation/ Business Effective Interest Held by the Group % % 1 Ascott International Management (NZ) Pte Limited Management of serviced apartments New Zealand Ascott Property Management (Beijing) Co., Ltd Property management The People s Republic of China Ascott Property Management (Shanghai) Co., Ltd Property management The People s Republic of China Ascott Residences Pte Ltd Investment and development of serviced apartments Singapore Cairnhill Place (1999) Limited Property investment Singapore Citadines SA Operating and management France Eurimeg SA Investment holding France FBM London Ltd Investment holding and management of serviced apartments United Kingdom EuroResidence 1 SARL Investment holding France EuroResidence 2 SAS Investment holding France Greenpark Investment (Guernsey) Ltd Property investment United Kingdom Guangzhou F.C. Golf & Country Club Co., Ltd Development and operation of a golf and country club The People s Republic of China Hanoi Tower Center Company Ltd Property investment The Socialist Republic of Vietnam Hemliner Real Estate (Beijing) Co., Ltd Property investment and management The People s Republic of China Hua Xin Residences Pte Ltd Property investment and investment holding Singapore/The People s Republic of China Javana Pte Ltd Investment holding Singapore Mekong-Hacota JV Co., Ltd Property investment The Socialist Republic of Vietnam Oakford Australia Pty Ltd Property management Australia Oriville SAS Investment holding France PT Bumi Perkasa Andhika Property development and management Indonesia FS-81

205 Name of Company Principal Activities Place of Incorporation/ Business Effective Interest Held by the Group % % 1 PT Ciputra Liang Court Property development and investment Indonesia PT Indonesia America Housing Property investment Indonesia Residence Italie Sci Management of serviced apartments France Saigon Office and Serviced Apartment Company Limited Property investment The Socialist Republic of Vietnam Shanghai Xin Wei Property Development Co., Ltd Property investment The People s Republic of China Somerset Investments Pte Ltd Property investment and investment holding Singapore SQ Resources Inc. Property investment Philippines The Ascott (Australia) Pty Ltd Investment holding Australia The Ascott Capital Pte Ltd Investment trading Singapore The Ascott Group (Europe) Pte Ltd The Ascott Heritage Pte Ltd The Ascott Holdings Limited The Ascott Hospitality Holdings Pte Ltd Investment holding Singapore Property investment Singapore Investment holding Singapore Investment holding Singapore Westlake Development Co. Ltd Property investment The Socialist Republic of Vietnam Wuhan New Minzhong Leyuan Co Ltd Property development and investment The People s Republic of China (viii) 4 Directly or indirectly held by Raffles Holdings Limited: Burton Way Hotel, Inc. Hotel owner and operator United States of America hospitalitybex pte ltd Operation of e-procurement portal Singapore Hotel International AG Hotel owner and operator Switzerland Hotel Vier Jahreszeiten von Friedrich Haerlin GmbH Hotel operator Germany Le Plaza Basel AG Hotel owner and operator Switzerland FS-82

206 Name of Company Principal Activities Place of Incorporation/ Business Effective Interest Held by the Group % % 2 2 MCH (Sydney) Trust Hotel owner and operator Australia Merchant Quay Pte Ltd Hotel owner and operator Singapore Raffles Centre (Private) Limited Raffles Grand Hotel Pte Ltd Investment holding Singapore Hotel owner and operator Cambodia Raffles Hotel (1886) Ltd Hotel owner, operator and property investment Singapore Raffles International Limited Hotel management and management of tourism related activities Singapore Raffles Royal Hotel Pte Ltd Hotel owner and operator Cambodia Rheinpark Plaza Neuss GmbH Société Montreux-Palace S.A. Hotel owner and operator Germany Hotel owner and operator Switzerland Swissôtel Amsterdam B.V. Hotel operator The Netherlands Swissôtel Berlin GmbH Hotel operator Germany Swissôtel Holding AG Investment holding Switzerland Swissôtel Management AG Hotel management and management of tourism related activities Switzerland Swissôtel Management Corporation Hotel management and management of tourism related activities United States of America Swissôtel Management (South America) L.L.C. Hotel management and management of tourism related activities United States of America Swissôtel Management (USA) L.L.C. Hotel management and management of tourism related activities United States of America Swissôtel Osaka Nankai K.K. Vier Jahreszeiten Grundstücksgesellschaft m.b.h. Hotel operator Japan Hotel owner Germany FS-83

207 Name of Company Principal Activities Place of Incorporation/ Business Effective Interest Held by the Group % % (ix) Directly or indirectly held by CapitaLand Property Services Holdings Pte Ltd: ESMACO International Pte Ltd Contact centre and home services Singapore ESMACO Pte Ltd Estate and building management and related services Singapore ESMACO Township Management Pte Ltd Real estate and township management Singapore PREMAS International Limited Property management and related services Singapore PREMAS Valuers & Property Consultants Pte. Ltd. Real estate valuation and property consultancy services Singapore PT. PREMAS International Property management and related services Indonesia RESMA Engineering Services Pte Ltd Engineering services Singapore RESMA Property Services Pte Ltd Estate and building management and related services Singapore Notes: Audited by other member firms of KPMG International. Audited by PricewaterhouseCoopers, Singapore and its associated firms. Audited by Ernst & Young, Singapore and its associated firms. Audited by PKF International Limited. Subsidiaries incorporated in Singapore which required audit are audited either by KPMG Singapore or PricewaterhouseCoopers Singapore. Companies disposed as part of the discontinued operations [note 39(c)]. FS-84

208 47 Associates Details of significant associates are as follows: Associates Principal Activities Place of Incorporation/ Business Effective Interest Held by the Group % % (i) Held by CapitaLand Corporate Investments Pte Ltd: RC Hotels (Pte) Ltd Hotel operator Singapore (ii) Indirectly held by CapitaLand Residential Limited: 2 Bangi Heights Development Sdn. Bhd. Property investment and development Malaysia CapitaLand China Development Fund Pte Ltd Investment holding Singapore Onesentral Park Sdn. Bhd. Property development Malaysia United Malayan Land Bhd. Investment holding Malaysia Wingem Investment Pte Ltd Property investment and development Singapore Winpeak Investment Pte Ltd Property investment and development Singapore (iii) Indirectly held by CapitaLand Commercial and Integrated Development Limited: 3 Bugis City Holdings Pte Ltd Investment holding Singapore CapitaCommercial Trust Property investment Singapore Hua Qing Holdings Pte Ltd Investment holding Singapore Inverfin Sdn Bhd Property investment Malaysia (iv) Indirectly held by CapitaLand Retail Limited: CapitaMall Trust Property investment Singapore Bugis City Holdings Pte Ltd CapitaRetail Japan Fund Private Limited Investment holding Singapore 29.5 Investment holding Singapore FS-85

209 Associates Principal Activities Place of Incorporation/ Business Effective Interest Held by the Group % % (v) Indirectly held by CapitaLand Financial Limited: 3 I. P. Property Fund Asia Limited CapitaLand China Residential Fund Limited Investment in real estate Guernsey Investment in real estate Singapore (vi) Indirectly held by The Ascott Group Limited: 1 Amanah Scotts Sdn Bhd Investment holding, property development and management Malaysia MEC Roppongi Tokutei Kaisha Property management Japan (vii) Directly held by Raffles Holdings Limited: 2 Tincel Properties (Private) Limited Real estate investment and management Singapore (viii) Indirectly held by CapitaLand Property Services Holdings Pte Ltd: 3 Bugis Junction Asset Management Pte Ltd Property management services Singapore PREMAS (THAILAND) CO., LTD. Integrated real estate management services Thailand Notes: Audited by other member firms of KPMG International. Audited by PricewaterhouseCoopers, Singapore and its associated firms. Audited by Ernst & Young, Singapore and its associated firms. Companies disposed as part of the discontinued operations [note 39(c)]. FS-86

210 48 Jointly-Controlled Entities Details of significant jointly-controlled entities are as follows: Jointly-Controlled Entities Principal Activities Place of Incorporation/ Business Effective Interest Held by the Group % % (i) Indirectly held by the Company: CapitaLand-Raffles Properties Pte Ltd Property development and investment Singapore (ii) Indirectly held by CapitaLand Asia Pte Ltd: 1 T.C.C. Capital Land Limited Property development and investment Thailand (iii) Indirectly held by CapitaLand Residential Limited: Commercial & Industrial Property (MT Waverley) Trust Discovery Point Pty Limited and Landcom Freshwater Residential Unit Trust Australand Holdings Limited & Morton Homestead Pty Ltd Motorway Business Park Pty Ltd Riverwalk Promenade Pte Ltd Property development Australia Property development Australia Property development Australia Property development Australia 26.7 Property development Australia Property development Singapore Trust Project No. 9 Unit Trust Property development Australia Village Park Consortium Property development Australia (iv) Indirectly held by CapitaLand Commercial and Integrated Development Limited: Eureka Office Fund Pte Ltd Investment holding Singapore Grand Design Development Limited Property investment Hong Kong Savu Investments Ltd Property investment Singapore FS-87

211 Jointly-Controlled Entities Principal Activities Place of Incorporation/ Business Effective Interest Held by the Group % % (v) Indirectly held by CapitaLand Retail Limited: 1 CapitaLand Hualian Management & Consulting (Shenzhen) Co., Ltd Property management and consulting services The People s Republic of China 50 Orchard Turn Holding Pte Ltd Investment holding Singapore 50 (vi) Indirectly held by CapitaLand Financial Limited: 3 I.P. Real Estate Asset Management (Asia) Pte Ltd Real estate portfolio management services Singapore I.P. Real Estate Asset Management (Guernsey) Limited Investment management Guernsey (vii) Indirectly held by The Ascott Group Limited: 1 Ascott Dilmun Holdings Limited Investment holding Jersey Sathorn Supsin Company Limited Property development and investment Thailand Notes: Audited by other member firms of KPMG International. Audited by PricewaterhouseCoopers, Singapore and its associated firms. Audited by Ernst & Young, Singapore and its associated firms. FS-88

212 49 Segment Reporting (Group) (a) Business Segments Total continuing operations Total discontinued operations Serviced Property Total Commercial Residential residences Others Eliminations Hotels management operations 2005 Revenue External revenue 997,085 2,190, , ,683 3,845, ,396 43, ,171 4,303,808 Inter-segment revenue 14,087 7,793 37,833 (59,713) Total Revenue 1,011,172 2,198, , ,516 (59,713) 3,845, ,396 43, ,171 4,303,808 FS-89 Segmental Results Company and subsidiaries 251, , ,958 33, , ,011 32, ,959 1,494,151 Associates 102,292 3,461 2, , ,001 Jointly-controlled entities (21,341) 47,663 (12,485) ,293 14,293 Partnership (114) (114) (114) Earnings before interest and taxation 332, , ,301 34, , ,011 33, ,055 1,617,331 Finance costs (280,274) Taxation (161,419) Minority interests (425,128) Profit for the year 750,510

213 Serviced Commercial Residential residences Others Consolidated 2005 Continuing Operations Significant Non-Cash Expenses Depreciation 3,868 3,208 12,570 16,446 36,092 Amortisation 1,762 1,762 Capital Expenditure + 32,833 3,416 21,096 5,464 62,809 + The capital expenditure of the discontinued operations amounted to $14,694,000. FS-90 Assets and Liabilities Segment assets 5,936,134 3,867,998 2,365,925 1,474,593 13,644,650 Investment in associates 2,120, ,829 24, ,833 2,749,732 jointly-controlled entities 639, ,102 77,380 24,628 1,178,938 Unallocated assets 609,733 Total Assets 8,696,638 4,517,929 2,467,699 1,891,054 18,183,053 Segment liabilities 870, , , ,437 1,966,585 Unallocated liabilities 7,188,100 Total Liabilities 870, , , ,437 9,154,685

214 Total continuing operations Total discontinued operations Serviced Property Total Commercial Residential residences Others Eliminations Hotels management operations 2004 Revenue External revenue 597,956 2,075, , ,810 3,179, , , ,878 3,828,942 Inter-segment revenue 6, ,897 (34,939) Total Revenue 604,889 2,075, , ,707 (34,939) 3,179, , , ,878 3,828,942 FS-91 Segmental Results Company and subsidiaries 138, ,704 54,408 71, ,883 35,914 8,671 44, ,468 Associates 42,647 7,987 2,279 20,289 73,202 (209) ,297 Jointly-controlled entities 39,755 13,214 (5,725) ,773 47,773 Partnership 4,541 4,541 4,541 Earnings before interest and taxation 225, ,905 50,962 92, ,399 35,705 8,975 44, ,079 Finance costs (272,075) Taxation (119,297) Minority interests (160,026) Profit for the year 305,681

215 Serviced Property Commercial Residential residences Hotels management Others Consolidated 2004 Significant Non-Cash Expenses Depreciation 7,278 5,465 8,166 65,330 2,147 1,354 89,740 Amortisation Capital Expenditure 6,385 7,531 9,510 22,840 2,107 1,353 49,726 FS-92 Assets and Liabilities Segment assets 2,920,770 4,595,005 1,972,535 1,546,179 67,351 2,246,484 13,348,324 Investment in associates 2,051, ,775 43, , ,944 2,642,689 jointly-controlled entities 675, , ,963 29,079 1,049,015 partnership 64,245 64,245 Unallocated assets 131,530 Total Assets 5,712,757 4,974,759 2,127,550 1,872,674 68,026 2,348,507 17,235,803 Segment liabilities 129,071 1,034, , ,458 45, ,898 1,808,348 Unallocated liabilities 8,013,163 Total Liabilities 129,071 1,034, , ,458 45, ,898 9,821,511

216 (b) Geographical Segments Singapore Australia and New Zealand China Other Asia # Europe Total continuing operations Total discontinued operations Total 2005 Revenue 1,002,002 2,041, ,407 85, ,104 3,845, ,171 4,303,808 Earnings before interest and taxation* 179, , , ,443 97,303 (111) 860, ,055 1,617,331 Total Assets 8,168,836 3,767,398 3,185,463 1,699,515 1,351,431 10,410 18,183,053 18,183,053 Capital Expenditure 21, , ,173 62,809 14,694 77,503 FS Revenue 1,082,979 1,392, ,971 67, ,958 3,179, ,878 3,828,942 Earnings before interest and taxation* 149, , , ,185 56, ,399 44, ,079 Total Assets 8,830,773 3,309,098 1,504,708 1,481,188 1,984, ,959 17,235,803 17,235,803 Capital Expenditure 22,290 6,857 2,771 6,084 10, ,726 49,726

217 (c) Strategic Business Units Residential Commercial and Integrated Development Retail Financial Services The Ascott Group ^ RHL Group and RCH^ Others and consolidation adjustments Total continuing operations Total discontinued operations Total 2005 Revenue 3,036, ,239 50,262 70, , ,428 (23,794) 3,845, ,171 4,303,808 Earnings before interest and taxation* 492,424 24, ,381 53, ,387 61,026 (30,946) 860, ,055 1,617, Revenue 2,407, ,534 84,348 42, , ,678 (29,083) 3,179, ,878 3,828,942 FS-94 Earnings before interest and taxation* 567,783 45,177 55,388 29,508 65,997 49,048 (502) 812,399 44, ,079 Notes: * ^ Earnings before interest and taxation include share of results from associates, jointly-controlled entities and partnership. The Group s operations in Other Asia include Indonesia, Hong Kong, Japan, Malaysia, Philippines, Thailand, Cambodia and Vietnam. The Group s operations in Others include the United States of America, South America and the Middle East/Mediterranean region. The figures differ from those reported by The Ascott Group and Raffles Holdings Group due to consolidation entries put through at CapitaLand Group level.

218 50 Subsequent Events At an Extraordinary General Meeting held on 13 February 2006, The Ascott Group Limited s ( TAG ) shareholders approved the proposal to sponsor a real estate investment trust, the Ascott Residence Trust ( ART ). ART s initial portfolio is valued at $856 million and comprises 12 of TAG s serviced residences. 51 Comparative Information Comparatives in the financial statements have been changed from previous year due to the change in accounting policy and adoption of new accounting standards as described in note 39. FS-95

219 Registration Number: N Annual Report Year Ended 31 December 2006 FS-96

220 KPMG 16 Raffles Quay #22-00 Hong Leong Building Singapore Telephone Fax Internet Independent Auditors Report To the Members of CapitaLand Limited We have audited the accompanying financial statements of CapitaLand Limited ( the Company ) and its subsidiaries ( the Group ), which comprise the balance sheets of the Group and the Company as at 31 December 2006, the income statements and statements of changes in equity of the Group and the Company and the cash flow statement of the Group for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages FS99 to FS184. Directors responsibility for the financial statements The Company s directors are responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Companies Act, Chapter 50 ( the Act ) and Singapore Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and 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. 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. 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 the directors, 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. FS-97

221 Opinion In our opinion: (a) (b) the consolidated financial statements of the Group and the balance sheet, income statement and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2006 and the results and changes in equity of the Group and of the Company and cash flows of the Group for the year ended on that date; and 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. KPMG Certified Public Accountants Singapore 28 February 2007 FS-98

222 Balance Sheets as at 31 December 2006 The Group The Company Note Non-Current Assets Property, Plant and Equipment 3 182, ,465 1,761 1,588 Intangible Assets 4 38,757 33,651 Investment Properties 5 6,553,643 5,914,905 Properties Under Development 6 413, ,004 Interests in Subsidiaries 7 2,895,750 3,773,558 Interests in Associates 8 (a) 3,163,011 2,751,475 Interests in Jointly-Controlled Entities 9 (a) 1,599,762 1,178,938 Financial Assets , ,253 Deferred Tax Assets 33 30,818 39,084 3,955 Other Non-Current Assets 11 5,011 8, ,314,199 11,038,312 2,897,742 3,779,357 Current Assets Development Properties for Sale 12 3,622,665 3,542,494 Consumable Stock 806 1,085 Trade and Other Receivables 13 2,024,538 1,417,790 1,544,600 1,101,118 Financial Assets 10 72,095 Cash and Cash Equivalents 17 2,684,851 2,111,277 1,477, ,736 8,332,860 7,144,741 3,022,110 2,088,854 Less: Current Liabilities Bank Overdrafts 17 6,262 Trade and Other Payables 18 1,862,377 2,005, , ,882 Short Term Bank Borrowings 24 1,523,160 1,699, , ,235 Current Portion of Debt Securities , ,633 34, ,500 Current Portion of Finance Leases 26 3,594 3,448 Current Tax Payable 316, ,664 6,980 3,976,188 4,630, , ,617 Net Current Assets 4,356,672 2,514,046 2,333,330 1,189,237 Less: Non-Current Liabilities Long Term Bank Borrowings 24 3,919,357 2,946,266 Debt Securities 25 2,368,802 1,281, , ,500 Finance Leases 26 44,685 48,683 Deferred Tax Liabilities ,533 74,230 11,572 Deferred Income 27 64,888 30,959 Other Non-Current Liabilities , ,107 23, ,597 7,158,121 4,523, , ,097 Net Assets 9,512,750 9,028,368 4,734,421 4,693,497 Representing: Share Capital 29 4,304,907 2,750,503 4,304,907 2,750,503 Reserves 30 3,095,239 3,907, ,514 1,942,994 Equity attributable to Equity Holders of the Company 7,400,146 6,657,710 4,734,421 4,693,497 Minority Interests 2,112,604 2,370,658 Total Equity 9,512,750 9,028,368 4,734,421 4,693,497 The accompanying notes form an integral part of these financial statements. FS-99

223 Income Statements Year ended 31 December 2006 The Group The Company Note Continuing operations Revenue 31 3,147,725 3,845, , ,030 Cost of sales (2,234,385) (3,036,173) Gross profit 913, , , ,030 Other operating income 558, , ,103 94,414 Administrative expenses (342,021) (390,295) (32,890) (38,607) Other operating expenses 90,333 (43,632) (3,906) 5,444 Profit from continuing operations 1,220, , , ,281 Finance costs (327,995) (274,581) (39,897) (55,041) Share of results of: associates 462, ,905 jointly-controlled entities 139,152 14,293 partnership (114) 601, ,084 Profit before taxation from continuing operations 32 1,494, , , ,240 Taxation (230,354) (152,020) (41,217) (9,132) Profit after taxation from continuing operations 1,263, , , ,108 Discontinued operations Profit after taxation from discontinued operations 35 26, ,963 Profit for the year 1,290,589 1,175, , ,108 Attributable to: Equity holders of the Company 1,017, , , ,108 Minority interests 272, ,128 Profit for the year 1,290,589 1,175, , ,108 Basic earnings per share (cents) from: continuing operations discontinued operations Total Fully diluted earnings per share (cents) from: continuing operations discontinued operations Total The accompanying notes form an integral part of these financial statements. FS-100

224 Statements of Changes in Equity Year ended 31 December 2006 FS-101 Share Capital Share Premium Revaluation Reserve Accumulated Profits Other Reserves Total Minority Interests Total Equity The Group At 1 January ,524,795 2,544,823 55, , ,658 5,335,197 2,051,565 7,386,762 Net (deficit)/surplus on revaluation of investment properties (31,455) (31,455) 40,796 9,341 Share of associates and jointly-controlled entities revaluation surplus 183, , ,031 Net deficit on revaluation transferred to income statement 32,192 32,192 32,192 Realisation of revaluation reserve transferred to income statement 7,585 7,585 7,585 Exchange differences arising from consolidation of foreign operations and translation of foreign currency loans 28,587 28, ,809 Realisation of foreign exchange reserve transferred to income statement (43,761) (43,761) (43,761) Change in fair value of available-for-sale investments 62,902 62,902 62,902 Effective portion of changes in fair value of cash flow hedges 21,100 21,100 21,100 Net gains recognised directly in equity 191,353 68, ,181 41, ,199 Profit for the year 750, , ,128 1,175,638 Total recognised gains for the year 191, ,510 68,828 1,010, ,146 1,476,837 Balance carried down 2,524,795 2,544, , , ,486 6,345,888 2,517,711 8,863,599 The accompanying notes form an integral part of these financial statements.

225 Statements of Changes in Equity Year ended 31 December 2006 (cont d) FS-102 Share Capital Share Premium Revaluation Reserve Accumulated Profits Other Reserves Total Minority Interests Total Equity The Group Balance brought forward 2,524,795 2,544, , , ,486 6,345,888 2,517,711 8,863,599 Dividends paid (126,526) (126,526) (126,526) Issue of shares under share option and performance share plans 35,422 16,081 (1,535) 49,968 49,968 Conversion of convertible bonds 190, ,343 (30,381) 379, ,248 Cost of share-based payment 17,517 17,517 1,369 18,886 Capital contribution from minority interests (net) 314, ,630 Effects of acquisition/disposals/dilution and liquidation of subsidiaries 28,089 28,089 Dividend paid to minority interests (497,179) (497,179) Others (898) (7,487) (8,385) 6,038 (2,347) At 31 December ,750,503 2,780, , , ,600 6,657,710 2,370,658 9,028,368 The accompanying notes form an integral part of these financial statements.

226 Statements of Changes in Equity Year ended 31 December 2006 (cont d) FS-103 Share Capital Share Premium Revaluation Reserve Accumulated Profits Other Reserves Total Minority Interests Total Equity The Group At 1 January ,750,503 2,780, , , ,600 6,657,710 2,370,658 9,028,368 Net surplus on revaluation of investment properties 102, ,429 18, ,475 Share of associates and jointly-controlled entities revaluation surplus 325, , ,734 Net revaluation surplus transferred to income statement (308,099) (308,099) (308,099) Realisation of revaluation reserve transferred to income statement (77,942) (77,942) (77,942) Exchange differences arising from consolidation of foreign operations and translation of foreign currency loans (58,726) (58,726) (29,392) (88,118) Change in fair value of available-for-sale investments 30,381 30,381 30,381 Effective portion of change in fair value of cash flow hedges 7,927 7,927 11,114 19,041 Realisation of available-for-sale reserve transferred to income statement (5,384) (5,384) (5,384) Realisation of hedging reserve transferred to income statement (1,203) (1,203) (665) (1,868) Realisation of foreign exchange reserve transferred to income statement 3,247 3,247 3,247 Net gains/(losses) recognised directly in equity 42,122 (23,758) 18,364 (897) 17,467 Profit for the year 1,017,985 1,017, ,604 1,290,589 Total recognised gains/(losses) for the year 42,122 1,017,985 (23,758) 1,036, ,707 1,308,056 Balance carried down 2,750,503 2,780, ,043 1,748, ,842 7,694,059 2,642,365 10,336,424 The accompanying notes form an integral part of these financial statements.

227 Statements of Changes in Equity Year ended 31 December 2006 (cont d) FS-104 Share Capital Share Premium Revaluation Reserve Accumulated Profits Other Reserves Total Minority Interests Total Equity The Group Balance brought forward 2,750,503 2,780, ,043 1,748, ,842 7,694,059 2,642,365 10,336,424 Dividends paid (399,089) (399,089) (399,089) Transfer to share capital and capital reserve 1,512,328 (2,780,247) 1,267,919 Issue of shares under share option and performance share plans 42,076 (2,909) 39,167 39,167 Equity portion of convertible bonds 41,831 41,831 41,831 Cost of share-based payment 24,641 24,641 1,534 26,175 Return of capital to minority interests (net) (42,738) (42,738) Effects of acquisition/disposals/dilution and liquidation of subsidiaries (23,939) (23,939) Dividends paid to minority interests (460,465) (460,465) Others (1,179) 716 (463) (4,153) (4,616) At 31 December ,304, ,043 1,348,156 1,458,040 7,400,146 2,112,604 9,512,750 The accompanying notes form an integral part of these financial statements.

228 Statements of Changes in Equity Year ended 31 December 2006 (cont d) Share Capital Share Premium Capital Reserve Accumulated Profits Equity Compensation Reserve Capital Redemption Reserve The Company At 1 January ,524,795 1,276,591 30, ,044 7, ,132,900 Profit for the year 245, ,108 Total recognised gains for the year 245, ,108 Dividends paid (126,526) (126,526) Issue of shares under share option and performance share plans 35,422 16,081 (1,535) 49,968 Conversion of convertible bonds 190, ,343 (30,381) 379,248 Cost of share-based payment 12,799 12,799 Transfer between reserves (401) 401 Total Equity FS-105 At 31 December ,750,503 1,512, ,225 19, ,693,497 At 1 January ,750,503 1,512, ,225 19, ,693,497 Profit for the year 352, ,666 Total recognised gains for the year 352, ,666 Dividends paid (399,089) (399,089) Transfer to share capital 1,512,328 (1,512,015) (313) Issue of shares under share option and performance share plans 42,076 (2,909) 39,167 Equity portion of convertible bonds 41,831 41,831 Cost of share-based payment 6,349 6,349 Transfer between reserves (1,449) 1,449 At 31 December ,304,907 41, ,353 24,330 4,734,421 The accompanying notes form an integral part of these financial statements.

229 Consolidated Statement of Cash Flows Year ended 31 December Operating activities Profit after taxation from continuing operations 1,263, ,675 Profit after taxation from discontinued operations 26, ,963 1,290,589 1,175,638 Adjustments for: Amortisation and impairment of intangible assets 4,754 1,102 Negative goodwill on acquisition (77,000) (820) (Write back)/allowance for: foreseeable losses on development properties for sale (54,532) (36,805) loans to associates 8,584 non-current financial assets 1,670 4,130 Share-based expenses 24,758 19,374 Changes in fair value of financial derivatives and assets 1,242 (29,998) Depreciation of property, plant and equipment 34,294 71,781 Loss/(Gain) on disposal/write off of property, plant and equipment 2,800 (23,635) Gain on disposal of investment properties (222,094) (13,141) (Write back)/write down in value of investment properties (113,037) 33,074 Gain on disposal of non-current financial assets (18,899) (2,101) Gain on disposal/dilution of subsidiaries and associates (128,451) (812,218) Share of results of associates, jointly-controlled entities and partnership (601,597) (123,180) Accretion of deferred income (4,678) (4,913) Reversal of provision for obligation no longer required (11,140) Interest expense 327, ,274 Interest income (146,340) (108,099) Tax expense 230, ,419 (730,177) (594,896) Operating profit before working capital changes 560, ,742 Decrease/(Increase) in working capital: Inventories, trade and other receivables 91,444 (46,334) Development properties for sale 38, ,575 Trade and other payables 169,744 45,616 Amount due to related corporations (3,232) Financial assets 45,531 (44,224) Changes in working capital 345, ,401 Cash generated from operations 905,804 1,216,143 Income tax paid (84,525) (86,255) Customer deposits and other non-current payables received 330 6,943 Net cash generated from operating activities carried down 821,609 1,136,831 The accompanying notes form an integral part of these financial statements. FS-106

230 Consolidated Statement of Cash Flows Year ended 31 December 2006 (cont d) Note Net cash generated from operating activities brought forward 821,609 1,136,831 Investing activities Proceeds from disposal of property, plant and equipment 13, ,767 Purchase of property, plant and equipment (63,512) (77,503) Increase in associates and jointly-controlled entities (1,635,205) (302,644) Decrease in associates and jointly-controlled entities 802, ,803 Increase in amounts owing by investee companies and other non-current receivables (393) (5,252) Deposits paid for new investments (28,172) (184,368) Acquisition of investment properties and properties under development (1,595,964) (1,042,486) Proceeds from disposal of investment properties 584, ,922 Acquisition of non-current financial assets (8,172) (151,892) Dividends received from associates and jointly-controlled entities 656, ,470 Acquisition of remaining interest in a subsidiary (49,549) (21,315) Acquisition and disposal of subsidiaries (net) ,475 1,182,480 Interest income received 145,719 96,981 Settlement of derivatives (15,849) Net cash (used in)/generated from investing activities (774,839) 147,114 Financing activities Proceeds from issue of shares under share option plan 39,167 49,968 (Repayment of)/proceeds from loans from minority interests (88) 36,448 (Return of capital to)/contribution from minority interests (42,738) 314,630 Proceeds from/(repayment of) sales of future receivables 156,941 (277,640) Proceeds from bank borrowings 3,450,696 2,332,441 Repayment of bank borrowings (2,879,187) (2,835,406) Proceeds from debt securities 1,839, ,133 Repayment of debt securities (772,115) (299,548) Repayment of finance lease payables (3,419) (3,447) Dividends paid to minority interests (460,465) (497,179) Dividends paid to shareholders (399,089) (126,526) Interest expense paid (382,177) (319,902) Net cash generated from/(used in) financing activities 546,944 (1,086,028) Net increase in Cash and Cash Equivalents 593, ,917 Cash and Cash Equivalents at beginning of the year 2,105,015 1,904,831 Effect of exchange rate changes on cash balances held in foreign currencies (13,878) 2,267 Cash and Cash Equivalents at end of the year 17 2,684,851 2,105,015 The accompanying notes form an integral part of these financial statements. FS-107

231 Notes to the Financial Statements These notes form an integral part of the financial statements. The financial statements were authorised for issue by the Board of Directors on 28 February Domicile and Activities CapitaLand Limited ( the Company ) is incorporated in the Republic of Singapore and has its registered office at 168 Robinson Road, #30-01 Capital Tower, Singapore The principal activities of the Company during the financial year are those relating to investment holding and consultancy services as well as the corporate headquarter which gives direction, provides management support services and integrates the activities of its subsidiaries. The principal activities of the significant subsidiaries are set out in note 42 to the accompanying financial statements. The consolidated financial statements relate to the Company and its subsidiaries ( the Group ) and the Group s interests in associates, jointly-controlled entities and partnership. 2 Summary of Significant Accounting Policies (a) Basis of preparation The financial statements have been prepared in accordance with Singapore Financial Reporting Standards ( FRS ). The financial statements have been prepared on the historical cost basis except for the following assets and liabilities: investment properties, certain financial assets and financial liabilities and non-current assets held for sale, the basis of measurement of which are indicated in the accounting policies set out below. The financial statements are presented in Singapore dollars which is the Company s functional currency. All financial information presented in Singapore dollars has been rounded to the nearest thousand, unless otherwise stated. The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the 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 are described in the following notes: Note 3 measurement of recoverable amounts of property, plant and equipment Note 4 assumptions of recoverable amounts relating to goodwill impairment Note 22 measurement of provisions Note 28 measurement of share-based payments Note 37(b) valuation of assets, liabilities and contingent liabilities acquired in business combinations Note 38 valuation of financial instruments FS-108

232 Accounting policy relating to financial guarantees (described in note 2(g)(iv)) was changed during the year arising from the adoption of Amendments to FRS 39 Financial Instruments: Recognition and Measurement Financial Guarantee Contracts. The adoption of this new policy did not have any material impact on the financial statements. Except for the above changes, the accounting policies set out below have been applied consistently by the Group and have been applied consistently to all periods presented in these financial statements. (b) Consolidation 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. Any excess or deficiency of the purchase consideration over the net fair value of the identifiable assets, liabilities and contingent liabilities is accounted for as goodwill or negative goodwill (see accounting policy 2(e)(i)). For acquisition of subsidiaries prior to 1 January 2004 which previously met the criteria for merger of businesses such that the assets and liabilities and results are accounted for under the pooling of interests method, the classification and accounting treatment of these business combinations have not been reconsidered or restated in preparing the Group s financial statements. Subsidiaries Subsidiaries are entities controlled by the Company. Control exists when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Associates and jointly-controlled entities Associates are those entities in which the Group has significant influence, but not control, over their financial and operating policies. Jointly-controlled entities are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. Associates and jointly-controlled entities (collectively referred to as equity accounted investees ) are accounted for using the equity method. The consolidated financial statements include the Group s share of the income and expenses of associates and jointly-controlled entities, after adjustments to align the accounting policies with those of the Group, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. When the Group s share of losses exceeds its interest in an associate or a jointly-controlled entity, the carrying amount of that interest is reduced to zero 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. Transactions eliminated on consolidation Intra-group balances, and any unrealised income or expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees 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. FS-109

233 Accounting for subsidiaries, associates and jointly-controlled entities by the Company Investments in subsidiaries, associates and jointly-controlled entities are stated in the Company s balance sheet at cost less accumulated impairment losses. (c) Foreign currencies Foreign currency transactions Items included in the financial statements of each entity in the Group are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to that entity ( the functional currency ). Transactions in foreign currencies are translated to the respective functional currencies of the Group s 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 income statement, except for differences arising on the retranslation of monetary items that in substance form part of the Group s net investment in a foreign operation (see below), available-for-sale equity instruments and financial liabilities designated as hedges of net investment in a foreign operation (see accounting policy 2(g)). Foreign operations The assets and liabilities of foreign operations are translated to Singapore dollars at exchange rates prevailing at the reporting date. The income and expenses of foreign operations are translated to Singapore dollars at exchange rates prevailing at the dates of the transactions. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. Foreign currency differences are recognised in the foreign currency translation reserve. When a foreign operation is disposed off, in part or in full, the relevant amount in the foreign currency translation reserve is transferred to the income statement. Net investment in a foreign operation Exchange differences arising from monetary items that in substance form part of the Company s net investment in a foreign operation are recognised in the Company s income statement. Such exchange differences are reclassified to equity in the consolidated financial statements. When the hedged net investment is disposed off, the cumulative amount in equity is transferred to the income statement as an adjustment to the profit or loss on disposal. (d) Property, plant and equipment Freehold land and property under construction are not depreciated. 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. Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the Group. All other subsequent expenditure is recognised as an expense in the period in which it is incurred. FS-110

234 Depreciation is provided on a straight-line basis over the estimated useful lives of each component of property, plant and equipment as follows: Leasehold hotel land and buildings remaining lease period ranging from 38 to 99 years Other leasehold land and buildings Freehold buildings Hospitality plant, machinery, improvements, furniture, fittings and equipment Other plant, machinery and improvements Other furniture, fittings and equipment Motor vehicles remaining lease period ranging from 6 to 32 years 20 to 50 years 1 to 15 years 3 to 10 years 2 to 5 years 5 years Assets under construction are stated at cost. Expenditure relating to assets under construction (including borrowing costs) are capitalised when incurred. Depreciation will commence when the development is completed. The assets residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. (e) Intangible Assets (i) Goodwill Goodwill and negative goodwill arise on the acquisition of subsidiaries, associates and jointly-controlled entities. Goodwill represents the excess of the cost of the acquisition over the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. Negative goodwill represents 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. Goodwill arising on the acquisition of subsidiaries is presented in intangible assets. Goodwill arising on the acquisition of associates and jointly-controlled entities is presented together with investments in associates and jointly-controlled entities. Acquisition prior to 1 January 2004 Prior to 1 January 2001, goodwill and negative goodwill on acquisitions were written off against accumulated profits in the year of acquisition. From 1 January 2001 to 31 December 2003, goodwill was stated at cost from the date of initial recognition and amortised over its estimated useful life of not more than 20 years. On 1 January 2004, the Group discontinued the amortisation of goodwill. The remaining goodwill balance is subject to testing for impairment (see accounting policy 2(j)). Negative goodwill was derecognised by crediting accumulated profits on 1 January Acquisitions on or after 1 January 2004 Goodwill is measured at cost less accumulated impairment losses. Goodwill is tested for impairment as described in note 2(j). Negative goodwill is credited to the income statement in the period of the acquisition. FS-111

235 Acquisition of minority interests Goodwill arising on the acquisition of a minority interest in a subsidiary represents the excess of the cost of the additional investment over the carrying amount of the net assets acquired at the date of exchange. (ii) Other intangible assets Other intangible assets with finite useful lives are measured at cost less accumulated amortisation and impairment losses. They are amortised in the income statement on a straight-line basis over their estimated useful lives of 1 to 10 years, from the date on which they are available for use. Other intangible assets with infinite useful lives are not amortised and are measured at cost less impairment losses. (f) Investment properties and investment properties under development (i) Investment properties Investment properties, which are not held with the intention of sale in the ordinary course of business, are stated at fair value. The fair value is determined by the directors on an annual basis based on internal valuation or independent professional valuation. Independent professional valuation is made at least once every 3 years. Any increase in value is credited to the revaluation reserve unless it offsets a previous decrease in value recognised in the income statement. A decrease in value is recognised in the income statement where it exceeds the increase previously recognised in the revaluation reserve. When an investment property is disposed off, the resulting gain or loss recognised in the income statement is the difference between net disposal proceeds and the carrying amount of the property. Any amount in the revaluation reserve that relates to the property is transferred to the income statement in calculating the gain or loss on disposal. (ii) Major retrofitting or redevelopment Investment properties undergoing or awaiting major retrofitting or redevelopment are stated at fair value immediately prior to the commencement of retrofitting or redevelopment. The cost of the properties including the retrofitting or redevelopment expenditure is stated at cost less impairment losses. An impairment loss is recognised in the same way as a deficit on revaluation. Upon completion of major retrofitting or redevelopment, the amount is reclassified to investment properties. This will be stated at fair value on the basis stated in 2(f)(i) above. (iii) Properties under development Properties under development are stated at specifically identified cost less impairment losses. Cost of property under development includes borrowing costs and other related expenditure which are capitalised as and when activities that are necessary to get the asset ready for its intended use are in progress. An impairment loss is recognised in the same way as a deficit on revaluation. Upon completion of the development, the amount is reclassified to investment properties. This will be stated at fair value on the basis stated in 2(f)(i) above. FS-112

236 (g) Financial instruments (i) Non-derivative financial instruments Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, financial liabilities, and trade and other payables. Non-derivative financial instruments are recognised initially at fair value plus any directly attributable transaction costs, except for financial instruments that are measured at fair value through profit and loss. Subsequent to initial recognition, non-derivative financial instruments are measured as described below. A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group s contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset to another party without retaining control or transfers substantially all the risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e., the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group s obligations specified in the contract expire or are discharged or cancelled. 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 Group s cash management are included as a component of cash and cash equivalents for the purpose of the cash flow statement. Available-for-sale financial assets The Group s investments in equity securities and certain debt securities are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than for impairment losses, and foreign exchange gains and losses on available-for-sale monetary items (see note 2(c)), are recognised directly in equity. When an investment is derecognised, the cumulative gain or loss in equity is transferred to the income statement. Investments at fair value through profit or loss An instrument is classified as at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated as fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value. Upon initial recognition, attributable transaction costs are recognised in the income statement when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognised in the income statement. Other Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses. (ii) Derivative financial instruments and hedging activities The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss. FS-113

237 Derivatives are recognised initially at fair value; attributable transaction costs are recognised in the income statement when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below. Cash flow hedges Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised directly in equity to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are recognised in the income statement. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in equity remains there until the forecast transaction occurs. When the hedged item is a non-financial asset, the amount recognised in equity is transferred to the carrying amount of the asset when it is recognised. In other cases the amount recognised in equity is transferred to the income statement in the same period that the hedged item affects profit or loss. Fair value hedges Changes in the fair value of a derivative hedging instrument designated as a fair value hedge are recognised in the income statement. The hedged item is stated at fair value in respect of the risk being hedged, with any gain or loss being recognised in the income statement. Hedge of net investment in a foreign operation Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign operation are recognised in the Company s income statement. On consolidation, such differences are recognised directly in equity, in the foreign currency translation reserve, to the extent that the hedge is effective. To the extent that the hedge is ineffective, such differences are recognised in the income statement. When the hedged net investment is disposed off, the cumulative amount in equity is transferred to the income statement as an adjustment to the profit or loss on disposal. Economic hedges Hedge accounting is not applied to derivative instruments that economically hedge monetary assets and liabilities denominated in foreign currencies. Changes in the fair value of such derivatives are recognised in the income statement as part of foreign currency gains and losses. Separable embedded derivatives Changes in the fair value of separable embedded derivatives are recognised immediately in the income statement. (iii) Convertible bonds Convertible bonds that can be converted into share capital where the number of shares issued does not vary with changes in the fair value of the bonds are accounted for as compound financial instruments. The gross proceeds from the bond issue are allocated separately between the liability component which represents the implied fair value of the financial liability and equity component which represents the implied fair value of the conversion rights. (iv) Financial guarantees Financial guarantee contracts are classified as financial liabilities unless the Group or the Company has previously asserted explicitly that it regards such contracts as insurance contracts and accounted for them as such. Election is made contract by contract, and each election is irrevocable. FS-114

238 Financial guarantees classified as financial liabilities Financial guarantees are recognised initially at fair value. Subsequent to initial measurement, the financial guarantees are stated at the higher of the initial fair value less cumulative amortisation and the amount that would be recognised if they were accounted for as contingent liabilities. When financial guarantees are terminated before their original expiry date, the carrying amount of the financial guarantees is transferred to the income statement. Financial guarantees classified as insurance contracts Financial guarantees are accounted for as insurance contracts. Provision is recognised based on the Group or the Company s estimate of the ultimate cost of settling all claims incurred but unpaid at the balance sheet date. The provision is assessed by reviewing individual claims and tested for adequacy by comparing the amount recognised and the amount that would be required to settle the guarantee contract. (v) Impairment of financial assets A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. 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 original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its current fair value. Significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in the income statement. Any cumulative loss in respect of an available-for-sale financial asset recognised previously in equity is transferred to the income statement. 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 and available-for-sale financial assets that are debt securities, the reversal is recognised in the income statement. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity. (h) 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. (i) Development properties for sale Development properties for sale are stated at the lower of cost plus, where appropriate, a portion of the attributable profit, and estimated net realisable value, net of progress billings. Net realisable value represents the estimated selling price less costs to be incurred in selling the property. The cost of properties under development comprises specifically identified costs, including acquisition costs, development expenditure, borrowing costs and other related expenditure. Borrowing costs payable on loans funding a development property are also capitalised, on a specific identification basis, as part of the cost of the development property until the completion of development. FS-115

239 (j) Impairment of non-financial assets The carrying amounts of the Group s non-financial assets, other than investment property, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the assets recoverable amounts are estimated. For goodwill, recoverable amount is estimated at each reporting date, and as and when indicators of impairment are identified. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment losses are recognised in the income statement 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. 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. 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. (k) Employee benefits Short-term employee benefits All short-term employee benefits, including accumulated compensated absences, are recognised in the income statement in the period in which the employees render their services. 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. Defined contribution plans Contributions to post-employment benefits under defined contribution plans are recognised as an expense in the income statement as incurred. Long service leave Liabilities for other employee entitlements which are not expected to be paid or settled within 12 months of the balance sheet date are accrued in respect of all employees at the present value of the future amounts expected to be paid based on a projected weighted average increase in wage and salary rates. Expected future payments are discounted using interest rates on relevant government securities with terms to maturity that match, as closely as possible, the estimated future cash outflows. FS-116

240 Share-based payment (i) Share options The share option programme allows the Group employees to acquire shares of the Company. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity compensation reserve. 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 transaction costs are credited to share capital when the options are exercised. (ii) Performance shares An initial estimate is made for the cost of compensation under the Company s Performance Share Plan based on the number of shares expected to be awarded at the end of the performance period, valued at market price at the date of the grant of the award. The cost is charged to the income statement on a basis that fairly reflects the manner in which the benefits will accrue to the employee under the plan over the service period to which the performance criteria relate. At each reporting date, the compensation cost is remeasured based on the latest estimate of the number of shares that will be awarded based on non-market vesting conditions. Any increase or decrease in compensation cost over the previous estimate is recorded in that reporting period. The final measure of compensation cost is based on the number of shares ultimately awarded at the date the performance criteria are met. (l) Provision A provision is recognised when the Group has a legal or constructive obligation as a result of a past event that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. A provision for onerous contract is recognised when the expected benefits from a contract are lower than the unavoidable cost of meeting the obligation under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. (m) Leases 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 their fair value and the present value of the 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 the lease when the lease adjustment is confirmed. FS-117

241 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 income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease payments made. Contingent rentals are charged to the income statement in the accounting period in which they are incurred. When entities within the Group are lessors of an operating lease Assets leased out under operating leases are included in investment properties and are stated at revalued amounts and not depreciated. (n) Income tax expense Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. 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 following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly-controlled entities to the extent that they probably will not reverse in the foreseeable future. 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 at the reporting date. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences 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. (o) Revenue recognition Rental income Rental income receivable under operating leases is recognised in the income statement on a straight-line basis over the term of the lease, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. 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. Development properties for sale The Group recognises income on property development projects when the risks and rewards of ownership have been transferred to the buyer through either the transfer of legal title or an equitable interest in a property. In cases where the Group is obliged to perform any significant acts after the transfer of legal title or equitable interest, revenue is recognised as the acts are performed based on the percentage of completion method, which is an allowed alternative method under Recommended Accounting Practice 11 Pre-completion Contracts for the Sale of Development Property ( RAP 11 ) issued by the Institute of Certified Public Accountants of Singapore in October Under the percentage of completion method, profit is brought into the income statements only in respect of sales FS-118

242 procured and to the extent that such profit relates to the progress of construction work. The progress of construction work is measured by the proportion of the construction costs incurred to date to the estimated total construction costs for each project. Depending on the selling conditions associated with each development project, revenue is generally not recognised if the Group provides various guarantees and other financial support to the buyers ( continuing involvement ) during the period of property development. Such continuing involvement by the Group would then require revenue to be deferred until the Group s continuing involvement ceases. Financial advisory and management fee Financial advisory and management fee is recognised in the income statement as and when services are rendered. Dividends Dividend income is recognised on the date that the Group s right to receive payment is established. Interest income Interest income is recognised as it accrues, using the effective interest method. (p) Finance costs Borrowing costs are recognised in the income statement 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. (q) Segment reporting A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. Segment information is presented in respect of the Group s business and geographical segments and is based on the Group s internal reporting structure. The primary format, business segments, is based on the Group s principal activities. Inter-segment pricing is determined on an arm s length basis. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise interest expenses, borrowings and taxation. Segment capital expenditure is the total cost incurred during the period to acquire segment assets (property, plant and equipment and intangible assets) that are expected to be used for more than one period. (r) Non-current assets held for sale Non-current assets (or disposal groups comprising assets and liabilities) that are expected to be recovered primarily through sale rather than through continuing use are classified as held for sale. Immediately before classification as held for sale, the assets (or components of a disposal group) are remeasured in accordance with the Group s accounting policies. Thereafter the assets (or disposal groups) are generally measured at the lower of their carrying amount and fair value less cost to sell. Any impairment loss on a disposal group is first allocated to goodwill, and then to remaining assets and FS-119

243 liabilities on pro-rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets and investment property, which continue to be measured under different rules in accordance with the Group s accounting policies. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognised in the income statement. Gains are not recognised in excess of any cumulative impairment loss. (s) Discontinued operations A discontinued operation is a component of the Group s business that represents a separate major line of business or geographical area of operations that has been disposed off or is held for sale, or is a subsidiary acquired exclusively for resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative income statement is restated as if the operation had been discontinued from the start of the comparative period. FS-120

244 3 Property, Plant and Equipment FS-121 Freehold land Freehold buildings Leasehold land Leasehold hotel buildings Other leasehold buildings Assets under construction Plant, machinery and improvements Motor vehicles Furniture, fittings and equipment Total The Group Cost At 1 January , , , ,423 33,632 2, ,762 8, ,869 2,101,139 Translation differences (7,035) (7,041) 1,349 (6,551) 2,054 (40) (698) 39 (4,266) (22,189) Additions ,091 2,796 30, ,082 77,503 Assets acquired in business combinations ,050 15,638 Assets disposed in business combinations (195,858) (412,356) (81,372) (296,122) 409 (218) (188,135) (3,607) (350,992) (1,528,251) Disposals (22,864) (134,099) (36) (3,181) (1,013) (26,751) (187,944) Written off (438) (593) (524) (1,555) Reclassification (33) (336) (969) (3,032) 3,094 1,276 At 31 December ,709 44,722 24,040 35,743 2,431 83,927 5, , ,341 At 1 January ,709 44,722 24,040 35,743 2,431 83,927 5, , ,341 Translation differences (454) (1,721) (2,912) (3,179) (187) 2,433 2,656 (11,587) (14,951) Additions ,476 7, ,516 62,877 Assets acquired in business combinations 2, ,774 4,755 Assets disposed in business combinations (21,705) (1,470) (3,054) (26,229) Disposals (2,821) (86) (8,519) (546) (18,739) (30,711) Written off (504) (1,379) (7,840) (9,723) Reclassification (1,350) 1,350 At 31 December ,255 43,001 21,321 30,337 15,130 63,308 6, , ,359

245 FS-122 Freehold land Freehold buildings Leasehold land Leasehold hotel buildings Other leasehold buildings Assets under construction Plant, machinery and improvements Motor vehicles Furniture, fittings and equipment Total The Group Accumulated Depreciation At 1 January ,921 9,532 83,833 29, ,097 6, , ,515 Translation differences (415) (51) (612) 462 (152) 37 (2,185) (2,916) Depreciation charge for the year 6, ,632 1,029 16, ,198 71,781 Assets acquired in business combinations ,667 11,165 Assets disposed in business combinations (42,115) (10,545) (86,853) 409 (121,549) (3,485) (244,747) (508,885) Disposals (15,212) (36) (3,138) (827) (19,488) (38,701) Written off (457) (424) (202) (1,083) Reclassification (311) 311 (274) 275 (1) At 31 December ,876 30,863 42,808 3, , ,876 At 1 January ,876 30,863 42,808 3, , ,876 Translation differences (142) (601) (3,802) (3,763) Depreciation charge for the year 2,770 1,661 6, ,620 34,294 Assets acquired in business combinations Assets disposed in business combinations (1,583) (426) (66) (2,075) Disposals (1,845) (1,315) (346) (11,147) (14,653) Written off (1,354) (7,835) (9,189) Reclassification (443) 443 At 31 December ,504 30,078 46,116 3, , ,315

246 Freehold land Freehold buildings Leasehold land Leasehold hotel buildings Other leasehold buildings Assets under construction Plant, machinery and improvements Motor vehicles Furniture, fittings and equipment Total Carrying amount At 1 January , ,230 93, ,590 3,902 2,925 91,665 1, ,441 1,379,624 At 31 December ,709 41,846 24,040 4,880 2,431 41,119 1,366 75, ,465 At 1 January ,709 41,846 24,040 4,880 2,431 41,119 1,366 75, ,465 At 31 December ,255 37,497 21, ,130 17,192 3,227 77, ,044 At 31 December 2006, certain property, plant and equipment with carrying value totalling approximately $9.8 million (2005: $52.1 million) were mortgaged to banks to secure credit facilities for the Group (note 24). FS-123

247 Plant, machinery and improvements Furniture, fittings and equipment Motor vehicles Total The Company Cost At 1 January ,297 4, ,265 Additions Disposals/Written off (2) (71) (73) At 31 December ,380 4, ,090 At 1 January ,380 4, ,090 Additions ,007 Disposals/Written off (131) (131) At 31 December ,402 5, ,966 Accumulated Depreciation At 1 January ,114 3, ,832 Depreciation charge for the year Disposals/Written off (2) (71) (73) At 31 December ,201 3, ,502 At 1 January ,201 3, ,502 Depreciation charge for the year Disposals/Written off (117) (117) At 31 December ,290 4, ,205 Carrying amount At 1 January ,433 At 31 December , ,588 At 1 January , ,588 At 31 December , ,761 FS-124

248 4 Intangible Assets Goodwill on consolidation Other^ Total The Group Cost At 1 January ,556 8,606 76,162 Additions Disposal of subsidiaries (29,047) (4,517) (33,564) Translation differences (213) (452) (665) At 31 December ,296 4,333 42,629 At 1 January ,296 4,333 42,629 Additions 8 15,079 15,087 Disposal of subsidiaries (4,679) (4,679) Written off (1,007) (1,007) Translation differences (1,495) (37) (1,532) At 31 December ,130 18,368 50,498 Accumulated amortisation and impairment loss At 1 January ,181 5,055 13,236 Amortisation charge for the year Impairment loss Disposal of subsidiaries (3,783) (1,365) (5,148) Translation differences 232 (444) (212) At 31 December ,006 3,972 8,978 At 1 January ,006 3,972 8,978 Amortisation charge for the year Impairment loss 4,408 4,408 Written off (1,007) (1,007) Translation differences (950) (34) (984) At 31 December ,464 3,277 11,741 Carrying amount At 1 January ,375 3,551 62,926 At 31 December , ,651 At 1 January , ,651 At 31 December ,666 15,091 38,757 ^ Others comprised trademark, franchises, patents and licences. FS-125

249 Impairment testing for goodwill The Group s goodwill on consolidation has principally been allocated to the respective cash generating units ( CGU ) for the purpose of annual impairment test as described below. (a) Management Companies in Europe The recoverable amount of the management companies in Europe is determined using cash flow projections for the remaining terms of those management contracts, which range from 2 to 5 years (2005: 2 to 6 years). The cash flow projections represent the management fee income less related costs which the Group will earn and are based on past experience and expectations for these management companies in general. Cash flows are projected using the estimated growth rate of 4% (2005: 4%) per annum. The growth rate used is based on historical growth and past experience and does not exceed the currently estimated long term average growth rate for the business in which the CGU operates. A pre-tax discount rate of 7% (2005: 7%) has been applied to the cash flow projections. At 31 December 2006, the carrying value of goodwill on consolidation is approximately $23.7 million (2005: $23.9 million). The Group believes that any reasonably possible changes in the above key assumptions applied are not likely to materially cause the recoverable amount to be lower than its carrying amount. (b) Serviced Residences in Australia The recoverable amount of the serviced residences in Australia is determined using cash flow projections for the remaining lease terms of those leased properties, which range from 5 to 20 years (2005: 6 to 23 years). The cash flow projections represent the rental income less related costs which the Group will earn and are based on past experience and expectations for these serviced residences in general. Cash flows are projected using the estimated growth rate, which ranges from 2% to 3% (2005: 2% to 3%) per annum. The growth rate used is based on historical growth and past experience and does not exceed the currently estimated long term average growth rate for the business in which the CGU operates. A pre-tax discount rate of 12% (2005: 12%) has been applied to the cash flow projections. Based on the above assessment, an impairment loss of $4.4 million (2005: $0.4 million) was recognised in the financial year ended 31 December As at 31 December 2006, the carrying value of goodwill on consolidation is $Nil (2005: $4.7 million). 5 Investment Properties The Group Freehold investment properties, at valuation 1,129,907 1,190,550 Leasehold investment properties, at valuation 5,423,736 4,724,355 6,553,643 5,914,905 FS-126

250 (a) Investment properties are stated at directors valuation based on independent professional valuations carried out by the following valuers, on the basis of open market valuations: Valuers Valuation Date BI Appraisals Ltd (Hong Kong) December 2006 CB Richard Ellis September/October/December 2006 Colliers International October/December 2006 DTZ Debenham Tie Leung October/November/December 2006 Henry Butcher Malaysia Sdn Bhd December 2006 HVS International November 2006 Icade Expertise October 2006 Jones Lang LaSalle October/December 2006 Knight Frank June/December 2006 M3 Property June/September/October 2006 Savills Property Services (Shanghai) Company Ltd June/December 2006 Urbis JHD Valuations June 2006 VPC Alliance (JB) Sdn Bhd October 2006 (b) (c) (d) As at 31 December 2006, certain investment properties with carrying value totalling approximately $3,623.7 million (2005: $3,681.4 million) were mortgaged to banks to secure credit facilities for the Group (notes 24 and 25). Investment properties of the Group are held mainly for use by tenants under operating leases. Certain leases contain an initial non-cancellable period of up to 16 (2005: 15) years, with an option to renew at negotiated terms. The value of investment properties of the Group held under finance leases at 31 December 2006 was $58.3 million (2005: $61.6 million). 6 Properties Under Development The Group Cost 422, ,702 Less: Allowance for impairment losses (8,447) (9,698) 413, ,004 During the financial year, interest capitalised as cost of properties under development amounted to approximately $22.7 million (2005: $8.0 million). FS-127

251 7 Interests in Subsidiaries 2006 The Company 2005 (a) Unquoted shares, at cost 2,122,402 2,557,131 Less: Allowance for impairment losses (49,929) (46,837) Add: Amounts owing by subsidiaries: 2,072,473 2,510,294 Loan accounts (interest bearing) 823,277 1,275,371 Less: Allowance for doubtful receivables (12,107) 823,277 1,263,264 2,895,750 3,773,558 (b) The loans are unsecured and settlement is neither planned nor likely to occur in the foreseeable future. (c) Details of the subsidiaries are set out in note Associates (a) Interests in associates Note 2006 The Group 2005 Investment in associates 2,945,355 2,047,952 Amounts owing by associates: Loan accounts interest free 207, ,772 interest bearing 10, , , ,523 3,163,011 2,751,475 (b) Amounts owing by/(to) associates: Current accounts (unsecured) interest free (trade) 18,965 3,676 interest free (non-trade) 430,971 99,247 interest bearing (non-trade) 76,009 98, , ,092 Less: Allowance for doubtful receivables (29,977) (22,371) , ,721 FS-128

252 2006 The Group 2005 Note Current accounts (non-trade and unsecured) interest free (115,584) (73,980) interest bearing (900) 18 (116,484) (73,980) (c) (d) (e) Of the loan accounts, there are approximately $115.5 million (2005: $494.9 million) subordinated to the repayment of borrowings of certain associates. The loans to associates formed part of the Group s net investment in associates. These loans are unsecured and settlement is neither planned nor likely to occur in the foreseeable future. Current account receivables at 31 December 2006 included $362.3 million deferred payment from the Group s divestment of subsidiaries. These receivables were fully settled in January (f) Details of the associates are set out in note 43. (g) The financial information of the associates is as follows: The Group Balance sheet Total assets 14,654,556 11,735,245 Total liabilities 6,094,255 4,900,669 Income statement Revenue 1,456,664 1,019,865 Expenses (633,206) (820,086) Profit after taxation 823, ,779 (h) The Group s share of capital commitments of the associates is $188.2 million (2005: $34.9 million). 9 Jointly-Controlled Entities (a) Interests in jointly-controlled entities The Group Investment in jointly-controlled entities 867, ,349 Amounts owing by jointly-controlled entities: Loan accounts interest free 27, ,416 interest bearing 703, , , ,589 1,599,762 1,178,938 FS-129

253 (b) Amounts owing by/(to) jointly-controlled entities: Note 2006 The Group 2005 Current accounts (non-trade and unsecured) interest free 339,092 68,884 interest bearing 147, , , ,697 interest free 18 (20,437) (49,000) (c) (d) Loan accounts included an amount of approximately $660.0 million (2005: $414.5 million) which is subordinated to the repayment of borrowings of certain jointly-controlled entities. The loans to jointly-controlled entities form part of the Group s net investment in jointly-controlled entities. These loans are unsecured and settlement is neither planned nor likely to occur in the foreseeable future. (e) Details of the jointly-controlled entities are set out in note 44. (f) The Group s share of the jointly-controlled entities results, assets and liabilities are as follows: The Group Balance sheet Investment properties 1,209,954 1,206,937 Properties under development 1,268, ,193 Other non-current assets 88,491 67,249 2,567,059 1,583,379 Current assets 1,705, ,169 Less: Current liabilities (439,310) (135,576) Net current assets 1,265, ,593 3,832,887 1,944,972 Less: Non-current liabilities (1,767,153) (619,337) 2,065,734 1,325,635 Income statement Revenue 329, ,611 Expenses (176,448) (88,982) Profit before taxation 152,976 30,629 Taxation (13,824) (16,336) Profit after taxation 139,152 14,293 (g) The Group s share of the capital commitments of the jointly-controlled entities is $364.9 million (2005: $89.9 million). FS-130

254 10 Financial Assets (a) (b) Non-current financial assets 2006 The Group 2005 Equity securities available-for-sale 327, ,253 Current financial assets Equity securities held for trading 72, Other Non-Current Assets The Group The Company Club memberships Derivative assets 1,047 1,157 Loans to staff (interest free) Amounts owing by investee companies: interest free 79 interest bearing 2,087 Amounts owing by third parties: interest free 3,211 4,257 5,011 8, The balances with third parties are unsecured and have no fixed terms of repayment. However, the management of the parties involved do not intend for the amounts to be repaid within the next 12 months. 12 Development Properties for Sale 2006 The Group 2005 (a) Properties in the course of development, at cost 4,398,650 3,934,600 Less: Allowance for foreseeable losses (251,533) (310,776) 4,147,117 3,623,824 Add: Attributable profit 401, ,756 4,549,015 3,738,580 Less: Progress billings (1,284,346) (502,089) 3,264,669 3,236,491 FS-131

255 2006 The Group 2005 (b) Completed units, at cost 366, ,374 Less: Allowance for foreseeable losses (8,881) (36,371) 357, ,003 3,622,665 3,542,494 (c) During the financial year, there were the following interest and securitisation costs capitalised as cost of development properties for sale: The Group Note Interest and securitisation costs paid and payable 32(f) 82,332 65,077 Less: Interest received and receivable from fixed deposit project accounts 32(a) (3,380) (1,911) 78,952 63,166 (d) (e) As at 31 December 2006, certain development properties for sale amounting to approximately $1,912.4 million (2005: $1,917.6 million) were mortgaged to banks to secure credit facilities of the Group (note 24). As at 31 December 2006, certain properties in Australia amounting to approximately A$122.6 million (2005: A$104.6 million), equivalent to $147.3 million (2005: $130.6 million), were acquired through unconditional exchange contracts with various land vendors. The related amount owing to land vendors is secured over the title of the properties being purchased (notes 20 and 22). (f) As at 31 December 2006, there were certain development properties for sale amounting to $431.1 million (2005: $223.2 million) whose future receivables were sold to third parties. As part of the arrangement of the sale, the Group has provided a fixed and floating charge over assets relating to the projects (including the land on which the projects are being built and the unsold units) to the third parties (note 22). (g) If the Group had adopted the completion of construction method, the effects on the financial statements for the financial year ended 31 December 2006 would have been as follows: The Group Increased/(Decreased) by Revenue (193,750) 680,269 Profit attributable to the equity holders of the Company (41,711) 69,999 Accumulated profits as at 1 January (42,845) (112,844) Development properties for sale as at 1 January 180, ,580 Development properties for sale as at 31 December 238, ,035 FS-132

256 13 Trade and Other Receivables The Group The Company Note Trade receivables , , Accrued receivables 15 39,551 66,962 Derivative assets 28,836 3,274 Deposits, prepayments and other receivables , ,541 1,595 20,224 Amounts owing by: associates 8 495, ,721 jointly-controlled entities 9 486, ,697 investee companies: interest free 11,064 interest bearing 192 related corporations 23 1,542,616 1,080,498 minority interests (unsecured and interest free) 144, ,828 2,024,538 1,417,790 1,544,600 1,101,118 As at 31 December 2006, certain trade receivables and other receivables amounting to approximately $87.1 million (2005: $67.5 million) and $221.7 million (2005: $186.7 million) respectively were mortgaged to banks to secure credit facilities of the Group (note 24). 14 Trade Receivables 2006 The Group The Company Trade receivables 229, , Less: Allowance for doubtful receivables (7,490) (8,379) , , Trade receivables balances denominated in currencies other than the Company s functional currency comprised $91.4 million (2005: $72.2 million) of balances denominated in Australia dollars and $41.2 million (2005: $32.9 million) denominated in other foreign currencies. 15 Accrued Receivables In accordance with the Group s accounting policy, income is recognised on the progress of the construction work for certain development properties for sale. Upon receipt of Temporary Occupation Permit, the balance of sales consideration to be billed is included as accrued receivables. FS-133

257 16 Deposits, Prepayments and Other Receivables 2006 The Group The Company 2005 Deposits 68, , Prepayments 27,883 51, Other receivables 444, ,440 1, Less: Allowance for doubtful receivables (18,658) (18,991) 425, ,449 1, Tax recoverables 73,390 81,096 19, , ,541 1,595 20,224 As at 31 December 2006, deposits included an amount of $28.0 million (2005: $184.0 million) in relation to the acquisition of new investments. Other receivables as at 31 December 2006 included an amount of A$150.5 million (2005: A$Nil), equivalent to $180.9 million (2005: $Nil), receivable from the sales of investment properties. Other receivables also included staff loans, interest receivables, deferred sales consideration and other recoverables. 17 Cash and Cash Equivalents 2006 The Group The Company 2005 Amounts held under Project Account Rules 1997 Ed withdrawals from which are restricted to payments for expenditure incurred on development projects 30,557 40,819 Fixed deposits 2,238,069 1,772,840 1,476, ,644 Cash at banks and in hand 416, , ,684,851 2,111,277 1,477, ,736 Bank overdrafts (secured) (6,262) Cash and cash equivalents in the cash flow statement 2,684,851 2,105,015 1,477, ,736 (a) (b) Amounts held under Project Account Rules 1997 Ed of $Nil (2005: $0.1 million) were pledged as securities for term loans (note 24). As at 31 December 2006, there was a charge over all monies from time to time standing to the credit of the project accounts amounting to $1.4 million (2005: $10.7 million) in respect of certain development properties for sale whose future receivables were sold (note 22). FS-134

258 18 Trade and Other Payables The Group The Company Note Trade payables 144,962 91, Accrued development expenditure 449, ,087 Accrued purchase of investments 125,224 Accruals , ,391 16,047 50,204 Other payables , ,581 13, Rental and other deposits 59, , Contract work-in-progress 21 4,186 1,780 Derivative liabilities 7,702 6,387 Provisions 22(a) 9,545 20,736 Liability for employee benefits 28 32,903 16,787 21,990 1,524 Amounts owing to: associates 8 116,484 73,980 jointly-controlled entities 9 20,437 49,000 related corporations , ,924 minority interests (unsecured): interest free 81, ,353 interest bearing 71,510 67,341 Proceeds from sale of future receivables 22(b) 199,974 1,862,377 2,005, , ,882 Trade payables balances denominated in currencies other than the Company s functional currency comprised $33.3 million (2005: $11.5 million) of balances denominated in Australia dollars, $22.3 million (2005: $19.3 million) of balances denominated in Euros and $29.7 million (2005: $13.9 million) denominated in other foreign currencies. 19 Accruals Accruals included accrued interest payable, accrued property, plant and equipment expenditure and accrued administrative expenses. 20 Other Payables Other payables included the following: (a) (b) A$104.2 million (2005: A$46.8 million), equivalent to $125.2 million (2005: $58.4 million), owing to land vendors from certain unconditional contracts which the Group has concluded with them to purchase properties for future developments. The total acquisition cost of the properties has been included in development properties for sale and the amount payable is secured over the relevant development properties; and retention sums and amounts payable in connection with capital expenditure incurred. FS-135

259 21 Contract Work-in-Progress The Group Cost incurred and provided for 181, ,493 Less: Progress payments received and receivable (185,920) (209,273) Progress billings in excess of work-in-progress (4,186) (1,780) 22 Other Non-Current Liabilities The Group The Company Note Amounts owing to related corporations ,000 Amounts owing to minority interests (unsecured) interest free 69,659 5,205 interest bearing 46,199 38,026 Liability for employee benefits 28 27,385 8,150 23,400 2,597 Derivative liabilities 6,684 2,339 Customer deposits and other non-current payables 40,391 80,687 Provisions 22(a) 7,700 Proceeds from sale of future receivables 22(b) 382, , ,107 23, ,597 The other non-current payables included an amount of A$18.4 million (2005: A$57.8 million), equivalent to $22.1 million (2005: $72.2 million), owing to land vendors on terms similar to those described in note 20(a). The amounts owing to minority interests are not expected to be repaid within the next 12 months. (a) Movements in provisions for income support are as follows: The Group Note At 1 January 28,436 44,572 Provision (written back)/made during the year (9,651) 177 Provision utilised during the year (9,240) (16,313) At 31 December 9,545 28,436 Current 18 9,545 20,736 Non-current 7,700 9,545 28,436 The provisions for income support were made in conjunction with the sale of equity interests in subsidiaries with stakes in investment properties in Under the sale and purchase agreements, the Group is obligated to compensate the buyer for any shortfall in earnings over a period of 5 to 8 years from FS-136

260 (b) These related to the sale of future receivables in respect of certain residential projects in Singapore. The Group Note Current ,974 Non-current 382, , ,974 The terms of the arrangement for the sale of future receivables included: (i) a fixed and floating charge over assets of the subsidiaries undertaking the projects (note 12); (ii) (iii) (iv) a charge over all monies from time to time standing to the credit of the related project accounts (note 17); an assignment of all the subsidiaries present and future rights, title to and interest in, and all benefits accrued and accruing to the subsidiaries under the contracts for sale entered into with buyers of units of the projects which form the pool of sold future receivables; and an assignment on all the subsidiaries present and future rights, title to and interest in: (a) (b) all contracts and agreements entered into by the subsidiaries with consultants and contractors and all construction guarantees issued in favour of the subsidiaries; and all the policies and contracts of insurance taken out by the subsidiaries. 23 Amounts Owing by/(to) Related Corporations 2006 The Company 2005 Note Current Amounts owing by: Subsidiaries: current accounts, mainly non-trade and interest bearing 37,097 39,830 current loan: interest free 190, interest bearing 1,315,355 1,040,668 1,506,128 1,041,384 Less: Allowance for doubtful receivables (609) (716) 1,505,519 1,040, ,542,616 1,080,498 Amounts owing (to): Subsidiaries: current accounts, mainly non-trade and interest bearing (773) (503) current loan: interest free (112,297) (112,302) interest bearing (307,340) (42,119) 18 (420,410) (154,924) FS-137

261 2006 The Company 2005 Note Non-current Amounts owing (to): Subsidiaries: loan accounts (interest bearing) 22 (147,000) All balances with related corporations are unsecured and repayable on demand. 24 Bank Borrowings 2006 The Group The Company 2005 Bank borrowings secured 2,088,030 1,841,036 unsecured 3,354,487 2,805, , ,235 5,442,517 4,646, , ,235 Repayable: within 1 year 1,523,160 1,699, , ,235 after 1 year 3,919,357 2,946,266 5,442,517 4,646, , ,235 (i) Secured bank borrowings The Group Within 1 year 240, ,885 From 1 to 2 years 1,006,887 1,005,681 From 2 to 5 years 499, ,918 After 5 years 340, ,552 After 1 year 1,847,099 1,706,151 2,088,030 1,841,036 Details of the secured term loans as at 31 December 2006 are as follows: (a) A subsidiary, Australand Holdings Limited ( Australand ), maintains a syndicated multi-option facility (including performance bank guarantee facility) of A$600.0 million (2005: A$600.0 million), equivalent to $721.1 million (2005: $749.0 million), which is a two-year evergreen facility subject to review annually in March. The facility is secured by fixed and floating charges over the assets of Australand. FS-138

262 (b) Other term loans are generally secured by: mortgages on the borrowing subsidiaries property, plant and equipment, investment properties, properties under development, development properties for sale and trade receivables; pledge of shares of subsidiaries; and assignment of all rights, titles and benefits with respect to the properties. (ii) Unsecured bank borrowings These comprise loans repayable: 2006 The Group The Company 2005 Within 1 year 1,282,229 1,565, , ,235 From 1 to 2 years 64, ,640 From 2 to 5 years 1,670, ,679 After 5 years 337, ,796 After 1 year 2,072,258 1,240,115 3,354,487 2,805, , , Debt Securities Debt securities comprise fixed rate notes, floating rate notes, hybrid rate notes and bonds issued by the Group and the Company The Group The Company 2005 Convertible bonds (unsecured) 370, ,679 Notes issued 2,920,598 2,633, , ,500 Less: Notes purchased (but not cancelled) (652,245) (674,591) (363,000) (338,500) Notes outstanding 2,268,353 1,959, , ,000 2,639,032 1,959, , ,000 Secured notes 998, ,500 Unsecured notes/bonds 1,640,962 1,149, , ,000 2,639,032 1,959, , ,000 Repayable: Within 1 year 270, ,633 34, ,500 From 1 to 2 years 440,000 45,500 91,000 34,500 From 2 to 5 years 1,508,399 1,086,548 91,000 After 5 years 420, , ,679 After 1 year 2,368,802 1,281, , ,500 2,639,032 1,959, , ,000 FS-139

263 (a) Convertible bonds (unsecured) The Group and The Company Note Convertible bonds, at amortised cost 428,537 Less: Bond discount At 1 January (4,823) Additions (58,910) Amount utilised upon the conversion 752 Amortisation 32(f) 1,052 4,071 At 31 December (57,858) 370,679 The Company issued $430.0 million principal amount of Convertible Bonds (the Bonds ) due 2016 which carry interest rate at 2.10% per annum. The Bonds are convertible by holders into new ordinary shares in the capital of the Company at the conversion price of $ at any time on or after 26 December 2006 and prior to the close of business (at the place the Convertible Bonds are deposited for conversion) on 5 November The Bonds may be redeemed, in whole or in part, at the option of the issuer at any time on or after 15 November 2011 and not less than seven business days prior to 15 November 2016 (subject to satisfaction of certain conditions). Unless previously redeemed by way of exercise of the option by the holder on 15 November 2013 or by the Company at any time on or after 15 November 2013, the final redemption date of the Convertible Bonds is 15 November The redemption price is equal to the principal amount of the Convertible Bonds being redeemed. (b) Secured debt securities (i) A subsidiary, Australand, issued Commercial Mortgage-backed Securities ( CMBS ) amounting to A$680.5 million (2005: A$413.0 million), equivalent to $817.8 million (2005: $515.5 million), maturing on 25 June 2009 and 10 March These notes are secured by a first ranking real property mortgage over specific investment properties of Australand and by a fixed and floating charge over some of the assets of Australand. (ii) Australand has also issued Unrated Floating Rate Notes amounting to A$150.0 million (2005: A$235.5 million), equivalent to $180.3 million (2005: $294.0 million), maturing on 25 June 2009 and 10 March These notes are fully secured by a first ranking real property mortgage over specific investment properties of Australand and by a fixed and floating charge over some of the assets of Australand. (c) Unsecured debt securities The holders of some of the above debt securities have the option to have all or any of their notes purchased by the Group at their principal amounts on interest payment dates. Unless previously redeemed or purchased and cancelled, the debt securities are redeemable at the principal amounts on their respective maturity dates. FS-140

264 26 Finance Leases The Group had obligations under finance leases that are repayable as follows: The Group Principal Interest Payments 2006 Repayable: Within 1 year 3,594 2,163 5,757 From 1 year to 5 years 15,783 6,720 22,503 After 5 years 28,902 4,481 33,383 After 1 year 44,685 11,201 55,886 48,279 13,364 61, Repayable: Within 1 year 3,448 1,796 5,244 From 1 year to 5 years 15,597 5,719 21,316 After 5 years 33,086 4,435 37,521 After 1 year 48,683 10,154 58,837 52,131 11,950 64, Deferred Income Deferred income represents mainly unrealised profits on project management services rendered to a jointly-controlled entity. 28 Employee Benefits Note 2006 The Group The Company 2005 Liability for short term accumulating compensated absences 8,970 9, Liability for long service leave entitlement 3,985 3,932 Liability for retirement gratuity 2,096 1,621 Liability for staff incentive 45,237 9,536 45,237 3,895 60,288 24,937 45,390 4,121 Current 18 32,903 16,787 21,990 1,524 Non-current 22 27,385 8,150 23,400 2,597 60,288 24,937 45,390 4,121 FS-141

265 (a) Long service leave This liability relates principally to provision made by a foreign subsidiary in relation to employees leave entitlement granted after certain qualifying periods based on duration of employees services rendered. (b) Retirement gratuity A subsidiary of the Group operates an unfunded, defined benefit Retirement Gratuity Scheme for its senior executives. Benefit is payable based on the last drawn salary of the executive and the number of years of service with the Group, including those with certain predecessor corporations. The provision for Retirement Gratuity Scheme as at 31 December 2006, comprises present value of obligations under the scheme of $2,096,000 (2005: $1,621,000). (c) Staff incentive This relates to staff incentive payable which is connected with the Group s financial performance achieved over a period of time. (d) Equity compensation benefits The Share Option Plan, the Performance Share Plan and the Restricted Stock Plan (collectively referred to as the Share Plans ) of the Company were approved and adopted by its members at an Extraordinary General Meeting held on 16 November The Share Plans are administered by the Company s Executive Resource and Compensation Committee ( Committee ) comprising Mr Lim Chin Beng, Mr Hsuan Owyang and Mr Peter Seah Lim Huat. Share Option Plan Statutory information regarding the Share Option Plan are set out below: (i) The exercise price of the options is set either at: A price equal to the volume-weighted average price on the SGX-ST over the three consecutive trading days immediately preceding the grant of the option ( Market Price ), or such higher price as may be determined by the Committee in its absolute discretion; or A discount not exceeding 20% of the Market Price in respect of that option. (ii) (iii) The options vest between 1 year to 4 years from the grant date. The options granted expire after 5 or 10 years from the dates of the grant. Movements in the number of share options and their related weighted average exercise prices are as follows: Weighted average exercise price No. of options Weighted average exercise price No. of options 2006 $ 2006 ( 000) 2005 $ 2005 ( 000) At 1 January , ,944 Granted , ,867 Forfeited/Expired 2.44 (3,188) 1.61 (5,805) Exercised 1.56 (25,397) 1.47 (33,887)* At 31 December , ,119 Exercisable on 31 December , ,646 * This included share options granted to staff of PREMAS International Limited and certain staff of Raffles Holdings Limited which were fully vested upon the divestments of PREMAS International and hotel business by the Company. FS-142

266 Options exercised in 2006 resulted in 25,397,307 (2005: 33,886,913) shares being issued at a weighted average market price of $4.72 (2005: $2.67) each. Options were exercised on a regular basis throughout the year. The weighted average share price during the year was $4.67 (2005: $2.78). Share options outstanding at the end of the year are summarised below: Weighted average contractual life Weighted average contractual life Range of Exercise Price Options outstanding 2006 Options outstanding 2005 Prior to Modification Post Modification* ( 000) ( 000) $1.00 to $1.14 $0.87 to $1.01 6, , $1.15 to $1.20 $1.02 to $1.07 9, , $1.21 to $1.79 $1.08 to $1.66 2, , $1.80 to $2.34 $1.67 to $2.00 4, , $2.35 to $2.88 $2.01 to $ , , $2.75 to $ , ,755 64,119 * The Company paid a special dividend of $0.01 and $0.12 on 25 May 2005 and 26 May 2006 respectively. Correspondingly, the exercise prices of the outstanding options granted under the Share Option Plan were modified to compensate for the decline in values of the said options. Of the outstanding options as at 31 December 2006, there were 6,712,050 (2005: 7,393,120) options held by the directors of the Company. This included 4,329,000 (2005: 4,181,000) options held by Mr Liew Mun Leong, the President and Chief Executive Officer of the Company. The fair value of services received in return for stock options granted are measured by reference to the fair value of stock options granted. The estimate of the fair value of the services received is measured based on Enhanced Trinomial (Hull and White) valuation model. The fair values of share options and assumptions are set out below: Year of grant of options Weighted average fair value of share options and assumptions Fair value at measurement date $0.26 $0.51 $0.60 $0.95 Share price based on volume-weighted average share price for 3 consecutive trading days prior to grant date $1.03 $1.74 $2.46 $4.03 Exercise price at grant date $1.03 $1.74 $2.46 $4.03 Expected volatility calculated based on 36 months adjusted closing price prior to the specific grant date 42.13% 38.47% 27.62% 23.34% Risk-free interest rate based on 5/10 years zerocoupon Singapore Government bond yield on grant date for option with 5/10 years contractual life 2.41% 3.54% 3.14% 3.48% Expected dividend yield based on expected dividend over 1-year volume-weighted average share price prior to grant date 3.51% 3.54% 2.67% 1.99% Post-vesting forfeiture rate representing resignation after vesting period 1.87% 1.85% 1.87% 1.90% Pre-vesting forfeiture rate representing resignation prior to vesting period 5.62% 5.54% 5.62% 5.69% Exercise multiple which is the expected ratio of share price to exercise price based on assumed employee early exercise behaviour FS-143

267 The share price is based on volume-weighted average share price for 3 consecutive trading days prior to the grant date. The expected volatility is based on the historic volatility and calculated based on 36 months prior to the date of grant. The Company uses 10 (or 5) years risk-free rate for options with a 10 (or 5) years contractual term. Expected dividend yield is based on expected dividend payout over the 1-year volume-weighted average share price prior to the grant date. Pre-vesting forfeiture rates and post-vesting forfeiture rates are based on historical option forfeiture and employee turnover rates. Exercise multiple is estimated based on historical employee exercise behaviour. The Modification Exercise in the Share Option Plan The Company paid a special dividend of $0.01 and $0.12 per issued ordinary share in respect of the financial year ended 31 December 2004 and 31 December 2005 respectively. In accordance with the Company s Share Option Plan, when the Company declares a special dividend (whether in cash or in specie), the Committee may as it deems appropriate determine whether the number of shares which are the subject of an award to the extent not yet vested shall be adjusted. Any adjustment under this rule should be made in a way that a share option holder will not receive a benefit that a shareholder does not receive and has been confirmed in writing by the auditors to be in their opinion, fair and reasonable. On 9 May 2006, adjustments to the terms of the unexercised share options were made (based on the respective ex-dividend dates, 6 May 2005 and 9 May 2006, and hereby also known as modification dates ) in a manner such that the share option holders will maintain parity of fair value before and on the modification date using the Equivalent Economic Value concept. The fair value of options was calculated using the Enhanced Trinomial (Hull and White) valuation model. Exercise price of the unexercised share options were adjusted lower ranging between $0.13 and $0.26 per share option to reflect the special dividend paid. No adjustments were made to the vesting and exercise periods of the share options. No incremental fair value of options was recognised as a result of the modification exercise and the significant inputs into the Enhanced Trinomial (Hull and White) valuation model were: Share price of $2.46 and $5.04, based on volume-weighted average share price for 3 consecutive trading days prior to the modification dates; The volatility measured at the standard deviation of expected share price returns of 26.20% and 22.35%, based on 36 months closing share price prior to the modification dates; Option life ranging from 0.1 year to 9.9 years; Risk-free interest rate ranging from 1.98% to 3.49% per annum that matches the remaining life of the option. This is based on the zero-coupon Singapore Government bond yield on modification dates for options with matching tenure contractual life; Early exercise multiple of 1.4, which is the expected ratio of share price to exercise price based on assumed employee early exercise behaviour; Dividend yield of 1.96% and 1.84%, based on expected dividend over 1-year volume-weighted average share price prior to the modification dates; and Post-vesting forfeiture rate representing resignation after vesting period of 2% for Group executives and parent group and 0% for non-executive directors. Performance shares This relates to compensation costs of the Company s Performance Share Plan reflecting the benefits accruing to the employees over the service period to which the performance criteria relate. FS-144

268 Performance shares outstanding at the end of the year are summarised below: Year of Award 2006 ( 000) 2005 ( 000) At 1 January 7,994 6,836 Granted 3,735 2,975 Forfeited/Cancelled (501) (282) Additional shares granted arising from modification* 303 Released** (2,527) (1,535) At 31 December 9,004 7,994 * The Company paid a special dividend of $0.01 and $0.12 on 25 May 2005 and 26 May 2006 respectively. Correspondingly, the number of performance shares granted under the Performance Share Plan was modified to compensate for the decline in fair values of the said performance shares. ** The release of 2,527,200 (2005: 1,817,400) Conditional Awards during the financial year resulted in 3,446,000 (2005: 1,535,000) shares being issued, of which 656,000 (2005: 246,000) shares were issued to Mr Liew Mun Leong, the President and Chief Executive Officer of the Company. The fair values of the performance shares are determined using Monte Carlo simulation method at the measurement date which projects future share price assuming log normal distribution based on Geometric Brownian Motion Theory. The fair value and assumptions are set out below: Year of Award Weighted average fair value of performance shares and assumptions Weighted average fair value at measurement date $0.84 $0.25 $2.53 $4.71 Expected volatility based on 36 months closing share price prior to grant date 37.80% 37.80% 27.88% 26.52% MSCI AC Asia Pacific Free ex-japan Industrial Index annualised volatility based on 36 months prior to grant date 20.14% 20.14% 16.00% 14.48% Share price at grant date $1.46 $1.46 $2.41 $4.10 Risk-free interest rate equal to the implied yield on zero-coupon Singapore Government Sovereign with a term equal to the length of performance period 1.68% 1.68% 2.10% 3.02% Expected dividend yield of over 12 months volumeweighted share price prior to the grant date 3.22% 3.22% 2.38% 2.00% Correlation of return between MSCI AC Asia Pacific Free ex-japan Industrial Index and the Company s share price measured over 36 months prior to the grant date 64.20% 64.20% 55.86% 47.96% The Modification Exercise in the Performance Share Plan The Company paid a special dividend of $0.01 and $0.12 per issued ordinary share in respect of the financial year ended 31 December 2004 and 31 December 2005 respectively. In accordance with the Company s Performance Share Plan Rules, when the Company declares a special dividend (whether in cash or in specie), the Committee may as it deems appropriate determine whether the number of shares which are the subject of an award to the extent not yet vested shall be adjusted. Any adjustment under this rule should be made in a way that a Performance Share Plan participant will not receive a benefit that a shareholder does not receive and has been confirmed in writing by the auditors to be in their opinion, fair and reasonable. FS-145

269 On 9 May 2006, adjustments to the terms of the unvested performance shares were made (based on the respective ex-dividend dates, 6 May 2005 and 9 May 2006, and hereby also known as modification dates ) in a manner such that the Performance Share Plan participants will maintain parity of fair value before and on the modification date using the Equivalent Economic Value concept. The fair value of performance shares was calculated using the Monte Carlo simulation model. The number of performance shares was adjusted to reflect the special dividend paid. The adjustments resulted in additional conditional awards of 303,322 performance shares during the financial year ended 31 December No incremental fair value of performance shares was recognised as the result of the modification exercise and the significant inputs into the Monte Carlo simulation model were: Share price of $2.46 and $5.04, based on volume-weighted average share price for 3 consecutive trading days prior to the modification dates; The volatility measured at the standard deviation of expected share price returns of 26.20% and 22.35%, based on 36 months closing share price prior to the modification dates; The MSCI AC Asia Pacific Free ex-japan Industrial Index annualised volatility based on 36 months prior to the modification dates of 16.86% and 14.00%; Correlation of return between MSCI AC Asia Pacific Free ex-japan Industrial Index and the Company s share price measured over 36 months prior to the modification dates of 55.20% and 41.80%; Risk-free interest rate ranging from 2.04% to 3.05% per annum that matches the remaining life of the award. This is based on the zero-coupon Singapore Government bond yield on modification dates for options with matching tenure contractual life; and Dividend yield of 1.96% and 1.84%, based on expected dividend over 1-year volume-weighted average share price prior to the modification dates. 29 Share Capital The Group and The Company Issued and fully paid: 2006 No. of shares ( 000) 2005 No. of shares ( 000) At 1 January 2,750,503 2,524,795 Exercise of share options 25,397 33,887 Issue of performance shares 3,446 1,535 Conversion of convertible bonds 190,286 At 31 December 2,779,346 2,750,503 On the date of commencement of the Companies (Amendment) Act 2005 on 30 January 2006: (a) (b) (c) the concept of authorised share capital was abolished; shares of the Company ceased to have par value; and the amount of standing to the credit of the Company s share premium account and capital redemption reserve became part of the Company s share capital. 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 regards to the Company s residual assets. FS-146

270 At the end of the financial year, there were 57,754,808 share options (2005: 64,118,788) and a maximum of 18,007,602 performance shares (2005: 15,988,600) relating to the Company s Share Option Plan and Performance Share Plan for unissued Ordinary Shares of the Company, details of which are disclosed in note 28(c) and (d). There were also $430 million Convertible Bonds due 2016 which are convertible by holders into 58,794,574 new Ordinary Shares in the capital of the Company at the conversion price of $ for each new Ordinary Shares (subject to adjustments in certain events) (note 25 (a)). 30 Reserves 2006 The Group The Company 2005 Share premium 2,780,247 1,512,015 Revaluation reserve 289, ,921 Accumulated profits 1,348, , , ,225 Other reserves: Capital reserve 1,372,224 59,038 41,831 Equity compensation reserve 46,220 24,534 24,330 19,441 Hedging reserve 6,129 (595) Available-for-sale reserve 111,328 86,331 Capital redemption reserve 3, Foreign currency translation reserve (77,861) (22,840) 1,458, ,600 66,161 19,754 3,095,239 3,907, ,514 1,942,994 The capital reserve comprises mainly capital gains on disposal of properties, share of associates capital reserve, the value of the option granted to bondholders to convert their convertible bonds into ordinary shares of the Company and the share premium of a subsidiary previously acquired and accounted for under the pooling of interest method. Transaction cost of $5.3 million (2005: $Nil) incurred in relation to the issuance of convertible bonds was capitalised in capital reserves during the year. The equity compensation reserve comprises the cumulative value of employee services received for the issue of the share options and performance shares. The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging instruments related to hedged transactions that have not yet occurred. The available-for-sale reserve comprises the cumulative net change in the fair value of available-for-sale investment until the investment is derecognised. The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign entities, as well as from the translation of foreign currency loans used to hedge the Group s net investments in foreign entities. FS-147

271 31 Revenue Revenue of the Group and of the Company is analysed as follows: Continuing operations: 2006 The Group The Company 2005 Trading of properties 2,159,743 2,923,966 Rental and related income 306, ,050 Fee income 210, ,761 36,459 29,266 Serviced residence rental and related income 434, ,791 Dividend income from subsidiaries 327, ,764 Others 36, ,069 3,147,725 3,845, , ,030 Discontinued operations 458,171 3,147,725 4,303, , , Profit Before Taxation Profit before taxation (continuing and discontinued operations) includes the following: Note 2006 The Group The Company 2005 (a) Other operating income Interest income fixed deposits 81,772 39,721 20,689 12,463 subsidiaries 85,837 81,504 associates and jointlycontrolled entities 54,134 59,353 investee companies and others 13,814 10,936 interest capitalised in development properties for sale 12(c) (3,380) (1,911) 146, , ,526 93,967 Dividend income from investments 19,711 6,863 Mark-to-market gain on financial assets held for trading 7,745 21,583 Gain on disposal/dilution/ liquidation of subsidiaries and associates 128, , Gain/(Loss) on disposal of financial assets 18,899 (2,101) Gain on foreign exchange 28,054 9, Gain on disposal of investment properties 222,094 13,141 FS-148

272 Note 2006 The Group The Company 2005 (b) Staff costs Wages and salaries 335, ,987 26,219 31,812 Contributions to defined contribution plans 37,432 35, ,003 Share-based expenses 24,758 19,374 6,349 12,799 Increase/(Decrease) in liability for short term accumulating compensated absences (72) 193 Increase in liability for retirement gratuity Increase in liability for long service leave entitlement Staff benefits, training/ development costs and others 42,305 72,759 1,615 1, , ,340 35,034 46,947 Less: Staff costs capitalised in development properties for sale (49,137) (57,760) 391, ,580 35,034 46,947 (c) (i) Cost of sales Write back of foreseeable losses on development properties for sale (54,532) (36,805) Operating lease expenses 62,857 64,669 (ii) Administrative expenses Allowance for/(write back of) doubtful receivables 11,123 (4,823) (12,376) (18,076) Amortisation of intangible assets Auditors remuneration: auditors of the Company 1,916 1, other auditors 3,198 3,859 Non-audit fees: auditors of the Company other auditors 1,173 1,432 Depreciation of property, plant and equipment 34,294 71, Impairment loss made on intangible assets 4, Negative goodwill on acquisition (77,000) (820) Operating lease expenses 15,663 43,731 1,586 1,335 FS-149

273 (iii) Other operating expenses Impairment/(Write back of allowance) of: Note 2006 The Group The Company 2005 current financial assets (681) non-current financial assets 1,670 4,130 Mark-to-market loss/(gain) on derivative instruments 8,987 (8,553) Loss/(Gain) on disposal of property, plant and equipment 2,266 (24,126) Property, plant and equipment written off (Write back of)/provision for income support 22(a) (9,651) 177 Impairment of/(write back of impairment loss for) subsidiaries 3,092 (5,475) Write (back)/down in value of investment properties (113,037) 33,074 (d) Remuneration of key management personnel The key management personnel compensations are as follows: 2006 The Group The Company 2005 Short term employee benefits 24,942 10,626 10,078 4,036 Equity compensation benefits 7,934 4,818 3,259 1,513 32,876 15,444 13,337 5,549 (e) Professional fees Fees paid and payable to firms in which certain directors (including former directors) of the Company are members: 2006 The Group The Company Charged to income statement 2, Included as cost of development properties for sale and property, plant and equipment 1 FS-150

274 (f) Finance costs Interest and securitisation costs paid and payable to: Note 2006 The Group The Company 2005 subsidiaries 12,273 12,392 bank loans and overdrafts 286, ,065 13,679 37,117 debt securities 121,675 85,670 11,309 14,921 Convertible bonds: interest expense 1, , amortisation of bond discount 25(a) 1,052 4,071 1,052 4,071 Mark-to-market of derivative instruments (5,030) (13,484) (14,750) Minority interests 22,400 2,984 Others 5,819 7, Total borrowing costs 433, ,334 39,897 55,041 Less: Borrowing costs capitalised in: properties under development 6 (22,738) (7,983) development properties for sale 12(c) (82,332) (65,077) (105,070) (73,060) 327, ,274 39,897 55,041 The finance costs have been capitalised at interest rates of 2.57% to 8.50% (2005: 1.34% to 8.50%) per annum for properties under development and development properties for sale. FS-151

275 33 Taxation (a) Deferred Taxation The Group At 1/1/2006 Income statement Equity Acquisition/ Disposal of subsidiaries Translation differences At 31/12/2006 Deferred tax liabilities Accelerated tax depreciation 9,466 7,546 (3,896) 13,116 Discounts on compound financial instruments (210) 11,782 11,572 Accrued income and interest receivable 3, (1) 4,342 Claw-back of capital allowances of assets in investment properties 10,906 1,014 (2,610) (30) 9,280 Profits recognised on percentage of completion 11,490 (489) (1) (409) 10,591 Revaluation gains of investment properties 47,149 30,126 24,357 (935) 100,697 Unremitted earnings 47,247 2, ,321 Others 2,448 (1,998) 8, ,279 Total 84,933 53,979 50,490 20,080 (1,284) 208,198 Deferred tax assets Unutilised tax losses (17,557) (9,848) 1,325 (13) (26,093) Unutilised capital allowances (135) (56) (191) Provisions and expenses (31,165) 8,897 2, (19,427) Deferred income (4,834) (4,834) Others (930) 173 (104) (77) (938) Total (49,787) (5,668) 3, (51,483) FS-152

276 Effects of At 1/1/2005 change in accounting policy Income statement Equity Acquisition/ Disposal of subsidiaries Translation differences At 31/12/2005 The Group Deferred tax liabilities Accelerated tax depreciation 15,483 1,358 (5,927) (1,448) 9,466 Discounts on compound financial instruments 1,061 (1,061) Accrued income and interest receivable 29,817 (26,408) (500) 565 3,474 Claw-back of capital allowances of assets in investment properties 11, (1,505) (1) 10,906 Profits recognised on percentage of completion 30,388 (24,765) 9,033 (3,174) 8 11,490 Revaluation gains of investment properties 22,344 3,049 35,480 (13,745) 21 47,149 Others 5,736 (3,130) (801) 643 2,448 Total 116,559 (24,765) (16,477) 35,480 (25,652) (212) 84,933 Deferred tax assets Unutilised tax losses (22,338) 8,975 (4,285) 91 (17,557) Unutilised capital allowances (4,776) (252) 5,164 (271) (135) Provisions and expenses (49,247) 20,399 (944) (1,373) (31,165) Others (5,096) (4,828) 4,224 4, (930) Total (81,457) 24,294 4,224 4,600 (1,448) (49,787) At 1/1/2006 Income statement At 31/12/2006 Equity The Company Deferred tax liabilities Discounts on compound financial instruments (210) 11,782 11,572 Deferred tax assets Provisions (3,955) 3,955 At 1/1/2005 Income statement At 31/12/2005 The Company Deferred tax liabilities Discounts on compound financial instruments 1,061 (1,061) Deferred tax assets Provisions (3,955) (3,955) FS-153

277 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 Group The Company 2005 Deferred tax liabilities 187,533 74,230 11,572 Deferred tax assets (30,818) (39,084) (3,955) At 31 December 156,715 35,146 11,572 (3,955) Deferred tax assets have not been recognised in respect of the following: The Group Deductible temporary differences 310, ,322 Tax losses 197, ,250 Unutilised capital allowances , ,941 Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profits will be available against which the subsidiaries of the Group can utilise the benefits. The tax losses are subject to agreement by the tax authorities and compliance with tax regulations in the respective countries in which the subsidiaries operate. The deductible temporary differences do not expire under current tax legislation. (b) Tax Charge Current tax expense 2006 The Group The Company 2005 Based on current year s results 169, ,128 23,211 4,500 Under provision in respect of prior years 12,832 33,474 10,981 1,122 Group relief 3,280 8, , ,602 37,472 14,148 Deferred tax expense Origination and reversal of temporary differences 48,311 7,817 3,745 (5,016) Total 230, ,419 41,217 9,132 FS-154

278 Reconciliation of effective tax rate The Group Profit before taxation (continuing and discontinued operations) 1,520,943 1,337,057 Income tax using Singapore tax rate of 20% 304, ,411 Adjustments: Expenses not deductible for tax purposes 88,668 71,547 Income not subject to tax (207,826) (227,140) Effect of unrecognised tax losses and other deductible temporary differences (22,693) (21,243) Effect of different tax rates in foreign jurisdictions 51,037 41,895 Under provision in respect of prior years 12,832 33,474 Others 4,147 (4,525) 230, ,419 The Company Profit before taxation 393, ,240 Income tax using Singapore tax rate of 20% 78,777 50,848 Adjustments: Expenses not deductible for tax purposes 6,373 1,968 Income not subject to tax (54,800) (44,710) Under provision in respect of prior years 10,981 1,122 Consideration paid for losses transferred 3,280 8,526 Tax benefit received on losses arising from group relief (3,280) (8,526) Others (114) (96) 41,217 9, Earnings Per Share (a) Basic earnings per share The Group Basic earnings per share is based on: Net profit attributable to equity holders of the Company: continuing operations 1,002, ,635 discontinued operations 15, ,875 Net profit attributable to equity holders of the Company 1,017, ,510 Number of shares ( 000) Weighted average number of ordinary shares in issue during the year 2,769,447 2,653,921 FS-155

279 (b) Fully diluted earnings per share In calculating diluted earnings per share, the net profit attributable to equity holders of the Company and weighted average number of ordinary shares in issue during the year are adjusted for the effects of all dilutive potential ordinary shares: The Group Net profit attributable to equity holders of the Company 1,017, ,510 Profit impact of assumed conversion 1,759 4,406 Adjusted net profit attributable to equity holders of the Company 1,019, ,916 Attributable to: continuing operations 1,003, ,041 discontinued operations 15, ,875 1,019, ,916 Number of shares ( 000) Weighted average number of ordinary shares used in calculation of basic earnings per share 2,769,447 2,653,921 Weighted average number of unissued ordinary shares from: share options 53,015 44,796 performance shares 18,008 15,053 convertible bonds 7,571 Number of ordinary shares that would have been issued at fair value (28,613) (22,666) 49,981 37,183 Weighted average number of ordinary shares in issue (diluted) 2,819,428 2,691,104 FS-156

280 35 Discontinued Operations The discontinued operations comprised PREMAS International Limited and the hotel business of Raffles Holdings Limited which were divested in May 2005 and September 2005 respectively. The results of the discontinued operations are as follows: The Group Revenue 458,171 Cost of sales (237,388) Gross profit 220,783 Other operating income 6,233 Administrative expenses (179,807) Other operating expenses (1,952) Profit from operations 45,257 Finance costs (5,693) Share of results of associates 96 Profit before taxation 39,660 Taxation (9,399) Profit after taxation before gain on sale of discontinued operations 30,261 Gain on sale of discontinued operations 26, ,702 Profit after taxation 26, ,963 Attributable to: Equity holders of the Company 15, ,875 Minority interests 11, ,088 Profit after taxation 26, ,963 The impact of the discontinued operations on the consolidated cash flow of the Group is as follows: The Group Operating cash flows 131,008 Investing cash flows 90,628 1,426,366 Financing cash flows (42,781) Cash flows from discontinued operations 90,628 1,514,593 FS-157

281 36 Dividends The Company s Board of Directors proposed a first and final dividend of 7.00 cents per share (of which up to 3.97 cents per share will be franked dividend, less tax at 18% and the balance will be one-tier dividend) and a special one-tier dividend of 5.00 cents per share, amounting to a net dividend of $313,638,175 based on the number of issued shares as at 31 December The franked dividend of 3.97 cents per share is estimated based on the number of issued shares as at 31 December 2006 as well as the availability of Section 44 credit balance which is subject to finalisation by the Inland Revenue Authority of Singapore. The exact composition between the franked and one-tier dividend is dependent on the finalised Section 44 credit balance and the number of issued shares of the Company as at the Books Closure Date. The dividends are subject to the shareholders approval at the forthcoming Annual General Meeting of the Company. For the previous financial year 2005, a first and final dividend of 6.00 cents per share and a special dividend of cents per share, less tax at 20% were approved and paid. The said dividends of $399,088,787 were paid in May Notes to the Consolidated Statement of Cash Flows (a) Acquisition of subsidiaries (i) The list of significant subsidiaries acquired during the year is as follows: Name of Subsidiary Date Acquired Equity Interest Acquired Yangzhou SZITIC Commercial Property Co., Ltd. April % Dongguan SZITIC Commercial Property Co., Ltd. June % Foshan SZITIC Commercial Property Co., Ltd. June % Hua Qing Holdings Pte Ltd September % Smooth Runner Co., Limited September % The total related acquisition costs for the above-mentioned subsidiaries and other subsidiaries acquired, which individually was not significant, in aggregate amounted to $167.8 million. From the dates of acquisitions to 31 December 2006, the above-mentioned acquisitions contributed net profit of $0.5 million to the Group s results for the year, before accounting for financing costs attributable to the acquisition. If the acquisitions had occurred on 1 January 2006, the Group s revenue for the year ended 31 December 2006 would have increased by $79.3 million and net profit would have increased by $4.2 million, before accounting for financing costs attributable to the acquisitions. (ii) The list of significant subsidiaries acquired in 2005 is as follows: Name of Subsidiary Date Acquired Equity Interest Acquired Foshan City Nanhai SZITIC Commercial Property Co., Ltd January % Hunan SZITIC Commercial Property Co., Ltd February % RiverEdge Development Pte Ltd March % CapitaLand Retail (SI) Investment Pte Ltd April % Australand Property Trust No. 4 October % Australand Property Trust No. 5 October % Hemliner Pte Ltd December % FS-158

282 The total related acquisition costs for the above-mentioned subsidiaries and other subsidiaries acquired, which individually was not significant, in aggregate amounted to $540.4 million. From the dates of acquisition to 31 December 2005, the abovementioned acquisitions contributed net profit of $4.0 million to the Group s results for the year, before accounting for financing costs attributable to the acquisitions. If the acquisitions had occurred on 1 January 2005, the Group s revenue for the year ended 31 December 2005 would have increased by $79.2 million and net profit would have increased by $14.8 million, before accounting for financing costs attributable to the acquisitions. (b) Effects of acquisitions The cash flow and the net assets of subsidiaries acquired are provided below: Carrying amounts Fair value adjustments Recognised values The Group 2006 Property, plant and equipment 3,929 3,929 Investment properties 817,749 29, ,508 Other non-current assets 1,013 1,013 Current assets 189, ,101 Current liabilities (153,788) (153,788) Interest bearing liabilities (287,815) (287,815) Non-current liabilities (184,821) (184,821) Minority interests (74,231) (10,416) (84,647) 311,137 19, ,480 Amounts previously accounted for as associates and jointlycontrolled entities (162,672) Net assets acquired 167,808 Goodwill arising from acquisition 8 Purchase consideration 167,816 Less: Deposit paid in 2005 (13,645) Cash of subsidiaries acquired (36,747) Cash outflow on acquisition of subsidiaries 117,424 FS-159

283 Carrying amounts Fair value adjustments Recognised values The Group 2005 Property, plant and equipment 4,473 4,473 Investment properties 917,109 4, ,134 Other non-current assets 272, , ,511 Current assets 133, ,537 Current liabilities (293,498) (293,498) Interest bearing liabilities (418,794) (418,794) Minority interests (51,055) (51,240) (102,295) 564,712 57, ,068 Amounts previously accounted for as associates, jointlycontrolled entities and financial assets (87,598) Net assets acquired 534,470 Negative goodwill arising from acquisition (820) Reserve arising from stapling 7,028 Purchase consideration 540,678 Less: Deposit paid in 2004 (65,978) Cash of subsidiaries acquired (21,310) Cash outflow on acquisition of subsidiaries 453,390 (c) Effects of disposals (i) During the year, the Group disposed off the following significant subsidiaries for a total consideration of $942.3 million: Shanghai Xin Mao Property Development Co., Ltd CapitaRetail China Developments (B) Pte Ltd CapitaRetail China Investments (B) Pte Ltd CapitaRetail China Investments (B) Alpha Pte Ltd CapitaRetail China Investments (B) Beta Pte Ltd CapitaRetail China Investments (B) Gamma Pte Ltd The disposed subsidiaries previously contributed net losses of $3.8 million for the year ended 31 December 2005 and $4.8 million from 1 January 2006 to the respective dates of disposal. (ii) In 2005, the Group disposed off the following significant subsidiaries for a total consideration of $1,816.8 million: Shanghai Huteng Real Estate Co., Ltd CL Moorgate Limited CapitaLand Ningbo Commercial Holdings Pte Ltd CapitaLand Ningbo Holdings Pte Ltd RiverEdge Development Pte Ltd Raffles Holdings Limited s hotel operations PREMAS International Limited The disposed subsidiaries previously contributed net profits of $27.5 million for the year ended 31 December 2004 and $20.4 million from 1 January 2005 to the respective dates of disposal. FS-160

284 (iii) The cash flow and the net assets of subsidiaries disposed are provided below: The Group Property, plant and equipment 24,154 1,019,366 Investment properties 1,482, ,987 Other non-current assets 9, ,271 Current assets 157, ,931 Current liabilities (207,038) (426,794) Interest bearing liabilities (156,725) (345,499) Non-current liabilities (24,589) (44,454) Minority interests (104,203) (45,991) Net assets 1,181,904 1,143,817 Less: Equity interest retained as associates and jointly-controlled entities (335,178) (18,450) Net assets disposed 846,726 1,125,367 Realisation of reserves (54,929) (66,024) Deferred income 36,563 Gain on disposal of subsidiaries 113, ,440 Sale consideration 942,316 1,816,783 Less: Deferred payment (362,301) (78,800) Amount received in 2005 (56,144) Add: Deferred sale consideration received in relation to prior year s disposal of subsidiaries 78,800 Cash of subsidiaries disposed (81,772) (102,113) Cash inflow on disposal of subsidiaries 520,899 1,635,870 (d) Net effects on acquisition and disposal of subsidiaries The Group Net cash inflow on acquisition/disposal of subsidiaries 403,475 1,182,480 FS-161

285 38 Financial Instruments (a) Financial risk management objectives and policies The Group and the Company are exposed to interest rate, foreign currency, credit and liquidity risks arising from its diversified portfolio business. The Group s risk management approach seeks to minimise the potential material adverse effects from these exposures. As a whole, the Group has implemented risk management policies and guidelines which set out its tolerance of risk and its general risk management philosophy. In connection with this, the Group has established a framework and process to monitor the exposures so as to ensure appropriate measures can be implemented on a timely and effective manner. (b) Interest rate risk The Group s exposure to market risk for changes in interest rate environment relates mainly to its investment in financial products and debt obligations. The investments in financial products are mainly short term in nature and they are not held or issued for trading or speculative purposes but were mainly placed in fixed deposits or short term commercial papers which yield better returns than cash at bank. The Group manages its interest rate exposure by maintaining a prudent mix of fixed and floating rate borrowings. The Group actively reviews its debt portfolio, taking into account the investment holding period and nature of its assets. This strategy allows it to capitalise on cheaper funding in a low interest rate environment and achieve certain level of protection against rate hikes. The Group also uses hedging instruments such as interest rate swaps and caps to minimise its exposure to interest rate volatility. The Group classifies these interest rate swaps and caps as cash flow hedges. The net fair value of swaps at 31 December 2006 was $21.7 million (2005: $1.6 million) comprising assets of $30.7 million (2005: $8.9 million) and liabilities of $9.0 million (2005: $7.3 million). (c) Foreign currency risk The Group operates internationally and is exposed to various currencies, mainly Australia dollars, Renminbi, Euros, Hong Kong dollars, Japanese yen, Sterling pounds, Swiss francs and US dollars. The Group maintains a natural hedge, whenever possible, by borrowing in the currency of the country in which the property or investment is located or by borrowing in currencies that match the future revenue stream to be generated from its investments. The Company s subsidiaries, The Ascott Group Limited and Ascott Residence Trust, use forward exchange contracts to hedge its foreign currency risk, where feasible. They generally enter into forward exchange contract with maturities of between 3 months and 5 years which are rolled over at maturity at market rates. The fair value loss of the above forward exchange contracts at 31 December 2006 was $7.6 million (2005: $5.6 million). Foreign exchange exposures in transactional currencies other than functional currencies of the operating entities are kept to an acceptable level. In relation to its overseas investments in its foreign subsidiaries whose net assets are exposed to currency translation risk and which are held for long term investment purposes, the differences arising from such translation are recorded under the foreign currency translation reserve. These translation differences are reviewed and monitored on a regular basis. FS-162

286 (d) Credit risk The Group has guidelines governing the process of granting credit as a service or product provider in its respective segments of business. Investments and financial transactions are restricted with counterparties that meet the appropriate credit criteria and of high credit standing. The principal risk to which the Group and the Company is exposed in respect of financial guarantee contracts is credit risk in connection with the guarantee contracts it has issued. To mitigate the risks, management continually monitors the risks and has established processes including performing credit evaluations of the parties it is providing the guarantee on behalf of. Guarantees are only given to its subsidiaries and related parties. The Group has a diversified portfolio of businesses and at balance sheet date, there were no significant concentration of credit risk with any entity. The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, in the balance sheet. (e) Liquidity risk The Group actively manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that all refinancing, repayment and funding needs are met. As part of its overall prudent liquidity management, the Group maintains sufficient level of cash or cash convertible investments to meet its working capital requirement. In addition, the Group strives to maintain available banking facilities of a reasonable level to its overall debt position. As far as possible, the Group will constantly raise committed funding from both capital markets and financial institutions and prudently balance its portfolio with some short term funding so as to achieve overall cost effectiveness. (f) Effective interest rates and repricing analysis In respect of interest earning financial assets and interest bearing financial liabilities, the following table indicates their effective interest rates at balance sheet date and the periods in which they reprice. FS-163

287 Effective interest rate Within 1to5 After Within 1to5 After Total 1 year years 5 years Total 1 year years 5 years The Group Note % % Financial assets Interest bearing amounts owing by: associates ,375 54,875 30, , , ,425 jointly-controlled entities , , , , , ,115 23, ,437 investee companies 11, ,087 2,087 Cash and cash equivalents ,268,626 2,268, ,813,659 1,813,659 Total 3,205,436 2,602, , ,824 2,708,652 2,192,356 23, ,862 Effective interest rate FS-164 Financial liabilities Bank overdrafts ,262 6,262 Bank borrowings: fixed rate , , , , , ,912 floating rate ,696,108 4,586, , ,181,508 4,181,508 effect of interest rate swaps (0.40) 0.81 (1,060,113) 1,060,113 (2.36) 1.32 (971,124) 846, ,830 Debt securities: fixed rate ,539, , , , ,103, , , ,697 floating rate ,099,425 1,099, , ,426 effect of interest rate swaps (0.51) 0.02 (764,750) 764, (460,623) 335, ,830 Finance leases ,279 46,738 1, ,131 3,448 48,683 Interest bearing loan from: minority interests 18, , , , ,367 Total 8,247,537 4,457,416 3,369, ,403 6,769,353 4,137,059 2,232, ,357

288 Effective interest rate Within 1to5 After Within 1to5 After Total 1 year years 5 years Total 1 year years 5 years The Company Note % % Financial assets Fixed deposits ,476,838 1,476, , ,644 Interest bearing amounts owing by subsidiaries 7, ,175,729 1,352, , ,355,869 1,080,498 1,275,371 Total 3,652,567 2,829, ,277 3,343,513 2,068,142 1,275,371 Effective interest rate FS-165 Financial liabilities Bank borrowings: fixed rate ,202 46,202 floating rate , , , ,033 Debt securities fixed rate ,179 34,500 91, , ,000 77, ,500 floating rate ,000 62,000 Interest bearing amounts owing to subsidiaries , , ,622 42, ,000 Total 978, ,052 91, ,679 1,007, , ,500

289 (g) Sensitivity analysis In managing its exposure to interest rate, foreign currency, credit and liquidity risks, the Group strives to prudently balance its portfolio so as to minimise its impact on earnings. As at balance sheet date, it is estimated that a one percentage point change in interest rates would affect the Group s profit before taxation by approximately $42.7 million (2005: $40.3 million). (h) Fair values The aggregate net fair values of financial assets and liabilities which are not carried at fair value in the balance sheet as at 31 December are represented in the following table: The Group Financial liabilities Carrying amount 2006 Fair value 2006 Carrying amount 2005 Fair value 2005 Fixed rate long term liabilities secured bank loans 344, , , ,954 unsecured bank loans 115, ,550 62,147 62,778 secured debt securities 173, , , ,783 unsecured debt securities 1,221,071 1,323, , ,585 1,854,088 1,969,633 1,151,864 1,168,100 The Company Fixed rate long term unsecured debt securities 461, , , ,549 The fair value quoted securities is their quoted bid price at the balance sheet date. For other financial instruments, fair value has been determined by discounting the relevant cash flows using current interest rates for similar instruments at the balance sheet date. At the balance sheet date, there are no (2005: Nil) financial instruments measured at fair value using a valuation technique that is not supported by observable market prices or rates. The following methods and assumptions are used to estimate the fair values of the following significant classes of financial instruments: (i) Floating Interest Bearing Loans No fair value is calculated as the Group believes that the carrying amounts of floating interest bearing loans which are all repriced within 6 months from the balance sheet date, reflect the corresponding fair values. (ii) Trade and Other Receivables and Trade and Other Payables The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate their fair values due to their short term nature. (iii) Financial Assets Fair value is based on quoted bid prices at the balance sheet date without any deduction for transaction costs. FS-166

290 (iv) Non-Current Loans Due from/to Subsidiaries, Associates, Jointly-Controlled Entities, Investee Companies, Third Parties and Minority Interests Fair value is estimated as the present value of future cash flows discounted at current interest rates for similar instruments at the balance sheet date. (v) Derivatives The fair value of financial derivatives instruments are based on their quoted market prices. 39 Commitments As at the balance sheet date, the Group and the Company had the following commitments: (a) Operating lease The Group leases a number of offices under operating leases. The leases typically have tenure of three years, with an option to renew the lease after that date. Lease payments are usually revised at each renewal date to reflect the market rate. Future minimum lease payments for the Group and the Company on non-cancellable operating leases with a term of more than one year are as follows: 2006 The Group The Company 2005 Lease payments payable: Within 1 year 45,313 45,728 1, From 1 to 5 years 94, ,679 2, After 5 years 53, , , ,206 4, The Group leases out its investment properties. Non-cancellable operating lease rentals are receivable as follows: 2006 The Group The Company 2005 Lease payments receivable: Within 1 year 258, ,241 From 1 to 5 years 733, ,468 After 5 years 428, ,507 1,421,011 1,904,216 FS-167

291 (b) Commitments 2006 The Group The Company 2005 Commitments in respect of: capital expenditure contracted but not provided for in the financial statements 24,872 69,414 capital expenditure authorised but not committed 83,072 89,441 Commitments in respect of: development expenditure contracted but not provided for in the financial statements 522,398 1,210,447 development expenditure authorised but not committed 328, ,676 capital contribution/acquisition of associates, jointly-controlled entities and investee companies 777, ,544 purchase of development properties 360,910 Commitments in respect of: shareholders loan committed to associates, jointly-controlled entities and investee companies 158, ,835 forward foreign exchange contracts 408, ,978 2,664,292 2,939,335 (c) As at the balance sheet date, the Group and the Company had entered into financial instruments with notional principal values as follows: The Group The Company Interest rate caps 305, ,225 Interest rate swaps 2,855,693 2,263,782 Forward start interest rate swaps 120, ,640 Non delivery swaps 48,090 69,182 3,330,111 3,651,829 The maturity dates of these financial instruments are: 2006 The Group The Company 2005 Within 1 year 957, ,615 From 1 to 5 years 1,930,733 1,761,574 After 5 years 442, ,640 3,330,111 3,651,829 FS-168

292 40 Financial Guarantee Contracts For financial guarantee contracts accounted for as insurance contracts, there are no terms and conditions attached to them that would have a material effect on the amount, timing and uncertainty of the Group and the Company s future cash flows. The Group and the Company only issue guarantees to their subsidiaries and related parties The Group The Company 2005 (a) Guarantees and undertaking issued on behalf of: subsidiaries 2,476, ,045 associates 216, ,798 jointly-controlled entities 32,150 14,832 16, , ,630 2,493, ,045 (b) (c) A subsidiary of the Group has provided several cost overrun undertakings, interest shortfall undertakings and completion undertakings, on a joint or several basis, in respect of term loans and revolving credit facilities amounting to $931.0 million (2005: $746.0 million), granted to its associated companies and jointly-controlled entities. A stapled entity of the Group, Australand, provided rental guarantees arrangements to tenants and owners of various residential buildings, which Australand is developing or has completed development on. These arrangements require Australand to guarantee the rental income of these properties for certain periods of time. As at the date of this report, the management is of the opinion that based on the current sub-lease proposals and forecast sub-lease commitments, together with the allowances made within the development budgets for these property developments, adequate allowances have been made in the financial statements for these potential obligations. 41 Significant Related Party Transactions Identity of related parties For the purposes of these financial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. In addition to the related party information disclosed elsewhere in the financial statements, there were the following significant related party transactions which were carried out in the normal course of business on terms agreed between the parties during the financial year: 2006 The Group The Company 2005 Subsidiaries Management fee income 36,459 29,266 Rental income 71 IT and administrative support services 243 Rental expense (374) (264) FS-169

293 2006 The Group The Company 2005 Other Related Corporations Rental income 1,253 Management and agency fee income 1,262 Management consultancy services 777 Purchase of air-tickets, IT related services and others (7,778) (722) Rooms, food and beverage and other incidental income 6,246 Associates and Jointly-Controlled Entities Management fee income 115,272 85,387 Management consultancy services 1,500 Rental expense (3,585) (46,095) (1,212) (1,071) Accounting service fee, marketing income and others 6,201 8,355 (183) (76) Construction and project management income 12,680 1,809 Directors and Their Associates Sale of residential properties Subsidiaries (a) The significant subsidiaries directly held by the Company set out below are incorporated and conducting business in the Republic of Singapore: Subsidiaries Areca Investment Pte Ltd Principal Activities Property development and investment holding Percentage Held by the Company % % CapitaLand Asia Pte Ltd Investment holding CapitaLand Commercial and Integrated Development Limited Investment holding and provision of management services CapitaLand Corporate Investments Pte Ltd Investment holding CapitaLand Financial Limited Investment holding CapitaLand ILEC Pte Ltd (formerly known as CapitaLand Realty Pte Ltd) Investment holding CapitaLand Raffles Investment Pte Ltd Investment holding CapitaLand Residential Limited Investment holding and provision of management services CapitaLand Retail Limited Investment holding CapitaLand Treasury Limited Provision of financial and treasury services to related corporations FS-170

294 Subsidiaries Principal Activities Percentage Held by the Company % % Pidemco Land Singapore Pte Ltd (formerly known as Pidemco Land (Indonesia) Pte Ltd) Investment holding pfission Pte Ltd Investment holding Somerset Capital Pte Ltd Investment holding Somerset Land Pte Ltd Investment holding and investment trading (b) Other significant subsidiaries in the Group are: Name of Company Principal Activities Place of Incorporation/ Business Effective Interest Held by the Group % % (i) Jointly held by Areca Investment Pte Ltd, CapitaLand Corporate Investments Pte Ltd and Pidemco Land Singapore Pte Ltd: 2 Raffles Holdings Limited Investment holding Singapore (ii) Jointly held by Areca Investment Pte Ltd, Somerset Capital Pte Ltd and Somerset Land Pte Ltd: The Ascott Group Limited Investment holding, property investment and the management of commercial, residential and serviced apartments Singapore (iii) Jointly held by Somerset Capital Pte Ltd, pfission Pte Ltd and The Ascott Group Limited: Ascott Residence Trust Property trust Singapore 61.3 (iv) Directly or indirectly held by CapitaLand Residential Limited: Ausprop Holdings Limited Investment holding Singapore Australand ASSETS Trust Special purpose entity for issuance of hybrid security Australia Australand Holdings Limited Property investment, development and investment holding Australia Australand Property Trust Property trust Australia Australand Property Trust No. 4 2 Australand Property Trust No. 5 Property trust Australia Property trust Australia Austvale Holdings Ltd Investment holding Singapore Beijing Xinkai Real Estate Development Co., Ltd Property development The People s Republic of China FS-171

295 Name of Company Principal Activities Place of Incorporation/ Business Effective Interest Held by the Group % % CapitaLand China Holdings Pte Ltd Investment holding Singapore CapitaLand Management & Consulting (China) Co., Ltd Management services The People s Republic of China CRL Realty Pte Ltd Property development and investment holding Singapore Hua Yuan Holdings Pte Ltd Investment holding Singapore Imperial Realty Limited Property development Singapore Leonie Court Pte Ltd Property development and investment holding Singapore Shanghai Ning Xin Real Estate Development Co., Ltd Property development The People s Republic of China (v) Directly or indirectly held by CapitaLand Commercial and Integrated Development Limited: 1 Beijing Xin Jing Cheng Property Management Co Ltd Property investment and consultancy services The People s Republic of China Brimitty Pte Ltd Property investment Singapore CapitaLand China Holdings (Commercial) Pte Ltd CapitaLand (Office) Investments Pte Ltd CapitaLand Investments Pte Ltd Investment holding Singapore Investment holding Singapore Investment holding Singapore E-Pavilion Pte Ltd Investment trading Singapore Hua Qing Holdings Pte Ltd Investment holding Singapore Malachite Land Pte Ltd Investment holding Singapore MCH Holdings Pte Ltd Investment holding Singapore SBR Pte Ltd Investment and fund management Singapore Temasek Tower Limited Property investment Singapore Tmall Ltd Property investment Singapore FS-172

296 Name of Company Principal Activities Place of Incorporation/ Business Effective Interest Held by the Group % % (vi) Directly or indirectly held by CapitaLand Retail Limited: Albert Complex Pte Ltd Investment holding Singapore CapitaLand Retail (BJ) Investments Pte Ltd 1 CapitaLand Retail BJ1 (M) Limited CapitaLand Retail (SI) Investments Pte Ltd CapitaLand Retail Hong Kong Investments Pte Ltd CapitaLand Retail China Private Limited Investment holding Singapore Investment holding Mauritius Investment holding Singapore Investment holding Singapore Property investment Singapore 100 Clarke Quay Pte Ltd Property investment Singapore Foshan City Nanhai SZITIC Commercial Property Co., Ltd Property investment The People s Republic of China Hunan SZITIC Commercial Property Co., Ltd Property investment The People s Republic of China Plaza Singapura Pte Ltd Property investment Singapore Premier Health Services International Pte Ltd Pyramex Investments Pte Ltd Investment holding Singapore Investment holding Singapore Retail Crown (BVI) Limited Property investment British Virgin Islands 100 (vii) Directly or indirectly held by CapitaLand Financial Limited: CapitaLand China Development Fund Management Private Limited CapitaLand Financial Services Limited Investment holding, fund management and investment management Investment holding and advisory services Singapore Singapore CapitaLand Hong Kong Investment (BVI) Limited Investment holding British Virgin Islands CapitaLand Fund Investment Private Limited CapitaLand Japan Kabushiki Kaisha Investment in real estate financial products, real estate assets and provision of investment and advisory services Consultancy and management services Singapore Japan FS-173

297 Name of Company Principal Activities Place of Incorporation/ Business Effective Interest Held by the Group % % CapitaCommercial Trust Management Limited CapitaMall Trust Management Limited Property fund management, investment and related services Property fund management, investment and related services Singapore Singapore CapitaLand RECM Pte Ltd Investment holding Singapore (viii) Directly or indirectly held by The Ascott Group Limited: 1 Ascott Group (Jersey) Limited Investment holding Jersey EuroResidence 1 SARL Investment holding France Greenpark Investment (Guernsey) Ltd Property investment United Kingdom Hanoi Tower Center Company Limited Construction and operating of serviced apartments and office complex Vietnam # Hemliner Real Estate (Beijing) Co., Ltd Rental and sale of apartment and real estate management service The People s Republic of China # 67.9 Javana Pte Ltd Investment holding Singapore # Mekong-Hacota Joint Venture Company Limited Property development and investment Vietnam # PT Ciputra Liang Court Property investment and management Indonesia # 39 1 Shanghai Xin Wei Property Development Co., Ltd Property development and management The People s Republic of China # 67.9 Somerset Investments Pte Ltd Property investment and investment holding Singapore The Ascott Group (Europe) Pte Ltd The Ascott Holdings Limited Investment holding Singapore Investment holding Singapore (ix) Directly or indirectly held by Ascott Residence Trust: Burton Engineering Pte Ltd Investment holding Singapore 61.3 # 1 Hanoi Tower Center Company Limited Construction and operating of serviced apartments and office complex Vietnam 46.9 # 1 Hemliner Real Estate (Beijing) Co., Ltd Rental and sale of apartment and real estate management service The People s Republic of China 61.3 # Javana Pte Ltd Investment holding Singapore 61.3 # FS-174

298 Name of Company Principal Activities Place of Incorporation/ Business Effective Interest Held by the Group % % 1 Mekong-Hacota Joint Venture Company Limited Property development and investment Vietnam 42.3 # 1 PT Ciputra Liang Court Property investment and management Indonesia 35.2 # 1 Shanghai Xin Wei Property Development Co., Ltd Property development and management The People s Republic of China 61.3 # Notes: All subsidiaries are audited by KPMG Singapore except for the following: 1 2 # Audited by other member firms of KPMG International. Audited by PricewaterhouseCoopers, Singapore and its associated firms. These subsidiaries were acquired by Ascott Residence Trust during the year. 43 Associates Details of significant associates are as follows: Associated Companies Principal Activities Place of Incorporation/ Business Effective Interest Held by the Group % % (i) Indirectly held by CapitaLand Residential Limited: 3 Lai Fung Holdings Limited Investment holding Cayman Islands 20 (ii) Indirectly held by CapitaLand Commercial and Integrated Development Limited: 3 Bugis City Holdings Pte Ltd Investment holding Singapore CapitaCommercial Trust Property investment Singapore Savu Properties Pte Ltd Property investment Singapore (iii) Indirectly held by CapitaLand Retail Limited: CapitaMall Trust Property investment Singapore Bugis City Holdings Pte Ltd Investment holding Singapore CapitaRetail Japan Fund Private Limited Investment holding Singapore CapitaRetail China Trust Property investment Singapore 26.2 CapitaRetail China Development Fund Property investment Singapore 45 (iv) Indirectly held by CapitaLand Financial Limited: 3 I. P. Property Fund Asia Limited Investment in real estate Guernsey FS-175

299 Associated Companies Principal Activities Place of Incorporation/ Business Effective Interest Held by the Group % % (v) Directly held by Raffles Holdings Limited: 2 Tincel Properties (Private) Limited Real estate investment and management Singapore (vi) Indirectly held by The Ascott Group Limited: 1 MEC Roppongi Tokute Kokuteki Serviced residence owner Japan # 27.2 (vii) Indirectly held by Ascott Residence Trust: 1 MEC Roppongi Tokute Kokuteki Serviced residence owner Japan 24.5 # Notes: All associated companies are audited by KPMG Singapore except for the following: # Audited by other member firms of KPMG International. Audited by PricewaterhouseCoopers, Singapore and its associated firms. Audited by Ernst & Young and its associated firms. This associated company was acquired by Ascott Residence Trust during the year. 44 Jointly-Controlled Entities Details of significant jointly-controlled entities are as follows: Jointly-Controlled Entities Principal Activities Place of Incorporation/ Business Effective Interest Held by the Group % % (i) Indirectly held by the Company: CapitaLand-Raffles Properties Pte Ltd Property development and investment Singapore (ii) Directly held by CapitaLand Asia Pte Ltd: 1 T.C.C. Capital Land Limited Property development and investment Thailand (iii) Indirectly held by CapitaLand Residential Limited: Riverwalk Promenade Pte Ltd Property development and investment Singapore (iv) Indirectly held by CapitaLand Commercial and Integrated Development Limited: Eureka Office Fund Pte Ltd Investment holding Singapore Grand Design Development Limited Property investment Hong Kong Savu Investments Ltd Property investment Singapore FS-176

300 Jointly-Controlled Entities Principal Activities Place of Incorporation/ Business Effective Interest Held by the Group % % (v) Indirectly held by CapitaLand Retail Limited: 1 CapitaLand Hualian Management & Consulting (Shenzhen) Co., Ltd Property management and consulting services The People s Republic of China Orchard Turn Holding Pte Ltd Investment holding Singapore Notes: All jointly-controlled entities are audited by KPMG Singapore except for the following: 1 2 Audited by other member firms of KPMG International. Audited by PricewaterhouseCoopers, Singapore and its associated firms. FS-177

301 45 Segment Reporting (Group) (a) Business Segments Rental and related income Trading of properties Serviced residences Fee-income and others Eliminations Total continuing operations Total discontinued operations^ Total operations 2006 Revenue External revenue 306,228 2,159, , ,298 3,147,725 3,147,725 Inter-segment revenue 3,249 34,740 (37,989) Total Revenue 309,477 2,159, , ,038 (37,989) 3,147,725 3,147,725 FS-178 Segmental Results Company and subsidiaries 501, , ,260 35,095 1,220,447 26,894 1,247,341 Associates 269,000 (4,174) 2, , , ,445 Jointly-controlled entities 73,095 63,380 (5,142) 7, , ,152 Earnings before interest and taxation 844, , , ,360 1,822,044 26,894 1,848,938 Finance costs (327,995) (327,995) Taxation (230,354) (230,354) Profit for the year 1,263,695 26,894 1,290,589 Attributable to: Equity holders of the Company 1,017,985 Minority interests 272,604 Profit for the year 1,290,589

302 Rental and related income Trading of properties Serviced residences Fee-income and others Eliminations Consolidated 2006 Continuing Operations Significant Non-Cash Items Depreciation 3,220 3,731 19,333 8,010 34,294 Amortisation Other non-cash items + (74,720) (77,000) 7,087 (16,238) (160,871) Capital Expenditure ++ 5,759 5,962 41,101 25,134 77, The other non-cash items consist of negative goodwill on acquisition, write back in value of investment properties and share-based expenses. The capital expenditure of the discontinued operations amounted to $Nil. FS-179 Assets and Liabilities Segment assets 5,489,920 4,688,852 2,796,560 2,878,136 15,853,468 Investment in associates 2,463, ,679 35,070 68,364 3,163,011 jointly-controlled entities 944, ,912 59,465 82,381 1,599,762 Unallocated assets 30,818 Total Assets 8,897,822 5,798,443 2,891,095 3,028,881 20,647,059 Segment liabilities 590, , , ,146 2,500,121 Unallocated liabilities 8,634,188 Total Liabilities 590, , , ,146 11,134,309

303 Rental and related income Trading of properties Serviced residences Fee-income and others Eliminations Total continuing operations Total discontinued operations^ Total operations 2005 Revenue External revenue 205,050 2,923, , ,830 3,845, ,171 4,303,808 Inter-segment revenue 2,735 56,978 (59,713) Total Revenue 207,785 2,923, , ,808 (59,713) 3,845, ,171 4,303,808 FS-180 Segmental Results Company and subsidiaries 117, , ,056 26, , ,959 1,494,151 Associates 103,640 3,461 2,828 (1,024) 108, ,001 Jointly-controlled entities (36,088) 64,864 (12,485) (1,998) 14,293 14,293 Partnership (114) (114) (114) Earnings before interest and taxation 185, ,624 97,399 22, , ,055 1,617,331 Finance costs (274,581) (5,693) (280,274) Taxation (152,020) (9,399) (161,419) Profit for the year 433, ,963 1,175,638 Attributable to: Equity holders of the Company 750,510 Minority interests 425,128 Profit for the year 1,175,638

304 Rental and related income Trading of properties Serviced residences Fee-income and others Consolidated 2005 Continuing operations Significant Non-Cash Items Depreciation 2,237 3,274 11,693 18,888 36,092 Amortisation Other non-cash items + 28,415 (6,925) 15,781 37,271 Capital Expenditure ++ 28,956 5,456 19,292 9,801 63, The other non-cash items consist of negative goodwill on acquisition, write down in value of investment properties and share-based expenses. The capital expenditure of the discontinued operations amounted to $14,694,000. FS-181 Assets and Liabilities Segment assets 5,005,561 4,051,409 2,313,598 2,274,082 13,644,650 Investment in associates 2,075, ,400 24, ,393 2,749,732 jointly-controlled entities 598, ,167 77,380 81,056 1,178,938 Unallocated assets 609,733 Total Assets 7,679,441 4,681,976 2,415,372 2,796,531 18,183,053 Segment liabilities 767, , , ,354 2,166,559 Unallocated liabilities 6,988,126 Total Liabilities 767, , , ,354 9,154,685

305 (b) Geographical Segments Singapore Australia and New Zealand China Other Asia # Europe Eliminations Total continuing operations Total discontinued operations^ Total 2006 Revenue 906,312 1,247, , , , ,147,725 3,147,725 Earnings before interest and taxation 932, , ,186 67, ,802 (207) 1,822,044 26,894 1,848,938 Total Assets 8,714,402 4,252,172 4,628,975 1,783,438 1,263,241 4,831 20,647,059 20,647,059 Capital Expenditure 31,949 1,980 13,346 22,217 8, ,956 77,956 FS Revenue 1,002,002 2,041, ,407 85, ,104 3,845, ,171 4,303,808 Earnings before interest and taxation 179, , , ,443 97,303 (111) 860, ,055 1,617,331 Total Assets 8,168,836 3,767,398 3,185,463 1,699,515 1,351,431 10,410 18,183,053 18,183,053 Capital Expenditure 21, , ,869 63,505 14,694 78,199

306 (c) Strategic Business Units Retail Commercial and integrated development Financial services Residential The Ascott Group RHL Group & RCH Others and consolidation adjustments Total continuing operations Total discontinued operations^ Total 2006 Revenue 94, , ,222 2,354, ,120 4,697 (26,168) 3,147,725 3,147,725 Earnings before interest and taxation 221, ,402 61, , , ,955 (15,692) 1,822,044 26,894 1,848, Revenue 50, ,239 70,633 3,036, , ,428 (23,794) 3,845, ,171 4,303,808 FS-183 Earnings before interest and taxation 138,381 24,727 53, , ,387 61,026 (30,946) 860, ,055 1,617,331 ^ In 2005, the discontinued operations comprised PREMAS International Limited and the hotel business of Raffles Holdings Limited which were divested in May 2005 and September 2005 respectively. The discontinued operation in 2006 related to the additional gains from the sale of hotel business. The Group s operations in Other Asia include Indonesia, Hong Kong, Japan, Malaysia, Philippines, Thailand, Korea, India and Vietnam. The Group s operations in Others include the United Arab Emirates, North America and Bahrain.

307 46 Subsequent Events On 20 January 2007, Raffles Holdings Limited has become an indirect wholly-owned subsidiary of the Company following the completion of the compulsory acquisition of Raffles Holdings Limited s shares. 47 New Accounting Standards and Interpretations not yet adopted The Group has not applied the following accounting standards and interpretations that have been issued as of the balance sheet date but are not yet effective: FRS 40 Investment Property FRS 107 Financial Instruments: Disclosures and the Amendment to FRS 1 Presentation of Financial Statements: Capital Disclosures INT FRS 107 Applying the Restatement Approach under FRS 29 Financial Reporting in Hyperinflationary Economies INT FRS 108 Scope of FRS 102 Share-based Payment INT FRS 109 Reassessment of Embedded Derivatives INT FRS 110 Interim Financial Reporting and Impairment FRS 40, which becomes mandatory for the Group s 2007 financial statements, permits investment property to be stated at either fair value or cost less accumulated depreciation and accumulated impairment losses. The Group will continue to state investment property at fair value. Under the fair value model in FRS 40, changes in fair values of investment property are required to be included in the income statement. As a result of adopting FRS 40, the Group expects to reclassify its revaluation reserve of approximately $235 million to accumulated profits on 1 January FRS 107 and amended FRS 1, which become mandatory for the Group s 2007 financial statements, will require extensive additional disclosures with respect to the Group s financial instruments and share capital. These standards do not have any impact on the recognition and measurement of the Group s financial statements. INT FRS 110 prohibits the reversal of an impairment loss recognised in an interim period during the financial year in respect of goodwill, an investment in an equity instrument or a financial asset carried at cost. INT FRS 110 will become mandatory for the Group s 2007 financial statements, and will apply to goodwill, investments in equity instruments, and financial assets carried at cost prospectively from the date the Group first applied the measurement criteria of FRS 36 and FRS 39 respectively (i.e. 1 January 2005). The adoption of INT FRS 110 is not expected to have a material impact on the Group s financial statements. Other than FRS 40 and INT FRS 110, the initial application of these 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. FS-184

308 Registration Number: N 2007 First Quarter Financial Statements Announcement The following information is the announcement made by CapitaLand Limited on 27 April 2007 in respect of its financial results for the periods ended 31 March 2007 and 31 March The consolidated financial statements for the three months ended 31 March 2007 and 31 March 2006 have not been audited or subject to review by the auditors of the Group. Investors should accordingly not place undue reliance on the unaudited consolidated financial statements for the three months ended 31 March 2007 and 31 March FS-185

309 CAPITALAND LIMITED 2007 FIRST QUARTER FINANCIAL STATEMENTS ANNOUNCEMENT 1(a)(i) Income Statement Group Note 1Q 2007 S 1Q 2006 S (restated) % Change Revenue A 637, ,651 (3.3) Cost of sales A (420,893) (505,230) (16.7) Gross profit 216, , Other operating income B 651, , Administrative expenses C (95,990) (91,183) 5.3 Other operating expenses D (3,124) (696) Profit from operations 768, , Finance costs (91,103) (70,073) 30.0 Share of results (net of tax) of: - associates 26,479 28,763 (7.9) - jointly-controlled entities 24,199 11, E 50,678 40, Profit before taxation 728, , Taxation F (37,624) (11,484) Profit after taxation 690, , Attributable to: Equity holders of the Company ( PATMI ) G 608, , Minority interests (MI) 82,605 12, , , Note : The comparative income statement for 1Q 2006 had been restated to take into account the retrospective adjustments relating to FRS 16 Property, Plant and Equipment. Please refer to Note 4. FS-186