S$1,500,000,000 Medium Term Note Programme (the MTN Programme )

Transcription

1 CITY DEVELOPMENTS LIMITED INFORMATION MEMORANDUM DATED 29 DECEMBER 2008 (Incorporated in the Republic of Singapore on 7 September 1963) (Company Registration No Z) S$1,500,000,000 Medium Term Note Programme (the MTN Programme ) This Information Memorandum has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this Information Memorandum and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of notes (the Notes ) to be issued from time to time by City Developments Limited (the Issuer ) pursuant to the MTN Programme may not be circulated or distributed, nor may the Notes 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 pursuant to Section 275(1), or any person pursuant to Section 275(1A), 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 provision of the SFA. Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is: (a) (b) 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 whom 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 transferred within six months after that corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except: (1) to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust 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, and further for corporations, in accordance with the conditions specified in Section 275 of the SFA; (2) where no consideration is or will be given for the transfer; or (3) where the transfer is by operation of law. Application has been made to the Singapore Exchange Securities Trading Limited (the SGX-ST ) for permission to deal in and quotation for any Notes which are agreed at the time of issue thereof to be so listed on the SGX- ST. Such permission will be granted when such Notes have been admitted to the Official List of the SGX-ST. The SGX-ST assumes no responsibility for the correctness of any of the statements made or opinions expressed or reports contained herein. Admission to the Official List of the SGX-ST and quotation of any Notes on the SGX-ST is not to be taken as an indication of the merits of the Issuer, its subsidiaries, its associated companies (if any), the MTN Programme or such Notes. Arranger

2 TABLE OF CONTENTS NOTICE... 1 Page FORWARD LOOKING STATEMENTS... 4 DEFINITIONS... 5 CORPORATE INFORMATION... 8 SUMMARY OF THE MTN PROGRAMME VARIATION IN TERMS FOR FUTURE TRANCHES OR SERIES OF NOTES TERMS AND CONDITIONS OF THE NOTES THE ISSUER RISK FACTORS PURPOSE OF THE MTN PROGRAMME AND USE OF PROCEEDS CLEARING AND SETTLEMENT UNDER THE DEPOSITORY SYSTEM SINGAPORE TAXATION SUBSCRIPTION, PURCHASE AND DISTRIBUTION APPENDICES I: GENERAL AND OTHER INFORMATION II: III: IV: AUDITED ACCOUNTS OF CITY DEVELOPMENTS LIMITED AND ITS SUBSIDIARIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER AUDITED ACCOUNTS OF CITY DEVELOPMENTS LIMITED AND ITS SUBSIDIARIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER UNAUDITED FINANCIAL STATEMENTS OF CITY DEVELOPMENTS LIMITED AND ITS SUBSIDIARIES FOR THE SECOND QUARTER AND HALF YEAR ENDED 30 JUNE V: UNAUDITED FINANCIAL STATEMENTS OF CITY DEVELOPMENTS LIMITED AND ITS SUBSIDIARIES FOR THE THIRD QUARTER AND NINE MONTHS ENDED 30 SEPTEMBER

3 NOTICE DBS Bank Ltd. (the Arranger ) has been appointed pursuant to the Supplemental Programme Agreement (as defined herein) by the Issuer as the arranger of the MTN Programme described herein following the retirement of Citicorp Investment Bank (Singapore) Limited as the arranger of the MTN Programme under the Programme Agreement on 12 December Under the MTN Programme, the Issuer may, subject to compliance with all relevant laws, regulations and directives, from time to time issue Notes denominated in Singapore dollars and/or any other currencies. The Issuer, having made all reasonable enquiries, confirms that this Information Memorandum contains all information with regard to the Issuer and its subsidiaries which is material in the context of the MTN Programme and the issue and offering of the Notes, the information contained in this Information Memorandum is true and accurate in all material respects and there are no other facts the omission of which in the context of the issue and offer of the Notes would make any such information misleading in any material respect. Notes may be issued in series having one or more issue dates and the same maturity date, bearing interest on the same basis and on identical terms, except in relation to interest commencement dates, issue prices and related matters. Each series may be issued in one or more tranches on the same or different issue dates. The Notes may be issued in bearer or registered form and may be listed on a stock exchange. Subject to compliance with all relevant laws, regulations and directives, the Notes may have maturities from three months to 10 years (or such other longer period as may be agreed between the Issuer and the relevant Dealers (as defined herein)) from their respective issue dates and may be subject to redemption or purchase in whole or in part. The Notes will bear interest at a fixed, floating or variable rate and may be repayable at par, at a specified amount above or below par or at an amount determined by reference to a formula, in each case with terms as specified in the Pricing Supplement (as defined herein) issued in relation to each series or tranche of Notes. Details applicable to each series or tranche of Notes will be specified in the applicable Pricing Supplement which is to be read in conjunction with this Information Memorandum. The maximum aggregate principal amount of the Notes to be issued, when added to the aggregate principal amount of all Notes outstanding (as defined in the Trust Deed referred to below) shall be S$1,500,000,000 (or its equivalent in any other currencies) or such higher amount as may be agreed between the Issuer and the Arranger. No person has been authorised to give any information or to make any representation other than those contained in this Information Memorandum and, if given or made, such information or representation must not be relied upon as having been authorised by the Issuer, the Arranger or any of the Dealers. The delivery or dissemination of this Information Memorandum at any time after the date of this Information Memorandum does not imply that the information contained in this Information Memorandum or any part of this Information Memorandum is correct at any time after such date. Save as expressly stated in this Information Memorandum, nothing contained herein is, or may be relied upon as, a promise or representation as to the future performance or policies of the Issuer or any of its subsidiaries or associated companies (if any). Neither this Information Memorandum nor any other document or information (or any part thereof) delivered or supplied under or in relation to the MTN Programme may be used for the purpose of, and does not constitute an offer of, or solicitation or invitation by or on behalf of the Issuer, the Arranger or any of the Dealers to subscribe for or purchase, the Notes in any jurisdiction or under any circumstances in which such offer, solicitation or invitation is unlawful, or not authorised or to any person to whom it is unlawful to make such offer, solicitation or invitation. The distribution and publication of this Information Memorandum or any such other document or information and the offer of the Notes in certain jurisdictions may be restricted by law. Persons who distribute or publish this Information Memorandum or any such other document or information or into whose possession this Information Memorandum or any such other document or information comes are required to inform themselves about and to observe any such restrictions and all applicable laws, orders, rules and regulations. 1

4 The Notes have not been, and will not be, registered under the Securities Act (as defined herein) and includes Notes in bearer form that are subject to U.S. tax law requirements. Subject to certain exceptions, the Notes may not be offered, sold or delivered within the United States or to U.S. persons. Neither this Information Memorandum nor any other document or information (or any part thereof) delivered or supplied under or in relation to the MTN Programme shall be deemed to constitute an offer of, or an invitation by or on behalf of the Issuer, the Arranger or any of the Dealers to subscribe for or purchase, any of the Notes. This Information Memorandum and any other documents or materials in relation to the issue, offering or sale of the Notes have been prepared solely for the purpose of the initial sale by the relevant Dealers of the Notes from time to time to be issued pursuant to the MTN Programme. This Information Memorandum and such other documents or materials are made available to the recipients thereof solely on the basis that they are persons falling within the ambit of Section 274 and/or Section 275 of the SFA and may not be relied upon by any person other than persons to whom the Notes are sold or with whom they are placed by the relevant Dealers as aforesaid or for any other purpose. Recipients of this Information Memorandum shall not reissue, circulate or distribute this Information Memorandum or any part thereof in any manner whatsoever. Neither the delivery of this Information Memorandum (or any part thereof) or the issue, offering, purchase or sale of the Notes shall, under any circumstances, constitute a representation, or give rise to any implication, that there has been no change in the prospects, results of operations or general affairs of the Issuer or any of its subsidiaries or associated companies (if any) or in the information herein since the date hereof or the date on which this Information Memorandum has been most recently amended or supplemented. The Arranger and the Dealers have not separately verified the information contained in this Information Memorandum. None of the Issuer, the Arranger, any of the Dealers or any of their respective officers or employees is making any representation or warranty expressed or implied as to the merits of the Notes or the subscription for, purchase or acquisition thereof, the creditworthiness or financial condition or otherwise of the Issuer or its subsidiaries or associated companies (if any). Further, none of the Arranger and the Dealers makes any representation or warranty as to the Issuer, its subsidiaries or associated companies (if any) or as to the accuracy, reliability or completeness of the information set out herein (including the legal and regulatory requirements pertaining to Sections 274, 275 and 276 or any other provisions of the SFA) and the documents which are incorporated by reference in, and form part of, this Information Memorandum. Neither this Information Memorandum nor any other document or information (or any part thereof) delivered or supplied under or in relation to the MTN Programme or the issue of the Notes is intended to provide the basis of any credit or other evaluation and should not be considered as a recommendation by the Issuer, the Arranger or any of the Dealers that any recipient of this Information Memorandum or such other document or information (or such part thereof) should subscribe for or purchase any of the Notes. A prospective purchaser shall make its own assessment of the foregoing and other relevant matters including the financial condition and affairs and the creditworthiness of the Issuer and its subsidiaries and associated companies (if any), and obtain its own independent legal or other advice thereon, and its investment shall be deemed to be based on its own independent investigation of the financial condition and affairs and its appraisal of the creditworthiness of the Issuer. Accordingly, notwithstanding anything herein, none of the Issuer, the Arranger, any of the Dealers or any of their respective officers, employees or agents shall be held responsible for any loss or damage suffered or incurred by the recipients of this Information Memorandum or such other document or information (or such part thereof) as a result of or arising from anything expressly or implicitly contained in or referred to in this Information Memorandum or such other document or information (or such part thereof) and the same shall not constitute a ground for rescission of any purchase or acquisition of any of the Notes by a recipient of this Information Memorandum or such other document or information (or such part thereof). 2

5 The following documents published or issued from time to time after the date hereof shall be deemed to be incorporated by reference in, and to form part of, this Information Memorandum: (1) any annual reports or audited consolidated accounts and any publicly available unaudited consolidated interim financial statements of the Issuer and its subsidiaries and associated companies (if any), (2) any supplement or amendment to this Information Memorandum issued by the Issuer and (3) any public announcements by the Issuer on the SGX-ST. This Information Memorandum is to be read in conjunction with all such documents which are incorporated by reference herein and, with respect to any series or tranche of Notes, any Pricing Supplement in respect of such series or tranche. Any statement contained in this Information Memorandum or in a document deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purpose of this Information Memorandum to the extent that a statement contained in this Information Memorandum or in such subsequent document that is also deemed to be incorporated by reference herein modifies or supersedes such earlier statement (whether expressly, by implication or otherwise). Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Information Memorandum. Copies of all documents deemed incorporated by reference herein are available for inspection at the specified office of the Issuing and Paying Agent (as defined herein). Any purchase or acquisition of the Notes is in all respects conditional on the satisfaction of certain conditions set out in the Programme Agreement and the issue of the Notes by the Issuer pursuant to the Programme Agreement. Any offer, invitation to offer or agreement made in connection with the purchase or acquisition of the Notes or pursuant to this Information Memorandum shall (without any liability or responsibility on the part of the Issuer, the Arranger or any of the Dealers) lapse and cease to have any effect if (for any other reason whatsoever) the Notes are not issued by the Issuer pursuant to the Programme Agreement. The attention of recipients of this Information Memorandum is drawn to the restrictions on resale of the Notes set out under Subscription, Purchase and Distribution on pages 67 to 68 of this Information Memorandum. Any person(s) who is invited to purchase or subscribe for the Notes or to whom this Information Memorandum is sent shall not make any offer or sale, directly or indirectly, of any Notes or distribute or cause to be distributed any document or other material in connection therewith in any country or jurisdiction except in such manner and in such circumstances as will result in compliance with any applicable laws and regulations. It is recommended that persons proposing to subscribe for or purchase any of the Notes consult their own legal and other advisers before purchasing or acquiring the Notes. 3

6 FORWARD-LOOKING STATEMENTS All statements contained in this Information Memorandum that are not statements of historical fact constitute forward-looking statements. Some of these statements can be identified by forward-looking terms such as expect, believe, plan, intend, estimate, anticipate, may, will, would and could or similar words. However, these words are not the exclusive means of identifying forward-looking statements. All statements regarding the expected financial position, business strategy, plans and prospects of the Issuer and/or the Group (including statements as to the Issuer s and/or the Group s revenue and profitability, prospects, future plans and other matters discussed in this Information Memorandum regarding matters that are not historical fact and including the financial forecasts, profit projections, statements as to the expansion plans of the Issuer and/or the Group, expected growth in the Issuer and/or the Group and other related matters), if any, are forward-looking statements and accordingly, are only predictions. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Issuer and/or the Group to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors are discussed in greater detail under the section Risk Factors. Given the risks and uncertainties that may cause the actual future results, performance or achievements of the Issuer or the Group to be materially different from the results, performance or achievements expected, expressed or implied by the financial forecasts, profit projections and forward-looking statements in this Information Memorandum, undue reliance must not be placed on those forecasts, projections and statements. The Issuer, the Arranger and the Dealers do not represent or warrant that the actual future results, performance or achievements of the Issuer or the Group will be as discussed in those statements. Neither the delivery of this Information Memorandum nor the issue of any Notes by the Issuer shall under any circumstances constitute a continuing representation or create any suggestion or implication that there has been no change in the affairs of the Issuer, the Group or any statement of fact or information contained in this Information Memorandum since the date of this Information Memorandum. Further, the Issuer, the Group, the Arranger and the Dealers disclaim any responsibility, and undertake no obligation, to update or revise any forward-looking statements contained herein to reflect any changes in the expectations with respect thereto after the date of this Information Memorandum or to reflect any change in events, conditions or circumstances on which any such statements are based. 4

7 DEFINITIONS The following definitions have, where appropriate, been used in this Information Memorandum: Agency Agreement : In relation to a Series or Tranche, the agency agreement made between (1) the Issuer, as issuer, (2) the Issuing and Paying Agent, the Agent Bank and the Registrar, and (3) the Trustee, as trustee, as amended, varied or supplemented from time to time. Agent Bank : In relation to a Series or Tranche, the person specified as such in the relevant Pricing Supplement and who has executed an agency agreement with the Issuer and the Trustee or any successor Agent Bank. Arranger : DBS Bank Ltd. Business Day : A day (other than Saturday or Sunday) on which commercial banks in Singapore are open for business. CDP : The Central Depository (Pte) Limited. Certificate : A registered certificate representing one or more Notes (in registered form) of the same Series and, save as provided in the Conditions, comprising the entire holding by a Noteholder of his Registered Notes of that Series. Citicorp : Citicorp Investment Bank (Singapore) Limited. Companies Act : The Companies Act, Chapter 50 of Singapore, as amended or modified from time to time. Couponholders : The holders of the Coupons. Coupons : The interest coupons appertaining to an interest bearing definitive Note and includes any replacement Coupons issued pursuant to Condition 12. Dealers : ABN AMRO Bank N.V., Citicorp Investment Bank (Singapore) Limited, DBS Bank Ltd., The Hongkong and Shanghai Banking Corporation Limited, Oversea-Chinese Banking Corporation Limited, and Standard Chartered Bank and such other persons appointed as dealers under the MTN Programme. Directors : The directors (including alternate directors, if any) of the Issuer as at the date of this Information Memorandum. FY : Financial Year ending or ended 31 December. Global Certificate : A Certificate representing Notes (in registered form) of a Series or one or more Tranches of the same Series. Global Note : A global Note representing Notes (in bearer form) of a Series or one or more Tranches of the same Series, being a Temporary Global Note and/or, as the context may require, a Permanent Global Note, in each case without Coupons. 5

8 Group : The Issuer and its subsidiaries. Initial Agency Agreement : The Agency Agreement dated 25 May 1999 made between (1) the Issuer, as issuer, (2) Citicorp, as issuing and paying agent, agent bank and registrar for certain Series or Tranches of Notes, and (3) the Trustee, as trustee, as amended, varied or supplemented from time to time. Issuer : City Developments Limited. Issuing and Paying Agent : In relation to a Series or Tranche, the person specified as such in the relevant Pricing Supplement and who has executed an agency agreement with the Issuer and the Trustee or any successor Issuing and Paying Agent. Listing Manual : The Listing Manual of the SGX-ST. MAS : Monetary Authority of Singapore. MTN Programme : The S$1,500,000,000 (or such higher amount as may be agreed between the Issuer and the Arranger) Medium Term Note Programme of the Issuer. Noteholders : The holders of the Notes. Notes : The notes to be issued by the Issuer in either bearer form or in registered form under the MTN Programme. Permanent Global Note : A Global Note representing Notes (in bearer form) of a Series or one or more Tranches of the same Series, either on issue or upon exchange of interests in a Temporary Global Note. Pounds Sterling : Pounds sterling. Pricing Supplement : In relation to a Tranche or Series, a pricing supplement, to be read in conjunction with this Information Memorandum, specifying the relevant issue details in relation to such Tranche or, as the case may be, Series. Programme Agreement : The Programme Agreement dated 25 May 1999 made between (1) the Issuer, as issuer, (2) Citicorp, as arranger and dealer, relating to the MTN Programme, as amended and supplemented by the Supplemental Programme Agreement and as further amended, varied or supplemented from time to time. Registrar : In relation to a Series or Tranche, the person specified as such in the relevant Pricing Supplement and who has executed an agency agreement with the Issuer and the Trustee or any successor Registrar. Securities Act : Securities Act of 1933 of the United States, as amended. Series : A series of Notes comprising one or more Tranches, whether or not issued on the same date, that (except in respect of the date of the first payment of interest and their issue price) have identical terms on issue and are expressed to have the same series number. 6

9 SFA : Securities and Futures Act, Chapter 289 of Singapore, as amended or modified from time to time. SGX-ST : Singapore Exchange Securities Trading Limited. Shares : Ordinary shares in the capital of the Issuer. subsidiary : Any company which is for the time being a subsidiary (within the meaning of Section 5 of the Companies Act, Chapter 50 of Singapore) of the Issuer. Supplemental Programme : The Supplemental Programme Agreement dated 29 December Agreement 2008 made between (1) the Issuer, as issuer, (2) the Arranger, as arranger and dealer, and (3) the Dealers, as dealers. Supplemental Trust Deed : The Supplemental Trust Deed dated 9 May 2000 made between (1) the Issuer, as issuer, and (2) the Trustee, being supplemental to the Trust Deed. Temporary Global Note : A Global Note representing Notes (in bearer form) of a Series or one or more Tranches of the same Series on issue. Tranche : In relation to a Series, those Notes of such Series that are issued on the same date and in respect of which the first interest payment is identical and at the same issue price. Trust Deed : The Trust Deed dated 25 May 1999 made between (1) the Issuer, as issuer, and (2) the Trustee, as trustee, as amended and supplemented by the Supplemental Trust Deed and as further amended, varied or supplemented from time to time. Trustee : HSBC Institutional Trust Services (Singapore) Limited (formerly known as Bermuda Trust (Singapore) Limited). United States or U.S. : United States of America. S$ or $ and cents : Singapore dollars and cents respectively. US$ or US dollars : United States dollars. or p : Pounds sterling and pence respectively. % : Per cent. Words importing the singular shall, where applicable, include the plural and vice versa, and words importing the masculine gender shall, where applicable, include the feminine and neuter genders. References to persons shall, where applicable, include corporations. Any reference to a time of day in this Information Memorandum shall be a reference to Singapore time unless otherwise stated. Any reference in this Information Memorandum to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defined under the Companies Act or the SFA or any statutory modification thereof and used in this Information Memorandum shall, where applicable, have the meaning ascribed to it under the Companies Act or, as the case may be, the SFA. 7

10 CORPORATE INFORMATION Board of Directors : Kwek Leng Beng Kwek Leng Joo Chee Keng Soon Chow Chiok Chiow Chiok Hock Foo See Juan Kwek Leng Peck Han Vo-Ta Tang See Chim Company Secretaries : Shufen Catherine Shufen Loh Enid Ling Peek Fong Registered Office : 36 Robinson Road #04-01 City House Singapore Auditors to the Issuer : KPMG LLP 16 Raffles Quay #22-00 Hong Leong Building Singapore Arranger of the MTN Programme : DBS Bank Ltd. 6 Shenton Way #35-00 DBS Building Tower One Singapore Dealers : ABN AMRO Bank N.V. Level 23, One Raffles Quay South Tower Singapore Citicorp Investment Bank (Singapore) Limited 3 Temasek Avenue #17-00 Centennial Tower Singapore DBS Bank Ltd. 6 Shenton Way #35-00 DBS Building Tower One Singapore The Hongkong and Shanghai Banking Corporation Limited 21 Collyer Quay #03-01 HSBC Building Singapore Oversea-Chinese Banking Corporation Limited 63 Chulia Street #03-05 OCBC Centre Singapore Standard Chartered Bank 6 Battery Road #09-00 Singapore

11 Legal Advisers to the Arranger, Dealers : Lee & Lee and the Trustee 5 Shenton Way #07-00 UIC Building Singapore Legal Advisers to the Issuer : Allen & Gledhill LLP One Marina Boulevard #28-00 Singapore Issuing and Paying Agent, Agent Bank : Citicorp Investment Bank (Singapore) Limited and Registrar under the Initial Agency 300 Tampines Avenue 5 Agreement for the Notes #09-00 Tampines Junction Singapore Trustee for the Noteholders : HSBC Institutional Trust Services (Singapore) Limited (formerly known as Bermuda Trust (Singapore) Limited) 21 Collyer Quay #14-01 HSBC Building Singapore

12 SUMMARY OF THE MTN PROGRAMME The following summary is derived from, and should be read in conjunction with, the full text of this Information Memorandum (and any relevant supplement to this Information Memorandum), the Programme Agreement, the Trust Deed, the Agency Agreement and the relevant Pricing Supplement. Issuer : City Developments Limited. Arranger : DBS Bank Ltd. Dealers : ABN AMRO Bank N.V., Citicorp Investment Bank (Singapore) Limited, DBS Bank Ltd., The Hongkong and Shanghai Banking Corporation Limited, Oversea-Chinese Banking Corporation Limited and Standard Chartered Bank and/or such other Dealers as may be appointed by the Issuer in accordance with the Programme Agreement. Issuing and Paying Agent, : In relation to a Series or Tranche, the persons specified as Agent Bank and Registrar such in the relevant Pricing Supplement and who have executed an agency agreement with the Issuer and the Trustee. Trustee : HSBC Institutional Trust Services (Singapore) Limited (formerly known as Bermuda Trust (Singapore) Limited). Description : Medium Term Note Programme. Programme Size : The maximum aggregate principal amount of the Notes outstanding at any time shall be S$1,500,000,000 (or its equivalent in other major convertible currencies) or such higher amount as may be agreed between the Issuer and the Arranger. Currency : Subject to compliance with all relevant laws, regulations and directives, Notes may be issued in Singapore dollars or any other major convertible currency agreed between the Issuer and the relevant Dealer(s). Method of Issue : Notes may be issued from time to time under the MTN Programme on a syndicated or non-syndicated basis and may be distributed by way of private placement. Each Series may be issued in one or more Tranches, on the same or different issue dates. The specific terms of each Series or Tranche will be specified in the relevant Pricing Supplement. Issue Price : Notes may be issued at par or at a discount, or premium, to par. Maturities : Subject to compliance with all relevant laws, regulations and directives, Notes may have maturities from three months to 10 years (or such longer period as may be agreed between the Issuer and the relevant Dealer) from their respective issue dates. Mandatory Redemption : Unless previously redeemed or purchased and cancelled, each Note will be redeemed at its redemption amount on the maturity date shown on its face. 10

13 Interest Basis : Notes may bear interest at fixed, floating or variable rates. Fixed Rate Notes : Fixed Rate Notes will bear a fixed rate of interest which will be payable in arrear on specified dates and at maturity. Floating Rate Notes : Floating Rate Notes which are denominated in Singapore dollars will bear interest to be determined separately for each Series by reference to S$ SIBOR or S$ SWAP RATE (or such other benchmark as may be agreed between the Issuer and the relevant Dealer(s)), as adjusted for any applicable margin. Interest periods in relation to the Floating Rate Notes will be agreed between the Issuer and the relevant Dealer(s) prior to their issue. Floating Rate Notes which are denominated in other currencies will bear interest to be determined separately for each Series by reference to such other benchmark as may be agreed between the Issuer and the relevant Dealer(s). Variable Rate Notes : Variable Rate Notes will bear interest at a variable rate determined in accordance with the terms and conditions of the Notes. Interest periods in relation to the Variable Rate Notes will be agreed between the Issuer and the relevant Dealer(s) prior to their issue. Form and Denomination of Notes : The Notes will be issued in bearer form or in registered form only and in such denominations as may be agreed between the Issuer and the relevant Dealer(s). Each Tranche or Series of Notes may initially be represented either (a) by a Temporary Global Note exchangeable for definitive Notes or for a Permanent Global Note which will be exchangeable as described therein for definitive Notes, (b) by a Permanent Global Note which will be exchangeable as described therein for definitive Notes or (c) by a Global Certificate exchangeable for further Certificates against transfers of the underlying Notes in registered form. Custody of the Notes : Notes which are to be listed on the SGX-ST may be cleared through CDP. Notes which are to be cleared through CDP are required to be kept with CDP as authorised depository. Status of the Notes : The Notes and Coupons of all Series will constitute direct, unconditional and unsecured obligations of the Issuer and will rank pari passu as a single class, without any preference or priority among themselves, and pari passu with all other present and future unsecured obligations (other than subordinated obligations and priorities created by law or by the Trust Deed (if any)) of the Issuer from time to time outstanding. Redemption and Purchase : If so provided on the face of the Note and the relevant Pricing Supplement, Notes may be redeemed (either in whole or in part) prior to their stated maturity at the option of the Issuer and/or the Noteholders. Further, if so provided on the face of the Note and the relevant Pricing Supplement, Notes may be purchased by the Issuer (either in whole or in part) prior to their stated maturity at the option of the Issuer and/or the Noteholders. 11

14 Negative Pledge/Sale, Transfer and : (i) The Issuer has covenanted with the Trustee in the Disposal Covenants Trust Deed that so long as any of the Notes remains outstanding, it shall not, and shall procure that none of its subsidiaries shall: (a) (b) sell, transfer or otherwise dispose of any of the properties described in the Fifth Schedule to the Trust Deed (the Properties ) or any part thereof or any of the Group s interest in any subsidiary which has an interest in any of the Properties; or create or permit to subsist or be created any mortgage, charge, pledge or other security interest over any of the Properties or any part thereof or any of the Group s interest in any subsidiary which has an interest in any of the Properties, Provided that the foregoing restrictions shall not apply to the following sale(s), transfer(s) or disposal(s) of any of the Properties or any part thereof (the Sale Property ) where compliance is made with the following terms and conditions: (1) where the value of the Properties in aggregate (the Properties Value ) at the time of the sale, transfer or disposal is less than S$500,000,000 and the Issuer forthwith nominates a property owned by it or any of its subsidiaries in substitution for the Sale Property (the Replacement Property ) and the value of the Replacement Property shall be equal to or greater than the value of the Sale Property; or (2) where the Properties Value at the time of the sale, transfer or disposal shall exceed S$500,000,000 and: (A) (B) the sale, transfer or disposal of the Sale Property shall not result in the Properties Value after such sale, transfer or disposal being reduced to less than S$500,000,000; or if the sale, transfer or disposal of the Sale Property shall result in the Properties Value after such sale, transfer or disposal being reduced to less than S$500,000,000, the Issuer forthwith nominates a Replacement Property such that the aggregate of the value of the Replacement Property and the Properties Value after such sale, transfer or disposal shall be no less than S$500,000,000, and upon nomination of any Replacement Property in accordance with the Trust Deed, the provisions of Clause 14.01(k) of the Trust Deed shall apply to such Replacement Property as if the same were named in the Fifth Schedule to the Trust Deed and comprised part of the Properties and upon any such sale, transfer or disposal, the Sale Property shall cease to form part of the Properties. 12

15 For the purpose of determining the Properties Value or the value of the Sale Property or the Replacement Property, as the case may be, set out in provisos (1) and (2) above: (I) (II) the Issuer shall, subject as hereinafter provided, be entitled to rely on the valuation thereof by the Issuer, signed on its behalf by a Director and certifying the estimated open market value of such property based on current market conditions. Such valuation by the Issuer shall include a copy of the professional valuation, if any, of such property upon which the valuation of the Issuer is based; and the Trustee shall have the right to require a Professional Valuation to determine such values if the aggregate of the consideration for the sale, transfer or disposal, as the case may be, (the Consideration ) of the Sale Property and the Consideration of every other Sale Property previously sold pursuant to the provisions herein (the Aggregate Consideration ) shall be equal to or exceed S$100,000,000 Provided That no Consideration of any Sale Property shall be included in the computation of the Aggregate Consideration more than once. For the aforesaid purpose, Professional Valuation in relation to any property, shall mean a desktop valuation of the open market value of such property by a reputable independent professional valuer appointed by (and at the expense of) the Issuer and approved by the Trustee. Provided always that the Issuer shall, within 14 Singapore Business Days of entering into such an agreement for the sale, transfer or disposal of any Sale Property hereunder, notify the Trustee of such sale, transfer or disposal and provide the Trustee with the particulars of the Sale Property, the Consideration of the Sale Property and the dates of the agreement and completion of the sale, transfer or disposal, and the Issuer shall certify in the notification to the Trustee whether such sale, transfer or disposal is made pursuant to provisos (1), (2)(A) or (2)(B) above and shall furnish therewith the valuation(s) by the Issuer or the Professional Valuation(s), as the case may be, of the relevant property or properties; further the Issuer shall (upon request of the Trustee) furnish to the Trustee a copy of the announcement (if any) made by the Issuer in respect of the sale, transfer or disposal of the Sale Property. And provided further that Clause 14.01(k) of the Trust Deed shall not prevent the sale, transfer or disposal of any of the Properties or any of the Group s interest in any subsidiary which has an interest in any of the Properties to another subsidiary of the Issuer but, for the avoidance of doubt, such Properties and interest in subsidiaries shall remain subject to the provisions of Clause 14.01(k) of the Trust Deed notwithstanding the sale, transfer or disposal. 13

16 (ii) The Issuer has also covenanted with the Trustee in the Trust Deed that so long as any of the Notes remains outstanding, it shall not, and shall procure that none of its subsidiaries (other than a subsidiary whose shares are listed on any stock exchange ( Listed Subsidiary ) and any subsidiaries of such Listed Subsidiary) shall, create or permit to subsist or be created any mortgage, charge, pledge or other security interest (collectively Charge ) over the whole or any part of its or their respective undertakings, assets, properties or revenues, present or future, where such Charge is given, or is intended to be given, to secure the Issuer s indebtedness in respect of any freely transferable securities (which are or are to be listed on any stock exchange) of, or guaranteed by, the Issuer unless such Charge is forthwith extended equally and rateably to the indebtedness of the Issuer in respect of the Notes. Financial Covenant : The Issuer has covenanted with the Trustee that so long as any of the Notes remains outstanding, it will procure that the aggregate amount from time to time outstanding in respect of all Borrowings (as defined in the Trust Deed) of the Group shall not exceed an amount equal to five times the Adjusted Total of Capital and Reserves (as defined in the Trust Deed) as calculated in accordance with the provisions of the Trust Deed. Events of Default : See Condition 8 of the Notes, subject to amendment and variation as provided in the relevant Pricing Supplement for each Tranche or Series of Notes. Taxation : Payments of principal and interest on the Notes will be made after withholding or deduction for or on account of any taxes or duties of whatever nature imposed by Singapore and which are required by applicable law to be deducted or withheld. The Issuer will not pay any additional amount in respect of any such withholding or deduction. For further details, please see the section on Singapore Taxation herein. Listing : Each Series of the Notes may, if so agreed between the Issuer and the relevant Dealer(s), be listed on the SGX-ST or any stock exchange(s) as may be agreed between the Issuer and the relevant Dealer(s), subject to all necessary approvals having been obtained. Selling Restrictions : For a description of certain restrictions on offers, sales and deliveries of Notes and the distribution of offering material relating to the Notes, see the section on Subscription, Purchase and Distribution below. Further restrictions may apply in connection with any particular Series or Tranche of Notes. Governing Law : The MTN Programme and any Notes issued under the MTN Programme will be governed by, and construed in accordance with, the laws of Singapore. 14

17 VARIATION IN TERMS FOR FUTURE TRANCHES OR SERIES OF NOTES It is intended that with effect from the date of this Information Memorandum, all Tranches or Series of Notes to be issued by the Issuer will contain terms and conditions which are amended (by way of the relevant Pricing Supplement for such Tranche or Series) to reflect the following: (i) (ii) an increase in the cross default threshold appearing in Condition 8(c) and 8(d) of the terms and conditions of the Notes from S$30,000,000 to S$50,000,000; and the deletion of the references to subsidiaries appearing in Condition 8(c) and 8(d) of the terms and conditions of the Notes. Accordingly, the amended Condition 8(c) and Condition 8(d) of all Tranches or Series of Notes to be issued by the Issuer with effect from the date of this Information Memorandum shall be as follows: (c) (d) any liability or indebtedness of the Issuer exceeding in aggregate S$50,000,000 (or its equivalent in any other currency or currencies), being repayable prior to its stated maturity by reason of default and the due date for payment thereof not being extended or any such liability or indebtedness of the Issuer not being repaid at its stated maturity as extended by any grace period permitted under the agreement or other documents evidencing or constituting such indebtedness; or any default by the Issuer in making any payment due under any guarantee or any indemnity given by the Issuer in respect of any obligation, liability or indebtedness having an aggregate outstanding principal amount exceeding S$50,000,000 (or the respective equivalent in any other currency or currencies) provided always that it shall not be an event of default if such refusal or failure is by reason of the Issuer in good faith contesting or disputing any liability under such guarantee or indemnity. 15

18 TERMS AND CONDITIONS OF THE NOTES The following is the text of the terms and conditions that, subject to completion and amendment and as supplemented or varied in accordance with the provisions of the relevant Pricing Supplement, shall be applicable to the Notes in definitive form (if any) issued in exchange for the Global Note(s) representing each Series. Either (i) the full text of these terms and conditions together with the relevant provisions of the Pricing Supplement or (ii) these terms and conditions as so completed, amended, supplemented or varied (and subject to simplification by the deletion of non-applicable provisions), shall be endorsed on such Bearer Notes or on the Certificates relating to such Registered Notes. All capitalised terms that are not defined in these Conditions will have the meanings given to them in the relevant Pricing Supplement. Those definitions will be endorsed on the definitive Notes or Certificates, as the case may be. Unless the context requires otherwise, references in the Conditions to Notes are to the Notes of one Series only, not to all Notes that may be issued under the Programme. The Notes are constituted by a Trust Deed (the Trust Deed ) dated 25 May 1999 made between City Developments Limited (the Issuer ) and Bermuda Trust (Singapore) Limited (the Trustee, which expression shall wherever the context so admits include such company and all other persons for the time being the trustee or trustees of the Trust Deed) as trustee for the Noteholders (as defined below) and (where applicable) with the benefit of a Deed of Covenant (the Deed of Covenant ) dated 25 May 1999 executed by the Issuer in relation to Notes which are represented by Global Notes or Global Certificates that are deposited with The Central Depository (Pte) Limited (the Depository ). The Issuer has entered into an Agency Agreement (the Agency Agreement ) dated 25 May 1999 made between the Issuer, Citicorp Investment Bank (Singapore) Limited as issuing and paying agent (in such capacity, the Issuing and Paying Agent ), as agent bank (in such capacity, the Agent Bank ) and as registrar (in such capacity, the Registrar ) and the Trustee. If a person other than Citicorp Investment Bank (Singapore) Limited is specified in the relevant Pricing Supplement as the Registrar, Issuing and Paying Agent and/or Agent Bank, all references herein to Registrar, Issuing and Paying Agent and Agent Bank shall refer to such other person and all references herein to Agency Agreement shall refer to the agency agreement entered into between such other person, the Issuer and the Trustee as specified in the relevant Pricing Supplement. The provisions in these Conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed. The Noteholders and the holders of the coupons (the Coupons ) appertaining to interest-bearing Notes in bearer form (the Couponholders ) are deemed to have notice of all of the provisions of the Trust Deed and those provisions applicable to them of the Deed of Covenant and the Agency Agreement. Copies of the Trust Deed, the Deed of Covenant and the Agency Agreement are available for inspection at the Specified office of the Issuing and Paying Agent. 1. FORM, DENOMINATION, TITLE AND TRANSFER (a) Form and Denomination (i) The Notes of the Series of which this Note forms part (in these Conditions, the Notes ) are issued in bearer form (the Bearer Notes ) or in registered form (the Registered Notes ) in each case in the Denomination Amount(s) shown hereon. (ii) (iii) (iv) This Note is a Fixed Rate Note, a Floating Rate Note or a Variable Rate Note (depending upon the Interest Basis shown on its face). Bearer Notes are serially numbered and are issued with Coupons attached, save in the case of Notes that do not bear interest in which case references to interest (other than in relation to default interest referred to in Conditions 3(I)(a) and 3(II)(a)) in these Conditions are not applicable. Registered Notes are represented by registered certificates (the Certificates ) and, save as provided in Condition 1 (c)(ii) below, each Certificate shall represent the entire holding of Registered Notes by the same holder. 16

19 (b) Title (i) (ii) (iii) (iv) (v) Subject as set out below, title to the Bearer Notes and the Coupons shall pass by delivery. Title to the Registered Notes shall pass by registration in the register (the Register ) to be kept by the Registrar on behalf of the Issuer. Except as ordered by a court of competent jurisdiction or as required by law, the Issuer, the Trustee, the Issuing and Paying Agent and the Registrar may deem and treat the holder of any Note or Coupon as the absolute owner (whether or not such Note or Coupon shall be overdue and notwithstanding any notice of ownership thereof (or that of the related Certificate) or any writing on it (or on the Certificate representing it) or notice of any loss or theft or forgery of the relevant Note or Coupon (or of the related Certificate) or any express notice to the Issuer, the Trustee, the Issuing and Paying Agent or the Registrar) for the purpose of receiving payment thereof and for all other purposes and no person shall be liable for so treating the holder. For so long as any of the Notes is represented by a Global Note or, as the case may be, a Global Certificate and such Global Note or, as the case may be, Global Certificate is held by the Depository, each person who is for the time being shown in the records of the Depository as the holder of a particular principal amount of such Notes (in which regard any certificate or other document issued by the Depository as to the principal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the Issuer, the Trustee, the Registrar, the Issuing and Paying Agent, the Agent Bank and all other agents of the Issuer as the holder of such principal amount of Notes for all purposes (including, but without limitation, for the purposes of giving notice to the Issuer pursuant to Condition 8) other than with respect to the payment of principal, interest and any other amounts in respect of the Notes, for which purpose the bearer of the Global Note or, as the case may be, the person(s) shown on the Register at the close of business on the Record Date (as defined below) shall be treated by the Issuer, the Trustee, the Registrar, the Issuing and Paying Agent, the Agent Bank and all other agents of the Issuer as the holder of such Notes in accordance with and subject to the terms of the Global Note or, as the case may be, the Global Certificate (and the expressions Noteholder and holder of the Notes and related expressions shall be construed accordingly). Notes which are represented by the Global Note or, as the case may be, the Global Certificate will be transferable only in accordance with the rules and procedures for the time being of the Depository. In these Conditions, Global Note means the relevant Temporary Global Note representing each Series or the relevant Permanent Global Note representing each Series, Global Certificate means the relevant Global Certificate representing each Series, Series means a series of Notes comprising one or more Tranches, whether or not issued on the same date, that (except in respect of the first payment of interest and their issue price) have identical terms on issue and are expressed to have the same series number, Tranche means, in relation to any Series, those Notes of such Series which are issued on the same Issue Date and in respect of which the first interest payment is identical, Noteholder means the bearer of any Bearer Note or the person in whose name a Registered Note is registered (as the case may be) and holder means the bearer of any Bearer Note or Coupon or the person in whose name a Registered Note is registered (as the case may be). Words and expressions defined in the Trust Deed or used in the applicable Pricing Supplement shall have the same meanings where used in these Conditions unless the context otherwise requires or unless otherwise stated and provided that, in the event of inconsistency between the Trust Deed and the applicable Pricing Supplement, the applicable Pricing Supplement will prevail. 17

20 (c) Transfer of Registered Notes (i) One or more Registered Notes may be transferred in whole or in part, by the transferee depositing the Certificate representing such Registered Notes for transfer and registration with the Registrar or its agent, together with the form of transfer endorsed on such Certificate duly completed and executed and any other evidence as the Issuer may reasonably require and subject to the regulations relating to, inter alia, the registration and transfer of Registered Notes set out in the Trust Deed or such other regulations as the Issuer may from time to time reasonably prescribe with the approval of the Trustee (such approval not to be unreasonably withheld). In the case of a transfer of part only of a holding or Registered Notes represented by one Certificate, a new Certificate shall be issued to the transferee in respect of the part transferred and a further new Certificate in respect of the balance of the holding not transferred shall be issued to the transferor. (ii) (iii) (iv) In the case of an exercise of any option by the Issuer or any Noteholder in respect of, or a partial redemption of, a holding of Registered Notes represented by a single Certificate, a new Certificate shall be issued to the holder to reflect the exercise of such option or in respect of the balance of the holding not redeemed. In the case of a partial exercise of an option resulting in Registered Notes of the same holding having different terms, separate Certificates shall be issued in respect of those Notes of that holding that have the same terms. New Certificates shall only be issued against surrender of the existing Certificates to the Issuer. In the case of a transfer of Registered Notes to a person who is already a holder of Registered Notes, a new Certificate representing the enlarged holding shall only be issued against surrender of the Certificate representing the existing holding. Each new Certificate to be issued pursuant to paragraph (c)(i) or (c)(ii) above shall be available for delivery within 30 business days of receipt of the request for exchange, form of transfer or surrender of the Certificate for exchange. Delivery of the new Certificate(s) shall be made at the registered office of the Registrar or at the specified office of its agent or, at the option of the holder making such delivery or surrender as aforesaid and as specified in the relevant request for exchange, form of transfer or otherwise in writing, be mailed by uninsured post at the risk of the holder entitled to the new Certificate to such address as may be so specified, unless such holder requests otherwise and pays in advance to the Issuer the costs of such other method of delivery and/or such insurance as it may specify. Exchange and transfer of Notes and Certificates on registration, transfer, partial redemption or exercise of an option shall be effected at a fee of S$30 for each registration, transfer, redemption or exercise and the Issuer may require the payment of any tax or other governmental charges that may be imposed in relation to it (or the giving of such indemnity as the Issuer may require). (v) No Noteholder may require the transfer of a Registered Note to be registered (1) during the period of seven business days ending on the due date for redemption of that Note, (2) during the period of seven business days before any date on which Notes may be called for redemption by the Issuer at its option pursuant to Condition 4(d), (3) after any such Note has been called for redemption, or (4) during the period of seven days ending on (and including) any Record Date. 2. STATUS The Notes and Coupons of all Series constitute direct, unconditional and unsecured obligations of the Issuer ranking pari passu as a single class without any preference or priority among themselves and ranking pari passu with all other present and future unsecured obligations (other than any subordinated obligations and priorities created by law or the Trust Deed (if any)) of the Issuer from time to time outstanding. 18

21 3. INTEREST AND OTHER CALCULATIONS (I) Interest on Fixed Rate Notes (a) Interest Rate and Accrual Each Fixed Rate Note bears interest on its Calculation Amount (as defined in Condition 3(II)(h)) from the Interest Commencement Date in respect thereof and as shown on the face of such Note at the rate per annum (expressed as a percentage) equal to the Interest Rate shown on the face of such Note payable in arrear on each Reference Date or Reference Dates shown on the face of such Note in each year and on the Maturity Date shown on the face of such Note if that date does not fall on a Reference Date. The first payment of interest will be made on the Reference Date next following the Interest Commencement Date (and, if the Interest Commencement Date is not a Reference Date, will amount to the Initial Broken Amount shown on the face of such Note), unless the Maturity Date falls before the date on which the first payment of interest would otherwise be due. If the Maturity Date is not a Reference Date, interest from the preceding Reference Date (or from the Interest Commencement Date, as the case may be) to (but excluding) the Maturity Date will amount to the Final Broken Amount shown on the face of such Note. Interest will cease to accrue on each Fixed Rate Note from the due date for redemption thereof unless, upon due presentation, payment of principal is improperly withheld or refused or the Notes have been declared due and payable pursuant to Condition 8, in which event interest at such rate will continue to accrue (as well after as before judgment) at the rate and in the manner provided in this Condition 3(I) to (but excluding) the Relevant Date (as defined in Condition 7). If the Issuer fails to pay any sum (including without limitation, any sum payable pursuant to this Condition 3) under or in respect of the Fixed Rate Notes on its due date for payment then the Issuer shall pay interest on such sum from the due date at the rate per annum equivalent to two per cent. above the Interest Rate applicable to such Note (both before and after any judgment) until whichever is the earlier of (i) the date on which all sums due in respect of such Notes up to that day are received by or on behalf of the relevant Noteholders and/or Couponholders and (ii) the day seven days after the Trustee or the Issuing and Paying Agent has notified Noteholders of receipt of all sums due in respect of all the Notes up to that seventh day (except to the extent that there is failure in the subsequent payment to the relevant holders under these Conditions). (b) Calculations In the case of a Fixed Rate Note, interest in respect of a period of less than one year will be calculated on the actual number of days lapsed as from and including the Issue Date or the last Reference Date or the due date for payment (as applicable) on the Fixed Rates Day Basis shown on the face of such Note and rounded upward to the nearest smallest divisible unit of the Relevant Currency (if not already a multiple or such unit) for each Note. (II) Interest on Floating Rate Notes or Variable Rate Notes and other Calculations (a) Interest Payment Dates Each Floating Rate Note or Variable Rate Note bears interest on its Calculation Amount from the Interest Commencement Date in respect thereof and as shown on the face of such Note, and such interest will be payable in arrear on each date ( Interest Payment Date ) which (save as mentioned in these Conditions) falls the number of months specified as the Interest Period (as defined below) on the face of 19

22 such Note (the Specified Number of Months ) after the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the Interest Commencement Date (and which corresponds numerically with such preceding Interest Payment Date or the Interest Commencement Date, as the case may be), provided that the Agreed Yield (as defined in Condition 3(II)(c)) in respect of any Variable Rate Note for any Interest Period relating to that Variable Rate Note shall be payable on the first day of that Interest Period. If any Interest Payment Date would otherwise fall on a day which is not a business day, it shall be postponed to the next day which is a business day unless it would thereby fall into the next calendar month. In any such case as aforesaid or if there is no date in the relevant month which corresponds numerically with the preceding Interest Payment Date or, as the case may be, the Interest Commencement Date (i) the Interest Payment Date shall be brought forward to the immediately preceding business day and (ii) each subsequent Interest Payment Date shall be the last business day of the month which is the last of the Specified Number of Months after the month in which the preceding Interest Payment Date or, as the case may be, the Interest Commencement Date shall have fallen. The period beginning on the Interest Commencement Date and ending on the first Interest Payment Date and each successive period beginning on an Interest Payment Date and ending on the next succeeding Interest Payment Date is herein called an Interest Period. Interest will cease to accrue on each Floating Rate Note or Variable Rate Note from the due date for redemption thereof unless, upon due presentation thereof, payment of principal is improperly withheld or refused or the Notes have been declared due and payable pursuant to Condition 8, in which event interest will continue to accrue (as well after as before judgment) at the rate and in the manner provided in this Condition 3(II) to (but excluding) the Relevant Date. If the Issuer fails to pay any sum (including without limitation, any sum payable pursuant to this Condition 3(II)(a)) under or in respect of the Floating Rate Notes or Variable Rate Notes on its due date for payment then the Issuer shall pay interest on such sum from the due date at the rate per annum equivalent to two per cent. above (in the case of a Floating Rate Note) the Rate of Interest applicable to such Note or (in the case of a Variable Rate Note) the variable rate by which the Agreed Yield applicable to such Note is determined or, as the case may be, the Rate of Interest applicable to such Note (both before and after any judgment) until whichever is the earlier of (i) the date on which all sums due in respect of such Notes up to that day are received by or on behalf of the relevant Noteholders and/or Couponholders and (ii) the day seven days after the Trustee or the Issuing and Paying Agent has notified Noteholders of receipt of all sums due in respect of all the Notes up to that seventh day (except to the extent that there is failure in the subsequent payment to the relevant holders under these Conditions). Interest at the rate(s) determined in accordance with this paragraph shall be calculated on the FRN Day Basis (in the case of a Floating Rate Note) or the VRN Day Basis (in the case of a Variable Rate Note) and the actual number of days elapsed and rounded upward to the nearest smallest divisible unit of the Relevant Currency (if not already a multiple of such unit) for each Note. 20

23 (b) Rate of Interest Floating Rate Notes (i) Each Floating Rate Note bears interest at a floating rate determined by reference to a benchmark as stated on the face of such Floating Rate Note, being (in the case of Notes which are denominated in Singapore dollars) SIBOR (in which case such Note will be a SIBOR Note) or Swap Rate (in which case such Note will be a Swap Rate Note) or (in any other case or in the case of Notes which are denominated in a currency other than Singapore dollars) such other benchmark as is set out on the face of such Note. Such floating rate may be adjusted by adding or subtracting the Spread (if any) stated on the face of such Note. The Spread is the percentage rate per annum specified on the face of such Note as being applicable to the rate of interest for such Note. The rate of interest so calculated shall be subject to paragraph (d) below. The rate of interest payable in respect of a Floating Rate Note from time to time is referred to in these Conditions as the Rate of Interest. (ii) The Rate of Interest payable from time to time in respect of each Floating Rate Note will be determined by the Agent Bank on the basis of the following provisions:- (1) in the case of Floating Rate Notes which are SIBOR Notes:- (A) (B) (C) the Agent Bank will, at or about the Relevant Time (as defined below) on the relevant Interest Determination Date (as defined below) in respect of each Interest Period, determine the Rate of Interest for such Interest Period which shall be the offered rate for deposits in Singapore dollars for a period equal to the duration of such Interest Period which appears on the Reuters Screen MASX Page (or such other replacement page thereof) and as adjusted by the Spread (if any); if no such rate appears on the Reuters Screen MASX Page (or such other replacement page thereof), the Agent Bank will, at or about the Relevant Time on such Interest Determination Date, determine the Rate of Interest for such Interest Period which shall be the rate which appears on Telerate Page 7310 of the Dow Jones Telerate Service (or such other replacement page thereof), being the offered rate for deposits in Singapore dollars for a period equal to the duration of such Interest Period; if no such rate appears on Telerate Page 7310 (or such other replacement page thereof) or such other Screen Page (as defined below) as may be provided hereon or if Telerate Page 7310 (or such other replacement page thereof) or such other Screen Page as may be provided hereon is unavailable for any reason, the Agent Bank will request the principal Singapore offices of each of the Reference Banks (as defined below) to provide the Agent Bank with the rate at which deposits in Singapore dollars are offered by it at approximately the Relevant Time on the Interest Determination Date to prime banks in the Singapore inter-bank market for a period equivalent to the duration of such Interest Period commencing on such Interest Payment Date in an amount comparable to the aggregate principal amount of the relevant 21

24 Floating Rate Notes. The Rate of Interest for such Interest Period shall be the arithmetic mean (rounded up, if necessary, to the nearest four decimal places) of such offered quotations and as adjusted by the Spread (if any), as determined by the Agent Bank; (D) (E) if on any Interest Determination Date two but not all the Reference Banks provide the Agent Bank with such quotations, the Rate of Interest for the relevant Interest Period shall be determined in accordance with (C) above on the basis of the quotations of those Reference Banks providing such quotations; and if on any Interest Determination Date one only or none of the Reference Banks provides the Agent Bank with such quotations, the Rate of Interest for the relevant Interest Period shall be the rate per annum which the Agent Bank determines to be the arithmetic mean (rounded up, if necessary, to the nearest four decimal places) of the rates quoted by the Reference Banks or those of them (being at least two in number) to the Agent Bank at or about the Relevant Time on such Interest Determination Date as being their cost (including the cost occasioned by or attributable to complying with reserves, liquidity, deposit or other requirements imposed on them by any relevant authority or authorities) of funding, for the relevant Interest Period, an amount equal to the aggregate principal amount of the relevant Floating Rate Notes by whatever means they determine to be most appropriate and as adjusted by the Spread (if any) or if on such Interest Determination Date one only or none of the Reference Banks provides the Agent Bank with such quotation, the rate per annum which the Agent Bank determines to be the arithmetic mean (rounded up, if necessary, to the nearest four decimal places) of the prime lending rates for Singapore dollars quoted by the Reference Banks at or about the Relevant Time on such Interest Determination Date and as adjusted by the Spread (if any); (2) in the case of Floating Rate Notes which are Swap Rate Notes:- (A) the Agent Bank will, at or about the Relevant Time on the relevant Interest Determination Date in respect of each Interest Period, determine the Rate of Interest for such Interest Period which shall be the Average Swap Rate for such Interest Period (determined by the Agent Bank as being the rate which appears under the caption ASIAN CURRENCY SWAP OFFER RATE FIXING AT 11 A.M. SINGAPORE TIME and the row headed SGD on Telerate Page of the Dow Jones Telerate Service (or such other page as may replace Telerate Page for the purpose of displaying the swap rates of leading reference banks) at or about the Relevant Time on such Interest Determination Date and for a period equal to the duration of such Interest Period) and as adjusted by the Spread (if any); 22

25 (B) if on any Interest Determination Date, no such rate is quoted on Telerate Page (or such other replacement page as aforesaid) or Telerate Page (or such other replacement page as aforesaid) is unavailable for any reason, the Agent Bank will determine the Average Swap Rate (which shall be rounded up, if necessary, to the nearest four decimal places) for such Interest Period in accordance with the following formula:- In the case of Premium:- Average Swap Rate = 365 x SIBOR + (Premium x 36500) 360 (T x Spot Rate) + (SIBOR x Premium) x 365 (Spot Rate) 360 Average Swap Rate = 365 x SIBOR (Discount x 36500) 360 (T x Spot Rate) In the case of Discount:- where:- (SIBOR x Discount) x 365 (Spot Rate) 360 SIBOR = the rate which appears under the caption SINGAPORE INTERBANK OFFER RATES (US$) and the column headed Fixing on Telerate Page 7311 of the Dow Jones Telerate Service (or such other page as may replace Telerate Page 7311 for the purpose of displaying Singapore inter-bank United States dollar offered rates of leading reference banks) at or about the Relevant Time on the relevant Interest Determination Date for a period equal to the duration of the Interest Period concerned; Spot Rate = the rate (determined by the Agent Bank) to be the arithmetic mean (rounded up, if necessary, to the nearest four decimal places) of the rates quoted by the Reference Banks and which appear under the caption SINGAPORE BANKS RATES AT 11 A.M. SGP TIME and the column headed Spot on Telerate Page of the Dow Jones Telerate Service (or such other page as may replace Telerate Page for the purpose of displaying the spot rates and swap points of leading reference banks) at or about the Relevant Time on the relevant Interest Determination Date for a period equal to the duration of the Interest Period concerned; 23

26 Premium or Discount = the rate (determined by the Agent Bank) to be the arithmetic mean (rounded up, if necessary, to the nearest four decimal places) of the rates quoted by the Reference Banks for a period equal to the duration of the Interest Period concerned which appear under the caption SINGAPORE BANKS RATES AT 11 A.M. SGP TIME on Telerate Page of the Dow Jones Telerate Service (or such other page as may replace Telerate Page for the purpose of displaying the spot rates and swap points of leading reference banks) at or about the Relevant Time on the relevant Interest Determination Date for a period equal to the duration of the Interest Period concerned; and T = the number of days in the Interest Period concerned. The Rate of Interest for such Interest Period shall be the Average Swap Rate (as determined by the Agent Bank) and as adjusted by the Spread (if any); (C) if on any Interest Determination Date any one of the components for the purposes of calculating the Average Swap Rate under (B) above is not quoted on the relevant Telerate Page (or such other replacement page as aforesaid) or the relevant Telerate Page (or such other replacement page as aforesaid) is unavailable for any reason, the Agent Bank will request the principal Singapore offices of the Reference Banks to provide the Agent Bank with quotations of their Swap Rates for the Interest Period concerned at or about the Relevant Time on that Interest Determination Date and the Rate of Interest for such Interest Period shall be the Average Swap Rate for such Interest Period (which shall be the rate per annum equal to the arithmetic mean (rounded up, if necessary, to the nearest four decimal places) of the Swap Rates quoted by the Reference Banks to the Agent Bank) and as adjusted by the Spread (if any). The Swap Rate of a Reference Bank means the rate at which that Reference Bank can generate Singapore dollars for the Interest Period concerned in the Singapore inter-bank market at or about the Relevant Time on the relevant Interest Determination Date and shall be determined as follows:- In the case of Premium:- Average Swap Rate = 365 x SIBOR + (Premium x 36500) 360 (T x Spot Rate) + (SIBOR x Premium) x 365 (Spot Rate)

27 In the case of Discount:- Average Swap Rate = 365 x SIBOR (Discount x 36500) 360 (T x Spot Rate) where:- (SIBOR x Discount) x 365 (Spot Rate) 360 SIBOR = the rate per annum at which United States dollar deposits for a period equal to the duration of the Interest Period concerned are being offered by that Reference Bank to prime banks in the Singapore inter-bank market at or about the Relevant Time on the relevant Interest Determination Date; Spot Rate = the rate at which that Reference Bank sells United States dollars spot in exchange for Singapore dollars in the Singapore inter-bank market at or about the Relevant Time on the relevant Interest Determination Date; Premium = the premium that would have been paid by that Reference Bank in buying United States dollars forward in exchange for Singapore dollars on the last day of the Interest Period concerned in the Singapore inter-bank market; Discount = the discount that would have been received by that Reference Bank in buying United States dollars forward in exchange for Singapore dollars on the last day of the Interest Period concerned in the Singapore inter-bank market; and T = the number of days in the Interest Period concerned; and (D) if on any Interest Determination Date one only or none of the Reference Banks provides the Agent Bank with quotations of their Swap Rate(s), the Average Swap Rate shall be determined by the Agent Bank to be the rate per annum equal to the arithmetic mean (rounded up, if necessary, to the nearest four decimal places) of the rates quoted by the Reference Banks or those of them (being at least two in number) to the Agent Bank at or about the Relevant Time on such Interest Determination Date as being their cost (including the cost occasioned by or attributable to complying with reserves, liquidity, deposit or other requirements imposed on them by any relevant authority or authorities) of funding, for the relevant Interest Period, an amount equal to the aggregate principal amount of the relevant Floating Rate Notes by whatever means they determine to be most appropriate and the Rate of Interest for the 25

28 relevant Interest Period shall be the Average Swap Rate (as so determined by the Agent Bank) and as adjusted by the Spread (if any), or if on such Interest Determination Date one only or none of the Reference Banks provides the Agent Bank with such quotation, the Rate of Interest for the relevant Interest Period shall be the rate per annum equal to the arithmetic mean (rounded up, if necessary, to the nearest four decimal places) of the prime lending rates for Singapore dollars quoted by the Reference Banks at or about the Relevant Time on such Interest Determination Date and as adjusted by the Spread (if any); and (3) in the case of Floating Rate Notes which are not SIBOR Notes or Swap Rate Notes or which are denominated in a currency other than Singapore dollars, the Agent Bank will determine the Rate of Interest in respect of any Interest Period at or about the Relevant Time on the Interest Determination Date in respect of such Interest Period as follows:- (A) if the Primary Source for the Floating Rate as stated on the face of such Note is a Screen Page, subject as provided below, the Rate of Interest in respect of such Interest Period shall be:- (aa) (bb) the Relevant Rate (as defined below) (where such Relevant Rate on such Screen Page is a composite quotation or is customarily supplied by one entity); or the arithmetic mean of the Relevant Rates of the persons whose Relevant Rates appear on that Screen Page, in each case appearing on such Screen Page at the Relevant Time on the Interest Determination Date; (B) (C) if the Primary Source for the Floating Rate as stated on the face of such Note is Reference Banks or if paragraph (b)(ii)(3)(a)(aa) applies and no Relevant Rate appears on the Screen Page at the Relevant Time on the Interest Determination Date or if paragraph (b)(ii)(3)(a)(bb) applies and fewer than two Relevant Rates appear on the Screen Page at the Relevant Time on the Interest Determination Date, subject as provided below, the Rate of Interest shall be the rate per annum which the Agent Bank determines to be the arithmetic mean (rounded up, if necessary, to the nearest four decimal places) of the Relevant Rates that each of the Reference Banks is quoting to leading banks in the Relevant Financial Centre (as defined below) at the Relevant Time on the Interest Determination Date; and if paragraph (b)(ii)(3)(b) applies and the Agent Bank determines that fewer than two Reference Banks are so quoting Relevant Rates, the Rate of Interest shall be the Rate of Interest determined on the previous Interest Determination Date. (iii) On the last day of each Interest Period, the Issuer will pay interest on each Floating Rate Note to which such Interest Period relates at the Rate of Interest for such Interest Period. 26

29 (c) Rate of Interest Variable Rate Notes (i) (ii) Each Variable Rate Note bears interest at a variable rate determined in accordance with the provisions of this paragraph (c). The interest payable in respect of a Variable Rate Note on the first day of an Interest Period relating to that Variable Rate Note is referred to in these Conditions as the Agreed Yield and the rate of interest payable in respect of a Variable Rate Note on the last day of an Interest Period relating to that Variable Rate Note is referred to in these Conditions as the Rate of Interest. The Agreed Yield or, as the case may be, the Rate of Interest payable from time to time in respect of each Variable Rate Note for each Interest Period shall, subject as referred to in paragraph (c)(iv) below, be determined as follows:- (1) not earlier than 9.00 a.m. (Singapore time) on the ninth business day nor later than 3.00 p.m. (Singapore time) on the third business day prior to the commencement of each Interest Period, the Issuer and the Relevant Dealer (as defined below) shall endeavour to agree on the following:- (A) (B) (C) whether interest in respect of such Variable Rate Note is to be paid on the first day or the last day of such Interest Period; if interest in respect of such Variable Rate Note is agreed between the Issuer and the Relevant Dealer to be paid on the first day of such Interest Period, an Agreed Yield in respect of such Variable Rate Note for such Interest Period (and, in the event of the Issuer and the Relevant Dealer so agreeing on such Agreed Yield, the Interest Amounts (as defined below) for such Variable Rate Note for such Interest Period shall be zero); and if interest in respect of such Variable Rate Note is agreed between the Issuer and the Relevant Dealer to be paid on the last day of such Interest Period, a Rate of Interest in respect of such Variable Rate Note for such Interest Period (an Agreed Rate ) and, in the event of the Issuer and the Relevant Dealer so agreeing on an Agreed Rate, such agreed Rate shall be the Rate of Interest for such Variable Rate Note for such Interest Period; and (2) if the Issuer and the Relevant Dealer shall not have agreed either an Agreed Yield or an Agreed Rate in respect of such Variable Rate Note for such Interest Period by 3.00 p.m. (Singapore time) on the third business day prior to the commencement of such Interest Period, or if there shall be no Relevant Dealer during the period for agreement referred to in (1) above, the Rate of Interest for such Variable Rate Note for such Interest Period shall automatically be the rate per annum equal to the Fall Back Rate (as defined below) for such Interest Period. (iii) The Issuer has undertaken to the Issuing and Paying Agent, the Agent Bank and the Trustee that it will as soon as possible after the Agreed Yield or, as the case may be, the Agreed Rate in respect of any Variable Rate Note is determined but not later than a.m. (Singapore time) on the next following business day:- (1) notify the Issuing and Paying Agent and the Agent Bank of the Agreed Yield or, as the case may be, the Agreed Rate for such Variable Rate Note for such Interest Period; and 27

30 (2) cause such Agreed Yield or, as the case may be, Agreed Rate for such Variable Rate Note to be notified by the Agent Bank to the relevant Noteholder and the Trustee upon request. (iv) For the purposes of sub-paragraph (ii) above, the Rate of Interest for each Interest Period for which there is neither an Agreed Yield nor Agreed Rate in respect of any Variable Rate Note(s) or no Relevant Dealer in respect of the Variable Rate Note(s) shall be the rate (the Fall Back Rate ) determined by reference to a benchmark as stated on the face of such Variable Rate Note(s), being (in the case of Variable Rate Notes which are denominated in Singapore dollars) SIBOR (in which case such Variable Rate Note(s) will be SIBOR Note(s)) or Swap Rate (in which case such Variable Rate Note(s) will be Swap Rate Note(s)) or (in any other case or in the case of Variable Rate Notes which are denominated in a currency other than Singapore dollars) such other benchmark as is set out on the face of such Variable Rate Note(s). Such rate may be adjusted by adding or subtracting the Spread (if any) stated on the face of such Variable Rate Note(s). The Spread is the percentage rate per annum specified on the face of such Variable Rate Note(s) as being applicable to the rate of interest for such Variable Rate Note(s). The rate of interest so calculated shall be subject to paragraph (d) below. The Fall Back Rate payable from time to time in respect of each Variable Rate Note will be determined by the Agent Bank in accordance with the provisions of Condition 3(II)(b)(ii) above (mutatis mutandis) and references therein to Rate of Interest shall mean Fall Back Rate. (v) If interest is payable in respect of a Variable Rate Note on the first day of an Interest Period relating to such Variable Rate Note, the Issuer will pay the Agreed Yield applicable to such Variable Rate Note for such Interest Period on the first day of such Interest Period. If interest is payable in respect of a Variable Rate Note on the last day of an Interest Period relating to such Variable Rate Note, the Issuer will pay the Interest Amounts for such Variable Rate Note for such Interest Period on the last day of such Interest Period. (d) Determination of Rate of Interest and Calculation of Interest Amounts and Redemption Amounts The Agent Bank will, as soon as practicable after the Relevant Time on each Interest Determination Date or such other time on such date as the Agent Bank may be required to calculate any Redemption Amount in respect of any Notes, determine the Rate of Interest and calculate the amount of interest payable (the Interest Amounts ) in respect of each Calculation Amount of the relevant Floating Rate Notes or Variable Rate Notes for the relevant Interest Period or calculate the Redemption Amount in respect of such Notes. The Interest Amounts shall be calculated by applying the Rate of Interest to the Calculation Amount, multiplying such product by the actual number of days in the Interest Period concerned (including the first, but excluding the last, day of such Interest Period), divided by the FRN Day Basis or, as the case may be, VRN Day Basis shown on the face of such Note and rounding the resultant figure upward to the nearest smallest divisible unit of the Relevant Currency (if not already a multiple of such unit). The determination of the Rate of Interest, the Interest Amounts and the Redemption Amount by the Agent Bank shall (in the absence of manifest error) be final and binding upon all parties. 28

31 (e) Notification of Rate of Interest and Interest Amounts The Agent Bank will cause the Rate of Interest and the Interest Amounts for each Interest Period and the relevant Interest Payment Date and, if required to be calculated, the Redemption Amount to be notified to the Issuing and Paying Agent, the Issuer and the Trustee and (in the case of Floating Rate Notes) to be notified to Noteholders in accordance with Condition 15 as soon as possible after their determination but in no event later than the second business day thereafter. The Interest Amounts and the Interest Payment Date so notified may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) in the event of an extension or shortening of the Interest Period in accordance with the provisions hereof, with similar arrangements, mutatis mutandis, for notification. If the Floating Rate Notes or, as the case may be, Variable Rate Notes become due and payable under Condition 8, the Rate of Interest and Interest Amounts payable in respect of the Floating Rate Notes or, as the case may be, Variable Rate Notes shall nevertheless continue to be calculated as previously in accordance with this Condition but no publication of the Rate of Interest and Interest Amounts need to be made (other than to the Noteholders at their request). (f) (g) (h) Determination or Calculation by the Trustee The Trustee shall (if the Agent Bank does not at any material time determine the Rate of Interest or calculate any Interest Amounts or Redemption Amount), without liability on its part, determine or procure the determination or calculation of such Rate of Interest, Interest Amounts or Redemption amount in accordance with the provisions of this Condition 3. In doing so, the Trustee shall apply the foregoing provisions of this Condition, with any necessary consequential amendments, to the extent that, in its opinion, it can do so, and, in all other respects, it shall do so in such manner as it shall deem fair and reasonable in all the circumstances. Agent Bank and Reference Banks The Issuer will procure that, so long as any Floating Rate Note or Variable Rate Note remains outstanding, there shall for the purpose of determining the Rate of Interest applicable to such Notes and calculating the Interest Amounts at all time be three Reference Banks and an Agent Bank. If any Reference Bank (acting through its relevant office) is unable or unwilling to continue to act as a Reference Bank or the Agent Bank is unable or unwilling to act as such or if the Agent Bank fails duly to establish the Rate of Interest for any Interest Period or to calculate the Interest Amounts or the Redemption Amount, the Issuer will, with the prior approval of the Trustee (such approval not to be unreasonably withheld), appoint the Singapore office of some other reputable bank, merchant bank or financial institution to act as such in its place. The Agent Bank may not resign its duties without a successor having been appointed as aforesaid. Definitions As used in these Conditions:- Benchmark means the rate specified as such in the relevant pricing Supplement; business day means:- (i) (ii) (in the case of Notes denominated in Singapore dollars) a day (other than a Saturday or Sunday) on which commercial banks are open for business in Singapore; and (in the case Notes denominated in a currency other than Singapore dollars), a day (other than a Saturday or Sunday) on which commercial banks and foreign exchange markets are open for business in the principal financial centre for that currency; 29

32 Calculation Amount means the amount specified as such on the face of any Note or, if no such amount is so specified, the Denomination Amount of such Note as shown on the face thereof; Interest Commencement Date means the Issue Date or such other date as may be specified as the Interest Commencement Date on the face of such Note; Interest Determination Date means, in respect of any Interest Period, the day falling such number of business days prior to the first day of such Interest Period as is set out in the applicable Pricing Supplement or on the face of the relevant Note; Reference Banks means the institutions specified as such hereon or, if none, three major banks selected by the Agent Bank in consultation with the Issuer in the interbank market that is most closely connected with the Benchmark; Relevant Currency means the currency in which the Notes are denominated; Relevant Dealer means, in respect of any Variable Rate Note, the Dealer party to the Programme Agreement referred to in the Trust Deed with whom the Issuer has concluded an agreement for the issue of such Variable Rate Note pursuant to the Programme Agreement; Relevant Financial Centre means, in the case of interest to be determined on an Interest Determination Date with respect to any Floating Rate Note or Variable Rate Note, the financial centre with which the relevant Benchmark is most closely connected or, if none is so connected, Singapore; Relevant Rate means the Benchmark for a Calculation Amount of the Relevant Currency for a period (if applicable or appropriate to the Benchmark) equal to the relevant Interest Period; Relevant Time means, with respect to any Interest Determination Date, the local time in the Relevant Financial Centre at which it is customary to determine bid and offered rates in respect of deposits in the Relevant Currency in the Inter-bank market in the Relevant Financial Centre; and Screen Page means such page, section, caption, column or other part of a particular information service (including, but not limited to, the Reuters Monitor Money Rates Service ( Reuters ) and the Dow Jones Telerate Service ( Telerate )) as may be specified hereon for the purpose of providing a Relevant Rate, or such other page, section, caption, column or other part as may replace it on that information service or on such other information service, in each case as may be nominated by the person or organisation providing or sponsoring the information appearing there for the purpose of displaying rates or prices comparable to that Relevant Rate. 4. REDEMPTION AND PURCHASE (a) Final Redemption Unless previously redeemed or purchased and cancelled as provided below, this Note will be redeemed at its Redemption Amount on the Maturity Date shown on its face (if this Note is shown on its face to be a Fixed Rate Note) or on the Interest Payment Date falling in the Redemption Month shown on its face (if this Note is shown on its face to be a Floating Rate Note or Variable Rate Note). 30

33 (b) (c) Purchase at the Option of Issuer If so provided hereon, the Issuer shall have the option to purchase all or any of the Fixed Rate Notes, Floating Rate Notes or Variable Rate Notes at their Redemption Amount on any date on which interest is due to be paid on such Notes and the Noteholders shall be bound to sell such Notes to the Issuer accordingly. To exercise such option, the Issuer shall give irrevocable notice to the Noteholders within the Issuer s Purchase Option Period shown on the face hereof. Such Notes may be held, resold or surrendered to the Issuing and Paying Agent for cancellation. The Notes so purchased, while held by or on behalf of the Issuer or any of its related corporations, shall not entitle the holder to vote at any meetings of the Noteholders and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of the Noteholders or for the purposes of Conditions 8 and 11. Purchase at the Option of Noteholders (i) Each Noteholder shall have the option to have all or any of his Variable Rate Notes purchased by the Issuer at their Redemption Amount on any Interest Payment Date and the Issuer will purchase such Variable Rate Notes accordingly. To exercise such option, a Noteholder shall deposit any Variable Rate Notes to be purchased with the Issuing and Paying Agent at its specified office (in the case of Bearer Notes) or the Certificate representing such Variable Rate Notes with the Issuer at its registered office or at the specified office of its agent (in the case of Registered Notes) together with all Coupons relating to such Variable Rate Notes which mature after the date fixed for purchase (in the case of Bearer Notes), together with a duly completed option exercise notice in the form obtainable from the Issuing and Paying Agent or the Issuer (as applicable) within the Noteholders VRN Purchase Option Period shown on the face hereof. Any Variable Rate Notes or Certificates so deposited may not be withdrawn (except as provided in the Trust Deed) without the prior consent of the Issuer. Such Variable Rate Notes may be held, resold or surrendered to the Issuing and Paying Agent for cancellation. The Variable Rate Notes so purchased, while held by or on behalf of the Issuer or any of its related corporations, shall not entitle the holder to vote at any meetings of the Noteholders and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of the Noteholders or for the purposes of Conditions 8 and 11. (ii) If so provided hereon, each Noteholder shall have the option to have all or any of his Fixed Rate Notes or Floating Rate Notes purchased by the Issuer at their Redemption Amount on any date on which interest is due to be paid on such Notes and the Issuer will purchase such Notes accordingly. To exercise such option, a Noteholder shall deposit any Notes to be purchased with the Issuing and Paying Agent at its specified office (in the case of Bearer Notes) or the Certificate representing such Fixed Rate Notes or Floating Rate Notes with the Issuer at its registered office or at the specified office of its agent (in the case of Registered Notes) together with all Coupons relating to such Notes which mature after the date fixed for purchase (in the case of Bearer Notes), together with a duly completed option exercise notice in the form obtainable from the Issuing and Paying Agent or the Issuer (as applicable) within the Noteholders Purchase Option Period shown on the face hereof. Any Notes or Certificates so deposited may not be withdrawn (except as provided in the Trust Deed) without the prior consent of the Issuer. Such Notes may be held, resold or surrendered to the Issuing and Paying Agent for cancellation. The Notes so purchased, while held by or on behalf of the Issuer or any of its related corporations, shall not entitle the holder to vote at any meetings of the Noteholders and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of the Noteholders or for the purposes of Conditions 8 and

34 (d) Redemption at the Option of the Issuer If so provided hereon, the Issuer may, on giving irrevocable notice to the Noteholders falling within the Issuer s Redemption Option Period shown in the face hereof, redeem all or, if so provided, some of the Notes at their Redemption Amount or integral multiples thereof and on the date or dates so provided. Any such redemption of Notes shall be at their Redemption Amount, together with interest accrued to (but excluding) the date fixed for redemption. All Notes in respect of which any such notice is given shall be redeemed on the date specified in such notice in accordance with this Condition. In the case of a partial redemption, the notice to Noteholders shall also contain the certificate numbers of the Notes to be redeemed, which shall have been drawn in such place and in such manner as may be fair and reasonable in the circumstances, taking account of prevailing market practices, subject to compliance with any applicable laws. So long as the Notes are listed on the Stock Exchange of Singapore Limited and the rules of such Stock Exchange so require, the Issuer shall, once in each year in which there has been a partial redemption of the Notes, cause to be published in a leading newspaper of general circulation in Singapore a notice specifying the aggregate principal amount of Notes outstanding and a list of the Notes drawn for redemption but not surrendered. (e) Redemption at the Option of Noteholders If so provided hereon, the Issuer shall, at the option of the holder of any Note, redeem such Note on the date or dates so provided at its Redemption Amount, together with interest accrued to (but excluding) the date fixed for redemption. To exercise such option the holder must deposit (in the case of Bearer Notes) such Note (together with all unmatured Coupons) with the Issuing and Paying Agent at its specified office or (in the case of Registered Notes) the Certificate representing such Note with the Issuer at its registered office or at the specified office of its agent, together with a duly completed option exercise notice in the form obtainable from the Issuing and Paying Agent or the Issuer (as applicable) within the Noteholders Redemption Option Period shown on the face hereof. No Note or Certificate so deposited may be withdrawn (except as provided in the Trust Deed) without the prior consent of the Issuer. (f) Purchases The Issuer and any of its related corporations may at any time and from time to time purchase or otherwise acquire Notes at any price in the open market (provided that they are purchased together with all unmatured Coupons relating to them). The Issuer or any of its related corporations may, at their option, retain such Notes for their own account and/or resell or otherwise deal with them at their discretion. The Issuer may cancel any Notes so acquired and any Notes so purchased and cancelled shall forthwith be surrendered to the Trustee or to its order. (g) Cancellation All Notes purchased by or on behalf of the Issuer or any of its related corporations may be surrendered for cancellation, in the case of Bearer Notes, by surrendering each such Note together with all unmatured Coupons to the Issuing and Paying Agent at its specified office and, in the case of Registered Notes, by surrendering the Certificate representing such Notes to the Issuer at its registered office or at the specified office of its agent and, in each case, if so surrendered, shall, together with all Notes redeemed by the Issuer, be cancelled forthwith (together with all unmatured Coupons attached thereto or surrendered therewith). Any Notes so surrendered for cancellation may not be reissued or resold. 32

35 5. PAYMENTS (a) Principal and Interest (i) Payments of principal and interest in respect of Bearer Notes will, subject as mentioned below, be made against presentation and surrender of the relevant Notes or Coupons, as the case may be, at the specified office of the Issuing and Paying Agent by a cheque drawn in the currency in which payment is due on, or, at the option of the holders, by transfer to an account maintained by the payee in that currency with, a bank in the principal financial centre for that currency. (ii) (1) Payment of principal in respect of Registered Notes shall be made against presentation and surrender of the relevant Certificates representing such Notes at the registered office of the Registrar or its agent and in the manner provided in sub-paragraph (2) below. (2) Interest on Registered Notes shall be paid to the person shown on the Register at the close of business on the seventh business day before the due date for payment thereof (the Record Date ). Payments of interest on each Registered Note shall be made in the currency in which such payments are due by cheque drawn on a bank in the principal financial centre for the currency concerned and mailed to the holder (or to the first named of joint holders) of such Note at its address appearing in the Register. Upon application by the holder to the registered office of the Registrar or its agent before the Record Date, such payment of interest may be made by transfer to an account in the relevant currency maintained by the payee with a bank in the principal financial centre for that currency. (b) (c) Payments subject to law etc. All payments are subject in all cases to any applicable fiscal or other laws, regulations and directives, but without prejudice to the provisions of Condition 6. Appointment of Agents The Issuing and Paying Agent, the Agent Bank and the Registrar initially appointed by the Issuer and their respective specified offices are listed below. The Issuer reserves the right at any time to vary or terminate the appointment of the Issuing and Paying Agent, the Agent Bank or the Registrar and to appoint additional or other Issuing and Paying Agents, Agent Banks and Registrars, provided that it will at all times maintain (i) an Issuing and Paying Agent, (ii) an Agent Bank and (iii) a Registrar where the Conditions so require. Notice of any such change or any change of any specified office will promptly be given to the Noteholders in accordance with Condition 15. The Agency Agreement may be amended by the Issuer, the Issuing and Paying Agent, the Agent Bank, the Registrar and the Trustee, without the consent of the Noteholders provided that such amendment is not, in the opinion of the Trustee, materially prejudicial to the interest of the Noteholders. 33

36 (d) Unmatured Coupons (i) Bearer Notes which are Fixed Rate Notes should be surrendered for payment together with all unmatured Coupons (if any) appertaining thereto, failing which an amount equal to the face value of each missing unmatured Coupon (or, in the case of payment not being made in full, that proportion of the amount of such missing unmatured Coupon which the sum of principal so paid bears to the total principal due) will be deducted from the Redemption Amount due for payment. Any amount so deducted will be paid in the manner mentioned above against surrender of such missing Coupon within a period of five years from the Relevant Date for the payment of such principal (whether or not such Coupon has become void pursuant to Condition 7). (ii) (iii) (iv) Subject to the provisions of the relevant Pricing Supplement, upon the due date for redemption of any Bearer Note which is a Floating Rate Note or Variable Rate Note, unmatured Coupons relating to such Bearer Note (whether or not attached) shall become void and no payment shall be made in respect of them. Where any Bearer Note which is a Floating Rate Note or Variable Rate Note is presented for redemption without all unmatured Coupons relating to it, redemption shall be made only against the provision of such indemnity as the Issuer may require. If the due date for redemption or repayment of any Note is not a due date for payment of interest, or if payment of principal is improperly withheld or refused in respect of such Note, interest accrued from the preceding due date for payment of interest or the Interest Commencement Date, as the case may be, shall only be payable against presentation and enfacement or surrender (as the case may be) of the relevant Note or Certificate representing it, as the case may be. (e) Non-Business Days Subject as provided in the relevant Pricing Supplement, if any date for the payment in respect of any Note or Coupon is not a business day, the holder shall not be entitled to payment until the next following business day and shall not be entitled to any further interest or payment in respect of any such delay. 6. TAXATION Subject as provided below, all payments of principal and interest in respect of the Notes will be made by the Issuer to Noteholders or Couponholders (as the case may be) after deducting or withholding any amounts for or on account of any present or future taxes or duties of whatsoever nature imposed or levied by or on behalf of Singapore or any authority thereof or therein having power to tax, and which are required by applicable law to be deducted or withheld. The Issuer will not pay any additional amount in respect of any such deduction or withholding from payments of principal or interest for or on account of any such taxes or duties. Where the Issuer is not permitted under applicable laws, regulations, directives, guidelines or policies to make payment in respect of the Notes or the Coupons without any such deduction or withholding for or on account of any such taxes, duties, assessments or charges, no payment of principal or interest shall be made by the Issuer to any Noteholder or Couponholder without any such deduction or withholding unless such Noteholder or, as the case may be, Couponholder shall have provided a statutory declaration or other evidence satisfactory to the Issuing and Paying Agent that the beneficial owner of such principal or interest is a resident in Singapore for tax purposes. If requested by the Noteholder or Couponholder, the Issuer shall procure that such person shall be furnished with a certificate specifying the gross amount of principal or interest, the amount of tax withheld or deducted and the net amount of principal or interest. 34

37 7. PRESCRIPTION The Notes and Coupons shall become void unless presented for payment within five years from the appropriate Relevant Date (as defined below) in respect of them. As used in these Conditions, Relevant Date means whichever is later of (i) the date on which payment on the Note or Coupon first becomes due and payable, and (ii) if full payment of such monies has not been received by the Trustee or the Issuing and Paying Agent on or prior to such due date, the date on which full payment of such monies shall have been unconditionally made available to the Trustee or the Issuing and Paying Agent for payment to the Noteholders and notice to that effect shall have been given to the Noteholders in accordance with Condition 15, and references to principal shall be deemed to include any premium payable in respect of the Notes, all Redemption Amounts and all other amounts in the nature of principal payable pursuant to Condition 4 and interest shall be deemed to include all Interest Amounts and all other amounts payable pursuant to Condition 3. Any monies paid by the Issuer to the Issuing and Paying Agent or the Trustee for payment in respect of any Note or any Coupon and remaining unclaimed when such Note or Coupon becomes void shall then be repaid to the Issuer and upon such repayment, all liability of the Issuing and Paying Agent and the Trustee with respect to such monies shall cease. 8. EVENTS OF DEFAULT The Trustee at its discretion may, and if so requested in writing by the Noteholders holding not less than 30 per cent. in principal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution (as defined in the Trust Deed) of the Noteholders shall, subject in the case of the happening of any of the events referred to in paragraphs (b), (c), (d), (f), (g) or (i) of this Condition 8, to the same having also been certified to the Issuer by the Trustee in writing to be in its opinion materially prejudicial to the interests of the Noteholders, by written notice to the Issuer declare the Notes to be, and upon such declaration the Notes shall become, immediately due and repayable at their Redemption Amounts together with accrued interest upon the happening of any of the following events:- (a) (b) (c) (d) default being made by the Issuer for 15 days in the payment of the principal or interest due in respect of any of the Notes as and when the same ought to be paid in accordance with the terms and conditions of the Trust Deed; or the issuer failing to perform or observe any of its other obligations under the Trust Deed and (except where the Trustee considers that such default is not capable of remedy in which case no notice will be required) such failure continuing for a period of 30 days (or such longer period as the Trustee may permit) next following the service by the Trustee on the Issuer of a notice in writing requiring the same to be remedied; or any liability or indebtedness of the Issuer or any of its subsidiaries exceeding in aggregate S$30,000,000 (or its equivalent in any other currency or currencies), being repayable prior to its stated maturity by reason of default and the due date for payment thereof not being extended or any such liability or indebtedness of the Issuer or any of its subsidiaries not being repaid at its stated maturity as extended by any grace period permitted under the agreement or other documents evidencing or constituting such indebtedness; or any default by the Issuer or any of its subsidiaries in making any payment due under any guarantee or any indemnity given by the Issuer or any of its subsidiaries in respect of any obligation, liability or indebtedness having an aggregate outstanding principal amount exceeding S$30,000,000 (or the respective equivalent in any other currency or currencies) provided always that it shall not be an event of default if such refusal or failure is by reason of the Issuer or the subsidiary, as the case may be, in good faith contesting or disputing any liability under such guarantee or indemnity; or 35

38 (e) (f) (g) (h) (i) (j) (k) a resolution being passed or an order of court being made that the Issuer or any of its Principal Subsidiaries (as defined below) be wound up or similar resolutions or orders which are determined by the Trustee to be analogous in effect being made (otherwise than (i) for the purposes of an amalgamation, reorganisation, merger or reconstruction not involving insolvency where either (1) such event does not, in the reasonable opinion of the Trustee, materially and adversely affect the ability of the Issuer to perform or observe its obligations under the Notes and the Trust Deed or (2) the terms whereof have previously been approved by the Trustee (such approval not to be unreasonably withheld) or by an Extraordinary Resolution passed at a meeting of the Noteholders or (ii) in the case only of any Principal Subsidiary, by way of a voluntary winding-up where the surplus assets attributable to the Issuer and/or any other subsidiary are distributed to the Issuer and/or any other subsidiary) and, in the case only of the winding-up of a Principal Subsidiary, such winding-up being certified in writing to the Issuer by the Trustee to be, in its opinion, materially prejudicial to the interests of the Noteholders; or an encumbrancer taking possession or a receiver, trustee, administrator or judicial manager or other similar official being appointed in relation to the whole or any substantial part of the assets or undertaking of the Issuer or any Principal Subsidiary; or a distress or execution or other process being levied or enforced upon or sued out against the whole or any substantial part of the business, undertaking or assets of the Issuer or any Principal Subsidiary and not being discharged within twenty-one (21) days thereof; or the Issuer or any of its Principal Subsidiaries stopping payment or threatening to stop payment of its debts generally or being unable to pay its debts generally or being unable to pay its debts within the meaning of Section 254 of the Companies Act (Cap. 50) of Singapore or admitting its inability to pay its debts or becoming bankrupt or insolvent or ceasing or threatening to cease to carry on its business or a substantial part of its business (other than for the purposes of an amalgamation, consolidation, merger, reorganisation or reconstruction not involving insolvency where either (1) such event does not, in the reasonable opinion of the Trustee, materially and adversely affect the ability of the Issuer to perform or observe its obligations under the Notes and the Trust Deed or (2) the terms of which have been approved by the Trustee, such approval not to be unreasonably withheld); or the whole or a substantial part of the undertaking or assets of the Issuer or any of its Principal Subsidiaries, being requisitioned, nationalised, sequestrated or compulsorily acquired by any competent authority where any such event has a material adverse effect on the financial position of the Group taken as a whole; or any resolution being passed or any application being made to apply for judicial composition proceedings with its creditors or judicial management order; or an order being made by any competent court for such proceedings in relation to the Issuer or any of its Principal Subsidiaries; or it is or will become unlawful at any time for the Issuer to perform all or any of its obligations under the Trust Deed, the Notes and the Coupons. For the purposes of these Conditions, subsidiary has the meaning ascribed to it in Section 5 of the Companies Act (Cap. 50) of Singapore. Principal Subsidiary means, at any particular time, any subsidiary of the Issuer whose total assets, as shown by the then latest audited accounts of such subsidiary, exceed S$300,000,000 Provided That:- (i) if a Principal Subsidiary transfers or otherwise disposes of any part of its assets to another subsidiary of the Issuer or any other person, the total assets of such subsidiaries shall be calculated by reference to the then latest audited balance sheet of each of the transferor and transferee subsidiary (as the case may be) adjusted as appropriate with effect from the date of transfer to reflect the transfer of such assets after the end of the financial period to which the balance sheet relates; and 36

39 (ii) if any subsidiary acquires any assets, the total assets of such subsidiary shall be calculated by reference to its then latest audited balance sheet adjusted as appropriate with effect from the date of acquisition to reflect the acquisition of such assets after the end of the financial period to which the balance sheet relates. 9. ENFORCEMENT At any time after the Notes shall have become due and repayable in accordance with Condition 8, the Trustee may, at its discretion and without further notice, take such proceedings against the Issuer as it may think fit to enforce the payment obligations of the Issuer under the Notes, the Coupons or the Trust Deed, but it shall not be bound to take any such proceedings unless:- (a) (b) it shall have been so directed by an Extraordinary Resolution of the Noteholders or so requested in writing by the holders of at least 30 per cent. in principal amount of the Notes then outstanding; and it shall have been indemnified by the Noteholders to its satisfaction. No Noteholder or Couponholder shall be entitled to proceed directly against the Issuer unless the Trustee, having become bound so to proceed, fails to do so within 45 days and such failure shall be continuing. 10. LIMITATION ON BORROWINGS AND NEGATIVE PLEDGE (a) The Issuer has covenanted with the Trustee that it shall not, and shall procure that none of its subsidiaries shall:- (i) (ii) sell, transfer or otherwise dispose of any of the properties described in the Fifth Schedule of the Trust Deed (the Properties ) or any part thereof or any of the Group s interest in any subsidiary which has an interest in any of the Properties; or create or permit to subsist or be created any mortgage, charge, pledge or other security interest over any of the Properties or any part thereof or any of the Group s interest in any subsidiary which has an interest in any of the Properties; PROVIDED THAT the foregoing restrictions shall not apply to the following sale(s), transfer(s) or disposal(s) of any of the Properties or any part thereof (the Sale Property ) where compliance is made with the following terms and conditions:- (1) where the value of the Properties in aggregate (the Properties Value ) at the time of the sale, transfer or disposal is less than S$500,000,000 and the Issuer forthwith nominates a property owned by it or any of its subsidiaries in substitution for the Sale Property (the Replacement Property ) and the value of the Replacement Property shall be equal to or greater than the value of the Sale Property; or (2) where the Properties Value at the time of the sale, transfer or disposal shall exceed S$500,000,000 and:- (A) (B) the sale, transfer or disposal of the Sale Property shall not result in the Properties Value after such sale, transfer or disposal being reduced to less than S$500,000,000; or if the sale, transfer or disposal of the Sale Property shall result in the Properties Value after such sale, transfer or disposal being reduced to less than S$500,000,000, the Issuer forthwith nominates a Replacement Property such that the aggregate of the value of the Replacement Property and the Properties Value after such sale, transfer or disposal shall be no less than S$500,000,000; 37

40 and upon nomination of any Replacement Property in accordance herewith, the provisions of this covenant shall apply to such Replacement Property as if the same were named in the Fifth Schedule of the Trust Deed and comprised part of the Properties and upon any such sale, transfer or disposal, the Sale Property shall cease to form part of the Properties. For the purpose of determining the Properties Value or the value of the Sale Property or the Replacement Property, as the case may be, set out in the provisos (1) and (2) above:- (I) (II) the Issuer shall, subject as hereinafter provided, be entitled to rely on the valuation thereof by the Issuer, signed on its behalf by a Director of the Issuer and certifying the estimated open market value of such property based on current market conditions. Such valuation by the Issuer shall include a copy of the professional valuation, if any, of such property upon which the valuation of the Issuer is based; and the Trustee shall have the right to require a Professional Valuation to determine such values if the aggregate of the consideration for the sale, transfer or disposal, as the case may be, (the Consideration ) of the Sale Property and the Consideration of every other Sale Property previously sold pursuant to the provisions herein (the Aggregate Consideration ) shall be equal to or exceed S$100,000,000 Provided That no Consideration of any Sale Property shall be included in the computation of the Aggregate Consideration more than once. For the aforesaid purpose, Professional Valuation in relation to any property, shall mean a desktop valuation of the open market value of such property by a reputable independent professional valuer appointed by (and at the expense of) the Issuer and approved by Trustee. PROVIDED ALWAYS THAT the Issuer shall, within 14 Singapore Business Days of entering into an agreement for the sale, transfer or disposal of any Sale Property hereunder, notify the Trustee of such sale, transfer or disposal and provide the Trustee with the particulars of the Sale Property, the Consideration of the Sale Property and the dates of the agreement and completion of the sale, transfer or disposal, and the Issuer shall certify in the notification to the Trustee whether such sale, transfer or disposal is made pursuant to provisos (1), (2)(A), or(2)(b) above and shall furnish therewith the valuation(s) by the Issuer or the Professional Valuation(s), as the case may be, of the relevant property or properties; further the Issuer shall (upon request of the Trustee) furnish to the Trustee a copy of the announcement (if any) made by the Issuer in respect of the sale, transfer or disposal of the Sale Property. AND PROVIDED FURTHER THAT this covenant shall not prevent the sale, transfer or disposal of any of the Properties or any of the Group s interest in any subsidiary which has an interest in any of the Properties or another subsidiary of the Issuer but, for the avoidance of doubt, such Properties and interest in subsidiaries shall remain subject to the provisions of this covenant notwithstanding the sale, transfer or disposal; (b) (c) The Issuer also covenanted with the Trustee that it shall not, and shall procure that none of its subsidiaries (other than a subsidiary whose shares are listed on any stock exchange ( Listed Subsidiary ) and any subsidiaries of such Listed Subsidiary) shall, create or permit to subsist or be created any mortgage, charge, pledge or other security interest (collectively Charge ) over the whole or any part of its or their respective undertakings, assets, properties or revenues, present or future, where such Charge is given, or is intended to be given, to secure the Issuer s indebtedness in respect of any freely transferable securities (which are or are to be listed on any stock exchange) of, or guaranteed by, the Issuer unless such Charge is forthwith extended equally and rateably to the indebtedness of the Issuer in respect of the Notes; and The Issuer has also covenanted with the Trustee, inter alia, that so long as any of the Notes remains outstanding, the Issuer will procure that the aggregate amount from time to time outstanding in respect of all Borrowings of the Group (as defined in the Trust Deed) shall not exceed an amount equal to five times the Adjusted Total of Capital and Reserve (as defined in the Trust Deed) as calculated in accordance with the provisions of the Trust Deed. 38

41 11. MEETING OF NOTEHOLDERS AND MODIFICATIONS The Trust Deed contains provisions for convening meetings of the Noteholders to consider any matter affecting their interests, including modification by Extraordinary Resolution of these Conditions and the Trust Deed. Any resolution (including an Extraordinary Resolution) duly passed at any such meeting shall be binding on all the Noteholders, whether present or not, and on all the Couponholders. In addition, such modifications as may be agreed between the Issuer and the Trustee may be made without the consent of the Noteholders and the Couponholders provided that the Trustee is satisfied that any such modification will not be prejudicial to the interests of the Noteholders or is of a formal, minor or technical nature or is made to correct a manifest error or is to comply with mandatory provisions of Singapore law. The Trustee may, without sanction of the Noteholders so as to be binding on all Noteholders and without prejudice to its rights in respect of any subsequent breach, agree to any waiver of such breach or to authorise any proposed breach by the Issuer of any of the provisions of the Trust Deed, the Notes or the Coupons which, in the opinion of the Trustee, is not materially prejudicial to the interests of the Noteholders. Any such modification, waiver or authorisation shall be binding on the Noteholders and the Couponholders, and, unless the Trustee agrees otherwise, shall be notified to the Noteholders in accordance with Condition 15 as soon as practicable thereafter. In connection with the exercise of its functions (including but not limited to those in relation to any proposed modification, waiver or authorisation) the Trustee shall have regard to the interests of the Noteholders as a class and shall not have regard to the consequences of such exercise for any particular individual Noteholder or Couponholder. These Conditions may be amended, modified, or varied in relation to any Series of Notes by the terms of the relevant Pricing Supplement in relation to such Series. 12. REPLACEMENT OF NOTES, CERTIFICATES AND COUPONS If a Note, Certificate or Coupons is lost, stolen, mutilated, defaced or destroyed, it may be replaced at the specified office of the Issuing and Paying Agent (in the case of Bearer Notes or Coupons) or at the registered office of the Registrar or its agent (in the case of Certificates), or at the specified office of such other Issuing and Paying Agent as may from time to time be designated by the Issuer for the purpose and notice of whose designation is given to Noteholders in accordance with Condition 15 in each case, on payment by the claimant of the costs and expenses (including the fees of the Issuer s agent and the Issuing and Paying Agent) incurred in connection therewith and on such terms as to evidence, security (including, without limitation, an insurance policy) and indemnity (which may provide, inter alia, that if the allegedly lost, stolen or destroyed Note, Certificate or Coupon is subsequently presented for payment, there will be paid to the Issuer on demand the amount payable by the Issuer in respect of such Note, Certificate or Coupon) and otherwise as the Issuer may require. Mutilated or defaced Notes, Certificates or Coupons must be surrendered before replacements will be issued. 13. INDEMNIFICATION OF THE TRUSTEE, ISSUING AND PAYING AGENT, AGENT BANK AND REGISTRAR 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 and any of its subsidiaries without accounting to the Noteholders or the Couponholders for any profit resulting therefrom. 39

42 The Agency Agreement contains provisions for the indemnification of the Issuing and Paying Agent, the Agent Bank and the Registrar under certain circumstances. In acting under the Agency Agreement, the Issuing and Paying Agent, the Agent Bank and the Registrar shall act solely as agents of the Issuer and will not assume any obligation or duty to or relationship of agency or trust for or with any Noteholder or Couponholder. 14. FURTHER ISSUES The Issuer may from time to time without the consent of the Noteholders or Couponholders create and issue further notes having the same terms and conditions as the Notes of any Series and so that the same shall be consolidated and form a single Series with such Notes, and references in these Conditions to Notes shall be construed accordingly. 15. NOTICES Notices to the holders of Bearer Notes will be valid if published in a daily newspaper in the English language of general circulation in Singapore. Notices will, if published more than once or on different dates, be deemed to have been given on the date of the first publication in such newspaper as provided above. If at any time, publication in such newspaper is not practicable for any reason whatsoever, notices will be valid if published in such other manner as the Issuer, with the approval of the Trustee, shall determine. Couponholders shall be deemed for all purposes to have notice of the contents of any notice to the holders in accordance with this Condition. Notices to the holders of Registered Notes shall be mailed to them at their respective addresses in the Register (in the case of joint holders to the address of the holder whose name stands first in the Register) and deemed to have been given on the second day after the date of despatch. Until such time as any definitive Notes are issued, there may, so long as the Global Note(s) is or are held in its or their entirety on behalf of the Depository, be substituted for such publication in such newspapers the delivery of the relevant notice to the Depository for communication by it to the Noteholders, except that if the Notes are listed on the Stock Exchange of Singapore Limited and the rules of such exchange so require, notice will in any event be published in accordance with the previous paragraph. Any such notice shall be deemed to have been given to the Noteholders on the seventh day after the day on which the said notice was given to the Depository. Notices to be given by any Noteholder pursuant hereto (including to the Issuer) shall be in writing and given by lodging the same, together with the relative Note or Notes, with the Issuing and Paying Agent. Whilst the Notes are represented by a Global Note, such notice may be given by any Noteholder to the Issuing and Paying Agent through the Depository in such manner as the Issuing and Paying Agent and the Depository may approve for this purpose. Notwithstanding the other provisions of this Condition, in any case where the Identity and addresses of all the Noteholders are known to the Issuer, notices to such holders may be given individually by recorded delivery mail to such addresses and will be deemed to have been given when received at such addresses. 16. AUTHENTICATION Neither this Note nor the Coupons attached to this Note on issue shall become valid or obligatory for any purpose unless and until this Note has been authenticated by the Issuing and Paying Agent. 17. GOVERNING LAW These Conditions, the Trust Deed, the Notes and the Coupons shall be governed by, and construed in accordance with, the laws of Singapore. Each of the Issuer and the Trustee (and each Noteholder and each Couponholder are deemed to) have irrevocably and unconditionally submitted to the non-exclusive jurisdiction of the Courts of Singapore for all purposes in relation to these Conditions, the Trust Deed, the Notes and the Coupons and waives any objection on the ground of venue or forum non conveniens or on similar grounds. 40

43 THE ISSUER History and Background City Developments Limited ( CDL ) was incorporated in Singapore as a public company on 7 September In November 1963, it obtained a listing of and quotation for its stock units (which were converted into shares in December 1996) on the then Malayan Stock Exchange. CDL has, since its incorporation, been involved mainly in the Singapore property market. The Hong Leong group of companies in Singapore (the Hong Leong Group ) first bought into CDL in 1969 and in 1972 acquired a majority stake in CDL. Shortly after the change in ownership, CDL shifted its strategy of developing only residential projects by adding investment properties to its portfolio, thus reducing its dependence on residential development as its main source of income. CDL began to increase the proportion of the recurrent income of CDL and its subsidiaries (collectively, the Group ) by acquiring a commercial building known as Central Building in 1978, a majority interest in Republic Hotels & Resorts Limited ( Republic Hotels ) in 1980 and the entire share capital of the property company, Singapura Developments (Private) Limited, in In 1983, the Group completed the development of a 23-storey office building known as City House. In 1987, CDL acquired a 49% interest in Hong Leong Properties Pte. Limited which owns Fuji Xerox Towers (formerly known as IBM Towers), and subsequently increased its interest in that company to 100%. In 1989, CDL made a strategic decision to diversify its core business to include hotel ownership. As a result, CDL reorganised and consolidated the Group s interests in six hotels under CDL Hotels International Limited ( CDL Hotels ), a company listed on the Stock Exchange of Hong Kong Limited. CDL Hotels acquired a controlling interest in CDL Hotels New Zealand Limited (now known as Millennium & Copthorne Hotels New Zealand Limited) which included CDL Investments New Zealand Limited in 1992 and a controlling interest in Kingsgate International Corporation Limited in CDL s new corporate headquarters, Republic Plaza, one of the tallest commercial buildings in Singapore, was completed in CDL continued to expand between the mid-1990s and the late 1990s, with new developments, an expanded investment property portfolio and hotel acquisitions, which had included the acquisitions of the Copthorne group of hotels in the United Kingdom, France and Germany in 1995 and Seoul Hilton in Korea and Regal Hotels in the United States of America in In 1999, the Group (through CDL Hotels) reorganised CDL Hotels holding of hotels and property into Millennium & Copthorne Hotels plc ( M&C ), a hotel group which currently owns, manages and franchises 103 hotels in 18 countries around the world (with a further 17 hotels in the pipeline). M&C which is a CDL subsidiary, is listed on the London Stock Exchange. This was followed by a restructuring exercise in 2000, whereby CDL acquired CDL Hotel s 52.4% controlling stake in M&C. CDL Hotels was renamed City e-solutions Limited ( CES ), and transformed into a technology solutions provider for the global hospitality industry. M&C also streamlined its operations through the privatisation of Republic Hotels in 2002, and of Kingsgate International Corporation Limited in Following the privatisation, Republic Hotels and Kingsgate International Corporation Limited were delisted from, respectively, the Singapore Exchange Limited and the New Zealand Stock Exchange. In 2003, CDL made a mandatory unconditional offer for Target Realty Limited ( TRL ), with the acquisition of a controlling interest in excess of 55% of TRL s issued shares. As at 7 November 2008, the Group holds an equity interest of 98.8% in TRL. CDL was admitted to the prestigious FTSE4Good Index Series in 2002, and in 2005 to the FTSE/ASEAN Index and the FTSE/ASEAN 40 Index. CDL was also designated as one of the component stocks of the revamped Straits Times Index, which was officially launched in January In 2006, M&C announced the initial public offering of CDL Hospitality Trusts, a stapled group comprising CDL Hospitality Real Estate Investment Trust and CDL Hospitality Business Trust, which became the first hotel real estate investment trust in Singapore. 41

44 As at 7 November 2008, CDL is one of the biggest landlords in Singapore with more than six million square feet of lettable office, industrial, retail, hotel and residential space. CDL owns one of the largest landbanks amongst private developers, of more than 8.5 million square feet of potential gross floor areas. The extensive landbank comprises mainly freehold and 999-year leasehold land. 72% of the landbank consists of residential land and 28% consists of land for commercial/hotel and industrial development. As of 7 November 2008, based on a market capitalisation of approximately $5.87 billion, CDL is one of the largest listed companies on the Mainboard of the Singapore Exchange Securities Trading Limited (the SGX-ST ) by market capitalisation. There are a total of six publicly listed companies in the Group, including CDL which is listed on the SGX-ST. CES is listed on the Stock Exchange of Hong Kong Limited. M&C is listed on the London Stock Exchange whilst its subsidiaries, Grand Plaza Hotel Corporation is listed on the Philippine Stock Exchange, and Millennium & Copthorne Hotels New Zealand Limited and CDL Investments New Zealand Limited are listed on the New Zealand Stock Exchange. The following diagram depicts the Group s corporate structure as of 30 September 2008: Hong Leong Group Singapore City Developments Limited* 97 Subsidiary Companies 31 Associated Companies 8 Limited Liability Corporations 52% City e-solutions Limited* 13 Subsidiary Companies 11 Associated Companies 53% Millennium & Copthorne Hotels plc* 99% Target Realty Limited 5 Subsidiary Companies Asia New Zealand/ Australia Europe & Middle East North America Republic Hotels & Resorts Limited (100%) 20 Asia Subsidiary Companies 1 Associated Company Grand Plaza Hotel Corporation* (66%) ¹ 1 Associated Company 23 Subsidiary Companies 11 Associated Companies CDL Hotels Holdings New Zealand Limited (100%) 1 Subsidiary Company Millennium & Copthorne Hotels New Zealand Limited* (70%) 42 Subsidiary Companies 1 General Partnership 34 Subsidiary Companies 17 Limited Liability Corporations 15 Limited Partnerships 2 General Partnerships KIN Holdings Limited (61%) Kingsgate International Corporation Limited (100%) 9 Subsidiary Companies CDL Investments New Zealand Limited* (64%) 1 Subsidiary Company 10 Subsidiary Companies MCHNZ Investments Limited (100%) 33 Associated Companies Notes: ¹ Held through a 60% subsidiary company of Millennium & Copthorne Hotels plc and a wholly-owned subsidiary company of Republic Hotels & Resorts Limited * Listed Companies 42

45 Principal Business Activities The principal business activities of the Group can be broadly classified into three categories, namely, property development, hotel operations and investment properties. The principal activities of CDL s subsidiaries are those of property developers and owners, hotel owners and operators, club operator and owner, investment in properties and in shares, property management, project management and consultancy services and providers of information technology and procurement services. (i) Property Development Since the late 1970s, the Group has consistently been an active property developer in Singapore. The Group aims to continually engage in developing commercial, residential and industrial properties for sale and constantly seeks opportunities to acquire land of good development potential to replenish its landbank. The Group s property development operations are fully vertically integrated, with in-house capabilities in architectural design, construction, project management, engineering, sales and marketing and property management. In-house skills and services are used to the extent possible for the Group s activities and they are complemented by external specialised professional services. The Group believes that vertical integration increases its ability to effectively complete projects with the desired quality, within budget and according to development schedules. In 2004, the Group launched the 1,111-unit The Marina Bay. Group successfully launched many more projects, as shown: Over the next few years, the Projects Launched in Singapore between late 2004 and 2008 Total Number of Units Project Launched Date in Project The Marina Bay * November 2004 Tower 1 1,111 October 2005 Tower 2 Parc Emily * March City Square Residences April St Regis Residences Singapore * June Evelyn * June The Sentosa Cove * July Butterworth 33 July Ferraria Park * October Tribeca November One Shenton January The Solitaire March Botannia * April Cliveden at Grange June Wilkie Studio November Shelford Suites March Livia * July Total 5,472 * Joint-venture projects Total number of units sold as at 7 November 2008 since November 2004: 4,888 Total value of units sold: S$7,547,275,974 43

46 The total revenue from property development accounted for approximately 28% and 29% of the Group s revenue for the FY ended 31 December 2007 and the six months ended 30 June 2008 respectively. (ii) Hotel Operations CDL has an interest in 53% of the shares in M&C, which is listed on the London Stock Exchange. M&C owns, manages and franchises 103 hotels in 18 countries around the world (with a further 17 hotels in the pipeline), including four-star and four-star deluxe hotels under the Grand Millennium, Millennium and Copthorne brands in various major cities around the world. Based on the results announcement of M&C for the period ended 30 September 2008, the number of hotels owned, managed and franchised is 103, with 78 hotels under the Grand Millennium, Millennium and Copthorne brands. In 1995, the Group acquired the Copthorne group of hotels with properties in the United Kingdom, France and Germany, in a deal valued at 219 million. M&C was then listed in 1996 on the London Stock Exchange. In 1999, M&C purchased the majority hotel interests of CDL Hotels in Southeast Asia (excluding Hong Kong) and Australasia, for a sum of 432 million. In the same year, M&C acquired the trade and assets of the Seoul Hilton in Korea for 134 million, and the shares of Regal North America group for a sum of 395 million. The acquisition of the remaining hotel interests of CDL Hotels in Hong Kong was completed in January 2000 for a sum of 22 million. Pursuant to a capital restructuring exercise in 2000, CDL acquired CDL Hotel s 52.4% controlling stake in M&C. M&C streamlined its operations through the privatisation of Republic Hotels in 2002, and of Kingsgate International Corporation Limited in Republic Hotels and Kingsgate International Corporation Limited were delisted from the Singapore Exchange Limited and the New Zealand Stock Exchange respectively. In 2006, M&C announced the initial public offering of CDL Hospitality Trusts ( CDLHT ), a stapled group comprising CDL Hospitality Real Estate Investment Trust and CDL Hospitality Business Trust, which became the first hotel real estate investment trust in Singapore. CDLHT s current hotel portfolio comprises 5 hotels located in Singapore and the Rendezvous Hotel Auckland, a deluxe hotel located in New Zealand s gateway city of Auckland. M&C currently has interests of approximately 39% in the stapled securities of CDLHT. The total revenue from hotel operations accounted for approximately 64% and 61% of the Group s revenue for, respectively, the financial year ended 31 December 2007, and the six months ended 30 June (iii) Investment Properties The Group has one of the largest investment property portfolios in Singapore with over six million square feet of net lettable office, industrial, retail, hotel and residential space as at 7 November % of the Group s investment property portfolio comprises freehold and 999-year leasehold properties with the remainder held under leases of 99 years or less. Office properties account for 51% of the total investment property portfolio, industrial properties 18%, retail properties 10% and residential and other properties 21%. The investment properties and fixed assets held by the Group are generally leased for periods ranging from two to six years. Recurrent rental income from the total investment property portfolio accounted for approximately 6% and 8% of the Group s turnover for, respectively, the financial year ended 31 December 2007, and the six months ended 30 June Ownership and Capital Structure As at 7 November 2008, CDL has an issued and fully paid up share capital of S$1,991.4 million consisting of 909,301,330 ordinary shares and 330,874,257 non-redeemable convertible non-cumulative preference shares. 44

47 As at 7 November 2008, the substantial shareholders of CDL are Hong Realty (Private) Limited, Hong Leong Holdings Limited, Hong Leong Investment Holdings Pte. Ltd., Davos Investment Holdings Private Limited, Kwek Holdings Pte Ltd, Aberdeen Asset Management plc and its subsidiaries, Aberdeen Asset Management Asia Limited and Aberdeen Asset Managers Limited. Environmental and Corporate Social Responsibility CDL advocates a Safe and Green culture and adheres to the Environmental, Health and Safety ( EHS ) policy which it instituted in CDL is the first private property developer in Singapore to be awarded the ISO (Environmental Management System) certification by the Building and Construction Authority ( BCA ) in 2003 for its commitment to raising environmental standards in its projects and incorporating eco-friendly features into its developments. CDL is also a recipient of the OHSAS (Occupational Health and Safety Management System) certification for establishing an EHS policy to monitor the environmental impact of its operations and improve workplace safety. In managing its investment properties, CDL is also the first private property developer in Singapore to be awarded the ISO and ISO 9001 (Quality Management System) certifications for 14 of its commercial buildings in CDL completed the ISO EMS certification journey when its Corporate Management and Operations was awarded the certification in April CDL is also committed to an extensive range of Corporate Social Responsibility ( CSR ) programmes which include staff volunteerism to help the less privileged, advocating environmental sustainablility, promoting the arts and enhancing youth development. In recognition of its sustained commitment and outstanding contributions to the environment and community, CDL has been conferred numerous awards including the prestigious President s Award for the Environment and President s Social Service Award in It is also the inaugural recipient of the BCA Green Mark Champion Award in CDL s CSR commitment and performance are in line with the international standards, and is a constituent company in the FTSE4Good Index Series. Performance Summary A summary of the audited consolidated results of the Group for the financial years ended 31 December 2005 to 2007, and a summary of the unaudited consolidated results of the Group for the six months ended 30 June 2008 are set out below: (S$,000) For the financial years For the six ended 31 December months ended June 2008 Revenue 2,374,279 2,546,804 3,106,106 1,539,516 Cost of sales (1,118,428) (1,179,145) (1,478,150) (670,719) Gross profit 1,255,851 1,367,659 1,627, ,797 Other operating income 68, ,519 29,202 5,005 Administrative expenses (430,014) (460,792) (522,757) (248,328) Other operating expenses (426,172) (420,726) (396,230) (206,837) Profit from operations 468, , , ,637 Finance income 28,269 42,468 49,218 16,062 Finance costs (151,278) (138,718) (119,486) (54,872) Net finance costs (123,009) (96,250) (70,268) (38,810) Share of after-tax profit of associates 5,956 16,254 10,800 Share of after-tax profit of jointly-controlled entitles 58, , ,456 90,744 Profit before income tax 403, , , ,371 Income tax expense (94,740) (129,312) (65,394) (89,203) Profit for the year/period 309, , , ,168 45

48 (S$,000) For the financial years For the six ended 31 December months ended June 2008 Attributable to: Equity holders of the Company 200, , , ,133 Minority interests 108, , ,226 62,035 Profit for the year/period 309, , , ,168 Basic earnings per share 20.8 cents 37.0 cents 78.3 cents 35.6 cents Notes: (1) Basic earnings per share for each of the financial years ended 31 December 2005, 2006 and 2007 and financial period ended 30 June 2008 are computed on the basis of the profit after taxation, minority interests and dividends on nonredeemable convertible non-cumulative preference shares and the weighted average number of 902,093,318, 915,414,150, 909,301,330 and 909,301,330 shares in issue, respectively. Diluted earnings per share has not been disclosed as the dilution is not material. Review of Past Performance Financial Year ended 31 December 2005 Group revenue for the year ended 31 December 2005, amounted to $2,374.3 million (restated 2004: $2,380.1 million). Pre-tax profit of $403.9 million (restated 2004: $502.6 million) was achieved whilst profit after tax and minority interests amounted to $200.4 million (restated 2004: $227.1 million). Higher profits were achieved in year 2004 mainly on account of greater profit contributions from jointly-controlled entities arising primarily from the sale of The Plaza, New York. During the year, the Group also reduced its borrowings by 10% to $3.60 billion (2004: $4.02 billion). The Group sold almost 2,100 residential property units, equivalent to a market share of over 23% of all private residential property units sold in the year. This represents a 108% increase compared to the Group s property sales in For 2005, the Group s property sales value amounted to $1.66 billion. City Square Residences, a 910-unit condominium, located at the junction of Serangoon and Kitchener Roads, was launched in April 2005 with good response. One of the most significant launches of the year was the 430-unit Tower 2 of The Marina Bay. The 295-unit Parc Emily of which the Group has a 50% share, which is located in Mount Emily Park in District 9 also contributed to the sales. Profits were also realised from existing projects such as Savannah CondoPark, The Pier at Robertson, The Esparis and Monterey Park. The office portfolio in the Group enjoyed occupancy of over 90%. M&C delivered strong growth in profitability. Backed by an improving trading environment, all regions experienced revenue per available room ( RevPAR ) growth with improvements in each quarter. M&C reported that its profit before tax, excluding other operating income and impairment, increased by 45% to 74.0 million (2004 restated: 51.2 million). Profit after tax and minority interests increased by 20% to 61.1 million (2004 restated: 50.9 million). The positive results achieved are due to M&C s focus on optimising operational efficiency and sustained operational excellence. It also benefited from its twin strategies of being an integrated owner and operator of international hotel assets, across a balanced geographical portfolio. Leveraging on its real estate expertise and resources, M&C maximised value from its disposal of selected real estate assets and redevelopment opportunities. It also announced that 10 new management and franchise contracts were secured for the year. 46

49 Financial Year ended 31 December 2006 For the year ended 31 December 2006, the attributable profit of the Group rose by 75% to $351.7 million (2005: $200.4 million) on the back of higher revenue of $2.55 billion (2005: $2.37 billion) and improved margins from both the property development and hotel segments. Pre-tax profit of $150.9 million was also recognised on the disposal of long leasehold interest in four Singapore hotels to CDLHT. Basic earnings per share increased by 78% to 37.0 cents for the year (2005: 20.8 cents). Although the Group sold 1,337 units in 2006, which is lower than the 2,071 units achieved in 2005, the sales value for 2006 of $2.77 billion was substantially higher compared to $1.66 billion achieved in It successfully launched four high-end projects in 2006 including the St. Regis Residences in early June. During the launch, it set prices of over $3,000 per square foot. In mid-june 2006, the Group also released for sale Evelyn, a 208-unit joint-venture development located on an elevated site in the Newton vicinity. Another of the Group s successful launches was the 264-unit waterfront enclave - The Sentosa Cove. Launched in July 2006, this 50:50 joint-venture development with TID Pte Ltd has been fully sold. In October 2006, the Group, together with its joint-venture partners launched the sale of the 472-unit freehold condominium, Ferraria Park in the Changi/Loyang area. More than 70% of the 250 units released under two phases had been sold. In November 2006, the Group launched Phase 1 of Tribeca, a 175-unit, freehold luxurious development located next to Grand Copthorne Waterfront Hotel. During the year, the Group booked in profits from both St. Regis Residences and The Marina Bay which are joint-venture developments. Other joint-venture developments which contributed towards the profits include The Robertson, Savannah CondoPark, Parc Emily, Evelyn and Edelweiss Park. Wholly-owned projects such as City Square Residences also contributed to the profits for the year under review. Occupancy rate of the Group s office properties had improved to 92% and rental rates upon renewal of leases had been adjusted to the then current market level. Grade A offices performed well with Republic Plaza achieving about $13.00 per square foot, surpassing the earlier peak of $11.00 per square foot in In line with the Group s strategic land acquisition policy to replenish its landbank, the Group successfully acquired four parcels of strategically located sites with land area of about 917,000 square feet and potential development areas of approximately more than 1.8 million square feet. Cost of these acquisitions amounted to over $1 billion. M&C s growth in 2006 was due to an improvement in operating profits and realisation of some capital gains from the disposal of a few assets. Revenue increased 9% to million (2005: million) with headline operating profit up 15% to million (2005: million). Headline profit before tax (excluding other operating income and impairment) rose to 94.4 million, an increase of 28% (2005: 74.0 million). In 2006, M&C sold the long term leasehold interests in three Singapore hotels to CDLHT. This realised million in cash of which 78 million was reinvested for a 39.1% stake in CDLHT. Financial Year ended 31 December 2007 Revenue increased by 22% to $3.11 billion from $2.55 billion in Profit for core earnings after tax and minority interest increased to $725.0 million, a 106% increase from 2006 of $351.7 million excluding divestment gains and fair value gains on investment properties. The Group s record profit achieved in 2007 was its best since its inception in Excluding the one-off gain arising from the divestment of its long leasehold interest in four Singapore hotels to CDLHT in 2006 of $150.9 million, 2007 s total profit before tax increased by $413.2 million or 76% to $954.6 million as compared to the corresponding year. 47

50 Basic earnings per share of the Group increased by 112% to 78.3 cents from 37.0 cents for The Group sold a total of 1,655 units with sales value hitting a record $3.4 billion, about 22% higher than 2006 s sales value of $2.8 billion. During the year, the Group successfully launched five new residential projects, three of which were in the high-end segment. In January, the Group launched the 341-unit One Shenton which is located in the Marina Bay area. Next, the boutique 59-unit The Solitaire, located in the residential area of Balmoral Park was successfully launched in March and all the units were sold. In June 2007, the Group launched Cliveden at Grange, a prominent 110-unit freehold, upmarket project. In the mid-market segment, the Group launched The Botannia, a 50:50 joint venture project, located in the West Coast area. More than 93% of the 493 units has been sold. In November, the Group launched Phase 1 of its Wilkie Studio located at Mount Sophia. During the year, the Group booked in profits from Monterey Park, City Square Residences and Tribeca as well as previously completed projects such as Chelsea Gardens and The Equatorial. Other joint venture developments contributing to the Group s profits included St. Regis Residences, The Marina Bay, The Sentosa Cove, Evelyn, Parc Emily, Savannah CondoPark, Edelweiss Park, Ferraria Park, The Pier at Robertson and The Botannia. Profits were also recognised from strata units bought from third parties for resale namely, Cuscaden Residences, 7 Draycott Drive and The Imperial. However, no profit recognition had been made for One Shenton, The Solitaire, Cliveden at Grange and Wilkie Studio as these projects were still in the initial stage of construction in These projects accounted for $1.7 billion of sales value. The Group s portfolio of office properties continued to enjoy occupancy of approximately 95%. In 2007, the Group acquired landbank at approximately $1.3 billion (including the Group s share of joint venture projects) which will serve as a pipeline for future development. A major acquisition was the tripartite, joint venture South Beach development, located along Beach Road in the Marina Bay / Raffles City area at a tender price of S$1.7 billion. M&C s profit after tax and minority interest was million (2006: million) and basic earnings per share increased by 47% to 50.7p. Six-months ended 30 June 2008 ( 1H 2008 ) The Group s profit before income tax increased for 1H 2008 by 13%, compared to the same corresponding period in Profit before income tax for 1H 2008 increased to $481.4 million (1H 2007: $425.5 million). For 1H 2007, the Group benefited from substantial one-off tax credits as a result of changes in the United Kingdom tax legislation on hotel tax allowances and reduction in tax rates in various geographical regions where the Group s hotel operations are located. Despite the absence of these tax credits in 1H 2008, the Group s profit after tax and minority interest for 1H 2008 increased by 3% to $330.1 million as compared to $320.5 million in 1H Basic earnings per share for 1H 2008 increased 3% to 35.6 cents (1H 2007: 34.5 cents). 48

51 Property development segment remains the main contributor of the Group s profit before tax. Hotel operations continued to be the second biggest contributor to the Group s results. Profit contribution from rental properties had also shown a significant increase of 84.9% to $49.6 million, as compared to 1H The Group launched 25 units in Phase 1 of the boutique, 77-unit freehold Shelford Suites in June units have been sold as at 10 August The Group also began previewing its joint-venture project Livia, a 724-unit development at Pasir Ris near Changi Airport, Singapore Expo and Changi Business Park, towards the end of Q When Phase 1 of Livia comprising 360 units, was launched in the first week of July 2008, more than 300 units were sold. The Group has a 51% share in Livia and profits from this project have not been recognised yet, as construction has just begun. During the year, the Group continued to book in profits from its pre-sold projects namely City Square Residences, Tribeca, The Solitaire, One Shenton and Cliveden at Grange. It also booked in profits from its joint-venture projects such as The Marina Bay, St. Regis Residences, Botannia, The Sentosa Cove, Parc Emily and Ferraria Park. The Group s office portfolio continued to enjoy occupancy of over 94% with upward rental revision upon renewal of existing tenancies. Although rental increase has moderated compared to last year, the Group enjoyed rental growth of 24% in 1H 2008 as compared to 1H In June 2008, the Group contracted to sell one of its non-core office assets Commerce Point, for a total consideration of $180.7 million. The sale was completed in July and profits will be booked in Q The securing of tenants for the Group s mega retail complex, City Square Mall continued to progress at a healthy pace. Most of the anchor tenants have already been confirmed and the rest of the space is being taken up progressively. The complex is expected to open for business in Q M&C s revenue for the half year was up by 2% to million at constant exchange rates, with hotel revenue growth up by 5% to million. M&C Group RevPAR rose 6% to for 1H 2008 at constant exchange rates. M&C s net profit before tax for the first half of the year went up 9% to 60.3 million, from 55.2 million for 1H Its profit after tax and minority interest for 1H 2008 amounted to 40.4 million, down by 23% from 52.7 million in 1H The decline is largely due to M&C benefiting from the changes made in the United Kingdom tax legislation in respect of the removal of claw back on hotel tax allowances and reduction in tax rates totalling 17.9 million, which were factored into its 1H 2007 results. The comparison is therefore not like-for-like. In Australia/New Zealand, there was a significant slowdown in general property market conditions. Excluding this property operations, M&C s profit before tax increased by 17% for 1H 2008 compared to 1H M&C s expansion in Asia continued with the opening of three more hotels in China. After the 352-room Millennium Harbourview Hotel Xiamen (formerly the Crown Plaza Harbourview Hotel Xiamen) contracted under a franchise agreement was opened in January, the 521-room Grand Millennium Beijing was officially opened in April, and the 455-room Copthorne Hotel Qingdao (formerly Hotel Equatorial Qingdao), also contracted under a franchise agreement, in May. In the Middle East, M&C opened four new hotels under management contracts, namely, the 352-room Grand Millennium Dubai, the 163-room Copthorne Hotel Dubai, the 262-room Al Jahrah Copthorne Hotel & Resort M&C s first property in Kuwait and finally, the 108-room Kingsgate Abu Dhabi Hotel. On 24 June 2008, M&C announced the proposed disposal of CDL Hotels (Korea) Limited ( CDL Korea ), a wholly-owned subsidiary of M&C with one principal asset, the Millennium Seoul Hilton Hotel. Completion of the proposed disposal was expected to take place on 30 September 2008 or such other date as the parties may agree. On 19 September 2008, M&C announced that given the current difficult credit markets, the prospective buyer had asked for an extension of the completion date to 30 November 2008 whilst it finalises the terms of its financing arrangements. M&C and the prospective buyer had 49

52 agreed that the completion date be amended to 28 November On 28 November 2008, M&C announced that the prospective buyer has been unable to finalise its financing arrangements and, consequently, the remainder of the purchase price remained unpaid. The agreement for the proposed disposal has therefore terminated with immediate effect. Following the termination, the Millennium Seoul Hilton will continue to be managed by the M&C Group. Notwithstanding the credible results of M&C for 1H 2008, the effect of translating the results at a weakening exchange rate of the Sterling Pound against the Singapore dollar has resulted in the decline in revenue and profit before tax contributions of the hotel operations. Unaudited third quarter and nine-month financial statement for the period ended 30 September 2008 On 13 November 2008, CDL announced its unaudited third quarter and nine-month financial statement for the period ended 30 September Please refer to Appendix V. 50

53 RISK FACTORS Prior to making an investment or divestment decision, prospective investors in or existing holders of the Notes should carefully consider all the information set forth in this Information Memorandum including the risk factors set out below. The risk factors set out below do not purport to be complete or comprehensive of all the risks that may be involved in the business, assets, financial condition, performance or prospects of the Issuer and its subsidiaries or any of the properties owned by the Group, or any decision to purchase, own or dispose of the Notes. Additional risk factors which the Issuer is currently unaware of may also impair its business, assets, financial condition, performance or prospects. If any of the following risk factors develops into actual events, the business, assets, financial condition, performance or prospects of the Issuer and/or the Group could be materially and adversely affected. In such cases, the ability of the Issuer to comply with its obligations under the Trust Deed and the Notes may be adversely affected. Limitations of this Information Memorandum This Information Memorandum does not purport to nor does it contain all information that a prospective investor in or existing holder of the Notes may require in investigating the Issuer or the Group, prior to making an investment or divestment decision in relation to the Notes issued under the MTN Programme. This Information Memorandum is not, and does not purport to be, investment advice. A prospective investor should make an investment in the Notes only after it has determined that such investment is suitable for its investment objectives. Determining whether an investment in the Notes is suitable is a prospective investor s responsibility, even if the investor has received information to assist it in making such determination. Neither this Information Memorandum nor any other document or information (or any part thereof) delivered or supplied under or in relation to the MTN Programme or the Notes (nor any part thereof) is intended to provide the basis of any credit or other evaluation and should not be considered as a recommendation by the Issuer, any of the Dealers or the Arranger that any recipient of this Information Memorandum or any such other document or information (or such part thereof) should subscribe for or purchase or sell any of the Notes. Each person receiving this Information Memorandum acknowledges that such person has not relied on the Issuer, its subsidiaries or associated companies (if any), any of the Dealers or the Arranger or any person affiliated with each of them in connection with its investigation of the accuracy or completeness of the information contained herein or of any additional information considered by it to be necessary in connection with its investment or divestment decision. Any recipient of this Information Memorandum contemplating subscribing for or purchasing or selling any of the Notes should determine for itself the relevance of the information contained in this Information Memorandum and any such other document or information (or any part thereof) and its investment or divestment should be, and shall be deemed to be, based solely upon its own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer and the Group, the terms and conditions of the Notes and any other factors relevant to its decision, including the merits and risks involved. A prospective investor should consult with its legal, tax and financial advisors prior to deciding to make an investment in the Notes. RISKS ASSOCIATED WITH AN INVESTMENT IN THE NOTES Limited Liquidity of the Notes issued under the MTN Programme There can be no assurance regarding the future development of the market for the Notes issued under the MTN Programme, the ability of the Noteholders, or the price at which the Noteholders may be able, to sell their Notes. Although the issue of additional Notes may increase the liquidity of the Notes, there can be no assurance that the price of such Notes will not be adversely affected by the issue in the market of such additional Notes. 51

54 Fluctuation of Market Value of Notes issued under the MTN Programme Trading prices of the Notes are influenced by numerous factors, including the operating results and/or financial condition of the Issuer and/or the Group, political, economic, financial and any other factors that can affect the capital markets, the industry, the Issuer and/or the Group generally. Adverse economic developments, in Singapore as well as countries in which the Issuer and/or the Group operate or have business dealings, could have a material adverse effect on the Singapore economy and the operating results and/or the financial condition of the Issuer and/or the Group. Interest Rate Risk Noteholders may suffer unforeseen losses due to fluctuations in interest rates. Generally, a rise in interest rates may cause a fall in bond prices, resulting in a capital loss for the Noteholders. However, the Noteholders may reinvest the interest payments at higher prevailing interest rates. Conversely, when interest rates fall, bond prices may rise. The Noteholders may enjoy a capital gain but interest payments received may be reinvested at lower prevailing interest rates. Inflation Risk Noteholders may suffer erosion on the return of their investments due to inflation. Noteholders would have an anticipated rate of return based on expected inflation rates on the purchase of the Notes. An unexpected increase in inflation could reduce the actual returns. Performance of contractual obligations The ability of the Issuer to make payments in respect of the Notes may depend upon the due performance by the other parties to the Programme Agreement, the Trust Deed and the Agency Agreement of their obligations thereunder including the performance by the Trustee, the Issuing and Paying Agent and/or the Agent Bank of their respective obligations. Whilst the non-performance of any relevant parties will not relieve the Issuer of their obligations to make payments in respect of the Notes, the Issuer may not, in such circumstances, be able to fulfill its obligations to the Noteholders and the Couponholders. Liquidity Risks In recent months, credit markets worldwide have experienced significant volatility including a reduction in liquidity levels, increasing costs for credit protection and a general decline in lending activity between financial institutions and in commercial lending markets worldwide. These developments may result in the Group incurring increasing financing costs associated with the Group s levels of debt. Furthermore, there can be no assurance that the Group will be able to raise financing on favourable terms or at all, which could have a material adverse effect on the Group. The Group s ability to meet its payment obligations and to fund planned capital expenditures will depend on the success of the Group s business strategy and the Group s ability to generate sufficient revenues to satisfy its obligations, which are subject to many uncertainties and contingencies beyond the Group s control. RISKS ASSOCIATED WITH THE GROUP S BUSINESS This section describes some of the risks that could have a material effect on the Group s business activities as at the date of this Information Memorandum. Not all potential risks are listed. Some risks are excluded because they are considered not material to the Group as a whole. Additionally, there may be risks that are not reasonably foreseeable at the date of this Information Memorandum for the Group to assess fully their potential impact on the business. The order in which risks are presented below is not indicative of the relative impact on the Group. The potential effect of these risks may be material to the Group s business by having an impact on revenue, profits, net assets and financial resources. Such risks also have the potential to impact on the Group s reputation. It is often difficult to assess with accuracy the likely impact of an event on a Group s reputation, as any damage may often be disproportionate to the event s actual financial impact. 52

55 Risks Relating to the Group s Property Development Business Changing market conditions may adversely affect the Group s financial condition The property market is subject to changes in economic outlook and financial market volatility, especially in the light of the current global financial crisis. Rapidly changing market conditions, including changes in customer tastes, market prices and the desirability of a location, may adversely affect the Group s property development business. Timing of launching new projects is therefore key to securing sales of units at optimal sales prices. A downturn in the property market leading to lower property values may result in the Group having to delay the launches of new developments. This will result in increased holding costs until the development properties are sold. Further, property development requires significant capital outlays and returns on capital are not achieved until cash is received from pre-sale, sales or leases. The size of the capital outlays and number of parties involved in a property development project make it difficult to change property development plans once set. As a result, the Group may not be able to adjust its plans or reallocate its resources to adapt to rapidly changing market conditions. The Group s property development business is heavily dependent on the performance of the real estate market in Singapore Most of the Group s existing development projects and landbank are located in Singapore. The success of the Group s property development business therefore depends heavily on the continued growth of the real estate market in Singapore. The Group s financial condition, results of operation and profitability may be materially and adversely affected by any adverse development in the supply of or demand for property or property prices in Singapore. The Group expects the residential real estate market in Singapore to remain highly competitive. Oversupply of developed properties could cause downward pressure on property sale prices. The Group is subject to risks associated with the development of residential and commercial properties The Group s primary business is the development of residential and commercial properties. Property developments typically require substantial capital outlay during the land acquisition and construction phases and may take one or more years before positive cashflows may be generated through pre-sales or sales of a completed property development. Depending on the size of the development, the time span for completing a property development usually lasts for more than a year. Consequently, changes in the business environment during the length of the project may affect the revenue and cost of the development, which in turn has a direct impact on the profitability of the projects. Factors that may affect the profitability of a project also include the risk that the receipt of government approvals may take more time than expected, the failure to complete construction according to original specifications, schedule or budget, the availability of financing and lacklustre sales of the properties. The sales and the value of a property development project may be adversely affected by a number of factors, including but not limited to the international, regional and local political and economic climate, local real estate conditions, perceptions of property buyers, competition from other available properties, changes in market rates for comparable sales and increased business and operating costs. If any of the property development risks described above materialises, the Group s returns on investments may be lower than originally expected and the Group s financial performance may be materially and adversely affected. The Group s business may be affected by changes in government policies The Singapore residential property market is subject to varying degrees of government regulations over, and policies on, among other things, land and title acquisition, development planning and design and construction and mortgage financing and refinancing. The Singapore Government is actively involved in the development, construction and sale of housing to middle and lower-income families through its public housing scheme. The Singapore Government is also a major supplier of land to private developers. The Singapore Government has exercised and continues to exercise significant influence over Singapore s property industry, and the policies of the Singapore Government concerning the economy or the real estate sector, or any change therein, could have a material adverse effect on the business of the Group. For example, changes to the Master Plan guidelines relating to zoning and micro-planning restrictions on land use, and changes in laws relating to sustainable development, environmental controls, building codes, stamp duty, property tax, income tax and capital gains tax could adversely affect the profitability of the Group. 53

56 Historically, the Singapore Government had sought to regulate or reduce property speculation through measures such as the adoption and enforcement of regulations and the imposition of credit controls, taxes and fees. Such measures include the Income Tax (Amendment) Act 1996 which imposes income tax on gains from the disposal of any real property (and on the sale of shares in a relevant property company) within three years from the date of its acquisition by any person although that person is not otherwise carrying on a trade of buying and selling properties. This measure has been suspended with effect from 13 October Another anti-speculation measure initiated by the Singapore Government in May 1996 was to curb speculation and the spiralling property prices then by the imposition of additional stamp duty payable by a vendor who sells a property within three years of its acquisition. This legislation imposing such additional stamp duty has since been repealed. However, no assurance can be given that in the future, the Singapore Government will not introduce or amend legislation or policies that would adversely affect the Singapore residential property market. The Group is subject to risks in relation to pre-sold properties The Group faces risks relating to pre-sale of properties. For example, the Group may fail to complete a fully or partially pre-sold property development, in which case, the Group may be liable for potential losses that buyers may suffer as a result. There can be no assurance that these losses would not exceed the purchase price paid in respect of the pre-sold units. In addition, if a pre-sold property development is not completed on time, the buyers of pre-sold units may be entitled to compensation for late delivery. 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 approval from government agencies or authorities, shortages of labour, adverse weather conditions, natural disasters, labour disputes, dispute with contractors, accidents and changes in government priorities and policies. If the delay extends beyond the contractually specified period, these buyers may even be entitled to terminate the pre-sale agreements and claim damages. There is no assurance that the Group will not experience any significant delays in completion or delivery or that the Group will not be subject to any liabilities for any such delays. Further, a high default rate of the buyers under their respective sale agreements could have an adverse effect on the Group s property development business, cashflow and financial position. The Group relies on independent contractors to provide property development products and services The Group engages independent third party contractors to provide significant property development services, including construction, piling and foundation, building and property fitting-out work, interior decoration and installation of air-conditioning units and elevators. There can be no assurance that the services rendered by any such independent contractor or any subcontractor will be completed in a timely manner or of satisfactory quality. If these services are not timely or of acceptable quality, the Group may incur substantial costs to complete the projects and remedy any defects and the Group s reputation could be significantly harmed. The Group is also exposed to the risk that a contractor may require additional funds in excess of the fixed cost to which they committed contractually and the Group may have to bear such additional amounts. Furthermore, any contractor that experiences financial or other difficulties, including labour disputes with its employees, may be unable to carry out construction or related work, resulting in delay in the completion of the Group s development projects or resulting in additional costs. The Group believes that any problems with the Group s contractors, individually or in the aggregate, may materially and adversely affect the Group s financial condition, results of operations or reputation. There is no assurance that such problems with the Group s contractors will not occur in the future. 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 business, financial condition and results of operations. 54

57 The Group s property development business may be subject to risks in investing outside Singapore The Group s property operations in foreign countries could expose it to political, economic, regulatory and social risks and 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 properties or reduced demand. 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 laws, regulations and interpretation thereof and changes in taxation could adversely affect the Group s future results and investments, which may also be exposed to currency fluctuations when they are converted to Singapore dollars. Such unfavourable events in such foreign countries will have an adverse impact on the Group s distributable income and asset value. The Group faces increasing competition The Group s real estate business competes with both domestic and international companies with respect to factors such as location, pricing, concept and design. Intensified competition between real estate developers may result in increased costs for land acquisition, lower profit margins 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. 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 its business and financial condition. The Group s performance may be affected by changes in commodity prices The Group faces risks in relation to changes in commodity prices due to the consumption 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 concerns the development of 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 existing or prospective contractors, which could materially and adversely affect the Group s results of operations and financial condition. 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. There may be disagreements 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 fulfil 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. 55

58 Risks Relating to the Group s Hotel Operations The financial performance of the Group s hotel operations which are carried out principally by Millennium & Copthorne Hotels plc ( M&C ) depends on the conditions of the hospitality industry in the countries in which M&C has hospitality assets and/or operates A number of factors are beyond the control of the M&C and its subsidiaries (the M&C Group ), and could affect the financial performance of the M&C Group s hotel operations, including the following: major events affecting either economic or political stability on a global and regional level represent an exposure to the M&C Group. Economic events such as the current global financial crisis, could include recessionary pressures which would have an impact on the M&C Group s revenue, operating costs and profitability. Political risk could include changes in the regulatory environment in which the M&C Group s business activities operate, including restrictions on the repatriation of funds or control over the ownership of assets; the hotel industry operates in an inherently cyclical market place. A weakening of demand, or an increase in market room-supply, may lead to downward pressure on room rates which in turn would lead to a negative effect on operating performance; sustained levels of occupancy and room rates can be adversely affected by events that reduce domestic or international travel. Such events may include acts of terrorism, war or perceived increased risk of armed conflict, epidemics, natural disasters, increased cost of travel or industrial action. These events may be localised to a particular country, region or could have a wider international perspective. Reduced demand will impact on revenue and operational profitability. The M&C Group has in place contingency and recovery plans to enable it to respond to major incidents or crises; changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations, fiscal policies and ordinances; the nature and length of a typical hotel guest s stay hotel guests typically stay on a short-term basis and there is therefore no assurance of long-term occupancy for hotel rooms; increases in operating costs due to inflation, labour costs (including the impact of unionisation), workers compensation and health-care related costs, utility costs, insurance and unanticipated costs such as acts of nature and their consequences; and changes in travel patterns resulting from increases in transportation or fuel costs, strikes among workers in the transportation industry and adverse weather patterns; These factors could have adverse effects on the M&C Group s results of operations and, consequentially, financial condition. The growth of the M&C Group s hotel business is dependent on the following: Intellectual property rights and brands. Future development will, in part, be dependent on the recognition of the M&C Group s brands and perception of the values inherent in those brands. Substantial investment continues to be made in protecting the M&C Group s brands from misuse and infringement, by way of trade mark registration and domain name protection. Consistent delivery of product quality is vitally important to influencing consumer preference and creating and maintaining value perception. Historically the M&C Group has mainly operated properties it owns. The increasing trend towards managing thirdparty properties increases the risk that product quality may not be delivered in accordance with brand standards. This may increase the M&C Group s exposure to litigation, increase risks to the reputation of the M&C Group s brands, reduce revenue and become an inhibiting factor on ongoing development. Management agreements. A key focus within the M&C Group s strategy is to increase the number of management contracts of third-party properties. In this regard, the M&C Group faces competition from established global and regional brands within the market place. Successful execution of this strategy will depend on the M&C Group s ability to identify suitable management opportunities, secure contracts on suitable contractual terms and ensure that contractual commitments are met and retained going forward. 56

59 The M&C Group faces the risk of slower growth in the event it is unsuccessful in penetrating this market. Information technology systems and infrastructure. The M&C Group invests in systems that are tried and tested so that as much operational resilience as possible, cost considerations permitting, can be obtained. Investment is made in robust infrastructure technology to provide a reliable operating platform. In order to maintain its competitiveness within the market place, the M&C Group may, in the future, need to make a substantial investment in new technology. Crisis management and disaster recovery plans are in place for business critical systems. Property ownership. The M&C Group s strategy is to be both owner and manager of hotel properties. Growth of the M&C Group s portfolio of owned assets is dependent on the availability of suitable development sites, acquisitions and access to funding. A limit on such opportunities may have a negative impact on future operational profitability. Property ownership requires ongoing investment in the form of preventive maintenance, refurbishment, existing and new capital expenditure and product development. There is also the possible loss of capital due to uninsured events and reductions in asset values as a result of demographic changes in the markets in which the properties are located. The hospitality business is exposed to tax and treasury risk As a multinational organisation, the M&C Group s businesses operate in numerous tax jurisdictions. Changes in tax laws in any of those jurisdictions may have adverse consequences to the M&C Group s profits. Similarly the M&C Group s interpretation and application of various tax laws may be challenged, with the possible result that the M&C Group is required to pay unforeseen tax liabilities. M&C trades in numerous international currencies but reports its financial results in Pounds Sterling. Fluctuations in currency exchange rates could dilute the M&C Group s reported trading results and also the M&C Group s net asset value. Unhedged interest rate exposures pose a risk to the M&C Group when interest rate rise, resulting in increased costs of funding and an impact on overall financial performance. The hospitality industry is competitive The global hospitality industry is highly competitive. The hotels owned and/or managed by the M&C Group typically experience competition primarily from other similar upscale hotels in their immediate vicinity, and also with other hotels in their geographical market. The level of competition in the global hospitality industry is affected by various factors, including changes in economic conditions, both locally, regionally and globally, changes in local, regional and global populations, the supply and demand for hotel rooms and changes in travel patterns and preferences. Competing hotels may offer more facilities at their premises at similar or more competitive prices compared to the facilities offered at the hotels owned or managed by the M&C Group. Competing hotels may also significantly lower their rates or offer greater convenience, services or amenities, to attract more guests. If these efforts are successful, the results of operations at the hotels owned or managed by the M&C Group may be adversely affected. There can also be no assurance that demographic, geographic or other changes will not adversely affect the convenience or demand for the hotels owned or managed by the M&C Group. An over-supply in room availability in the markets where the M&C Group owns or manages hotels could adversely affect occupancy rates and the average daily hotel rates of the hotels owned or managed by the M&C Group. Risks Relating to the Group s Investment Properties Business The Group may not be able to generate adequate returns on its properties held for long-term purposes Property investment is subject to varying degrees of risks. The investment returns available from investments in real estate depend, to a large extent, on the amount of capital appreciation generated, income earned from the rental of the relevant properties as well as the expenses incurred. Maximising yields from properties held for long-term investment also depends to a large extent on active ongoing management and maintenance of the properties. The ability to eventually dispose of investment properties will also depend on market conditions and levels of liquidity, which may be limited or subject to significant fluctuation in the case of certain types of commercial properties. The revenue derived from and the value of property investment may be adversely affected by a number of factors, including but not 57

60 limited to changes in market rates for comparable rentals, the inability to collect rent due to bankruptcy or insolvency of tenants and the costs resulting from periodic maintenance, repair and re-letting. If the Group expands the property investment aspect of the Group s business but are unable to generate adequate returns, the Group s financial condition and results of operations may be adversely affected. Other Risks Relating to the Group s Business The Group may be adversely affected by a compulsory acquisition of property by the Singapore Government The Land Acquisition Act, Chapter 152 of Singapore, inter alia, gives the Singapore Government the power to acquire any land in Singapore: for any public purpose; where the acquisition is required by any person, corporation or statutory board, for any work or undertaking which is of public benefit or of public utility or in the public interest; or for any residential, commercial or industrial purpose. In determining the amount of the compensation to be awarded pursuant to any such compulsory acquisition, the following matters, inter alia, would be considered: (i) the market value of the property as at the date of the publication in the Singapore Government Gazette of the notification of likely acquisition of the land (provided that within six months from the date of publication of such notification, a declaration of intention to acquire is made by publication in the Singapore Government Gazette); or (ii) the market value of the property as at the date of publication in the Singapore Government Gazette of the declaration of intention to acquire in any other case. Accordingly, if the market price of the property or part thereof which is acquired is greater than the market values referred to above, the compensation paid in respect of the property will be less than its market value. In such event, such compulsory acquisitions would have an adverse effect on the Group s financial condition. 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 the Group s properties (such as contractors, sub-contractors, suppliers, construction companies, purchasers and other partners), and the management and operations of the Group s hotels and investment properties. 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 the Group to administrative proceedings and unfavourable decrees that result in financial losses and/or a delay in the construction or completion of the Group s projects. The Group may suffer an uninsured loss The Group maintains insurance cover appropriate to its risk profile after taking into account the level of retained risk the Group considers to be appropriate, relative to the cost of cover available in the market place. Not all risks are insured, either because the cover is not available in the market or that cover is not available on commercially viable terms. The Group is exposed to the risk of cover not being continually available. Availability may be influenced by factors outside the Group s control, which could reduce the markets underwriting capacity, breadth of policy coverage or simply make the cost of cover too expensive. The Group could be exposed to uninsured third-party claims, loss of revenue or reduction of fixed asset values which may, in turn, have an adverse effect on Group profitability, cash flows and ability to satisfy banking covenants. 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, at commercially reasonable rates or at all. 58

61 The Group is exposed to general risks associated with the ownership and management of real estate Property investment is also subject to risks incidental to the ownership and management of commercial properties. In particular, risks associated with the Group s property rental business (and to a lesser extent, the Group s hospitality and property development businesses) would include, among other things, defects (latent or otherwise) in buildings 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 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 operations are subject to various regulatory requirements The Group s operations are subject to various regulatory requirements. Failure to comply with these requirements could result in the imposition of fines or other penalties by governmental authorities, which may include the revocation of governmental licences. This may also result in delays to the completion of the Group s property development projects. Any penalties imposed by governmental authorities may materially and adversely affect the business of the Group. The outbreak of an infectious disease or any other serious public health concerns in Singapore could adversely impact the business, results of operations and financial conditions of the Group As most of the Group s existing investment properties, development projects and landbank are located in Singapore, the outbreak of an infectious disease in Singapore such as SARS, may result in an adverse development in the supply of or demand for property or property prices which would in turn have a material and adverse effect on the Group s business, results of operations and financial conditions. 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 Singapore could seriously harm the Group s business. 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 Southeast Asia and the rest of the world have resulted in substantial and continuing economic volatility and social unrest in Southeast Asia. Any further developments or 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 unpredictable, and the Group may not be able to foresee events that could have an adverse effect on its businesses and results of operations. The Group s real estate investments may be illiquid Real estate investments are generally 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 Group 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. 59

62 The Group depends on the continued service of certain key personnel, and the loss of any such key personnel may adversely affect its financial condition and results of operations Execution of the Group s strategy depends on its ability to attract, develop and retain employees with the appropriate skills, experience and aptitude. Development and maintenance of a group culture, recognition systems, compensation and benefits arrangements, training and development all play leading roles in minimising this risk. The loss of key employees may have a material adverse effect on the Group s businesses, financial condition and results of operations. The Group s key businesses are generally capital intensive in nature, and the Group s growth may be affected if it is unable to obtain financing The Group s key businesses are generally capital intensive in nature. For instance, the Group s hospitality and investment properties will require periodic capital expenditure, refurbishments, renovation and improvements to remain competitive. Acquisitions or development of additional hotels and property assets (including landbank for future development) will also require significant capital expenditure. The Group may not be able to fund capital improvements or acquisitions solely from cash generated from its operating activities. The Group may not be able to obtain additional equity or debt nor be able to obtain such financing on favourable terms. 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. 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. The Group is subject to exchange rate fluctuations 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. 60

63 PURPOSE OF THE MTN PROGRAMME AND USE OF PROCEEDS The net proceeds arising from the issue of Notes under the MTN Programme (after deducting issue expenses) will be used to refinance existing borrowings of the Group and/or to finance the general working capital requirements of the Group. 61

64 CLEARING AND SETTLEMENT UNDER THE DEPOSITORY SYSTEM Clearance and Settlement In respect of Notes which are accepted for clearance by CDP in Singapore, clearance will be effected through an electronic book-entry clearance and settlement system for the trading of debt securities ( Depository System ) maintained by CDP. Notes that are to be listed on the SGX-ST may be cleared through CDP. CDP, a wholly-owned subsidiary of Singapore Exchange Limited, is incorporated under the laws of Singapore and acts as a depository and clearing organisation. CDP holds securities for its accountholders and facilitates the clearance and settlement of securities transactions between accountholders through electronic book-entry changes in the securities accounts maintained by such accountholders with CDP. In respect of Notes which are accepted for clearance by CDP, the entire issue of the Notes is to be held by CDP in the form of a global note for persons holding the Notes in securities accounts with CDP ( Depositors ). Delivery and transfer of Notes between Depositors is by electronic book-entries in the records of CDP only, as reflected in the securities accounts of Depositors. Although CDP encourages settlement on the third business day following the trade date of debt securities, market participants may mutually agree on a different settlement period if necessary. Settlement of over-the-counter trades in the Notes through the Depository System may only be effected through certain corporate depositors ( Depository Agents ) approved by CDP under the Companies Act to maintain securities sub-accounts and to hold the Notes in such securities sub-accounts for themselves and their clients. Accordingly, Notes for which trade settlement is to be effected through the Depository System must be held in securities sub-accounts with Depository Agents. Depositors holding the Notes in direct securities accounts with CDP, and who wish to trade Notes through the Depository System, must transfer the Notes to be traded from such direct securities accounts to a securities sub-account with a Depository Agent for trade settlement. CDP is not involved in money settlement between Depository Agents (or any other persons) as CDP is not a counterparty in the settlement of trades of debt securities. However, CDP will make payment of interest and repayment of principal on behalf of issuers of debt securities. Although CDP has established procedures to facilitate transfer of interests in the Notes in global form among Depositors, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of the Issuer, the Issuing and Paying Agent or any other agent will have the responsibility for the performance by CDP of its obligations under the rules and procedures governing its operations. 62

65 SINGAPORE TAXATION The statements below are general in nature and are based on certain aspects of current tax laws in Singapore and administrative guidelines issued by the MAS in force as at the date of this Information Memorandum and are subject to any changes in such laws or administrative guidelines, or the interpretation of those laws or guidelines, occurring after such date, which changes could be made on a retroactive basis. Neither these statements nor any other statements in this Information Memorandum are to be regarded as advice on the tax position of any holder of the Notes or of any person acquiring, selling or otherwise dealing with the Notes or on any tax implications arising from the acquisition, sale or other dealings in respect of the Notes. The statements do not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase, own or dispose of the Notes 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 Notes who are in doubt about their respective tax positions or any such tax implications of the purchase, ownership or transfer of Notes or who may be subject to tax in a jurisdiction other than Singapore should consult their own professional advisers. 1. Interest and Other Payments Subject to the following paragraphs, under Section 12(6) of the Income Tax Act, Chapter 134 of Singapore (the ITA ) the following payments are deemed to be derived from Singapore: (a) (b) any interest, commission, fee or any other payment in connection with any loan or indebtedness or with any arrangement, management, guarantee, or service relating to any loan or indebtedness which is (i) borne, directly or indirectly, by a person resident in Singapore or a permanent establishment in Singapore except in respect of any business carried on outside Singapore through a permanent establishment outside Singapore or any immovable property situated outside Singapore or (ii) deductible against any income accruing in or derived from Singapore; or any income derived from loans where the funds provided by such loans are brought into or used in Singapore. Such payments, where made to a person not known to the paying party to be a resident in Singapore for tax purposes, are subject to withholding tax in Singapore. The rate at which tax is to be withheld for such payments (other than those subject to the 15 per cent. final withholding tax described below) to non-resident persons other than non-resident individuals and non-resident Hindu-joint families is 18 per cent. with effect from year of assessment The applicable rate for non-resident individuals and non-resident Hindu-joint families is 20 per cent. However, if the payment is derived by a person not resident in Singapore otherwise than from any trade, business, profession or vocation carried on or exercised by such person in Singapore and is not effectively connected with any permanent establishment in Singapore of that person, the payment is subject to a final withholding tax of 15 per cent. The rate of 15 per cent. may be reduced by applicable tax treaties. Certain Singapore-sourced investment income derived by individuals from financial instruments is exempt from tax, including: (a) interest from debt securities derived on or after 1 January 2004; (b) (c) (d) discount income (not including discount income arising from secondary trading) from debt securities derived on or after 17 February 2006; prepayment fee, redemption premium and break cost (as such terms are defined in the ITA) from debt securities derived on or after 15 February 2007; and such other income directly attributable to debt securities as may be prescribed by regulations derived from Singapore on or after a prescribed date, 63

66 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 addition, if the Dealers for more than half of the principal amount of a Tranche of Notes issued under the Programme during the period from the date of this Information Memorandum to 31 December 2013 are: (i) (ii) financial institutions who have been awarded Financial Sector Incentive (Bond Market) Company status by the Minister for Finance of Singapore or such person as he may appoint; or financial institutions in Singapore where their staff based in Singapore have a leading and substantial role in the distribution of such Tranche of Notes, such Tranche of Notes ( Relevant Notes ) would be qualifying debt securities for the purposes of the ITA, to which the following treatments shall apply: (i) (ii) (iii) (iv) subject to certain prescribed conditions having been fulfilled (including the furnishing by the Issuer, or such other person as the Comptroller of Income Tax in Singapore (the Comptroller ) may direct, of a return on debt securities in respect of the Relevant Notes within such period as the Comptroller may specify and such other particulars in connection with the Relevant Notes as the Comptroller may require to the Comptroller and the MAS, and the inclusion by the Issuer in all offering documents relating to the Relevant Notes of a statement to the effect that where interest, discount income, prepayment fee, redemption premium or break cost is derived by a person who is not resident in Singapore and who carries on any operation in Singapore through a permanent establishment in Singapore, the tax exemption shall not apply if the non-resident person acquires the Relevant Notes using funds from that person s operations through the Singapore permanent establishment), interest, discount income (not including discount income arising from secondary trading), prepayment fee, redemption premium and break cost (as such terms are defined in the ITA) (collectively, the Qualifying Income ) from the Relevant Notes, derived by a holder who is not resident in Singapore and (aa) who does not have any permanent establishment in Singapore or (bb) carries on any operation in Singapore through a permanent establishment in Singapore but the funds used by that person to acquire the Relevant Notes are not obtained from the operation in Singapore, are exempt from Singapore tax; subject to certain conditions having been fulfilled (including the furnishing by the Issuer, or such other person as the Comptroller may direct, of a return on debt securities in respect of the Relevant Notes within such period as the Comptroller may specify and such other particulars in connection with the Relevant Notes as the Comptroller may require to the Comptroller and the MAS), Qualifying Income from the Relevant Notes derived by any company in Singapore is subject to tax at a concessionary rate of 10 per cent.; Qualifying Income from the Relevant Notes derived by a body of persons (as defined in the ITA) in Singapore is subject to tax at a concessionary rate of 10 per cent.; and subject to: (aa) the Issuer including in all offering documents relating to the Relevant Notes a statement to the effect that any person whose interest, discount income, prepayment fee, redemption premium or break cost derived from the Relevant Notes is not exempt from tax shall include such income in a return of income made under the ITA; and (bb) the Issuer, or such other person as the Comptroller may direct, furnishing to the Comptroller and the MAS a return on debt securities in respect of the Relevant Notes within such period as the Comptroller may specify and such other particulars in connection with the Relevant Notes as the Comptroller may require, 64

67 Qualifying Income derived from the Relevant Notes is not subject to withholding of tax by the Issuer. However, notwithstanding the foregoing: (A) (B) if during the primary launch of any tranche of Relevant Notes, such Relevant Notes are issued to fewer than four persons and 50 per cent. or more of the issue of such Relevant Notes is beneficially held or funded, directly or indirectly, by related parties of the Issuer, such Relevant Notes would not qualify as qualifying debt securities ; and even though a particular tranche of Relevant Notes are qualifying debt securities, if, at any time during the tenure of such tranche of Relevant Notes, 50 per cent. or more of the issue of such Relevant Notes is held beneficially or funded, directly or indirectly, by any related party(ies) of the Issuer, Qualifying Income derived by: (i) (ii) any related party of the Issuer; or any other person where the funds used by such person to acquire such Relevant Notes 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 described above. 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. The terms break cost, prepayment fee and redemption premium are defined in the ITA as follows: break cost, in relation to debt securities and qualifying debt securities, means any fee payable by the issuer of the securities on the early redemption of the securities, the amount of which is determined by any loss or liability incurred by the holder of the securities in connection with such redemption; prepayment fee, in relation to debt securities and qualifying debt securities, means any fee payable by the issuer of the securities on the early redemption of the securities, the amount of which is determined by the terms of the issuance of the securities; and redemption premium, in relation to debt securities and qualifying debt securities, means any premium payable by the issuer of the securities on the redemption of the securities upon their maturity. References to break cost, prepayment fee and redemption premium in this Singapore tax disclosure have their same meanings as in the ITA. Notwithstanding that the Issuer is permitted to make payments of interest, discount income, prepayment fee, redemption premium and break cost in respect of the Relevant Notes without deduction or withholding for tax under Section 45 or Section 45A of the ITA, any person whose interest, discount income, prepayment fee, redemption premium or break cost derived from the Relevant Notes is not exempt from tax is required to include such income in a return of income made under the ITA. The Qualifying Debt Securities Plus Scheme ( QDS Plus Scheme ) has also been introduced as an enhancement of the Qualifying Debt Securities Scheme. Under the QDS Plus Scheme, income tax exemption is granted on, inter alia, Qualifying Income derived by any investor from qualifying debt securities (excluding Singapore Government Securities) which:- (a) are issued during the period from 16 February 2008 to 31 December 2013; 65

68 (b) (c) (d) have an original maturity date of not less than 10 years; cannot be redeemed, called, exchanged or converted within 10 years from the date of their issue; and cannot be reopened with a resulting tenure of less than 10 years to the original maturity date. All payments in respect of the Notes by the Issuer shall be made after withholding or deducting any amounts for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, by or on behalf of Singapore or any authority thereof or therein having power to tax and which are required by applicable law to be withheld or deducted. The Issuer will not pay any additional amounts in respect of any such withholding or deduction from payments in respect of the Notes and Coupons for or on account of any such taxes, duties, assessments or charges. Where the Issuer is not permitted under applicable law to make payments of principal or interest in respect of any Notes or Coupons without any withholding or deduction for Singapore tax, no payment of principal or interest shall be made by the Issuer to any Noteholder or Couponholder without deduction or withholding for or on account of any such taxes, duties, assessments or charges unless such Noteholder or Couponholder shall have provided a statutory declaration or other evidence satisfactory to the Issuing and Paying Agent that the beneficial owner of such principal or interest is a resident in Singapore for tax purposes or a permanent establishment in Singapore (not resident in Singapore) which has obtained waiver from withholding tax. 2. Capital Gains Any gains considered to be in the nature of capital made from the sale of the Notes will not be subject to tax in Singapore. However, any gains from the sale of Notes which are gains from any trade, business, profession or vocation carried on by that person, if accruing in or derived from Singapore, may be taxable as such gains are considered revenue in nature. Holders of the Notes who are adopting Singapore Financial Reporting Standard 39 - Financial Instruments: Recognition and Measurement ( FRS 39 ) may for Singapore income tax purposes be required to recognise gains or losses on the Notes, irrespective of disposal, in accordance with FRS 39. Please see the section below on Adoption of FRS 39 treatment for Singapore income tax purposes. 3. Adoption of FRS 39 treatment for Singapore income tax 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 ITA has since been amended to give effect to the FRS 39 Circular. The FRS 39 Circular generally applies, subject to certain opt-out provisions, to taxpayers who are required to comply with FRS 39 for financial reporting purposes. Holders of the Notes 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 disposal of the Notes. 4. Estate Duty Singapore estate duty has been abolished with respect to all deaths occurring on or after 15 February

69 SUBSCRIPTION, PURCHASE AND DISTRIBUTION The Programme Agreement provides for Notes to be offered from time to time through one or more Dealers. The price at which a Series or Tranche will be issued will be determined prior to its issue between the Issuer and the relevant Dealer(s). The obligations of the Dealers under the Programme Agreement will be subject to certain conditions set out in the Programme Agreement. Each Dealer (acting as principal) will subscribe or procure subscribers for Notes from the Issuer pursuant to the Programme Agreement. United States The Notes have not been and will not be registered under the Securities Act and the Notes may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons, except in certain transactions exempt from the registration requirements of the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S. Notes in bearer form are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to a United States person, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code and regulations thereunder. Each Dealer has agreed and each further Dealer appointed under the Programme will be required to agree that, except as permitted by the Programme Agreement, it will not offer, or sell or, in the case of Notes in bearer form, deliver Notes (i) as part of their distribution at any time or (ii) otherwise until 40 days after the completion of the distribution of an identifiable tranche of which such Notes are a part, as determined and certified to the Issuer and each relevant Dealer by such Dealer (or, in the case of an identifiable tranche of Notes sold to or through more than one Dealer, by each of such Dealers with respect to Notes of an identifiable tranche purchased by or through it, in which case the Issuing and Paying Agent shall notify such Dealer when all such Dealers have so certified), within the United States or to, or for the account or benefit of, U.S. persons, and it will have sent to each Dealer to which it sells Notes during the distribution compliance period a confirmation or other notice setting out the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons. Terms used in the preceding sentence have the meanings given to them by Regulation S. The Notes are being offered and sold outside the United States to non-u.s. persons in reliance on Regulation S. In addition, until 40 days after the commencement of the offering of any identifiable tranche of Notes, an offer or sale of Notes within the United States by any dealer (whether or not participating in the offering of such tranche of Notes) may violate the registration requirements of the Securities Act. This Information Memorandum has been prepared by the Issuer for use in connection with the offer and sale of the Notes outside the United States. The Issuer and the Dealers reserve the right to reject any offer to purchase the Notes, in whole or in part, for any reason. This Information Memorandum does not constitute an offer to any person in the United States. Distribution of this Information Memorandum by any non-u.s. person outside the United States to any U.S. person or to any other person within the United States, is unauthorised and any disclosure without the prior written consent of the Issuer of any of its contents to any such U.S. person or other person within the United States, is prohibited. Singapore Each Dealer has acknowledged that this Information Memorandum has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, each Dealer has represented, warranted and agreed that it has not offered or sold any Notes or caused the Notes to be made the subject of an invitation for subscription or purchase and will not offer or sell any Notes or cause the Notes 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 Information Memorandum or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes, whether directly 67

70 or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the SFA, (ii) to a relevant person pursuant to Section 275(1), or to any person pursuant to Section 275(1A), 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 provision of the SFA. Hong Kong Each Dealer has represented, warranted and agreed that: (i) (ii) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Notes 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; and it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Notes, 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 Notes 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. General Each Dealer understands that no action has been taken in any jurisdiction that would permit a public offering of any of the Notes, or possession or distribution of this Information Memorandum or any other document or any Pricing Supplement, in any country or jurisdiction (other than Singapore) where action for that purpose is required. Each issue of Notes shall be subject to such additional selling restrictions as may be agreed to between the Issuer and the relevant Dealer(s) and each of the Dealers has undertaken that it will at all times comply with all such selling restrictions. Each Dealer has agreed to observe and comply with all applicable laws and regulations in each jurisdiction in which it may offer, sell or deliver the Notes or distribute any such material as a result of any of the foregoing activities and it will also ensure that no obligations or liabilities are imposed on the Issuer in any such jurisdiction as a result of any of the foregoing actions. The Issuer will not have any responsibility for, and each Dealer will at its own expense obtain, any consent, approval or permission required by it for the acquisition, offer, sale or delivery by it of the Notes under the laws and regulations in force in any jurisdiction (other than in Singapore in respect of the Information Memorandum or in connection with the invocation by the Issuer of any applicable exemption under Sections 274 and/or 275 of the SFA) to which it is subject or in or from which it makes any acquisition, offer, sale or delivery. Further, each Dealer has agreed that it will not directly or indirectly solicit subscription for any Notes or distribute or publish any prospectus, form of application, offering circular, advertisement or other offering material in any country or jurisdiction except under circumstances that will result in compliance with any applicable laws and regulations. Each Dealer has also agreed to impose restrictions similar to those set out above on any subsequent holder of the Notes. Any person who may be in doubt as to the restrictions set out in the SFA or the laws, regulations and directives in each jurisdiction in which it subscribes for, purchases, offers, sells or delivers the Notes or any interest therein or rights in respect thereof and the consequences arising from a contravention thereof should consult his own professional advisers and should make his own inquiries as to the laws, regulations and directives in force or applicable in any particular jurisdiction at any relevant time. 68

71 APPENDIX I GENERAL AND OTHER INFORMATION INFORMATION ON DIRECTORS 1. The names and positions of each of the Directors are set out below: Name Kwek Leng Beng Kwek Leng Joo Chee Keng Soon Chow Chiok Hock Foo See Juan Kwek Leng Peck Han Vo-Ta Tang See Chim Position Executive Chairman Managing Director Director Director Director Director Director Director 2. Save for transactions entered into between the Issuer, any of its subsidiaries or associated companies (as defined in the Listing Manual) and any of its interested persons (as defined in Chapter 9 of the Listing Manual) in the ordinary course of business of the Issuer, its subsidiaries and associated companies, in which certain Directors have an interest, directly or indirectly, in the shares of such interested persons and, by virtue of such interest, may be deemed to have an interest in such transactions, no Director is interested, directly or indirectly, in the promotion of any assets acquired or disposed of by or leased to, the Issuer or any of its subsidiaries or its associated companies, within the two years preceding the date of this Information Memorandum, or in any proposal for such acquisition, disposal or lease as aforesaid. SHARE CAPITAL 3. As at the date of this Information Memorandum, there are only two classes of shares namely ordinary shares and preference shares in the Issuer. The rights and privileges attached to the ordinary shares and preference shares respectively are stated in the Articles of Association of the Issuer. 4. As at the date of this Information Memorandum, the number of Shares issued by the Issuer is as follows: Share Designation Number of Shares Ordinary 909,301,330 Preference 330,874, As at 7 November 2008, the interests of the substantial shareholders of the Issuer in the ordinary shares are as follows: Substantial Number of ordinary shares held Shareholders Direct Interest Deemed Interest Hong Realty (Private) Limited 32,068,024 30,499,756 Hong Leong Holdings Limited 148,787,477 19,547,220 Hong Leong Investment Holdings Pte. Ltd. 140,169, ,958,566 Davos Investment Holdings Private Limited 442,127,901 Kwek Holdings Pte Ltd 442,127,901 Aberdeen Asset Management plc 109,362,288 and its subsidiaries Aberdeen Asset Management Asia Limited 83,332,688 Aberdeen Asset Managers Limited 56,260,200 69

72 BORROWINGS 6. As at 30 September 2008, the borrowings of the Group are as disclosed in Appendix V to this Information Memorandum. WORKING CAPITAL 7. After taking into account the present banking facilities, the Issuer will have adequate working capital for its present requirements. CHANGES IN ACCOUNTING POLICIES 8. There has been no significant change in the accounting policies of the Issuer since its audited financial accounts for the financial year ended 31 December LITIGATION 9. There are no legal or arbitration proceedings pending or threatened against the Issuer the outcome of which may have or have had during the 12 months prior to the date of this Information Memorandum a material adverse effect on the financial position of the Issuer. CONSENTS 10. The Arranger of the MTN Programme, the Dealers, the Legal Advisers to the Arranger, Dealers and the Trustee, the Legal Advisers to the Issuer, the Issuing and Paying Agent, Agent Bank and Registrar under the Initial Agency Agreement, the Trustee and the Auditors have given and have not withdrawn their respective written consents to the issue of this Information Memorandum with the references herein to their names and, where applicable, reports in the form and context in which they appear in this Information Memorandum. DOCUMENTS AVAILABLE FOR INSPECTION 11. Copies of the following documents may be inspected at the registered office of the Issuer at 36 Robinson Road #04-01 City House Singapore during normal business hours for a period of six months from the date of this Information Memorandum: (a) the Memorandum and Articles of Association of the Issuer; (b) the audited accounts of the Issuer and its subsidiaries for the financial years ended 31 December 2006 and 31 December 2007 and the unaudited financial statements of the Issuer and its subsidiaries for the first quarter ended 31 March 2008, the second quarter and half year ended 30 June 2008 and the third quarter and nine months ended 30 September 2008; (c) (d) the Trust Deed and the Supplemental Trust Deed; and the letters of consent referred to in paragraph 10 above. FUNCTIONS, RIGHTS AND OBLIGATIONS OF THE TRUSTEE 12. The functions, rights and obligations of the Trustee are set out in the Trust Deed. 70

73 APPENDIX II AUDITED ACCOUNTS OF CITY DEVELOPMENTS LIMITED AND ITS SUBSIDIARIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006 The information in this Appendix II has been reproduced from the annual report of City Developments Limited and its subsidiaries for the financial year ended 31 December 2006 and has not been specifically prepared for inclusion in this Information Memorandum and references to the page numbers herein are those as reproduced from the annual report of City Developments Limited and its subsidiaries for the financial year ended 31 December

74 STATEMENT BY DIRECTORS In our opinion: (a) the financial statements set out on pages 76 to 170 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2006 and of the results, recognised income and expenses and cash flows of the Group for the year ended on that date in accordance with the provisions of the Singapore Companies Act, Chapter 50 and Singapore Financial Reporting Standards; and (b) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due. The Board of Directors has, on the date of this statement, authorised these financial statements for issue. On behalf of the Board of Directors KWEK LENG BENG Executive Chairman KWEK LENG JOO Managing Director Singapore 9 March CITY DEVELOPMENTS LIMITED ANNUAL REPORT

75 INDEPENDENT AUDITORS REPORT Members of the Company City Developments Limited We have audited the accompanying financial statements of City Developments 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 statement, statement of recognised income and expenses and 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 76 to 170. 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 Singapore Companies Act, Chapter 50 (the Act) and Singapore Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control 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 judgment, 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. Opinion In our opinion: (a) the consolidated financial statements of the Group and the balance sheet 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, recognised income and expenses and cash flows of the Group for the year ended on that date; and (b) 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 9 March 2007 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

76 BALANCE SHEETS as at 31 December 2006 GROUP COMPANY NOTE $ 000 $ 000 $ 000 $ 000 Non-current assets Property, plant and equipment 3 6,318,829 7,062, , ,000 Intangible assets Investments in: subsidiaries 5 2,219,682 2,187,325 an associate 6 116,990 jointly-controlled entities 7 289, ,270 50,054 48,654 Financial assets 8 152, ,316 39,582 37,752 Other non-current assets 9 277, , , ,738 7,155,045 7,597,925 2,788,872 2,942,469 Current assets Development properties 10 2,281,858 1,886,488 1,469,935 1,484,558 Consumable stocks 14,507 13,875 1,014 Financial assets 8 70,703 52,069 Trade and other receivables , ,177 1,376,141 1,104,580 Cash and cash equivalents , ,608 99, ,726 3,849,320 3,297,217 2,945,817 2,727,878 Total assets 11,004,365 10,895,142 5,734,689 5,670,347 Equity attributable to equity holders of the Company Share capital 15 1,991, ,944 1,991, ,944 Reserves 16 2,743,138 4,086,872 1,914,961 3,299,588 4,734,535 4,547,816 3,906,358 3,760,532 Minority interests 1,645,564 1,527,445 Total equity 17 6,380,099 6,075,261 3,906,358 3,760,532 Non-current liabilities Interest-bearing borrowings 19 2,316,947 2,679, , ,467 Employee benefits 24 45,178 45,877 Other liabilities 25 53,323 46,951 10,070 8,663 Provisions 26 5,548 8,377 Deferred tax liabilities , ,549 22,955 20,437 2,888,263 3,214, , ,567 Current liabilities Bank overdrafts 14 2,319 2,815 Trade and other payables , , , ,790 Interest-bearing borrowings 19 1,029, , , ,264 Employee benefits 24 16,336 15,602 1,477 1,191 Other liabilities 25 2,498 2,394 Provision for taxation 110,701 81,630 51,765 16,003 Provisions 26 2,356 1,858 1,736,003 1,605,201 1,205, ,248 Total liabilities 4,624,266 4,819,881 1,828,331 1,909,815 Total equity and liabilities 11,004,365 10,895,142 5,734,689 5,670,347 The accompanying notes form an integral part of these financial statements. 76 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

77 CONSOLIDATED INCOME STATEMENT Year ended 31 December 2006 GROUP NOTE $ 000 $ 000 Revenue 29 2,546,804 2,374,279 Cost of sales (1,179,145) (1,118,428) Gross profit 1,367,659 1,255,851 Other operating income ,519 68,581 Administrative expenses (460,792) (430,014) Other operating expenses (420,726) (426,172) Profit from operations 673, ,246 Finance income 42,468 28,269 Finance costs (138,718) (151,278) Net finance costs 30 (96,250) (123,009) Share of after-tax profit of an associate 5,956 Share of after-tax profit of jointly-controlled entities 108,912 58,625 Profit before income tax , ,862 Income tax expense 31 (129,312) (94,740) Profit for the year 562, ,122 Attributable to: Equity holders of the Company Ordinary shareholders 338, ,493 Preference shareholders 12,904 12, , ,397 Minority interests 211, ,725 Profit for the year 562, ,122 Earnings per share Basic cents 20.8 cents Diluted cents 20.5 cents The accompanying notes form an integral part of these financial statements. CITY DEVELOPMENTS LIMITED ANNUAL REPORT

78 CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSES Year ended 31 December 2006 GROUP $ 000 $ 000 Translation differences arising on consolidation of foreign subsidiaries (110,133) 4,446 Exchange differences on hedge of net investments in foreign entities (1,437) (3,475) Exchange differences on monetary items forming part of net investments in foreign entities (7,881) 4,609 Change in fair value of equity investments available for sale 4,045 10,087 Share of other reserves movements of an associate (6,738) Actuarial losses on defined benefit plans (2,755) (6,447) Net (losses)/gains recognised directly in equity (124,899) 9,220 Profit for the year 562, ,122 Total recognised income and expenses for the year 438, ,342 Attributable to: Equity holders of the Company 290, ,074 Minority interests 147, , , ,342 Effect of changes in accounting policies: Equity holders of the Company (588,547) Minority interests (774,062) (1,362,609) The accompanying notes form an integral part of these financial statements. 78 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

79 CONSOLIDATED CASH FLOW STATEMENT Year ended 31 December 2006 GROUP $ 000 $ 000 Operating activities Profit before income tax 692, ,862 Adjustments for: Allowance for foreseeable losses on development properties written back (net) (38,561) (7,296) Depreciation and amortisation 155, ,705 Dividend income (9,647) (9,136) Finance income (42,468) (28,269) Interest expense 135, ,307 Impairment losses for property, plant and equipment 9,220 24,530 Loss on liquidation of a jointly-controlled entity 1,247 Profit on sale of long leasehold interest in hotels and property, plant and equipment (153,581) (21,507) Profit on sale of investments (205) Property, plant and equipment written off 3, Share of after-tax profit of an associate (5,956) Share of after-tax profit of jointly-controlled entities (108,912) (58,625) Value of employee services received for issue of share options 1,822 1,789 Operating profit before working capital changes 639, ,118 Changes in working capital: Development properties (159,485) 170,341 Stocks, trade and other receivables (82,457) 33,156 Trade and other payables (2,991) (12,702) Employee benefits (3,012) (2,108) Cash generated from operations 391, ,805 Income tax paid (62,121) (91,958) Cash flows from operating activities carried forward 329, ,847 The accompanying notes form an integral part of these financial statements. CITY DEVELOPMENTS LIMITED ANNUAL REPORT

80 CONSOLIDATED CASH FLOW STATEMENT Year ended 31 December 2006 GROUP $ 000 $ 000 Cash flows from operating activities brought forward 329, ,847 Investing activities Acquisition of a subsidiary (net of cash acquired) (Note 34) (48,674) (4,519) Dividends received financial investments 8,379 9,136 jointly-controlled entities 28,204 12,688 Interest received 48,934 27,708 Proceeds from sale of property, plant and equipment 869, ,920 Purchase of financial assets (51,509) (55,963) (Purchase)/Disposal of investments in jointly-controlled entities (250) 86,975 Purchase of intangible assets (5) (3) Purchase of investment in an associate (229,640) Purchase of property, plant and equipment (177,325) (300,066) Cash flows from investing activities 447,220 (98,124) Financing activities Advances from/(to) related corporations 2,896 (209,149) Capital contribution from minority shareholders 12,001 2,072 Dividends paid (198,123) (119,710) Finance lease payments (5,734) (5,361) Fixed deposits pledged to a financial institution 1,026 (16) Interest paid (including amounts capitalised as property, plant and equipment and development properties) (151,471) (161,719) Net proceeds from revolving credit facilities and short-term bank borrowings 116, ,514 Payment of financing transaction costs (1,571) (2,986) Proceeds from issuance of bonds and notes 479, ,601 Proceeds from issue of shares 51,251 42,016 Proceeds from bank borrowings 232,993 1,257,472 Repayment of bank borrowings (787,158) (1,405,041) Repayment of bonds and notes (300,455) (783,240) Repayment of other long-term liabilities (405) (442) Cash flows from financing activities (548,958) (865,989) Net increase/(decrease) in cash and cash equivalents 227,652 (245,266) Cash and cash equivalents at beginning of the year 569, ,663 Effect of exchange rate changes on balances held in foreign currencies (22,814) (10,630) Cash and cash equivalents at end of the year (Note 14) 774, ,767 The accompanying notes form an integral part of these financial statements. 80 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

81 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2006 These notes form an integral part of the financial statements. The financial statements were authorised for issue by the Board of Directors on 9 March DOMICILE AND ACTIVITIES City Developments Limited (the Company) is incorporated in the Republic of Singapore and has its registered office at 36 Robinson Road, #04-01 City House, Singapore The principal activities of the Company are those of a property developer and owner and investment holding. The principal activities of the subsidiaries are those of property developers and owners, hotel owners and operators, club operator and owner, investment in properties and in shares, property management, project management and consultancy services and providers of information technology and procurement services. The consolidated financial statements for the year ended 31 December 2006 relate to the Company and its subsidiaries (together referred to as the Group) and the Group s interests in an associate and jointly-controlled entities. The directors consider the immediate and ultimate holding company to be Hong Leong Investment Holdings Pte. Ltd., a company incorporated in the Republic of Singapore. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis of preparation The financial statements are prepared in accordance with Singapore Financial Reporting Standards (FRS). The financial statements are presented in Singapore dollars which is the Company s functional currency. All financial information has been rounded to the nearest thousand, unless otherwise stated. The financial statements have been prepared on the historical cost basis, except that certain financial assets and financial liabilities are stated at fair value. 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 areas: Note 2.2 Note 2.11 Note 2.16 Note 2.19 Note 34 Note 38 Assessment of ability to control or exert significant influence over partly-owned investments Measurement of recoverable amounts of hotel and rental properties Measurement of profit attributable to properties under development Estimation of provisions for current and deferred taxation Valuation of properties acquired in business combinations, and deferred taxes thereon Valuation of financial instruments that are not actively traded The accounting policies set out below have been applied consistently to all periods presented in these financial statements. CITY DEVELOPMENTS LIMITED ANNUAL REPORT

82 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) 2.2 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. The excess of the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is credited to the income statement in the period of the acquisition. Subsidiaries Subsidiaries are those entities controlled by the Group. Control exists when the Group 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, as is the extent to which the Group benefits from the activities of the investee. 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 companies 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 (including any long-term investments) 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. Jointly-controlled assets Joint venture arrangements which involve the use of the assets that are jointly controlled (whether or not owned jointly), without the establishment of a separate entity, are referred to as jointly-controlled assets. The Group recognises its interests in jointly-controlled assets using proportionate consolidation. The Group combines its share of each of the assets, liabilities, income and expenses of the joint venture with the similar items, line by line, in its consolidated financial statements. Consistent accounting policies are applied for like transactions and events in similar circumstances. The joint venture is proportionately consolidated until the date on which the Group ceases to have joint control over the jointly-controlled assets. 82 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

83 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) 2.2 Consolidation (cont d) 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. 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 impairment losses. 2.3 Foreign currencies Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the exchange rates ruling 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. 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 the net investment in a foreign operation (see Note 2.6). 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 foreign operations on or after 1 January 2005 are treated as assets and liabilities of the foreign operation and at the closing rate. For acquisitions prior to 1 January 2005, the exchange rates at the date of acquisition were used. Foreign currency differences are recognised in the exchange fluctuation reserve. When a foreign operation is disposed of, in part or in full, the relevant amount in the exchange translation reserve is transferred to the income statement as part of the gain or loss on disposal. Net investment in a foreign operation Exchange differences arising from monetary items that in substance form part of the Group s net investment in a foreign operation are recognised in equity in the consolidated financial statements. When the hedged net investment is disposed of, the cumulative amount in equity is transferred to the income statement as an adjustment to the profit and loss arising on disposal. CITY DEVELOPMENTS LIMITED ANNUAL REPORT

84 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) 2.4 Property, plant and equipment Owned assets Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the cost of dismantling and removing the items and restoring the site on which they are located. Leased assets Leases whereby the Group assumes substantially all risks and rewards of ownership are classified as finance leases. Property, plant and equipment acquired through finance leases are capitalised at the lower of its fair value and the present value of the minimum lease payments at the inception of the lease, less accumulated depreciation and impairment losses. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against the income statement. Capitalised leased assets are depreciated over the shorter of the economic useful life of the asset and the lease term. Depreciation No depreciation is provided on freehold and 999-year leasehold land. For freehold and leasehold properties under development and renovation-in-progress, no depreciation is provided until these items have been completed. Freehold properties under development are transferred to other asset categories at the carrying value on the date of transfer. Depreciation is recognised in the income statement on a straight-line basis over the estimated useful lives (or lease term, if shorter) of each part of an item of property, plant and equipment. The estimated useful lives are as follows: Freehold and leasehold land and buildings Core component of hotel buildings 50 years, or lease term if shorter Surface, finishes and services of hotel buildings 30 years, or lease term if shorter Non-hotel buildings 50 years, or lease term if shorter Non-hotel leasehold land Lease term of 85 to 96 years Freehold and leasehold properties 50 years, or lease term if shorter Furniture, fittings, plant and equipment and improvements 3 to 20 years Residual values ascribed to the core component of hotel buildings depend on the nature, location and tenure of each hotel property. No residual values are ascribed to surface, finishes and services of hotel buildings. Depreciation methods, useful lives and residual values are reviewed, and adjusted as appropriate, at each reporting date. 84 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

85 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) 2.5 Intangible assets Goodwill Goodwill and negative goodwill arise on the acquisition of subsidiaries, associates and jointly-controlled entities. Acquisitions prior to 1 January 2001 Goodwill represented the excess of the cost of the acquisition over the Group s interest in the net fair value of the identifiable assets and liabilities of the acquiree. Goodwill and negative goodwill on acquisitions were written off against reserves in the year of acquisition. Goodwill and negative goodwill that had previously been taken to reserves are not taken to the income statement when (a) the business is disposed of or (b) the goodwill is impaired. Acquisitions occurring between 1 January 2001 and 1 January 2005 There was no goodwill arising from acquisition of subsidiaries occurring between 1 January 2001 and 1 January Acquisitions on or after 1 January 2005 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. 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. Goodwill is measured at cost less impairment losses. Goodwill is tested for impairment as described in Note Negative goodwill is recognised immediately in the income statement. Acquisitions of minority interest 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. Other intangible assets Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortisation and impairment losses. Other intangible assets are amortised in the income statement on a straight-line basis over their estimated useful lives of 15 years, from the date on which they are available for use. CITY DEVELOPMENTS LIMITED ANNUAL REPORT

86 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) 2.6 Financial instruments Non-derivative financial instruments Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, interest-bearing borrowings, other liabilities and trade and other payables. Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs, except 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. Subsequent to initial recognition, non-derivative financial instruments are measured as described below. 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 2.3), are recognised directly in equity. When an investment is derecognised, the cumulative gain or loss in equity is transferred to the income statement. Where an investment in equity security classified as available-for-sale does not have a quoted market price in an active market and other methods of determining fair value do not result in a reasonable estimate, the investment is measured at cost less impairment losses. Held-for-trading investments Financial instruments are designated as held for trading 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 designated as held for trading 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. 86 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

87 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) 2.6 Financial instruments (cont d) 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. Derivative financial instruments 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 hedge 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 hedge 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 also 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 the Group s net investment in a foreign operation are recognised in the exchange fluctuation 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 of, 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. CITY DEVELOPMENTS LIMITED ANNUAL REPORT

88 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) 2.7 Interest-free intercompany loans Loans to subsidiaries In the Company s financial statements, interest-free intercompany loans to subsidiaries are stated at fair value at inception. The difference between the fair value and the loan amount at inception is recognised as additional investments in the Company s financial statements. Subsequently, these loans are measured at amortised cost using the effective interest method. Such balances are eliminated in full in the consolidated financial statements. Loans from subsidiaries In the Company s financial statements, interest-free intercompany loans from subsidiaries are stated at fair value at inception. The difference between the fair values and the loan amounts at inception is recognised as distribution income in the Company s income statement. Subsequently, these loans are measured at amortised cost using the effective interest method. Such balances are eliminated in full in the Group s consolidated financial statements. 2.8 Development properties Development properties are those properties which are held with the intention of development and sale in the ordinary course of business. They are stated at the lower of cost plus, where appropriate, a portion of 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 comprise 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. 2.9 Consumable stocks Consumable stocks comprise principally food and beverage and other hotel related consumable stocks. Stocks are valued at the lower of cost and net realisable value. Cost is determined on a first-in, first-out basis Cash and cash equivalents 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. 88 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

89 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) 2.11 Impairment 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. Individually 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 and measured at amortised cost, the reversal is recognised directly in equity. For available-for-sale financial assets that are equity securities and measured at cost less impairment losses, an impairment loss is not reversed. Impairment of non-financial assets The carrying amounts of the Group s non-financial assets, other than consumable stocks 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, the 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. 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. CITY DEVELOPMENTS LIMITED ANNUAL REPORT

90 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) 2.12 Share capital Ordinary 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. Preference share capital Preference shares are classified as equity if they are non-redeemable and dividend payments are discretionary. Dividends on preference shares classified as equity are recognised as distributions within equity. Dividends on non-redeemable preference shares are recognised as a liability in the period in which they are incurred Employee benefits Defined contribution plans Obligations for contributions to defined contribution plans are recognised as an expense in the income statement as incurred. Defined benefit plans The Group s net obligation in respect of defined benefit post-employment plans including pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in current and prior periods. That benefit is discounted to determine its present value, and the fair value of any plan assets is deducted. The discount rate is the yield at the balance sheet date on AA credit-rated bonds that have maturity dates approximating the terms of the Group s obligations. The calculation is performed by a qualified actuary using the projected unit cost method. When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in the income statement on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in the income statement. The Group recognises all actuarial gains and losses arising from defined benefit plans directly in equity immediately. Long-term service benefits The Group s net obligation in respect of long-term employee benefits, other than post-employment plans, is the amount of future benefit that employees have earned in return for their service in current and prior periods. The obligation is calculated using the projected unit credit method and is discounted to its present value and the fair value of any plan assets is deducted. The discount rate is the yield at the balance sheet date on AA credit-rated bonds that have maturity dates approximating the terms of the Group s obligations. 90 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

91 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) 2.13 Employee benefits (cont d) Short-term benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans where 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. Share-based payments The share option programme allows the Group s employees to acquire shares of one of the Company s listed subsidiaries. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using a stochastic model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is due to share prices not achieving the threshold for vesting Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Onerous contracts A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations 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. Before a provision is established, the Group recognises any impairment loss on the assets associated with the contract. Capital expenditure A provision for capital expenditure is recognised for the Group s contractual obligation to incur capital expenditure under the terms of the hotel operating agreements. The liability is expected to be incurred over 5 years Financial guarantee contracts Financial guarantee contracts are accounted for as insurance contracts. A provision is recognised based on 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. CITY DEVELOPMENTS LIMITED ANNUAL REPORT

92 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) 2.16 Revenue recognition 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 an equitable interest, revenue is recognised as the acts are performed based on the percentage of completion method under Recommended Accounting Practice (RAP) 11 Pre-completion Contracts for the Sale of Development Property issued by the Institute of Certified Public Accountants of Singapore in October Under RAP 11, when (a) construction is beyond a preliminary stage, (b) minimum down payment criterion is met, (c) sale prices are collectible, and (d) aggregate sales proceeds and costs can be reasonably estimated, the percentage of completion method is an allowed alternative. If any of the above criteria are not met, pre-completion proceeds received are accounted for as deposits until such criteria are met. Under the percentage of completion method, the percentage of completion is measured by reference to the work performed, based on the ratio of costs incurred to date to the estimated total costs for each contract. Profits are recognised only in respect of finalised sales agreements to the extent that such profits relate to the progress of the construction work. The Group s current policy of recognising revenue using the percentage of completion method on its development projects in Singapore is an allowed alternative under RAP 11. The impact on the financial statements, had revenue on the Singapore projects been recognised using the completion of construction method, is as follows: GROUP $ 000 $ 000 Increase in revenue 124, ,900 Decrease in profit for the year 47,985 39,489 Decrease in opening accumulated profits 76,198 36,709 Decrease in development properties as at 1 January 31,918 37,884 Decrease in development properties as at 31 December 81,531 31,918 Decrease in investments in jointly-controlled entities as at 1 January 64,044 8,403 Decrease in investments in jointly-controlled entities as at 31 December 72,816 64,044 Rental and car park income Rental and car park income are recognised on an accrual basis. Lease incentives are recognised as an integral part of the total rental income to be received. Contingent rentals, which include gross turnover rental, are recognised as income in the accounting period on a receipt basis. No contingent rentals are recognised if there are uncertainties due to the possible return of amounts received. Hotel income Revenue from hotel operations is recognised on an accrual basis, upon rendering of the relevant services. Dividends Dividend income is recognised in the income statement when the shareholder s right to receive payment is established. 92 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

93 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) 2.17 Operating leases Where 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. Where entities within the Group are lessors of an operating lease Assets leased out under operating leases are included in property, plant and equipment. Rental income (net of any incentives given to lessees) is recognised on a straight-line basis over the lease term Finance income and expense Finance income comprises mainly interest income on funds invested, marked-to-market gain on financial assets held for trading and gain on hedging instruments that are recognised in the income statement. Interest income is recognised as it accrues, using the effective interest method. Finance expense comprise interest expense on borrowings, amortisation of transactions costs capitalised and losses on hedging instruments that are recognised in the income statement. All 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. CITY DEVELOPMENTS LIMITED ANNUAL REPORT

94 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) 2.19 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, associates 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 by the reporting 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. 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 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. The primary format, business segments, is based on the Group s internal reporting structure. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. The Group comprises three principal business segments, namely hotel operations, property development and rental properties. These segments operate in three principal geographical areas, namely, East and South East Asia, North America and Europe, and Australia and New Zealand. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location where the services are rendered and the products are sold. Segment assets are based on the geographical location of the assets. 94 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

95 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December PROPERTY, PLANT AND EQUIPMENT FREEHOLD FURNITURE, AND FITTINGS, LEASEHOLD PLANT AND FREEHOLD LEASEHOLD PROPERTIES EQUIPMENT LAND AND LAND AND FREEHOLD LEASEHOLD UNDER AND RENOVATION- BUILDINGS BUILDINGS PROPERTIES PROPERTIES DEVELOPMENT IMPROVEMENTS IN-PROGRESS TOTAL $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Group Cost At 1 January ,067,576 2,090, ,263 1,034, ,420 1,313,212 25,886 9,072,456 Additions 7,442 2, ,125 78, , ,638 Disposals (45,802) (25,660) (448) (36,937) (28,236) (345) (137,428) Written off during the year (33,605) (33,605) Reclassifications and transfers (37,135) 1,316 76,725 (40,906) Acquisition by foreclosure on collateralised property 12,476 12,476 Transfers to development properties (15,378) (37,605) (52,983) Translation differences on consolidation 47,783 (48,938) (6,398) (20) 5,307 (28,207) (691) (31,164) At 31 December ,036,962 2,045, ,475 1,034,197 48,310 1,378, ,925 9,110,390 Additions 1,873 3, ,744 81,362 36, ,157 Acquisition of subsidiaries 146, ,204 Disposals (515,399) (9,271) (272,831) (114) (797,615) Written off during the year (20) (25,665) (6) (25,691) Reclassifications and transfers 124,735 1,214 39,894 11,116 (176,959) Transfers to development properties (61,284) (11,687) (187,689) (11,568) (272,228) Translation differences on consolidation (81,624) (8,612) (1,216) (5) (23,423) 5,045 (109,835) At 31 December ,651,447 2,032, , , ,054 1,137,287 29,348 8,229,382 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

96 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December PROPERTY, PLANT AND EQUIPMENT (cont d) FREEHOLD FURNITURE, AND FITTINGS, LEASEHOLD PLANT AND FREEHOLD LEASEHOLD PROPERTIES EQUIPMENT LAND AND LAND AND FREEHOLD LEASEHOLD UNDER AND RENOVATION- BUILDINGS BUILDINGS PROPERTIES PROPERTIES DEVELOPMENT IMPROVEMENTS IN-PROGRESS TOTAL $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Group Accumulated depreciation and impairment losses At 1 January , , , , ,616 1,961,356 Charge for the year 24,842 21,661 6,391 17,953 91, ,230 Disposals (4,226) (4,852) (24,303) (33,381) Impairment losses 7,440 3, ,715 31,737 Reversal of impairment losses (5,994) (1,200) (13) (7,207) Written off during the year (32,847) (32,847) Reclassifications (13,596) 13,596 Translation differences on consolidation (28,028) (3,356) 1,772 (20) (3,906) (33,538) At 31 December , , , , ,254 2,048,350 Charge for the year 26,224 18,019 6,765 17,364 81, ,744 Disposals (97,625) (23,368) (89,163) (210,156) Written off during the year (22,262) (22,262) Impairment losses 1,591 10,064 8,451 20,106 Reversal of impairment losses (4,052) (3,980) (2,854) (10,886) Reclassifications (1,790) 5,249 (3,459) Transfers to development properties (840) (63,428) (9,347) (73,615) Translation differences on consolidation 3,258 3,061 1,616 (6) 1,343 9,272 At 31 December , , , , ,189 1,910,553 Carrying amount At 1 January ,483,237 1,847, , , , ,596 25,886 7,111,100 At 31 December ,472,185 1,781, , ,601 48, , ,925 7,062,040 At 31 December ,159,904 1,774, , , , ,098 29,348 6,318,829 During the financial year, interest capitalised as cost of property, plant and equipment amounted to $526,000 (2005: $1,744,000). 96 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

97 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December PROPERTY, PLANT AND EQUIPMENT (cont d) FURNITURE, FITTINGS, FREEHOLD PLANT AND FREEHOLD LEASEHOLD PROPERTIES EQUIPMENT LAND AND LAND AND FREEHOLD LEASEHOLD UNDER AND BUILDINGS BUILDING PROPERTIES PROPERTY DEVELOPMENT IMPROVEMENTS TOTAL $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Company Cost At 1 January ,360 96,163 11,238 8,359 45,999 47, ,058 Additions 2,311 9,871 12,182 Disposals (9,049) (2,431) (1,566) (13,046) Written off during the year (1,667) (1,667) Reclassifications (44,883) 44,883 At 31 December ,428 93,732 11,238 8,359 48,310 99, ,527 Additions 8,806 8,571 17,377 Disposals (191,594) (71,610) (263,204) Written off during the year (304) (304) Reclassifications (21,328) 29,484 (8,156) At 31 December ,506 93,732 40,722 8,359 57,116 27, ,396 Accumulated depreciation and impairment losses At 1 January ,738 11,862 3,084 2,419 29,755 94,858 Charge for the year 4,047 1, ,021 16,179 Disposals (518) (387) (590) (1,495) Written off during the year (1,015) (1,015) Reclassifications (13,596) 13,596 At 31 December ,671 13,177 3,326 2,586 51, ,527 Charge for the year 3,253 1, ,400 11,916 Impairment loss 10,064 10,064 Disposals (15,638) (33,792) (49,430) Written off during the year (33) (33) Reclassifications (1,790) 5,249 (3,459) At 31 December ,496 14,830 19,082 2,753 20,883 81,044 Carrying amount At 1 January ,622 84,301 8,154 5,940 45,999 18, ,200 At 31 December ,757 80,555 7,912 5,773 48,310 47, ,000 At 31 December ,010 78,902 21,640 5,606 57,116 7, ,352 During the financial year, interest capitalised as cost of property, plant and equipment amounted to $281,000 (2005: $251,000). CITY DEVELOPMENTS LIMITED ANNUAL REPORT

98 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December PROPERTY, PLANT AND EQUIPMENT (cont d) Property, plant and equipment with the following carrying values were acquired under finance lease arrangements: GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Freehold buildings 19,332 32,035 Furniture, fittings, plant and equipment and improvements ,650 32, During the year, the Group and the Company acquired property, plant and equipment under finance leases amounting to $306,000 (2005: $Nil) and $Nil (2005: $28,000) respectively. In 2006, upon the Group and the Company assessing the carrying value of its property, plant and equipment for indications of impairment, the carrying amounts of certain property, plant and equipment were written down by $20,106,000 (2005: $31,737,000) and $10,064,000 (2005: $Nil) respectively. In addition, the Group reversed impairment losses of $10,886,000 (2005: $7,207,000) recognised in prior years for freehold and leasehold land and buildings, and a leasehold property. The net amount written down is included in other operating expenses. In respect of an impairment loss reversed of $4,052,000 (2005: $5,994,000), the estimate of recoverable amount was based on the value of freehold land and a freehold building, located in Japan, determined by an external valuer based on the open market value. In respect of the remaining impairment losses reversed, the estimates of recoverable amounts were based on the value of the freehold land and buildings, leasehold land and buildings and leasehold properties on the value-in-use basis using management s estimates of cash flows and discount rates ranging from 3.0% to 14.0% (2005: 3.8% to 10.0%) per annum as applicable to the nature and location of the asset in question. The reversal of the impairment losses was a result of a recovery of the property markets in Japan and Singapore. An impairment loss of $8,451,000 on a leasehold hotel located in the United Kingdom held by a subsidiary was charged following an assessment by the subsidiary s management that there is a likelihood of exiting the lease when it expires in 2011 due to deterioration in the hotel business. The estimate of recoverable amount was based on the value-in-use of the said property using management s estimates of cash flows in the period to the expiry of the lease and a discount rate of 7.8%. In relation to the remaining impairment losses charged of $11,655,000 (2005: $31,737,000), the estimates of recoverable amount were based on value of freehold land and buildings, leasehold land and buildings, freehold properties, leasehold properties and furniture, fittings, plant and equipment and improvements, on the value-in-use basis using management s estimates of cash flows and discount rates ranging from 4.5% to 14.0% (2005: 7.0% to 10.0%) per annum as applicable to the nature and location of the asset in question. Most of the impairment loss relates to a retail property in Singapore. Included in property, plant and equipment are certain hotel properties and land and buildings of the Group with carrying value totalling $2,539,854,000 (2005: $2,815,840,000) which are mortgaged to certain financial institutions to secure credit facilities (refer to Notes 20 and 22 for more details of the facilities). Property, plant and equipment comprise a number of commercial properties that are leased to external customers. Generally, each of the leases contains an initial non-cancellable period of 2 to 3 years. 98 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

99 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December INTANGIBLE ASSETS GROUP $ 000 Cost At 1 January Additions 1 Translation differences on consolidation 2 At 31 December Additions 5 Translation differences on consolidation (17) At 31 December Accumulated amortisation At 1 January Charge for the year 14 Translation differences on consolidation 4 At 31 December Charge for the year 14 Translation differences on consolidation (13) At 31 December Carrying amount At 1 January At 31 December At 31 December Intangible assets of the Group relate to trademarks. The amortisation charge is included in other operating expenses in the consolidated income statement. CITY DEVELOPMENTS LIMITED ANNUAL REPORT

100 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December INVESTMENTS IN AND BALANCES WITH SUBSIDIARIES COMPANY NOTE $ 000 $ 000 Investments in subsidiaries Unquoted shares, at cost 2,257,512 2,261,289 Discount implicit in non-current inter-company balances 9,441 2,417 Impairment losses (47,271) (76,381) 2,219,682 2,187,325 Balances with subsidiaries Amounts owing by subsidiaries trade, interest-free 1,484 1,495 non-trade, interest-free 812, ,690 non-trade, interest-bearing 387, ,009 1,201, ,194 Allowance for doubtful receivables (43,784) (22,960) 1,157, ,234 Receivable within 12 months 11 1,020, ,496 Receivable after 12 months 9 137, ,738 1,157, ,234 Amounts owing to subsidiaries trade, interest-free 314 3,752 non-trade, interest-free 383, , , ,845 Repayable within 12 months , ,845 The amounts owing by and to subsidiaries are unsecured. In respect of interest-bearing amounts, interest at 0.47% to 4.02% (2005: 0.29% to 3.99%) per annum was charged. Included in amounts owing by subsidiaries receivable after 12 months is $49,973,000 (2005: $54,461,000) which form part of the Company s net investment in subsidiaries. Settlement of the loans is neither planned nor likely to occur in the foreseeable future. The balances with subsidiaries that are presented as receivable or repayable within 12 months are receivable or repayable on demand. The currencies in which these balances with subsidiaries are denominated are disclosed in Notes 9, 11 and 28, together with similar information for receivables and payables. During the year, the Company assessed the recoverable amount of its investments in subsidiaries. Based on this assessment, the Company reversed impairment losses of $29,110,000 (2005: impairment losses recognised: $15,534,000) on its investments in certain subsidiaries. Impairment losses were quantified under the value-in-use method using management s estimates of the future underlying cash flows in the subsidiaries expected in the future, and discount rates ranging from 3.8% to 4.0% (2005: 3.8% to 5.0%) per annum. The reversal of the impairment losses was a result of a recovery of the Singapore property market. Further details regarding subsidiaries are set out in Note CITY DEVELOPMENTS LIMITED ANNUAL REPORT

101 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December INVESTMENT IN AND BALANCES WITH AN ASSOCIATE GROUP COMPANY NOTE $ 000 $ 000 $ 000 $ 000 Investment in an associate 116,990 Balances with an associate Amounts owing by an associate (trade, current, interest-free) Amounts owing to an associate (trade, current, interest-free) 28 5,222 8 As at 31 December 2006, the amounts owing by and to an associate were unsecured. The currencies in which the amounts owing by and to an associate are denominated are disclosed in Notes 11 and 28, together with similar information for receivables and payables. The fair value of the investment in the associate based on published price quotations is $459,792,000. Further details regarding the associate are set out in Note 41. Summarised financial information relating to the associate, which is not adjusted for the percentage of ownership held by the Group, is as follows: $ 000 $ 000 Total assets 973,303 Total liabilities 397,564 Revenue (from 8 June 2006 (the date of constitution) to 31 December 2006) 28,189 Profit after taxation (from 8 June 2006 (the date of constitution) to 31 December 2006) 15,035 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

102 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December INVESTMENTS IN AND BALANCES WITH JOINTLY-CONTROLLED ENTITIES Investments in jointly-controlled entities GROUP COMPANY NOTE $ 000 $ 000 $ 000 $ 000 Investments in jointly-controlled entities 289, ,270 52,495 52,495 Impairment losses (2,441) (3,841) 289, ,270 50,054 48,654 Balances with jointly-controlled entities Amounts owing by jointly-controlled entities trade, interest-free 6,890 2,456 5,683 1,244 non-trade, interest-bearing 460, , , ,566 non-trade, interest-free 108, , , , , ,810 Allowance for doubtful receivables (92,700) (60,000) (92,700) (60,000) 482, , , ,810 Receivable: Within 12 months , , , ,810 After 12 months 9 90,702 98, , , , ,810 Included in the Group s share of after-tax profits of jointly-controlled entities is a gain of $5,251,000 (2005: $2,262,000) recognised on ordinary shares and non-redeemable convertible non-cumulative preference shares of the Company which are held by a jointly-controlled entity for trading purposes. GROUP COMPANY NOTE $ 000 $ 000 $ 000 $ 000 Amounts owing to jointly-controlled entities (non-trade, current, interest-free) 28 40,479 72,701 15,475 15,475 The amounts owing by and to jointly-controlled entities are unsecured. In respect of interest-bearing amounts, interest at rates ranging from 0.6% to 4.5% (2005: 0.6% to 5.0%) per annum and 1.5% to 3.5% (2005: 1.5% to 2.5%) per annum were charged by the Group and the Company respectively. The amounts presented as receivable or repayable within 12 months are repayable on demand. Included in the non-current amounts owing by jointly-controlled entities are foreign currency denominated loans to jointly-controlled entities amounting to $10,879,000 (2005: $11,862,000) which form part of the Group s net investment in jointly-controlled entities. Settlement of the loans is neither planned nor likely to occur in the foreseeable future. The remaining non-current receivables from jointly-controlled entities is repayable on demand but is not expected to be repaid within the next 12 months. The currencies in which the balances with jointly-controlled entities are denominated are disclosed in Notes 9, 11 and 28, together with similar information for receivables and payables. 102 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

103 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December INVESTMENTS IN AND BALANCES WITH JOINTLY-CONTROLLED ENTITIES (cont d) Balances with jointly-controlled entities (cont d) During the financial year, the Company assessed the recoverable amount of its investments in jointly-controlled entities. Based on this assessment, the Company reversed impairment losses of $1,400,000 (2005: impairment losses recognised: $2,226,000) on its investments in jointly-controlled entities. Impairment losses were quantified under the value-in-use method using management s estimates of the future underlying cash flows in the jointly-controlled entities expected in the future, and a discount rate of 5.0% (2005: ranging from 3.8% to 5.0%) per annum. The reversal of the impairment losses was a result of the recovery of the Singapore property market on the value of development properties held by these jointly-controlled entities. Further details regarding jointly-controlled entities are set out in Note 41. In total, the Group s share of the jointly-controlled entities results, assets, liabilities and commitments is as follows: Results $ 000 $ 000 Revenue and other operating income 381, ,104 Cost of sales and other expenses (245,031) (186,448) Profit before income tax 136,463 92,656 Income tax expenses (18,469) (27,364) Minority interest (9,082) (6,667) Profit for the year 108,912 58,625 Assets and liabilities Non-current assets 516, ,633 Current assets 855, ,257 Current liabilities (474,772) (897,175) Non-current liabilities (608,128) (470,445) Net assets 289, ,270 Commitments Development expenditure contracted but not provided for in the financial statements: land purchases for which deposits have been paid 136,468 construction costs 202, , , ,057 Capital expenditure contracted but not provided for in the financial statements 4,817 Non-cancellable operating lease payables 16 2 Non-cancellable operating lease receivables 8,428 6,790 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

104 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December FINANCIAL ASSETS GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Non-current financial assets Unquoted equity investments available for sale fellow subsidiaries 3,372 3,297 3,290 3,290 non-related companies 85,573 46,448 1,340 1,340 88,945 49,745 4,630 4,630 Quoted equity investments available for sale fellow subsidiaries 41,566 39,390 34,952 33,122 non-related companies 22,347 20,181 63,913 59,571 34,952 33,122 Current financial assets 152, ,316 39,582 37,752 GROUP $ 000 $ 000 Quoted investments held for trading equity investments 32,267 22,018 debt securities 12, Unquoted investments held for trading equity investments 4,603 12,901 bond funds 21,563 17,109 70,703 52,069 Unquoted equity investments that are available for sale or held for trading are measured at cost less impairment losses as there is no active market for these investments and other methods of determining fair value do not result in a reliable estimate. The carrying values of such investments are set out in the table above. Held-for-trading debt securities have interest rates of 1.6% to 6.0% (2005: 6.0%) per annum and mature within 50 months (2005: 25 months). 104 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

105 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December FINANCIAL ASSETS (cont d) Financial assets are denominated in the following currencies: GROUP COMPANY $ 000 $ 000 $ 000 $ 000 United States Dollar 90,523 38,670 Singapore Dollar 76,492 69,772 39,582 37,752 New Zealand Dollar 21,563 Sterling Pound 19,039 24,664 Hong Kong Dollar 9,387 28,279 Others 6, , ,385 39,582 37,752 9 OTHER NON-CURRENT ASSETS GROUP COMPANY NOTE $ 000 $ 000 $ 000 $ 000 Amounts owing by: subsidiaries 5 137, ,738 jointly-controlled entities 7 90,702 98,004 Deferred tax assets 27 4,800 Deposit receivables 3,993 Lease premium prepayments 177, , , , , ,738 Lease premium prepayments relate to the non-current portion of upfront premiums paid in respect of long leasehold land of hotel properties where land title is not anticipated to be passed to the Group. Amounts owing by subsidiaries, jointly-controlled entities and deposit receivables are denominated in the following currencies: GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Singapore Dollar 70,061 71, ,526 74,274 Thai Baht 13,755 4,164 United States Dollar 10,879 22,118 Japanese Yen 30,676 33,464 94,695 98, , ,738 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

106 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December DEVELOPMENT PROPERTIES GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Properties in the course of development, at cost 1,482, ,628 1,052, ,628 Attributable profit 66,646 26,485 66,646 26,485 1,549, ,113 1,119, ,113 Progress billings (182,671) (107,056) (154,581) (107,056) 1,366, , , ,057 Joint development properties, at cost 468, , , ,105 Attributable profit 9,552 6,847 9,552 6, , , , ,952 Progress billings (160,681) (43,765) (160,681) (43,764) 317, , , ,188 Contributions from other participants (39,194) (43,747) (39,194) (43,747) 278, , , ,441 Joint development properties in which the Group participates through contributions 10,723 10,898 10,723 10,898 Properties for development and resale representing mainly land 258, , ,752 Completed units 459, , , ,313 2,374,158 2,012,275 1,475,158 1,540,461 Allowance for foreseeable losses (92,300) (125,787) (5,223) (55,903) Total development properties 2,281,858 1,886,488 1,469,935 1,484,558 During the year, interest capitalised (net of interest income) as cost of development properties amounted to 17,741 12,297 15,414 12,306 The Group uses the percentage of completion method to recognise revenue on its development projects in Singapore. The impact on the financial statements, had revenue on the Singapore development projects been recognised using the completion of construction method, is set out in Note CITY DEVELOPMENTS LIMITED ANNUAL REPORT

107 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December TRADE AND OTHER RECEIVABLES GROUP COMPANY NOTE $ 000 $ 000 $ 000 $ 000 Trade receivables 173, ,844 41,650 28,434 Allowance for doubtful receivables (4,831) (5,247) (27) (98) 169, ,597 41,623 28,336 Other receivables, deposits and prepayments 129,325 78,127 8,061 10,773 Allowance for doubtful receivables (3,438) (2,476) (1,514) (1,533) 125,887 75,651 6,547 9,240 Derivative financial instruments 94 Lease premium prepayments 2,252 2,393 Accrued receivables 12 6,398 14, ,845 Amounts owing by: subsidiaries 5 1,020, ,496 an associate jointly-controlled entities 7 391, , , ,810 fellow subsidiaries 13 9,492 4,965 9,409 4, , ,177 1,376,141 1,104,580 Trade and other receivables (excluding lease premium prepayments) are denominated in the following currencies: GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Singapore Dollar 547, ,870 1,332,283 1,070,025 United States Dollar 48,369 65, Sterling Pound 45,504 51, Others 61,392 50,832 43,090 33, , ,784 1,376,141 1,104, ACCRUED RECEIVABLES Accrued receivables represent mainly the remaining balances of sales consideration to be billed. In accordance with the Group s accounting policy, income is recognised on the sale of certain development properties on the progress of the construction work. Upon receipt of the Temporary Occupation Permit, the balance of sales consideration to be billed is included as accrued receivables. CITY DEVELOPMENTS LIMITED ANNUAL REPORT

108 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December AMOUNTS OWING BY AND TO FELLOW SUBSIDIARIES GROUP COMPANY NOTE $ 000 $ 000 $ 000 $ 000 Amounts owing by fellow subsidiaries trade non-trade 9,460 4,906 9,403 4, ,492 4,965 9,409 4,853 Amounts owing to fellow subsidiaries trade non-trade Fellow subsidiaries are subsidiaries of the immediate holding company which are subject to common control. The amounts owing by and to fellow subsidiaries are interest-free and unsecured. The currencies in which the amounts owing by and to fellow subsidiaries are denominated are disclosed in Notes 11 and 28, together with similar information for receivables and payables. 14 CASH AND CASH EQUIVALENTS GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Amounts held under the Singapore development project rules, withdrawals from which are restricted to project-related payments 43,055 34,849 41,061 34,806 Fixed deposits placed with financial institutions which are: fellow subsidiaries 21,054 19,579 2,704 others 509, ,579 51,976 91, , ,158 51,976 94,474 Cash at banks and in hand 203, ,601 6,704 8, , ,608 99, ,726 Bank overdrafts (2,319) (2,815) 774, ,793 99, ,726 Fixed deposits (pledged) (1,026) Cash and cash equivalents in the consolidated cash flow statement 774, ,767 Included in cash and cash equivalents as at 31 December 2005 was a deposit of $1,026,000 placed by the Group with a related financial institution which was a fellow subsidiary. This deposit was pledged to the financial institution as collateral for facilities granted to a third party. 108 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

109 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December CASH AND CASH EQUIVALENTS (cont d) Cash and cash equivalents are denominated in the following currencies: GROUP COMPANY $ 000 $ 000 $ 000 $ 000 United States Dollar 261, ,506 6,097 9,141 Singapore Dollar 164, ,428 91, ,944 Australian Dollar 144,089 Sterling Pound 54,855 34,331 New Zealand Dollar 51, ,996 Others 98,210 54,532 1, , ,793 99, , SHARE CAPITAL COMPANY NUMBER NUMBER OF SHARES $ 000 OF SHARES $ 000 Issued and fully paid ordinary share capital: At 1 January 888,801, , ,994, ,997 Issue of shares during the year 20,500,272 50,848 16,806,550 8,403 Transfer from share premium account to share capital upon implementation of the Companies (Amendment) Act ,479,605 At 31 December 909,301,330 1,974, ,801, ,400 Issued and fully paid preference share capital: Non-redeemable convertible non-cumulative preference shares 330,874,257 16, ,874,257 16,544 Total share capital 1,991, ,944 On the date of commencement of the Companies (Amendment) Act 2005 on 30 January 2006: (i) the concept of par value and authorised share capital was abolished; and (ii) the amount standing to the credit of the Company s share premium account become part of the Company s share capital. CITY DEVELOPMENTS LIMITED ANNUAL REPORT

110 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SHARE CAPITAL (cont d) Ordinary 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 General Meetings of the Company. All ordinary shares rank equally with regard to the Company s residual assets. On 11 May 2004, the Company issued 82,718,564 bonus warrants, which were subsequently listed on the Official List of the Singapore Exchange Securities Trading Limited on 13 May Each bonus warrant carried the right to subscribe in cash for one ordinary share of the Company at the exercise price of $2.50, subject to adjustments under certain circumstances in accordance with the terms and conditions of the bonus warrants as set out in a Deed Poll dated 6 May During the financial year, the Company issued 20,500,272 (2005: 16,806,550) new ordinary shares arising from the exercise of subscription rights by bonus warrant holders. As at 31 December 2006, there were no outstanding bonus warrants as bonus warrants which were not exercised as at 10 May 2006 (date of expiry of the subscription rights comprised in the bonus warrants) have lapsed (2005: 21,103,149 bonus warrants outstanding). Preference share capital On 9 June 2004, the Company issued 330,874,257 non-redeemable convertible non-cumulative preference shares (Preference Shares), then of par value of $0.05 each, at an issue price of $1.00 each, which were subsequently listed on the Official List of the Singapore Exchange Securities Trading Limited on 14 June The Preference Shares are convertible at the sole option of the Company at any time on or after the second anniversary of the date of issue of the Preference Shares, into fully-paid ordinary shares of the Company at the conversion ratio of ordinary share for each Preference Share. In the event the Company exercises its right of conversion, the Company shall pay to preference shareholders a one-off preference cash dividend at the fixed rate of 64% (net) of the issue price for each Preference Share (Additional Preference Dividend) and any preference dividend accrued but unpaid. As at 31 December 2006, a maximum number of 44,998,898 (2005: 44,998,898) ordinary shares may be issued upon full conversion at the sole option of the Company of all the Preference Shares. Holders of Preference Shares shall have no voting rights, except under certain circumstances provided for in the Companies Act as set out in the Company s Articles of Association. The Preference Shares rank: (i) pari passu without any preference or priority among themselves; and (ii) in priority over the ordinary shares in respect of (a) payment of the Preference Dividend (when, as and if declared) and the Additional Preference Dividend; and (b) in the event of a winding-up of or return of capital by the Company, payment of any Preference Dividend that has accrued to holders of Preference Shares and is unpaid, the Additional Preference Dividend (whether or not then due) as well as the amount paid up on the Preference Shares (including the premium paid thereon). 110 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

111 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December RESERVES GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Share premium 1,492,324 1,479,202 Capital reserve 147, ,143 63,743 63,743 Hedging reserve (189) Fair value reserve 25,448 21,403 19,228 17,764 Share option reserve 2,757 1,792 Exchange fluctuation reserve 81, ,075 Accumulated profits 2,486,242 2,281,135 1,831,990 1,738,879 2,743,138 4,086,872 1,914,961 3,299,588 The capital reserve comprises mainly negative goodwill on the consolidation of subsidiaries. Hedging reserve comprises the Group s share of the hedging reserve of an associate which relates to the effective portion of the cumulative net change in fair value of cash flow hedging instruments relating to hedged transactions that have not yet occurred. The fair value reserve comprises the cumulative net change in the fair value of available-for-sale investments until the investments are derecognised. The share option reserve comprises the cumulative value of employee services received for the issue of share options. The exchange fluctuation reserve comprises: (a) foreign exchange differences arising from the translation of the financial statements of foreign entities whose functional currencies are different from the presentation currency of the Company; (b) the gain or loss on instruments used to hedge the Group s net investment in foreign entities that are determined to be effective hedges; and (c) exchange differences on monetary items which form part of the Group s net investment in foreign operations, provided certain conditions are met. The accumulated profits of the Group include profits of $102,110,000 (2005: $5,908,000) attributable to associates and jointly-controlled entities. CITY DEVELOPMENTS LIMITED ANNUAL REPORT

112 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December TOTAL EQUITY Group SHARE SHARE CAPITAL NOTE CAPITAL PREMIUM RESERVE $ 000 $ 000 $ 000 At 1 January ,541 1,458, ,143 Translation differences arising on consolidation of foreign subsidiaries Exchange differences on hedges of net investments in foreign entities Exchange differences on monetary items forming part of net investments in foreign entities Change in fair value of equity investments available for sale Actuarial losses on defined benefit plans Net gains/(losses) recognised directly in equity Profit for the year Total recognised income and expenses for the year Issue of ordinary shares 15 8,403 33,613 Change of interest in subsidiaries Value of employee services received for issue of share options 30 Transfer of hedging reserve on realisation Dividends 33 At 31 December ,944 1,492, , CITY DEVELOPMENTS LIMITED ANNUAL REPORT

113 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2006 TOTAL ATTRIBUTABLE SHARE EXCHANGE TO EQUITY HEDGING FAIR VALUE OPTION FLUCTUATION ACCUMULATED HOLDERS OF MINORITY TOTAL RESERVE RESERVE RESERVE RESERVE PROFITS THE COMPANY INTERESTS EQUITY $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 (6,454) 15, ,330 2,149,646 4,364,048 1,460,761 5,824,809 (3,836) (3,836) 8,282 4,446 (2,084) (2,084) (1,391) (3,475) 2,665 2,665 1,944 4,609 6,150 6,150 3,937 10,087 (3,218) (3,218) (3,229) (6,447) 6,150 (3,255) (3,218) (323) 9,543 9, , , , ,122 6,150 (3,255) 197, , , ,342 42,016 42,016 2,072 2, ,789 6,454 6,454 5,994 12,448 (65,690) (65,690) (60,525) (126,215) 21,403 1, ,075 2,281,135 4,547,816 1,527,445 6,075,261 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

114 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December TOTAL EQUITY (cont d) Group SHARE SHARE CAPITAL NOTE CAPITAL PREMIUM RESERVE $ 000 $ 000 $ 000 At 1 January ,944 1,492, ,143 Translation differences arising on consolidation of foreign subsidiaries Exchange differences on hedges of net investments in foreign entities Exchange differences on monetary items forming part of net investments in foreign entities Change in fair value of equity investments available for sale Share of other reserve movements of an associate (3,351) Actuarial losses on defined benefit plans Net (losses)/gains recognised directly in equity (3,351) Profit for the year Total recognised income and expenses for the year (3,351) Issue of ordinary shares 15 50, Transfer from share premium account to share capital upon implementation of the Companies (Amendment) Act ,479,605 (1,492,727) Change of interest in subsidiaries 2,340 Value of employee services received for issue of share options 30 Dividends 33 At 31 December ,991, , CITY DEVELOPMENTS LIMITED ANNUAL REPORT

115 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2006 TOTAL ATTRIBUTABLE SHARE EXCHANGE TO EQUITY HEDGING FAIR VALUE OPTION FLUCTUATION ACCUMULATED HOLDERS OF MINORITY TOTAL RESERVE RESERVE RESERVE RESERVE PROFITS THE COMPANY INTERESTS EQUITY $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ ,403 1, ,075 2,281,135 4,547,816 1,527,445 6,075,261 (54,861) (54,861) (55,272) (110,133) (1,324) (1,324) (113) (1,437) (4,142) (4,142) (3,739) (7,881) 4,045 4,045 4,045 (189) (3,540) (3,198) (6,738) (1,367) (1,367) (1,388) (2,755) (189) 4,045 (60,327) (1,367) (61,189) (63,710) (124,899) 351, , , ,966 (189) 4,045 (60,327) 350, , , ,067 51,251 51,251 13, ,347 9,487 11, ,822 (158,307) (158,307) (39,829) (198,136) (189) 25,448 2,757 81,748 2,486,242 4,734,535 1,645,564 6,380,099 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

116 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December EQUITY COMPENSATION BENEFITS By the Company Under the terms of the City Developments Share Option Scheme 2001 (CDL Scheme), offers of the grant of options may be made to: (i) Group Employees and Parent Group Employees (both as defined in the CDL Scheme) which may be exercisable during an option exercise period commencing from the date that the option vests and expiring on the day preceding the tenth anniversary of its date of grant; and (ii) Non-Executive Directors, Parent Group Non-Executive Directors and Associated Company Employees (all three as defined in the CDL Scheme) which may be exercisable during an option exercise period commencing from the date that the option vests and expiring on the day preceding the fifth anniversary of its date of grant. Options granted under the CDL Scheme may have subscription prices that are, at the Scheme Committee s discretion, (i) Market Price Options; or (ii) Discount Price Options; or (iii) Incentive Price Options (all three as defined in the CDL Scheme). The aggregate number of ordinary shares over which options may be granted under the CDL Scheme on any date, when added to the number of ordinary shares issued and issuable in respect of all options granted under the CDL Scheme, shall not exceed 8% of the issued shares in the capital of the Company on the day preceding the relevant date of grant. The aggregate number of ordinary shares which may be offered by way of grant of options to Parent Group Employees and Parent Group Non-Executive Directors collectively under the CDL Scheme shall not exceed 20% of the total number of ordinary shares available under the CDL Scheme. No options have been granted since the commencement of the CDL Scheme. There were no unissued shares of the Company under option as at the end of the financial year. The CDL Scheme shall continue to be in force at the discretion of the CDL Scheme Committee for a maximum period of 10 years commencing from its adoption on 30 January CITY DEVELOPMENTS LIMITED ANNUAL REPORT

117 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December EQUITY COMPENSATION BENEFITS (cont d) By Subsidiaries City e-solutions Limited The City e-solutions Limited Share Option Scheme (CES Scheme) was adopted by the shareholders of CES at the Annual General Meeting of CES held on 27 April The subscription price of the CES shares under the CES Scheme shall be a price determined by the CES Scheme Committee at its absolute discretion which may require the achievement of performance targets by the Grantee as specified by the CES Scheme Committee. The subscription price shall not be less than the highest of: (i) the official closing price of the CES shares as stated in the daily quotations sheet of the Hong Kong Stock Exchange on the Offer Date; (ii) the average of the official closing price of the CES shares as stated in the daily quotations sheets of the Hong Kong Stock Exchange for the five business days immediately preceding the Offer Date; and (iii) the nominal value of a CES share. During the financial year under review, (i) no options were granted to subscribe for ordinary shares of HK$1.00 each in CES; and (ii) no ordinary shares of HK$1.00 each in CES were issued following the exercise of the subscription rights set out in the CES Scheme. As at the end of the financial year, there were no unissued shares under options pursuant to the CES Scheme. The options granted by CES do not entitle the holders of the options, by virtue of such holding, to any rights to participate in any share issue of any other company. Millennium & Copthorne Hotels plc M&C has the following share option schemes: (i) Millennium & Copthorne Hotels plc 2003 Executive Share Option Scheme; (ii) Millennium & Copthorne Hotels Executive Share Option Scheme; (iii) Millennium & Copthorne Hotels Sharesave Schemes 1996 and 2006; and (iv) Millennium & Copthorne Hotels Long Term Incentive Plan CITY DEVELOPMENTS LIMITED ANNUAL REPORT

118 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December EQUITY COMPENSATION BENEFITS (cont d) Millennium & Copthorne Hotels plc (cont d) (i) Millennium & Copthorne Hotels plc 2003 Executive Share Option Scheme (a) The Millennium & Copthorne Hotels plc 2003 Executive Share Option Scheme (M&C 2003 Scheme) was approved by the shareholders at the Annual General Meeting of M&C held on 21 May There are 2 parts of the M&C 2003 Scheme, namely the Approved part for which approval from the United Kingdom Inland Revenue has been obtained, and the Unapproved part which is not designed for the United Kingdom Inland Revenue approval and which is used primarily where employees have more than 30,000 worth of outstanding approved options or are not based in the United Kingdom. Except to the extent required to obtain the United Kingdom Inland Revenue approval, the Approved and Unapproved parts of the M&C 2003 Scheme are in all material aspects identical. (b) Under the terms of the M&C 2003 Scheme, (i) All employees of M&C, its subsidiaries and joint ventures (including directors who are required to devote substantially the whole of their working time to the business of the M&C Group who are not within 6 months of contractual retirement ages) will be eligible to participate in the M&C 2003 Scheme. (ii) No option may be granted to an individual if it would cause the aggregate exercise price of options granted to him in any year under the M&C 2003 Scheme to exceed 200% of his basic salary, other than in exceptional circumstances (where the limit is 400% of basic salary). (iii) No payment will be required for the grant of an option. Acquisition price upon the exercise of an option will not be less than the higher of: the average of the middle-market quotations of a share on the London Stock Exchange on the 3 dealing days immediately prior to grant date, provided that no such dealing day may fall prior to the date on which M&C last announced its results for any period; and the nominal value of a share (unless the option is expressed to relate only to existing shares). (c) No options may be granted which would cause the number of shares issued or issuable pursuant to options granted in the previous 10 years under the M&C 2003 Scheme or under any other share option scheme, or issued in that period under any employee share scheme (other than an option scheme) to exceed 10% of M&C s issued ordinary share capital from time to time. Not more than 5% of M&C s issued ordinary share capital from time to time may relate to discretionary share schemes. 118 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

119 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December EQUITY COMPENSATION BENEFITS (cont d) Millennium & Copthorne Hotels plc (cont d) (ii) Millennium & Copthorne Hotels Executive Share Option Scheme (a) The Millennium & Copthorne Hotels Executive Share Option Scheme (M&C 1996 Scheme) is divided into two parts, Part A which was approved by the United Kingdom Inland Revenue under Schedule 9 of the United Kingdom Income and Corporation Taxes Act 1988 on 12 April 1996 and Part B, which was an unapproved executive share option scheme designed for the United Kingdom (UK) and non-uk executives of M&C. (b) Under the terms of Part A of the M&C 1996 Scheme, the board may offer any full time director or employee of M&C and its subsidiaries (M&C Group) (other than anyone within two years of retirement, or anyone who has a material interest in a close company and is thereby rendered ineligible under Paragraph 8, Schedule 9 of the United Kingdom Income and Corporation Taxes Act 1988), to participate in Part A of the M&C 1996 Scheme. A person is eligible to be granted an option under Part B if he is a director or employee of any member of the M&C Group which is required to devote the whole or substantially the whole of his working time to the service of any member of the M&C Group. Where an option has been exercised under Part B, the board may elect to pay cash to the executive concerned instead of issuing ordinary shares. (c) No option shall be granted under the M&C 1996 Scheme in the period of 5 calendar years beginning with the year 1996 which would, at the time they are granted, cause the number of shares in M&C which shall have been or may be issued in pursuance of options granted in that period, or shall have been issued in that period otherwise than in pursuance of options, under the M&C 1996 Scheme or under any other employees share option scheme adopted by M&C to exceed such number as represents 5% of the ordinary share capital of M&C in issue at that time. (d) No option shall be granted under the M&C 1996 Scheme in any year which would, at the time they are granted, cause the number of shares in M&C which shall have been or may be issued in pursuance of options granted in the period of 10 calendar years ending with that year, or have been issued in that period otherwise than in pursuance of options, under the M&C 1996 Scheme or under any other employees share scheme adopted by M&C to exceed such number as representing 10% of the ordinary share capital of M&C in issue at that time. (e) The total subscription price payable for ordinary shares under options granted in any 10 year period (leaving out of account options which have been exercised) to any person under the M&C 1996 Scheme may not exceed four times the higher of the executive s total annual remuneration at that time and the total remuneration paid by the M&C Group to the executive in the preceding 12 months. Executives may be granted options to replace those which have been exercised. CITY DEVELOPMENTS LIMITED ANNUAL REPORT

120 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December EQUITY COMPENSATION BENEFITS (cont d) Millennium & Copthorne Hotels plc (cont d) (iii) Millennium & Copthorne Hotels Sharesave Schemes 1996 and 2006 (a) The Millennium & Copthorne Hotels Sharesave Schemes 1996 and 2006 (M&C Sharesave Schemes) are the United Kingdom Inland Revenue approved schemes under which the executive directors of M&C and the M&C Group employees are eligible to participate. (b) Under the terms of the M&C Sharesave Schemes, M&C Group employees were to enter into a 3-year or 5-year savings contract, with an option to purchase shares at a pre-determined exercise price on maturity of the savings contract. The first such scheme was introduced in 1996 with a life of ten years. A replacement scheme was approved by the shareholders at M&C s Annual General Meeting on 4 May (c) No payment is required for the grant of an option. (d) The options may be exercised upon maturity provided that the monies agreed under the savings contract are fully paid and the participant continues to hold office or employment with M&C. The M&C Sharesave Schemes provide that shares in M&C can be purchased at the option price up to the value of the accrued savings and interests in the event of retirement at normal retirement age, redundancy, injury, disability or by the employees estate in the event of their death. (e) M&C may grant options up to the value of a savings contract at maturity. Participants cannot enter into contracts where their savings, in aggregate, would exceed 250 per month. (iv) Millennium & Copthorne Hotels Long Term Incentive Plan The Millennium & Copthorne Hotels Long Term Incentive Plan (LTIP) was approved at the M&C Annual General Meeting held on 4 May Under the terms of the LTIP, M&C is permitted to make both Performance Share Awards and Deferred Share Bonus Awards to an employee (including an executive director) of M&C or its subsidiaries. The level of awards made under the terms of the LTIP are determined by M&C s Remuneration Committee. Vesting of Performance Share Awards is subject to the achievement of stretching performance targets. Consistent with the performance measures for M&C s executive share options schemes, earnings per share (EPS) targets have been chosen so that participants are incentivised to deliver significant earnings growth which, in turn, should return substantial shareholder value. The performance condition applying to Performance Share Awards require M&C s EPS to grow, in real terms, over a period of three consecutive financial years after award. Performance Share Awards will vest on the third anniversary of the award being made, subject to the EPS growth targets being met. Awards will not be subject to re-testing. During the financial year under review, Performance Share Awards were made over 266,152 ordinary shares of 0.30 each in M&C. 120 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

121 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December EQUITY COMPENSATION BENEFITS (cont d) Details of the options granted under the M&C option schemes on the unissued ordinary shares of 0.30 each in a subsidiary, Millennium & Copthorne Hotels plc, as at the end of the financial year, presented in Sterling Pound, are as follows: (i) Millennium & Copthorne Hotels plc 2003 Executive Share Option Scheme 2005 OPTIONS OPTIONS OPTIONS OUTSTANDING OPTIONS OPTIONS OPTIONS OPTIONS OUTSTANDING EXERCISABLE DATE OF EXERCISE AS AT GRANTED EXERCISED FORFEITED EXPIRED AS AT AS AT GRANT OF PRICE 1 JANUARY DURING DURING DURING DURING 31 DECEMBER 31 DECEMBER OPTIONS PER SHARE 2005 THE YEAR THE YEAR THE YEAR THE YEAR EXERCISE PERIOD Part I ,325 (15,503) 63,822 63, ,049 62, ,703 52, Part II ,198,465 (52,697) (19,639) 1,126,129 1,126, ,109 (34,960) (39,429) 594, ,613 (29,365) 676, ,008, ,316 (87,657) (103,936) 2,575,671 1,189, OPTIONS OPTIONS OPTIONS OUTSTANDING OPTIONS OPTIONS OPTIONS OPTIONS OUTSTANDING EXERCISABLE DATE OF EXERCISE AS AT GRANTED EXERCISED FORFEITED EXPIRED AS AT AS AT GRANT OF PRICE 1 JANUARY DURING DURING DURING DURING 31 DECEMBER 31 DECEMBER OPTIONS PER SHARE 2006 THE YEAR THE YEAR THE YEAR THE YEAR EXERCISE PERIOD Part I ,822 (23,255) (1,292) 39,275 39, ,049 (10,284) (1) 51, ,703 (7,529) (7,529) 37, Part II ,126,129 (125,657) (453,230) 547, , ,720 (41,143) (220,658) 332, ,248 (143,065) (180,458) 352, ,575,671 (350,933) (863,168) 1,361, ,517 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

122 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December EQUITY COMPENSATION BENEFITS (cont d) (ii) Millennium & Copthorne Hotels Executive Share Option Scheme 2005 OPTIONS OPTIONS OPTIONS OUTSTANDING OPTIONS OPTIONS OPTIONS OPTIONS OUTSTANDING EXERCISABLE DATE OF EXERCISE AS AT GRANTED EXERCISED FORFEITED EXPIRED AS AT AS AT GRANT OF PRICE 1 JANUARY DURING DURING DURING DURING 31 DECEMBER 31 DECEMBER OPTIONS PER SHARE 2005 THE YEAR THE YEAR THE YEAR THE YEAR EXERCISE PERIOD Part A ,509 6,509 6, ,526 7,526 7, ,955 8,955 8, ,594 7,594 7, ,168 (6,896) 48,272 48, ,583 (68,110) (2,117) 26,356 26, ,335 (68,110) (9,013) 105, , OPTIONS OPTIONS OPTIONS OUTSTANDING OPTIONS OPTIONS OPTIONS OPTIONS OUTSTANDING EXERCISABLE DATE OF EXERCISE AS AT GRANTED EXERCISED FORFEITED EXPIRED AS AT AS AT GRANT OF PRICE 1 JANUARY DURING DURING DURING DURING 31 DECEMBER 31 DECEMBER OPTIONS PER SHARE 2006 THE YEAR THE YEAR THE YEAR THE YEAR EXERCISE PERIOD Part A ,509 6,509 6, ,526 (7,526) ,955 (8,955) ,594 (7,594) ,272 (41,376) (6,896) ,356 (17,829) 8,527 8, ,212 (74,325) (15,851) 15,036 15, CITY DEVELOPMENTS LIMITED ANNUAL REPORT

123 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December EQUITY COMPENSATION BENEFITS (cont d) (ii) Millennium & Copthorne Hotels Executive Share Option Scheme (cont d) 2005 OPTIONS OPTIONS OPTIONS OUTSTANDING OPTIONS OPTIONS OPTIONS OPTIONS OUTSTANDING EXERCISABLE DATE OF EXERCISE AS AT GRANTED EXERCISED FORFEITED EXPIRED AS AT AS AT GRANT OF PRICE 1 JANUARY DURING DURING DURING DURING 31 DECEMBER 31 DECEMBER OPTIONS PER SHARE 2005 THE YEAR THE YEAR THE YEAR THE YEAR EXERCISE PERIOD Part B ,186 (15,186) ,830 (7,278) (20,552) ,436 40,436 40, ,670 47,670 47, ,625 (104,256) 18,369 18, ,570 5,570 5, , , , ,151 (1,437) 131, , ,787 (153,787) ,639 (221,684) (23,537) 150, , ,062,125 (479,727) (32,252) (35,738) 514, , OPTIONS OPTIONS OPTIONS OUTSTANDING OPTIONS OPTIONS OPTIONS OPTIONS OUTSTANDING EXERCISABLE DATE OF EXERCISE AS AT GRANTED EXERCISED FORFEITED EXPIRED AS AT AS AT GRANT OF PRICE 1 JANUARY DURING DURING DURING DURING 31 DECEMBER 31 DECEMBER OPTIONS PER SHARE 2006 THE YEAR THE YEAR THE YEAR THE YEAR EXERCISE PERIOD Part B ,436 (40,436) ,670 (47,670) ,369 (10,414) (7,955) ,570 (5,570) ,231 (50,867) 69,364 69, ,714 (74,190) (30,810) (20,690) 6,024 6, ,418 (33,119) (28,358) 88,941 88, ,408 (170,963) (117,990) (61,126) 164, ,329 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

124 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December EQUITY COMPENSATION BENEFITS (cont d) (iii) Millennium & Copthorne Hotels Sharesave Scheme 2005 OPTIONS OPTIONS OPTIONS OUTSTANDING OPTIONS OPTIONS OPTIONS OPTIONS OUTSTANDING EXERCISABLE DATE OF EXERCISE AS AT GRANTED EXERCISED FORFEITED EXPIRED AS AT AS AT GRANT OF PRICE 1 JANUARY DURING DURING DURING DURING 31 DECEMBER 31 DECEMBER OPTIONS PER SHARE 2005 THE YEAR THE YEAR THE YEAR THE YEAR EXERCISE PERIOD ,626 (13,626) ,845 (11,275) (1,436) 4,134 4, ,897 (28,897) ,806 (645) 22, ,037 (23,346) (7,350) 10,341 10, ,247 (3,173) 21, ,637 (4,393) 122, ,050 (33,633) 109, ,019 (14,656) 49, ,152 (2,653) 28, ,112 (6,705) 67, ,341 (3,862) 39, , ,453 (34,621) (78,506) (42,523) 474,119 14, OPTIONS OPTIONS OPTIONS OUTSTANDING OPTIONS OPTIONS OPTIONS OPTIONS OUTSTANDING EXERCISABLE DATE OF EXERCISE AS AT GRANTED EXERCISED FORFEITED EXPIRED AS AT AS AT GRANT OF PRICE 1 JANUARY DURING DURING DURING DURING 31 DECEMBER 31 DECEMBER OPTIONS PER SHARE 2006 THE YEAR THE YEAR THE YEAR THE YEAR EXERCISE PERIOD ,134 (4,134) ,161 (10,435) (5,811) 5,915 5, ,341 (10,341) ,074 (1,586) 19, ,244 (98,000) (10,302) 13,942 13, ,417 (12,679) (27,300) (9,161) 60, ,363 (4,347) 45, ,499 (139) (2,794) 25, ,407 (16,236) 51, ,479 (8,368) 31, ,728 (1,840) 71, ,677 (4,953) 38, , ,405 (121,114) (80,882) (26,430) 363,098 19,857 (iv) Millennium & Copthorne Hotels plc Long Term Incentive Plan DATE OF AWARD BALANCE AT BEGINNING AWARDS AWARDED AWARDS VESTED BALANCE AT END EXERCISE PERIOD OF YEAR DURING THE YEAR DURING THE YEAR OF YEAR , , CITY DEVELOPMENTS LIMITED ANNUAL REPORT

125 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December EQUITY COMPENSATION BENEFITS (cont d) For options exercised during 2006, the weighted average share price at the date of exercise is 4.70 (2005: 3.86). Options were exercised on a regular basis throughout the year. The options outstanding as at 31 December 2006 have an exercise price in the range of to 3.25 and a weighted average contractual life of 6 years (2005: 8 years). 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 a stochastic model. The share option pricing model involves six variables, namely the exercise price, share price at grant date, expected life of option (note (a) below), expected volatility of share price (note (b) below), risk free interest rate and expected dividend yield (note (c) below). The variables used in estimating the fair value of options and awards granted under the M&C option schemes, presented in Sterling Pound, are as follows: SHARE PRICE EXPECTED EXPECTED RISK FREE DATE OF OPTIONS PREVAILING ON EXERCISE FAIR TERM EXPECTED DIVIDEND INTEREST GRANT GRANTED DATE OF GRANT PRICE VALUE (YEARS) VOLATILITY YIELD RATES 2006 LTIP (directors) , Nil % LTIP (non-directors) , Nil % Sharesave Scheme (3 year) , % 1.87% 4.74% Sharesave Scheme (5 year) , % 1.87% 4.71% Executive Share Option Scheme (directors) , Note (b) 33.2% 1.58% 4.79% 2003 Executive Share Option Scheme (non-directors) , Note (b) 33.2% 1.58% 4.79% Sharesave Scheme (3 year) , % 1.58% 4.79% Sharesave Scheme (5 year) , % 1.58% 4.79% Note (a) Directors: Non-directors: 30% exercise after 3 years if gain; 25% of the remainder in following years using reducing balance method; 1% exercise in years 4 to 10 (on reducing balance method) and the balance of options exercised at maturity (year 10) if in the money. 45% after 3 years if gain; 25% of the remainder in following years using reducing balance method; 10% exercise in years 1 to 3 (straight-line); 5% exercise on third anniversary; 5% exercise in years 4 to 10 (on reducing balance method) and the balance of options exercised at maturity (year 10) if in the money. Note (b) The expected volatility is based upon the movement in the share price over a certain period until the grant date. The length of the period reviewed commensurate with the expected term of the option granted. Note (c) The expected dividend yield is based upon dividends announced in the 12 months prior to grant calculated as a percentage of the share price on the date of grant. CITY DEVELOPMENTS LIMITED ANNUAL REPORT

126 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December INTEREST-BEARING BORROWINGS GROUP COMPANY NOTE $ 000 $ 000 $ 000 $ 000 Term loans 20 1,707,042 2,173, , ,845 Finance lease creditors 21 6,561 11, Bonds and notes 22 1,557,215 1,393, , ,635 Bank loans 23 75,281 11,226 75,281 11,226 3,346,099 3,590,348 1,199,811 1,092,731 Repayable: Within 1 year 1,029, , , ,264 After 1 year but within 5 years 2,316,947 2,679, , ,467 3,346,099 3,590,348 1,199,811 1,092,731 Interest-bearing borrowings are denominated in the following currencies: GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Singapore Dollar 2,015,278 2,050,867 1,170,280 1,060,532 United States Dollar 611, ,055 Sterling Pound 340, ,571 Others 379, ,855 29,531 32,199 3,346,099 3,590,348 1,199,811 1,092, CITY DEVELOPMENTS LIMITED ANNUAL REPORT

127 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December TERM LOANS GROUP COMPANY NOTE $ 000 $ 000 $ 000 $ 000 Secured 682,277 1,114,112 Unsecured 1,024,765 1,059, , , ,707,042 2,173, , ,845 Repayable: Within 1 year 533, , , ,040 After 1 year but within 5 years 1,173,275 1,562, , ,805 1,707,042 2,173, , ,845 The term loans are obtained from banks and financial institutions. GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Secured term loans Repayable: Within 1 year 256, ,099 After 1 year but within 5 years 426, , ,277 1,114,112 The secured term loans are generally secured by: mortgages on the borrowing subsidiaries land and buildings and hotel properties; and assignment of all rights and benefits to sale, lease and insurance proceeds. The Group s secured term loans bear interest at rates ranging from 3.38% to 8.17% (2005: 1.96% to 8.15%) per annum during the year. GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Unsecured term loans Repayable: Within 1 year 277, , , ,040 After 1 year but within 5 years 747, , , ,805 1,024,765 1,059, , ,845 The Group s unsecured term loans bear interest at rates ranging from 0.41% to 7.42% (2005: 0.41% to 5.29%) per annum during the year. The Company s unsecured term loans bear interest at rates ranging from 0.54% to 4.77% (2005: 0.54% to 4.81%) per annum during the year. CITY DEVELOPMENTS LIMITED ANNUAL REPORT

128 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December FINANCE LEASE CREDITORS At the balance sheet date, the Group and the Company had obligations under finance leases that are repayable as follows: Group PRINCIPAL INTEREST PAYMENTS $ 000 $ 000 $ Repayable: Within 1 year 6,351 1,109 7,460 After 1 year but within 5 years ,561 1,131 7, Repayable: Within 1 year 5, ,481 After 1 year but within 5 years 6, ,082 11, ,563 Company 2006 Repayable: Within 1 year After 1 year but within 5 years Repayable: Within 1 year After 1 year but within 5 years Under the terms of the lease agreements, no contingent rents are payable. The Group s and the Company s finance lease obligations bear interest at rates ranging from 2.70% to 7.96% (2005: 2.70% to 7.96%) and 6.51% (2005: 6.51%) per annum respectively during the year. 128 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

129 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December BONDS AND NOTES GROUP COMPANY NOTE $ 000 $ 000 $ 000 $ 000 Secured 475, ,376 Unsecured 1,082,021 1,011, , , ,557,215 1,393, , ,635 Repayable: Within 1 year 413, , ,972 32,993 After 1 year but within 5 years 1,143,462 1,110, , ,642 1,557,215 1,393, , ,635 Secured bonds and notes Repayable: Within 1 year 125, ,976 After 1 year but within 5 years 349, , , ,376 Secured bonds and notes comprise the following: (i) KRW76 billion (approximately S$125 million) (2005: KRW80 billion (approximately S$132 million)) non-guaranteed secured notes (Notes) issued by a subsidiary bearing interest at rates of 4.95% to 5.69% (2005: 4.90%) per annum during the year are redeemable at their principal amounts in February These Notes are secured by a mortgage on the land and hotel building of a subsidiary and an assignment of insurance proceeds in respect of insurance over the said property; and (ii) $350 million (2005: $250 million) medium term notes (MTNs) which comprise 4 series of notes issued by a subsidiary as part of a $700 million secured MTN programme established in The MTNs bear interest at 3.73% to 3.88% (2005: 4.815%) per annum and are secured by a mortgage over the commercial building and land jointly owned by two subsidiaries, as well as rental and insurance proceeds to be derived from the said properties. Unless previously redeemed or purchased and cancelled, the MTNs are redeemable at their principal amounts on their respective maturity dates from January 2009 to October 2011 (2005: in January 2006). GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Unsecured bonds and notes Repayable: Within 1 year 287,973 32, ,972 32,993 After 1 year but within 5 years 794, , , ,642 1,082,021 1,011, , ,635 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

130 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December BONDS AND NOTES (cont d) Unsecured bonds and notes comprise: (i) $518 million (2005: $551 million) MTNs which comprise 10 series of notes issued by the Company at various interest rates as part of a $700 million unsecured MTN programme established in The MTNs bear interest at rates ranging from 2.35% to 5.50% (2005: 2.01% to 5.50%) per annum. Unless previously redeemed or purchased and cancelled, the MTNs are redeemable at their principal amounts on their respective maturity dates from February 2007 to June 2010 (2005: from August 2006 to June 2010); (ii) $564 million (2005: $460 million) MTNs which comprise 10 series of notes issued by a subsidiary as part of a $1 billion unsecured MTN programme established in 2002 bearing interest at rates ranging from 2.70% to 6.37% (2005: 2.70% to 5.72%) per annum. Unless previously redeemed or purchased and cancelled, the MTNs are redeemable at their principal amounts on their respective maturity dates from June 2007 to April 2011 (2005: from June 2007 to June 2010). 23 BANK LOANS GROUP COMPANY NOTE $ 000 $ 000 $ 000 $ 000 Bank loans (unsecured) repayable within 1 year 19 75,281 11,226 75,281 11,226 Interest is charged at 0.31% to 3.96% (2005: 0.25% to 4.11%) per annum during the year. 24 EMPLOYEE BENEFITS GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Net liability for: defined benefit obligations 45,178 45,877 short-term accumulating compensated absences 15,988 15,245 1,477 1,191 long service leave ,514 61,479 1,477 1,191 Repayable: Within 12 months 16,336 15,602 1,477 1,191 After 12 months 45,178 45,877 61,514 61,479 1,477 1, CITY DEVELOPMENTS LIMITED ANNUAL REPORT

131 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December EMPLOYEE BENEFITS (cont d) Net liability for defined benefit obligations GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Present value of unfunded obligations 19, Present value of funded obligations 112, ,496 Fair value of plan assets (87,041) (77,186) Liability for defined benefit obligations 45,178 45,877 The Group operates various funded pension schemes which are established in accordance with local conditions and practices within the countries concerned. The most significant funds are described below: United Kingdom (UK) The Group makes contributions to a pension scheme (the Millennium & Copthorne Pension Plan) for its UK employees which was set up in The scheme is a funded defined benefit arrangement with different categories of membership. The Trustees of the Plan have appointed The Frank Russell Company and Legal and General Investment Management Limited as the investment managers of the Millennium & Copthorne Pension Plan. The assets of the Millennium & Copthorne Pension Plan are held separately from those of the Group. The contributions required are determined by a qualified actuary on the basis of triennial valuations using the projected unit cost method. The last full actuarial valuation of this scheme was carried out by a qualified independent actuary as at 6 April 2005 and this has been updated on an approximate basis to 31 December The contributions of the Group were 20.6% of pensionable salary until April 2006 when the contribution rate reduced to 20.5% of pensionable salary (2005: 20.6%). In addition, during the year the Group agreed an enhanced contribution to address the plan s deficit that resulted in an additional S$3.2 million ( 1.1 million) per annum to be paid commencing April The contributions of employees were from 3% to 5% (2005: 3% to 5%) of pensionable salary. As the defined benefit section is closed to new entrants, the current service cost, as a percentage of pensionable payroll is likely to increase as the membership ages, although it will be applied to a decreasing pensionable payroll. The assumptions which have the most significant effect on the results of the valuation are those relating to mortality, the discount rate and the rates of increase in salaries and pensions. Korea The Group makes contributions to a defined benefit pension plan for its employees. The contributions required are determined by an external qualified actuary using the projected unit cost method. The most recent valuation was carried out on 31 December The contributions of the Group were 17% (2005: 13%) of the employees earnings. The assumptions which have the most significant effect on the results of the valuations are those relating to the discount rate and the rate of increase in salaries. CITY DEVELOPMENTS LIMITED ANNUAL REPORT

132 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December EMPLOYEE BENEFITS (cont d) Taiwan The Group makes contributions to a defined benefit pension plan for its employees. The contributions required are determined by an external qualified actuary using the projected unit cost method. The most recent valuation was carried out on 31 December The contributions of the Group were 6% (2005: 6%) of the employees earnings. The assumptions which have the most significant effect on the results of the valuations are those relating to the discount rate and the rate of increase in salaries. The assets of each scheme have been taken at market value and the liabilities have been calculated using the following principal assumptions: UK KOREA TAIWAN UK KOREA TAIWAN % % % % % % Inflation rate Discount rate Rate of salary increase Rate of pension increases Annual expected return on plan assets The assumptions used by the actuary are the best estimates chosen from a range of possible actuarial assumptions, which due to the timescale covered, may not be necessarily borne out in practice. The present value of the schemes liabilities are derived from cash flow projections over long periods and are inherently uncertain. The expected annual return on UK plan assets for 2006 of 6.17% has been calculated using a 6.48% return on equity (representing 75% of the plan assets) and a 5.23% return on bonds (representing 25% of the plan assets). Expense recognised in the income statement GROUP $ 000 $ 000 Current service costs 5,503 6,491 Interest on obligations 5,833 5,461 Expected return on plan assets (4,104) (3,689) Defined benefit obligation expenses 7,232 8,263 The expense is recognised in the following line items in the income statement: Cost of sales 2,342 3,938 Administrative expenses 4,690 2,565 Other operating expenses 200 1,760 Defined benefit obligation expenses 7,232 8,263 Actual return on plan asset 5,235 10, CITY DEVELOPMENTS LIMITED ANNUAL REPORT

133 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December EMPLOYEE BENEFITS (cont d) GROUP $ 000 $ 000 Actuarial losses recognised directly in equity Cumulative amount at 1 January 17,724 10,443 Recognised during the year 4,452 7,281 Cumulative amount at 31 December 22,176 17,724 Changes in the present value of the defined benefit obligations Defined benefit obligations as at 1 January 123, ,989 Actuarial losses 5,583 13,669 Benefit paid (9,923) (10,095) Interest cost 5,833 5,461 Service cost 5,503 6,491 Translation differences on consolidation 2,160 (5,452) Defined benefit obligations at 31 December 132, ,063 Changes in the fair value of plan assets Fair value of plan assets at 1 January 77,186 71,252 Expected return 4,104 3,689 Actuarial gains 1,131 6,388 Contributions by employer 12,667 9,287 Benefits paid (9,923) (10,095) Translation differences on consolidation 1,876 (3,335) Fair value of plan assets at 31 December 87,041 77,186 The fair values of plan assets in each category are as follows: Equity 48,067 42,788 Bonds 15,465 12,023 Cash 23,509 22,375 Fair value of plan assets 87,041 77,186 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

134 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December EMPLOYEE BENEFITS (cont d) Trend analysis Amounts for the current and previous four periods are as follows: $ 000 $ 000 $ 000 $ 000 $ 000 Present value of defined benefit obligations (81,193) (93,141) (112,989) (123,063) (132,219) Fair value of plan assets 49,991 61,993 71,252 77,186 87,041 Deficit in the plan (31,202) (31,148) (41,737) (45,877) (45,178) Experience adjustments on plan liabilities 2,728 (2,950) (597) (714) 2,158 Changes in assumptions underlying the present value of plan liabilities (11,283) 1,812 (10,248) (12,955) (7,741) Actual return less expected return on plan assets (3,684) 3, ,388 1, OTHER LIABILITIES GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Advances from minority shareholders of subsidiaries (unsecured and interest charged at 1.5% (2005: 1.5%) per annum) Deferred real estate tax payable in 10 equal annual instalments commencing in July ,115 8,728 Miscellaneous (principally deposits received and payables) 14,619 13,203 Rental deposits 27,313 20,666 2,957 2,037 Non-current retention sums payable 7,649 6,626 7,113 6,626 55,821 49,345 10,070 8,663 Repayable: Within 12 months 2,498 2,394 After 12 months 53,323 46,951 10,070 8,663 55,821 49,345 10,070 8, CITY DEVELOPMENTS LIMITED ANNUAL REPORT

135 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December OTHER LIABILITIES (cont d) Other liabilities are denominated in the following currencies: GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Singapore Dollar 33,428 24,473 10,070 8,663 Korean Won 12,589 10,937 United States Dollar 8,145 10,995 Others 1,659 2,940 55,821 49,345 10,070 8, PROVISIONS ONEROUS CAPITAL CONTRACTS EXPENDITURE TOTAL $ 000 $ 000 $ 000 Group At 1 January ,868 4,367 10,235 Provisions made during the year 3,251 3,251 Provisions utilised during the year (968) (4,608) (5,576) Translation differences on consolidation 219 (225) (6) At 31 December ,119 2,785 7,904 Current 2,356 Non-current 5,548 7,904 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

136 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December DEFERRED TAX LIABILITIES Movements in deferred tax assets and liabilities (prior to offsetting of balances) during the year are as follows: Group RECOGNISED TRANSFER TO AT IN PROVISION 1 JANUARY INCOME RECOGNISED FOR 2005 STATEMENT IN EQUITY TAXATION $ 000 $ 000 $ 000 $ 000 Deferred tax liabilities Property, plant and equipment 470,399 40,655 (2,647) Financial assets 4,953 Development properties (10,103) 5,484 Others (5,057) (5,123) ,239 41,016 4,968 (2,647) Deferred tax assets Property, plant and equipment Tax losses (58,631) (56) Others (9,086) 171 (329) (67,717) 115 (329) 387,522 41,131 4,639 (2,647) 136 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

137 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2006 TRANSFER TRANSFER TRANSLATION RECOGNISED TO TO TRANSLATION DIFFERENCES AT 31 IN PROVISION INVESTMENT DIFFERENCES AT 31 ON DECEMBER INCOME RECOGNISED FOR IN AN ON DECEMBER CONSOLIDATION 2005 STATEMENT IN EQUITY TAXATION ASSOCIATE CONSOLIDATION 2006 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 (6,117) 502,290 6,590 (840) (15,130) 492,910 4, ,915 (4,619) 18,124 13,505 3,407 (6,758) 7,940 (36) 1,146 (2,710) 495,866 32, (36) (840) (15,130) 513,476 (35) 1 (34) 4,922 (53,765) 20,929 3,059 (29,777) 692 (8,552) (12,884) 238 (21,198) 5,614 (62,317) 8,010 3,298 (51,009) 2, ,549 40, (36) (840) (11,832) 462,467 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

138 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December DEFERRED TAX LIABILITIES (cont d) Company Deferred tax liabilities RECOGNISED AT IN AT 31 RECOGNISED AT 31 1 JANUARY INCOME RECOGNISED DECEMBER IN INCOME RECOGNISED DECEMBER 2005 STATEMENT IN EQUITY 2005 STATEMENT IN EQUITY 2006 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Property, plant and equipment 20,162 (544) 19,618 (16,104) 3,514 Financial assets 4,442 4, ,808 Development properties (10,103) 5,484 (4,619) 18,124 13,505 Others ,128 10,906 5,074 4,457 20,437 2, ,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 amounts, determined after appropriate offsetting, are as follows: GROUP COMPANY NOTE $ 000 $ 000 $ 000 $ 000 Deferred tax assets 9 4,800 Deferred tax liabilities (467,267) (433,549) (22,955) (20,437) (462,467) (433,549) (22,955) (20,437) Deferred tax assets have not been recognised in respect of the following items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits therefrom: GROUP $ 000 $ 000 Deductible temporary differences 103, ,270 Tax losses 116, , , ,718 The deductible temporary differences do not expire under current tax legislation. The tax losses are subject to agreement by the tax authorities and compliance with tax regulations in the respective countries in which certain subsidiaries operate. The tax losses with expiry dates are as follows: GROUP $ 000 $ 000 Expiry dates Within 1 to 5 years 902 4,329 After 5 years 8, , CITY DEVELOPMENTS LIMITED ANNUAL REPORT

139 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December TRADE AND OTHER PAYABLES GROUP COMPANY NOTE $ 000 $ 000 $ 000 $ 000 Trade payables 137, ,271 9,278 7,768 Accruals 286, , , ,810 Other payables 54,685 57,405 2, Rental and other deposits 38,851 32,545 12,755 6,854 Retention sums payable 9,812 31,486 9,089 9,914 Amounts owing to: subsidiaries 5 383, ,845 an associate 6 5,222 8 jointly-controlled entities 7 40,479 72,701 15,475 15,475 fellow subsidiaries , , , ,790 Trade and other payables are denominated in the following currencies: GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Singapore Dollar 289, , , ,641 United States Dollar 107, ,739 67,251 71,834 Sterling Pound 62,229 56, Others 113,265 97,977 13,284 13, , , , ,790 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

140 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December REVENUE Revenue of the Group includes property development income, income from owning and operating hotels, gross rental income, income from provision of information technology and procurement services, dividend income, project management and consultancy fees, property management fees, club income and net results from sale of investments but excludes intra-group transactions. Property development income consists of sale proceeds of commercial and residential properties and projects under development. GROUP $ 000 $ 000 Hotel operations 1,846,378 1,803,256 Property development 484, ,045 Rental and car park income 168, ,072 Gross dividends from investments fellow subsidiaries quoted 2,502 4,214 unquoted 2,532 3,375 others quoted equity investments 2, unquoted equity investments 1, Others 37,733 36,770 2,546,804 2,374, PROFIT BEFORE INCOME TAX The following items have been included in arriving at profit for the year: Other operating income GROUP $ 000 $ 000 Business interruption insurance proceeds 15,928 39,788 Exchange gain (net) 6,043 Management fees and miscellaneous income 11,762 7,286 Profit on sale of investments 205 Profit on sale of long leasehold interests in hotels and property, plant and equipment 153,581 21, ,519 68, CITY DEVELOPMENTS LIMITED ANNUAL REPORT

141 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December PROFIT BEFORE INCOME TAX (cont d) GROUP $ 000 $ 000 Staff costs Wages and salaries 734, ,006 Contributions to defined contribution plans 16,340 18,087 Increase in liability for defined benefit plans 7,232 8,263 Value of employee services received for issue of share options 1,822 1,789 (Decrease)/Increase in liability for long service leave (23) 237 Increase in liability for short-term accumulating compensated absences , ,181 Less: Staff costs capitalised in: development properties (1,039) (1,371) property, plant and equipment (73) (67) 759, ,743 Other expenses Allowance for doubtful receivables made trade non-trade 3,133 1,546 Allowance for foreseeable losses on development properties written back (38,561) (7,296) Amortisation of intangible assets Amortisation of upfront premiums on long leasehold land of hotel properties 2,314 2,490 Depreciation of property, plant and equipment 149, ,230 Exchange loss (net) 1,557 Impairment losses for property, plant and equipment 9,220 24,530 Loss on liquidation of a jointly-controlled entity 1,247 Non-audit fees auditors of the Company other auditors of the subsidiaries 1,801 1,789 Operating lease expenses 37,944 11,952 Property, plant and equipment written off 3, CITY DEVELOPMENTS LIMITED ANNUAL REPORT

142 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December PROFIT BEFORE INCOME TAX (cont d) GROUP $ 000 $ 000 Finance income Interest income fellow subsidiaries fixed deposits with financial institutions 24,827 19,386 jointly-controlled entities 6,093 6,065 others 1,303 1,249 Marked-to-market gain on financial assets held for trading (net) 8,919 1,286 Others Total finance income 42,468 28,269 Finance costs Interest expense banks 82,174 97,960 bonds and notes 66,278 59,920 others 4,619 1,925 Amortisation of transaction costs capitalised 3,633 5,971 Total finance costs 156, ,776 Finance costs capitalised in development properties and property, plant and equipment (17,986) (14,498) Finance costs charged to income statement 138, ,278 Net finance costs (96,250) (123,009) Included in marked-to-market gain on financial assets held for trading is a gain of $5,998,000 (2005: loss of $1,141,000) recognised on shares of a listed subsidiary which are held by the Group for trading purposes. As these shares are held for trading purposes, and not as part of the controlling block of shares held in the subsidiary, the relevant portion of equity represented is not consolidated. Finance costs of the Group and the Company have been capitalised at rates ranging from 0.37% to 6.00% (2005: 0.29% to 3.79%) and 0.37% to 4.77% (2005: 0.29% to 3.79%) per annum respectively for development properties and property, plant and equipment. 142 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

143 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December INCOME TAX EXPENSE GROUP $ 000 $ 000 Current tax expense Current year 96,378 78,526 Overprovision in respect of prior years (7,730) (24,917) 88,648 53,609 Deferred tax expense Movements in temporary differences 39,853 35,180 Effect of change in tax rates 18 4,247 Underprovision in respect of prior years 5,575 1,704 Recognition of previously unrecognised deferred tax assets (4,782) 40,664 41,131 Income tax expense 129,312 94,740 Reconciliation of effective tax rate Profit before taxation 692, ,862 Income tax using Singapore tax rate of 20% (2005: 20%) 138,456 80,772 Income not subject to tax (59,720) (24,426) Expenses not deductible for tax purposes 25,288 33,742 Effect of changes in tax rates 18 4,247 Effect of different tax rates in other countries 28,596 27,682 Effect of share of results of jointly-controlled entities 2,646 4,631 Tax exempt income (3,173) (962) Unrecognised deferred tax assets 7,388 7,953 Tax effect of losses not allowed to be set off against future taxable profits 2, Tax incentives (32) (9,671) Utilisation of previously unrecognised deferred tax assets (5,643) (6,151) Overprovision in respect of prior years (2,155) (23,213) Recognition of previously unrecognised deferred tax assets (4,782) 129,312 94,740 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

144 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December EARNINGS PER SHARE Basic earnings per share is calculated based on: GROUP $ 000 $ 000 Profit attributable to shareholders 351, ,397 Less: Dividends on non-redeemable preference shares (12,904) (12,904) Profit attributable to ordinary shareholders after deduction of non-cumulative preference dividends 338, ,493 GROUP (RESTATED) NUMBER NUMBER OF SHARES OF SHARES Weighted average number of ordinary shares outstanding during the year 903,756, ,753,739 Bonus element of warrants exercised in ,657,443 15,197,217 Bonus element of warrants exercised in ,142,362 Weighted average number of ordinary shares 915,414, ,093,318 Basic earnings per share 37.0 cents 20.8 cents Diluted earnings per share is based on: GROUP $ 000 $ 000 Profit attributable to shareholders after deduction of non-cumulative preference dividends 338, ,493 Add: Dividends on non-redeemable preference shares 12,904 Net profit used for computing diluted earnings per share 351, ,493 For the purpose of calculating the diluted earnings per ordinary share, the weighted average number of ordinary shares in issue is adjusted to take into account the dilutive effect arising from the exercise of all outstanding bonus warrants and conversion of the non-redeemable convertible non-cumulative preference shares, with the potential ordinary shares weighted for the period outstanding. 144 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

145 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December EARNINGS PER SHARE (cont d) The effect of the potential ordinary shares on the weighted average number of ordinary shares in issue is as follows: GROUP (RESTATED) NUMBER NUMBER OF SHARES OF SHARES Weighted average number of ordinary shares issued used in the calculation of basic earnings per share 915,414, ,093,318 Potential ordinary shares issuable under warrants 14,346,249 Potential ordinary shares issuable under non-redeemable convertible non-cumulative preference shares 44,998,898 Weighted average number of ordinary shares issued and potential shares assuming full conversion 960,413, ,439,567 Diluted earnings per share 36.6 cents 20.5 cents For 2005, the non-redeemable convertible non-cumulative preference shares were anti-dilutive and were excluded in the calculation of diluted earnings per share. 33 DIVIDENDS COMPANY $ 000 $ 000 Special final ordinary dividend paid of 5.0 cents per ordinary share less tax at 20% in respect of financial year ended 31 December ,338 Final ordinary dividend paid of 7.5 cents (2005: 7.5 cents) per ordinary share less tax at 20% (2005: 20%) in respect of financial year ended 31 December ,507 52,786 Special interim ordinary dividend paid of 7.5 cents per ordinary share less tax at 20% in respect of financial year ended 31 December ,558 Non-cumulative preference dividend paid of 2.41 cents (2005: 2.41 cents) per preference share less tax at 20% (2005: 20%) 6,386 6,399 Non-cumulative preference dividend declared of 2.46 cents (2005: 2.46 cents) per preference share less tax at 20% (2005: 20%) 6,518 6, ,307 65,690 After the balance sheet date, the directors proposed the following ordinary dividends, which have not been provided for: COMPANY $ 000 $ 000 Final ordinary dividend of 7.5 cents (2005: 7.5 cents) per ordinary share less tax at 18% (2005: 20%) 55,922 53,328 Special final ordinary dividend of 10.0 cents (2005: 5.0 cents) per ordinary share less tax at 18% (2005: 20%) 74,563 35, ,485 88,880 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

146 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December ACQUISITION OF SUBSIDIARIES On 30 November 2006, the Group acquired the remaining 50% interest in three foreign jointly-controlled entities in the business of hotel operations for a consideration of $51,934,000. In December 2006, these entities contributed a net loss of $1,289,000 to the consolidated profit for the year. If the acquisition had occurred on 1 January 2006, the Group s revenue and profit for the year would have been $2,563,956,000 and $559,384,000 respectively. The effect of the acquisition of the subsidiaries is set out below: CARRYING FAIR VALUE RECOGNISED AMOUNTS ADJUSTMENTS VALUES $ 000 $ 000 $ 000 Property, plant and equipment 126,145 20, ,204 Consumable stocks Trade debtors 1,712 1,712 Other current assets 4,621 4,621 Cash at bank 3,260 3,260 Trade and other payables (10,067) (10,067) Amount owing to shareholders* (79,359) (79,359) Long term loan (secured) (59,284) (59,284) Net identifiable (liabilities)/assets (12,508) 20,059 7,551 Amounts previously accounted for as jointly-controlled entities 4,704 Additional shareholder s loan acquired 39,679 Cash consideration paid, satisfied in cash 51,934 Cash acquired (3,260) Net cash outflow 48,674 * This amount is eliminated on consolidations. Since the Group ultimately owns 100% of the shareholders loans, there is no shareholders loan on consolidation. 146 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

147 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December ACQUISITION OF SUBSIDIARIES (cont d) On 20 August 2005, the Group acquired the remaining 50% interest in its jointly-controlled entity, Edenspring Properties Pte Ltd, for a consideration of $1. In the four months to 31 December 2005, the company contributed a net profit of $25,000 to the consolidated net profit for the year. If the acquisition had occurred on 1 January 2005, the Group s revenue and profit for that year would have been $2,374,579,000 and $308,841,000 respectively. The effect of the acquisition of the subsidiary is set out below: CARRYING AMOUNTS AND FAIR VALUE 2005 $ 000 Property, plant and equipment 9 Development property 26,601 Other current assets 54 Cash at bank 74 Other current liabilities (302) Amount owing to shareholders* (10,854) Bank loan (secured) (17,250) Net identifiable assets and liabilities (1,668) Amounts previously accounted for as jointly-controlled entity 834 Additional shareholder s loan acquired 5,427 4,593 Cash consideration paid, satisfied in cash Cash acquired (74) Net cash outflow 4,519 * This amount is eliminated on consolidations. Since the Group ultimately owns 100% of the shareholders loan, there is no shareholders loan on consolidation. The carrying amount of identifiable assets and liabilities immediately before the combination approximates the fair value at the date of acquisition. CITY DEVELOPMENTS LIMITED ANNUAL REPORT

148 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December COMMITMENTS The Group and the Company had the following commitments as at the balance sheet date: GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Development expenditure contracted but not provided for in the financial statements 634, , , ,979 Capital expenditure contracted but not provided for in the financial statements 13,727 31,017 Commitment in respect of purchase of properties for which deposits have been paid 382,097 55,031 55,031 In addition, the Group and the Company had the following commitments: (a) The Group holds a number of office facilities and hotel properties under operating leases. The leases typically run for an initial period of 1 to 30 years. The Group s and the Company s commitments for future minimum lease payments under non-cancellable operating leases are as follows: GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Within 1 year 85,064 41,689 3,509 6,533 After 1 year but within 5 years 275, ,488 2,147 8,488 After 5 years 642, ,858 1,003, ,035 5,656 15,021 Contingent rents, generally determined based on a percentage of gross revenue and gross operating profit, of $25,798,000 (2005: $9,146,000) for the Group have been recognised as an expense in the income statement during the year. 148 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

149 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December COMMITMENTS (cont d) (b) The Group and the Company lease out some of their property, plant and equipment. Non-cancellable operating lease rentals are receivable as follows: GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Within 1 year 137, ,445 13,722 11,680 After 1 year but within 5 years 169, ,697 12,879 6,148 After 5 years 11, , ,142 26,601 17,828 Contingent rents, generally determined based on a percentage of tenants revenue, of $77,000 (2005: $79,000) and $42,000 (2005: $31,000) have been recognised as income by the Group and the Company respectively in the income statement during the year. (c) Certain subsidiaries of the Group have obligations with the relevant authorities in Malaysia to reduce their present 100% interest in two hotel-owning subsidiaries to 51%, by sale of equity to Malaysians by June 2006 in one case and June 2007 in the other. A further extension for former divestment to 31 December 2007 has been obtained on 7 August (d) A subsidiary leases land, on which a hotel building stands, from the Ministry of Economic Affairs (MOEA) in Taiwan, for 50 years starting from 7 March 1990 and extendible up to 80 years. The lease rental to be paid is based on a percentage of the published land value in Taiwan and will be adjusted when land value tax and related levies are changed. Upon expiry of the lease, the subsidiary is required to unconditionally transfer the building and its contents to the government. The subsidiary has also committed to the MOEA: to spend in each year not less than 4% to 5% of the annual gross revenue of the hotel to maintain and improve the hotel s furniture and fixtures, equipment and building, and its environment. to pay an annual royalty to the MOEA at 6.25% of the annual gross revenue of the hotel, with a minimum sum of NT$195 million (approximately S$9.4 million) (2005: NT$195 million (approximately S$9.9 million)). In the event that the subsidiary terminates the hotel assistance and management agreement, the royalty is to be increased to 8.25% of the annual gross revenue of the hotel, subject to a minimum sum of NT$257.4 million (approximately S$12.4 million) (2005: NT$257.4 million (approximately S$13.1 million)). (e) In the previous financial year, a subsidiary, CDL Hotels (Korea) Ltd., had entered into a hotel lease agreement for the period from 1 January 2006 to 31 December Under the terms of the lease agreement, the subsidiary has committed to incur capital expenditure for an amount up to KRW1.96 billion (approximately S$3.2 million) (2006: KRW1.4 billion (approximately S$2.3 million)). CITY DEVELOPMENTS LIMITED ANNUAL REPORT

150 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SIGNIFICANT RELATED PARTY TRANSACTIONS For the purpose of these financial statements, parties are considered to be related to the Company if the Company 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 Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. Other than as disclosed elsewhere in the financial statements, the transactions with related parties based on terms agreed between the parties are as follows: GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Rental received and receivable from: subsidiaries 982 1,208 fellow subsidiaries an associate ,209 1,237 Management services fees received and receivable from: subsidiaries 1,785 2,017 fellow subsidiaries 1,347 1,122 1,071 1,076 jointly-controlled entities 11,800 8,763 10,608 5,242 an associate 3, ,678 9,885 13,483 8, CITY DEVELOPMENTS LIMITED ANNUAL REPORT

151 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SIGNIFICANT RELATED PARTY TRANSACTIONS (cont d) GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Maintenance services fees received and receivable from: fellow subsidiaries jointly-controlled entities Rental paid and payable to: subsidiaries 3,745 5,322 jointly-controlled entities an associate 26,408 26, ,745 5,322 Management services fees paid and payable to: immediate and ultimate holding company 447 subsidiaries 1,583 2,229 a fellow subsidiary ,583 2,229 Maintenance services fees paid and payable to subsidiaries 1,941 1,762 Sale of properties to: key management personnel and their immediate families by jointly-controlled entities 27,520 27,520 key management personnel and their immediate families by a joint venture in which the Company is a venturer 1,993 1,993 a key management personnel and his immediate family , , CITY DEVELOPMENTS LIMITED ANNUAL REPORT

152 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SIGNIFICANT RELATED PARTY TRANSACTIONS (cont d) GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Sale of long leasehold interests in hotels and property, plant and equipment to: a subsidiary 1,504 an associate 846, , , ,604 Short-term employee benefits paid and payable to key management personnel 12,281 14,086 11,618 7,875 Professional fees paid and payable to firms of which directors of the Company are members: charged to income statement included as cost of property, plant and equipment and cost of development properties CONTINGENT LIABILITIES (UNSECURED) As at the balance sheet date, the Group and the Company have the following indemnities and guarantees in issue: GROUP COMPANY $ 000 $ 000 $ 000 $ 000 Guarantee issued on behalf of a subsidiary which will expire in ,112 43,026 Indemnities given to financial institutions for performance guarantees issued on behalf of: subsidiaries 120,710 78,358 a jointly-controlled entity 4,391 17,565 4,391 17,565 4,391 17, , , CITY DEVELOPMENTS LIMITED ANNUAL REPORT

153 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December FINANCIAL INSTRUMENTS Financial risk management objectives and policies Exposure to credit, interest rate and currency risks arise in the normal course of the Group s business activities. The Group s overall objectives and policies focus on managing financial risks by using financial instruments, where appropriate. Use of derivatives is for hedging purposes only against specific exposures and are entered into in a manner consistent with the overall policies of the Group. The Group does not enter into derivative transactions for speculative purposes. Credit risk Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. The Group does not require collateral in respect of these financial assets. Transactions involving financial instruments are entered into only with counterparties that are of acceptable credit quality. In relation to the financial guarantee contracts issued by the Company on behalf of its subsidiaries or jointly-controlled entities, the credit risk, being the principal risk to which the Company is exposed, represents the loss that would be recognised upon a default by the subsidiary or jointly-controlled entity. The intra-group financial guarantees are eliminated in preparing the consolidated financial statements. There are no terms and conditions attached to the guarantee contracts that would have a material effect on the amount, timing and uncertainty of the Company s future cash flows. At the balance sheet date, there is no significant concentration of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheets. Liquidity risk The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group s operations and to mitigate the effects of fluctuations in cash flows. CITY DEVELOPMENTS LIMITED ANNUAL REPORT

154 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December FINANCIAL INSTRUMENTS (cont d) Interest rate risk The Group s exposure to market risk changes in interest rates relates primarily to its interest-bearing financial assets and debt obligations. The Group adopts a policy of managing its interest rate exposure by maintaining a debt portfolio with both fixed and floating rates of interest. Where appropriate, the Group uses interest rate derivatives to hedge its interest rate exposure for specific underlying debt obligations. At 31 December 2006, the Group did not have interest rate swaps. 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. EFFECTIVE FLOATING FIXED INTEREST RATE MATURING NOTE INTEREST RATE INTEREST WITHIN 1 TO 2 2 TO 3 3 TO 4 4 TO 5 AFTER PER ANNUM RATE 1 YEAR YEARS YEARS YEARS YEARS 5 YEARS TOTAL % $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Group 2006 Financial assets Cash and cash equivalents 0.50 to , , ,377 Amounts owing by jointly-controlled entities to ,679 13, ,434 Investments in debt securities held for trading to ,837 6,972 1, ,270 Balance carried forward 38,463 1,122,430 6,972 1, ,755 1,184, CITY DEVELOPMENTS LIMITED ANNUAL REPORT

155 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December FINANCIAL INSTRUMENTS (cont d) EFFECTIVE FLOATING FIXED INTEREST RATE MATURING NOTE INTEREST RATE INTEREST WITHIN 1 TO 2 2 TO 3 3 TO 4 4 TO 5 AFTER PER ANNUM RATE 1 YEAR YEARS YEARS YEARS YEARS 5 YEARS TOTAL % $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Group 2006 Balance brought forward 38,463 1,122,430 6,972 1, ,755 1,184,081 Financial liabilities Bank overdrafts to 8.30 (2,319) (2,319) Term loans 20 secured 3.97 to 8.17 (682,277) (682,277) unsecured 0.49 to 7.42 (1,024,765) (1,024,765) Finance lease creditors to 7.96 (6,351) (8) (7) (195) (6,561) Bonds and notes 22 secured 3.73 to 5.64 (125,780) (149,817) (199,597) (475,194) unsecured 2.35 to 6.37 (602,214) (219,981) (49,986) (49,947) (159,893) (1,082,021) Bank loans (unsecured) to 3.71 (75,281) (75,281) Advances from minority shareholders of subsidiaries (125) (125) (2,512,636) (226,457) (49,994) (199,771) (160,088) (199,597) (3,348,543) Total (2,474,173) 895,973 (43,022) (198,638) (159,599) (198,758) 13,755 (2,164,462) 2005 Financial assets Cash and cash equivalents 0.10 to , , ,219 Amounts owing by jointly-controlled entities to , ,007 Investments in debt securities held for trading Balance carried forward 60, , ,267 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

156 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December FINANCIAL INSTRUMENTS (cont d) EFFECTIVE FLOATING FIXED INTEREST RATE MATURING NOTE INTEREST RATE INTEREST WITHIN 1 TO 2 2 TO 3 3 TO 4 4 TO 5 AFTER PER ANNUM RATE 1 YEAR YEARS YEARS YEARS YEARS 5 YEARS TOTAL % $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Group 2005 Balance brought forward 60, , ,267 Financial liabilities Bank overdrafts to 8.00 (2,815) (2,815) Term loans 20 secured 3.30 to 8.15 (1,114,112) (1,114,112) unsecured 0.43 to 5.29 (1,059,610) (1,059,610) Finance lease creditors to 7.96 (5,104) (6,688) (9) (7) (4) (11,812) Bonds and notes 22 secured 4.82 to 4.90 (132,400) (249,976) (382,376) unsecured 2.35 to 5.50 (518,554) (12,997) (219,898) (49,973) (49,929) (159,861) (1,011,212) Bank loans (unsecured) to 0.38 (11,226) (11,226) Advances from minority shareholders of subsidiaries (122) (122) (2,838,717) (268,199) (226,586) (49,982) (49,936) (159,865) (3,593,285) Total (2,778,688) 622,039 (226,586) (49,982) (49,936) (159,865) (2,643,018) 156 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

157 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December FINANCIAL INSTRUMENTS (cont d) EFFECTIVE FLOATING FIXED INTEREST RATE MATURING NOTE INTEREST RATE INTEREST WITHIN 1 TO 2 2 TO 3 3 TO 4 4 TO 5 AFTER PER ANNUM RATE 1 YEAR YEARS YEARS YEARS YEARS 5 YEARS TOTAL % $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Company 2006 Financial assets Cash and cash equivalents 2.95 to ,056 87,056 Amounts owing by: subsidiaries to , , ,456 jointly-controlled entities to , ,981 60, , ,493 Financial liabilities Term loans (unsecured) to 4.57 (606,711) (606,711) Finance lease creditor (5) (6) (6) (3) (20) Bonds and notes (unsecured) to 5.50 (67,992) (189,980) (49,986) (49,947) (159,894) (517,799) Bank loans (unsecured) to 3.71 (75,281) (75,281) (749,984) (189,985) (49,992) (49,953) (159,897) (1,199,811) Total (689,231) 608,755 (49,992) (49,953) (159,897) (340,318) CITY DEVELOPMENTS LIMITED ANNUAL REPORT

158 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December FINANCIAL INSTRUMENTS (cont d) EFFECTIVE FLOATING FIXED INTEREST RATE MATURING NOTE INTEREST RATE INTEREST WITHIN 1 TO 2 2 TO 3 3 TO 4 4 TO 5 AFTER PER ANNUM RATE 1 YEAR YEARS YEARS YEARS YEARS 5 YEARS TOTAL % $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Company 2005 Financial assets Cash and cash equivalents 2.06 to , ,495 Amounts owing by: subsidiaries to ,285 77, ,009 jointly-controlled entities to , ,566 44, , ,070 Financial liabilities Term loans (unsecured) to 4.24 (530,845) (530,845) Finance lease creditor (5) (5) (6) (6) (3) (25) Bonds and notes (unsecured) to 5.50 (87,960) (12,997) (189,915) (49,973) (49,929) (159,861) (550,635) Bank loans (unsecured) to 0.38 (11,226) (11,226) (630,031) (13,002) (189,920) (49,979) (49,935) (159,864) (1,092,731) Total (585,746) 610,783 (189,920) (49,979) (49,935) (159,864) (424,661) 158 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

159 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December FINANCIAL INSTRUMENTS (cont d) Foreign currency risk The Group manages its foreign exchange exposure by a policy of matching receipts and payments, and asset purchases and borrowings in each individual currency. Forward foreign exchange contracts are used purely as a hedging tool, where an active market for the relevant currencies exists, to minimise the Group s exposure to movements in exchange rates on firm commitments and specific transactions. Wherever necessary, the Group finances its property, plant and equipment purchases by using the relevant local currency cash resources and arranging for bank facilities denominated in the same currency. This enables the Group to limit translation exposure to its balance sheet arising from consolidation of the Group s overseas net assets. As at 31 December 2006, a subsidiary has outstanding forward exchange contracts with notional amounts of approximately HK$107 million (approximately S$21 million) (2005: $Nil). Changes in the fair value of forward exchange contracts that economically hedge monetary assets and liabilities in foreign currencies are recognised in the income statement (see Note 2.6). The net fair value of forward exchange contracts used by the subsidiary as economic hedges of monetary assets and liabilities in foreign currencies at 31 December 2006 was HK$475,000 (approximately S$94,000) (2005: $Nil). These amounts are recognised as derivative financial instruments in the balance sheet. Estimation of fair values Investments in equity and debt securities The fair value of quoted investments that are classified as available for sale or held for trading is their quoted bid price at the balance sheet date. The fair values of unquoted securities classified as available for sale or held for trading have not been determined as there is no quoted market price in an active market and other methods of determining fair value do not result in a reliable estimate. Amounts owing by subsidiaries, associates and jointly-controlled entities The fair values of amounts owing by subsidiaries, associates and jointly-controlled entities are estimated as the present value of future cash flows, discounted at market interest rates. Derivatives The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market price is not available, fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual period to maturity of the contract using a risk-free interest rate (based on government bonds). Non-derivative financial liabilities Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases, the market rate of interest is determined by reference to similar agreements. CITY DEVELOPMENTS LIMITED ANNUAL REPORT

160 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December FINANCIAL INSTRUMENTS (cont d) Other financial assets and liabilities The carrying amounts of financial assets and liabilities with a maturity of less than one year (including trade and other receivables, cash and cash equivalents, trade and other payables and advances from minority shareholders of subsidiaries) are assumed to approximate their fair values because of the short period to maturity. All other financial assets and liabilities are discounted to determine their fair values. Recognised financial instruments The aggregate net fair values of financial assets and liabilities which are not carried at fair values in the balance sheet as at 31 December are represented in the following table: Group CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE $ 000 $ 000 $ 000 $ 000 Financial assets Amounts owing by jointly-controlled entities 13,755 8,859 Deposit receivables 3,993 3,883 17,748 12,742 Financial liabilities Term loans secured (669,137) (668,173) unsecured (439,906) (438,300) Finance lease creditors (6,535) (6,427) (11,778) (12,349) Bonds and notes secured (349,414) (350,040) unsecured (259,827) (255,568) (923,252) (915,293) long-term deposits (14,339) (11,351) (13,204) (10,545) (630,115) (623,386) (2,057,277) (2,044,660) (612,367) (610,644) (2,057,277) (2,044,660) Unrecognised gains 1,723 12, CITY DEVELOPMENTS LIMITED ANNUAL REPORT

161 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December FINANCIAL INSTRUMENTS (cont d) Company CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE $ 000 $ 000 $ 000 $ 000 Financial asset Amounts owing by subsidiaries 48,031 44,603 Financial liability Bonds and notes (unsecured) (259,827) (255,568) (462,675) (458,673) (211,796) (210,965) (462,675) (458,673) Unrecognised gains 831 4, SEGMENT REPORTING Business Segments 2006 PROPERTY HOTEL RENTAL DEVELOPMENT OPERATIONS PROPERTIES OTHERS TOTAL $ 000 $ 000 $ 000 $ 000 $ 000 Revenue 484,980 1,846, ,066 47,380 2,546,804 Segment results 132, ,796 22,535 34, ,410 Share of after-tax profit of an associate and jointly-controlled entities 93,381 8,802 7,512 5, ,868 Profit before income tax 225, ,598 30,047 39, ,278 Income tax expense (129,312) Profit for the year 562,966 Significant Non-Cash Transactions Depreciation ,429 48,242 1, ,744 Amortisation 204 5, ,961 Impairment losses 10,042 (822) 9,220 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

162 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SEGMENT REPORTING (cont d) 2005 PROPERTY HOTEL RENTAL DEVELOPMENT OPERATIONS PROPERTIES OTHERS TOTAL $ 000 $ 000 $ 000 $ 000 $ 000 Revenue 365,045 1,803, ,072 45,906 2,374,279 Segment results 103, ,416 24,913 12, ,237 Share of after-tax profit of jointly-controlled entities 47,385 8,587 2,653 58,625 Profit before income tax 151, ,003 27,566 12, ,862 Income tax expense (94,740) Profit for the year 309,122 Significant Non-Cash Transactions Depreciation 1, ,604 46,178 1, ,230 Amortisation 336 6,969 1, ,475 Impairment losses 31,661 (7,131) 24, CITY DEVELOPMENTS LIMITED ANNUAL REPORT

163 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SEGMENT REPORTING (cont d) 2006 PROPERTY HOTEL RENTAL DEVELOPMENT OPERATIONS PROPERTIES OTHERS TOTAL $ 000 $ 000 $ 000 $ 000 $ 000 Assets and Liabilities Segment assets 2,663,888 4,968,210 2,622, ,540 10,593,561 Investment in an associate (111,846) 228, ,990 Investments in jointly-controlled entities 188,395 98,104 12,237 (9,722) 289,014 2,852,283 4,954,468 2,863, ,818 10,999,565 Deferred tax assets 4,800 Total assets 11,004,365 Segment liabilities 1,264,360 1,709, ,628 83,318 4,046,298 Deferred tax liabilities 467,267 Provision for taxation 110,701 Total liabilities 4,624,266 Capital expenditure 2, ,481 44,593 2, , Assets and Liabilities Segment assets 2,471,009 5,051,595 2,829, ,400 10,755,872 Investments in jointly-controlled entities (4,636) 71,689 11,154 61, ,270 Total assets 2,466,373 5,123,284 2,841, ,463 10,895,142 Segment liabilities 984,790 2,257, ,057 94,716 4,304,702 Deferred tax liabilities 433,549 Provision for taxation 81,630 Total liabilities 4,819,881 Capital expenditure 10, ,756 92,290 4, ,639 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

164 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SEGMENT REPORTING (cont d) Geographical Segments 2006 EAST AND NORTH AUSTRALIA SOUTH EAST AMERICA AND ASIA AND EUROPE NEW ZEALAND TOTAL $ 000 $ 000 $ 000 $ 000 Revenue 1,164,184 1,188, ,442 2,546,804 Segment assets 7,059,291 3,505, ,606 10,999,565 Capital expenditure 111,724 55,829 10, , Revenue 1,023,500 1,171, ,152 2,374,279 Segment assets 7,637,658 3,175,939 81,545 10,895,142 Capital expenditure 185,960 72,356 22, , CITY DEVELOPMENTS LIMITED ANNUAL REPORT

165 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 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 financial statements of the Group from the year commencing 1 January 2007, permits investment properties (currently included in property, plant and equipment) to be stated at either fair value or cost less accumulated depreciation and accumulated impairment losses. Currently, investment properties are accounted for under FRS 16 Property, Plant and Equipment at cost less accumulated depreciation and accumulated impairment losses. With the adoption of FRS 40 from 1 January 2007, the Group will reclassify the carrying value of its investment properties from property, plant and equipment to investment properties, which will continue to be stated at cost less accumulated depreciation and accumulated impairment losses. 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. This standard does 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 initial application of these standards and interpretations is 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. CITY DEVELOPMENTS LIMITED ANNUAL REPORT

166 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SIGNIFICANT INVESTMENTS The following are the Group s significant investments: Subsidiaries Direct / Indirect Subsidiaries of the Company EFFECTIVE PRINCIPAL COUNTRY OF GROUP ACTIVITY INCORPORATION INTEREST % % * 100G Pasir Panjang Road Pte Ltd Property holding Singapore * Allinvest Holding Pte Ltd Property owner Singapore * Aston Properties Pte Ltd Property owner, developer Singapore and investment holding * Bloomsville Investments Pte Ltd Property owner, developer Singapore and investment holding * CDL Land Pte Ltd Property owner Singapore * CDL Management Services Pte. Ltd. Provision of project and Singapore (formerly known as City Project & property management Property Management Pte. Ltd.) and consultancy services * CDL Properties Ltd Property owner and Singapore investment holding * Central Mall Pte Ltd Property owner Singapore * Cideco Pte. Ltd. Property owner Singapore * # City Building Management Pte Ltd Building maintenance, security, Singapore cleaning, car park and related services to commercial and residential buildings * City Capital Corporation Pte Ltd Property owner Singapore * City Centrepoint Pte Ltd Property owner and Singapore investment holding * City Condominiums Pte Ltd Property owner, developer Singapore and investment holding * City Developments Realty Limited Investment in shares Singapore and investment holding * City e-solutions Limited Investment holding and provision Cayman of consultancy services Islands * City Serviced Offices Pte. Ltd. Operating serviced offices Singapore * Citydev Investments Pte. Ltd. Investment in shares and Singapore investment holding * Citydev Real Estate (Singapore) Pte Ltd Property owner Singapore * Cityview Place Holdings Pte. Ltd. Property owner Singapore (formerly known as Tagore and developer Warehouse Holdings Pte. Ltd.) * Darfera Pte. Ltd. Property owner and developer Singapore CITY DEVELOPMENTS LIMITED ANNUAL REPORT

167 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SIGNIFICANT INVESTMENTS (cont d) Subsidiaries (cont d) Direct / Indirect Subsidiaries of the Company (cont d) EFFECTIVE PRINCIPAL COUNTRY OF GROUP ACTIVITY INCORPORATION INTEREST % % * Eccott Pte Ltd Investment holding and Singapore property owner * Edenspring Properties Pte Ltd Property sales and ownership Singapore *** Educado Company Limited Investment in shares Hong Kong * Elishan Investments Pte Ltd Property owner Singapore * Elite Holdings Private Limited Property owner and developer Singapore * Empire City Consultant Pte Ltd Management of properties Singapore ^ empire Investments Limited Investment holding Bermuda * Guan Realty (Private) Limited Property owner Singapore and developer * Highgrove Investments Pte Ltd Property owner Singapore * Hong Leong Properties Pte. Limited Property owner Singapore * Island City Garden Development Pte. Ltd. Property owner, developer and Singapore investment holding * Land Equity Development Pte Ltd Property owner Singapore ** Lingo Enterprises Limited Property holding and Hong Kong property investment ** Millennium & Copthorne Hotels plc Investment holding United Kingdom * North Bridge Commercial Complex Property holding Singapore Pte Ltd ** Pacific Height Enterprises Company Property investment Hong Kong Limited ** Palmerston Holdings Sdn. Bhd. Property owner and developer Malaysia ^ Reach Across International Limited Investment holding British Virgin Islands * Republic Plaza City Club (Singapore) Owner and operator of clubs Singapore Pte Ltd * Singapura Developments (Private) Property owner, developer Singapore Limited and investment holding * Sunshine Plaza Pte Ltd Property owner, developer Singapore and investment holding * Target Realty Limited Property owner, developer Singapore and investment holding * The Corporate Building Pte Ltd Property holding Singapore * The Corporate Office Pte Ltd Property holding Singapore * The Office Chamber Pte Ltd Property holding Singapore ^ Wideachieve Holdings Limited Investment holding British Virgin Islands CITY DEVELOPMENTS LIMITED ANNUAL REPORT

168 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SIGNIFICANT INVESTMENTS (cont d) Subsidiaries (cont d) Direct / Indirect Subsidiaries of Millennium & Copthorne Hotels plc EFFECTIVE PRINCIPAL COUNTRY OF GROUP ACTIVITY INCORPORATION INTEREST % % ** Anchorage-Lakefront Limited Partnership Hotel owner United States and operator of America ** Bostonian Hotel Limited Partnership Hotel owner United States and operator of America ** CDL (New York) LLC Hotel owner United States of America ** CDL Hotels (Chelsea) Limited Hotel owner and operator United Kingdom ** CDL Hotels (Korea) Ltd. Hotel owner and operator Republic of Korea ** CDL Hotels (Malaysia) Sdn. Bhd Hotel owner and operator Malaysia ** CDL Hotels (U.K.) Limited Hotel owner and operator United Kingdom ** CDL Hotels USA Inc. Hotel investment United States holding company of America ** CDL Investments New Zealand Limited Investment and New Zealand property/management company ** CDL West 45th Street LLC Hotel owner United States of America ** Chicago Hotel Holdings, Inc. Hotel owner and operator United States of America * City Hotels Pte. Ltd. Hotel owner and operator Singapore ** Copthorne Hotel (Birmingham) Limited Hotel owner and operator United Kingdom ** Copthorne Hotel (Gatwick) Limited Hotel owner and operator United Kingdom ** Copthorne Hotel (Manchester) Limited Hotel owner and operator United Kingdom ** Copthorne Hotel (Newcastle) Limited Hotel owner and operator United Kingdom ** Copthorne Hotel (Slough) Limited Hotel owner and operator United Kingdom ** Copthorne Hotel Holdings Limited Hotel investment United Kingdom holding company ** Copthorne Hotels Limited Hotel investment United Kingdom holding company * Copthorne Orchid Hotel Singapore Hotel owner and operator Singapore Pte Ltd ** Gateway Regal Holdings LLC Hotel owner and United States operator of America ** Grand Plaza Hotel Corporation Hotel owner and Philippines operator and investment holding company 168 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

169 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SIGNIFICANT INVESTMENTS (cont d) EFFECTIVE PRINCIPAL COUNTRY OF GROUP ACTIVITY INCORPORATION INTEREST % % Subsidiaries (cont d) Direct / Indirect Subsidiaries of Millennium & Copthorne Hotels plc (cont d) * Harbour View Hotel Pte. Ltd. Hotel owner Singapore ** Hong Leong Hotel Development Limited Hotel owner and operator Taiwan * Hong Leong Hotels Pte Ltd. Hotel owner and operator Cayman Islands ** Hospitality Group Limited Hotel investment New Zealand holding company * King s Tanglin Shopping Pte. Ltd. Property owner Singapore ** Kingsgate Hotel Pty. Ltd. Property owner Australia ** London Britannia Hotel Limited Hotel owner and operator United Kingdom ** London Tara Hotel Limited Hotel owner and operator United Kingdom ** M&C Crescent Interests, LLC Property owner United States of America ** M&C Hotels France SAS Hotel owner France ** Millennium & Copthorne Hotels Hotel investment New Zealand New Zealand Limited holding company * Millennium & Copthorne International Hotels and resorts Singapore Limited management ** RHM-88, LLC Hotel owner United States and operator of America ** WHB Biltmore LLC Hotel owner and United States operator of America Direct / Indirect Subsidiaries of City e-solutions Limited ** Richfield Hospitality, Inc. Investment holding United States and provision of of America hospitality related services ** Sceptre Hospitality Resources, Inc. Provision of reservation United States system services of America ^ SWAN Holdings Limited Investment holding Bermuda ** SWAN USA, Inc. Holding company United States of America Associate Associate of Millennium & Copthorne Hotels plc * CDL Hospitality Trusts Real Estate Investment Trust Singapore 21 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

170 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December SIGNIFICANT INVESTMENTS (cont d) Jointly-controlled Entities Jointly-controlled Entities of the Company EFFECTIVE PRINCIPAL COUNTRY OF GROUP ACTIVITY INCORPORATION INTEREST % % * Aster Land Development Pte Ltd Property development and Singapore investment dealing activities * Branbury Investments Ltd Property owner Singapore * Burlington Square Investment Pte Ltd Property owner Singapore * Burlington Square Properties Pte Ltd Property sales and ownership Singapore * Camborne Developments Pte Ltd Property owner and developer Singapore * City Sunshine Holdings Pte. Ltd. Property owner Singapore * Cuscaden Investment Pte Ltd Real estate developer and Singapore investment holding company ** Exchange Tower Ltd. Investment holding Thailand * Glengary Pte. Ltd. Property owner and developer Singapore * Granmil Holdings Pte Ltd Property owner and developer Singapore ** Krungthep Rimnam Ltd. Hotel business Thailand ** P.T. City Island Utama Property owner and developer Indonesia * Richmond Hotel Pte Ltd Property owner and developer Singapore * TC Development Pte. Ltd. Property owner and developer Singapore * Tomlinson Hotel Pte. Ltd. Hotel owner Singapore * Tripartite Developers Pte. Limited Property developer Singapore Jointly-controlled Entity of Millennium & Copthorne Hotels plc ^ New Unity Holdings Limited Investment holding company British Virgin Islands * Audited by KPMG Singapore ** Audited by other member firms of KPMG International *** Audited by S.Y. Yang & Company, Hong Kong ^ Not subject to audit by law of country of incorporation # Name of City Building Management Pte Ltd was changed to CBM Pte. Ltd. on 1 January COMPARATIVE FIGURES The Group has modified the presentation of the income statement by reclassifying finance income from other operating income to net finance costs. In addition, the Group has also reclassified the non-current portion of the rental deposits to non-current liabilities. Accordingly, the comparative amounts were reclassified to conform with the current year s presentation. 170 CITY DEVELOPMENTS LIMITED ANNUAL REPORT

171 APPENDIX III AUDITED ACCOUNTS OF CITY DEVELOPMENTS LIMITED AND ITS SUBSIDIARIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007 The information in this Appendix III has been reproduced from the annual report of City Developments Limited and its subsidiaries for the financial year ended 31 December 2007 and has not been specifically prepared for inclusion in this Information Memorandum and references to the page numbers herein are those as reproduced from the annual report of City Developments Limited and its subsidiaries for the financial year ended 31 December

172 Statement by Directors In our opinion: (a) (b) the financial statements set out on pages 80 to 166 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2007 and the results, recognised income and expenses and cash flows of the Group for the year ended on that date in accordance with the provisions of the Companies Act, Chapter 50 and Singapore Financial Reporting Standards; and at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due. The Board of Directors has, on the date of this statement, authorised these financial statements for issue. On behalf of the Board of Directors Kwek Leng Beng Executive Chairman Kwek Leng Joo Managing Director Singapore 7 March 2008 City Developments Limited Annual Report

173 Independent Auditors Report Members of the Company City Developments Limited We have audited the financial statements of City Developments Limited (the Company) and its subsidiaries (the Group), which comprise the balance sheets of the Group and the Company as at 31 December 2007, the income statement, statement of recognised income and expenses and 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 80 to 166. 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 Singapore Companies Act, Chapter 50 (the Act) and Singapore Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control 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 of 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 judgment, 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. Opinion In our opinion: (a) (b) the consolidated financial statements of the Group and the balance sheet 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 2007 and the results, recognised income and expenses 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 7 March 2008 City Developments Limited Annual Report

174 Balance Sheets As at 31 December 2007 Group Company Note $ 000 $ 000 $ 000 $ 000 Non-current assets Property, plant and equipment 3 4,038,315 3,893, ,202 65,923 Investment properties 4 2,468,253 2,425, , ,429 Investments in: - subsidiaries 5 2,258,755 2,219,682 - associates 6 277, ,990 - jointly-controlled entities 7 553, ,014 34,159 50,054 Financial assets 8 183, ,858 39,307 39,582 Other non-current assets 9 248, , , ,202 7,769,600 7,155,045 2,846,262 2,788,872 Current assets Development properties 10 2,578,015 2,281,858 1,428,690 1,469,935 Consumable stocks 14,877 14,507 Financial assets 8 67,509 70,703 Trade and other receivables 11 1,076, ,328 2,278,295 1,376,141 Cash and cash equivalents , , ,027 99,741 4,448,950 3,849,320 3,810,012 2,945,817 Total assets 12,218,550 11,004,365 6,656,274 5,734,689 Equity attributable to equity holders of the Company Share capital 15 1,991,397 1,991,397 1,991,397 1,991,397 Reserves 16 3,207,387 2,743,138 2,343,449 1,914,961 5,198,784 4,734,535 4,334,846 3,906,358 Minority interests 1,717,613 1,645,564 Total equity 17 6,916,397 6,380,099 4,334,846 3,906,358 Non-current liabilities Interest-bearing borrowings 19 3,235,377 2,316,947 1,618, ,384 Employee benefits 24 36,999 45,178 Other liabilities 25 74,739 53,323 21,336 10,070 Provisions 26 3,464 5,548 Deferred tax liabilities , ,267 45,999 22,955 3,777,391 2,888,263 1,686, ,409 Current liabilities Trade and other payables , , , ,253 Interest-bearing borrowings ,290 1,031, , ,427 Employee benefits 24 15,718 16,336 1,625 1,477 Other liabilities 25 2,236 2,498 Provision for taxation 115, ,701 32,080 51,765 Provisions 26 9,622 2,356 1,524,762 1,736, ,284 1,205,922 Total liabilities 5,302,153 4,624,266 2,321,428 1,828,331 Total equity and liabilities 12,218,550 11,004,365 6,656,274 5,734,689 The accompanying notes form an integral part of these financial statements. City Developments Limited Annual Report

175 Consolidated Income Statement Year ended 31 December 2007 Group Note $ 000 $ 000 Revenue 29 3,106,106 2,546,804 Cost of sales (1,478,150) (1,179,145) Gross profit 1,627,956 1,367,659 Other operating income 30 29, ,519 Administrative expenses (522,757) (460,792) Other operating expenses (396,230) (420,726) Profit from operating activities 738, ,660 Finance income 49,218 42,468 Finance costs (119,486) (138,718) Net finance costs 30 (70,268) (96,250) Share of after-tax profit of associates 16,254 5,956 Share of after-tax profit of jointly-controlled entities 270, ,912 Profit before income tax 954, ,278 Income tax expense 31 (65,394) (129,312) Profit for the year , ,966 Attributable to: Equity holders of the Company - Ordinary shareholders 712, ,755 - Preference shareholders 12,904 12, , ,659 Minority interests 164, ,307 Profit for the year 889, ,966 Earnings per share - Basic cents 37.0 cents - Diluted cents 36.6 cents The accompanying notes form an integral part of these financial statements. City Developments Limited Annual Report

176 Consolidated Statement of Recognised Income and Expenses Year ended 31 December 2007 Group $ 000 $ 000 Translation differences arising on consolidation of foreign subsidiaries (64,111) (110,133) Exchange differences on hedges of net investment in foreign entities (775) (1,437) Exchange differences on monetary items forming part of net investment in foreign entities (14,851) (7,881) Change in fair value of equity investments available for sale 1,409 4,045 Share of other reserve movements of an associate (6,738) Actuarial losses on defined benefit plans (1,573) (2,755) Net losses recognised directly in equity (79,901) (124,899) Profit for the year 889, ,966 Total recognised income and expenses for the year 809, ,067 Attributable to: Equity holders of the Company 679, ,470 Minority interests 129, , , ,067 The accompanying notes form an integral part of these financial statements. City Developments Limited Annual Report

177 Consolidated Cash Flow Statement Year ended 31 December 2007 Group $ 000 $ 000 Operating activities Profit before income tax 954, ,278 Adjustments for: Depreciation and amortisation 136, ,705 Dividend income (14,150) (9,647) Gain on dilution and disposal of investment in an associate (8,228) Finance income (49,218) (42,468) Finance costs 119, ,085 Impairment losses on property, plant and equipment 20,320 10,042 Loss on liquidation of a jointly-controlled entity 24 1,247 Profit on sale of investments (310) (205) Profit on sale of property, plant and equipment and long leasehold interests in hotels (1,812) (153,581) Property, plant and equipment written off 22,163 3,429 Share of after-tax profits of associates (16,254) (5,956) Share of after-tax profits of jointly-controlled entities (270,456) (108,912) Units in an associate received and receivable in lieu of fee income (8,242) Value of employee services received for issue of share options 2,340 1,822 Write-back of impairment losses on investment properties (75,017) (822) 811, ,017 Changes in working capital: Development properties (249,663) (198,046) Stocks, trade and other receivables 76,670 (82,457) Trade and other payables 99,597 (2,991) Employee benefits (24,535) (3,012) Cash generated from operations 713, ,511 Income tax paid (98,152) (62,121) Cash flows from operating activities carried forward 615, ,390 The accompanying notes form an integral part of these financial statements. City Developments Limited Annual Report

178 Consolidated Cash Flow Statement Year ended 31 December 2007 Group Note $ 000 $ 000 Cash flows from operating activities brought forward 615, ,390 Investing activities Acquisition of a subsidiary (net of cash acquired) 34 (48,674) Capital expenditure on investment properties (10,471) (13,270) Dividends received - an associate 19,953 - financial investments 12,429 8,379 - jointly-controlled entities 34,500 28,204 Interest received 46,649 48,934 Proceeds from disposal of interest in an associate 4,771 Proceeds from liquidation of a jointly-controlled entity 77 Proceeds from sale of property, plant and equipment and long leasehold interests in hotels ,106 Purchase of financial assets (30,699) (51,509) Purchase of investments in associates (150,727) (229,640) Purchase of investments in jointly-controlled entities (37,483) (250) Purchase of intangible assets (5) Payments for purchase of property, plant and equipment and lease premium (485,762) (164,055) Cash flows from investing activities (596,361) 447,220 Financing activities Advances (to)/from related parties (348,934) 2,896 (Return of capital to)/capital contribution from minority shareholders (23,735) 12,001 Dividends paid (260,002) (198,123) Finance lease payments (6,474) (5,734) Fixed deposits pledged to a financial institution 1,026 Interest paid (including amounts capitalised as property, plant and equipment and development properties) (153,330) (151,471) Net proceeds from revolving credit facilities and short-term bank borrowings 528, ,761 Payment of financing transaction costs (3,901) (1,571) Proceeds from bank borrowings 871, ,993 Proceeds from issuance of bonds and notes 515, ,031 Proceeds from issue of shares 51,251 Repayment of bank borrowings (740,736) (787,158) Repayment of bonds and notes (450,920) (300,455) Repayment of other long-term liabilities (2,541) (405) Cash flows from financing activities (74,330) (548,958) Net (decrease)/increase in cash and cash equivalents (55,376) 227,652 Cash and cash equivalents at beginning of the year 774, ,767 Effect of exchange rate changes on balances held in foreign currencies (8,663) (22,814) Cash and cash equivalents at end of the year , ,605 Significant non-cash transactions Management fee income of $8,242,000 (2006: $Nil) is received and receivable by the Group in the form of units in an associate. Dividends amounting to $20,749,000 (2006: $4,559,000) were paid by a subsidiary to its minority shareholders in the form of scrip dividends. The accompanying notes form an integral part of these financial statements. City Developments Limited Annual Report

179 Notes to the Financial Statements Year ended 31 December 2007 These notes form an integral part of the financial statements. The financial statements were authorised for issue by the Board of Directors on 7 March Domicile and activities City Developments Limited (the Company) is incorporated in the Republic of Singapore and has its registered office at 36 Robinson Road, #04-01 City House, Singapore The principal activities of the Company are those of a property developer and owner and investment holding. The principal activities of the subsidiaries are those of property developers and owners, hotel owners and operators, a club operator and owner, investment in properties and in shares, property management, project management and consultancy services and providers of information technology and procurement services. The consolidated financial statements for the year ended 31 December 2007 relate to the Company and its subsidiaries (together referred to as the Group) and the Group s interests in associates and jointly-controlled entities. The directors consider the immediate and ultimate holding company to be Hong Leong Investment Holdings Pte. Ltd., a company incorporated in the Republic of Singapore. 2 Summary of significant accounting policies 2.1 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 that certain financial assets and financial liabilities are stated at fair value. The financial statements are presented in Singapore dollars which is the Company s functional currency. All financial information has been rounded to the nearest thousand, unless otherwise stated. The preparation of financial statements in conformity with FRS 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 areas: Note 2.2 Note 2.17 Note 2.20 Note 3 and 4 Note 5 Note 24 Note 38 Assessment of ability to control or exert significant influence over partly-owned investments Measurement of profit attributable to properties under development Estimation of provisions for current and deferred taxation Measurement of recoverable amounts of hotel and investment properties Measurement of recoverable amounts of investments in subsidiaries Valuation of defined benefit employee obligations Valuation of financial instruments that are not actively traded Except as set out in Note 2.6, the accounting policies set out below have been applied consistently to all periods presented in these financial statements. City Developments Limited Annual Report

180 Notes to the Financial Statements Year ended 31 December Summary of significant accounting policies (cont d) 2.2 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. The excess of the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is credited to the income statement in the period of the acquisition. Subsidiaries Subsidiaries are those entities controlled by the Group. Control exists when the Group 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, as is the extent to which the Group benefits from the activities of the investee. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Where the accounting policies of subsidiaries are different from those adopted by the Group, adjustments have been made to their financial statements in order that accounting policies are consistently applied in the consolidated financial statements. Associates and jointly-controlled entities Associates are companies in which the Group has significant influence, but not control, over their financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity. 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 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 (including any long-term interests that, in substance, form part of the Group s net investment in the associate or jointlycontrolled entity) 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. Jointly-controlled assets Joint venture arrangements which involve the use of the assets that are jointly controlled (whether or not owned jointly), without the establishment of a separate entity, are referred to as jointly-controlled assets. The Group recognises its interests in jointlycontrolled assets using proportionate consolidation. The Group combines its share of each of the assets, liabilities, income and expenses of the joint venture with the similar items, line by line, in its consolidated financial statements. Consistent accounting policies are applied for like transactions and events in similar circumstances. The joint venture is proportionately consolidated until the date on which the Group ceases to have joint control over the jointlycontrolled assets. 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 associates and jointly-controlled entities 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. 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 impairment losses. City Developments Limited Annual Report

181 Notes to the Financial Statements Year ended 31 December Summary of significant accounting policies (cont d) 2.3 Foreign currencies Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the exchange rates ruling at the date of the transactions. 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 currencies 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 the net investment in a foreign operation (see Note 2.7). 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 foreign operations on or after 1 January 2005 are treated as assets and liabilities of the foreign operation and at the closing rate. For acquisitions prior to 1 January 2005, the exchange rates at the date of acquisition were used. Foreign currency differences are recognised in the exchange fluctuation reserve. When a foreign operation is disposed of, in part or in full, the relevant amount in the exchange translation reserve is transferred to the income statement as part of the gain or loss on disposal. Net investment in a foreign operation Exchange differences arising from monetary items that in substance form part of the Group s net investment in a foreign operation are recognised in equity in the consolidated financial statements. When the hedged net investment is disposed of, the cumulative amount in equity is transferred to the income statement as an adjustment to the profit or loss arising on disposal. 2.4 Property, plant and equipment Owned assets Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the cost of dismantling and removing the items and restoring the site on which they are located. Property that is being constructed for future use as investment property is accounted for as property, plant and equipment until the end of the construction or development, at which time it is transferred to investment properties. Leased assets Leases whereby the Group assumes substantially all risks and rewards of ownership are classified as finance leases. Property, plant and equipment acquired through finance leases are capitalised at the lower of its fair value and the present value of the minimum lease payments at the inception of the lease, less accumulated depreciation and impairment losses. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against the income statement. Capitalised leased assets are depreciated over the shorter of the economic useful life of the asset and the lease term. City Developments Limited Annual Report

182 Notes to the Financial Statements Year ended 31 December Summary of significant accounting policies (cont d) 2.4 Property, plant and equipment (cont d) Depreciation No depreciation is provided on freehold and 999-year leasehold land. For freehold and leasehold properties under development and renovation-in-progress, no depreciation is provided until these items have been completed. Freehold and leasehold properties under development are transferred to other asset categories at the carrying value on the date of transfer. Depreciation is recognised in the income statement on a straight-line basis over the estimated useful lives (or lease term, if shorter) of each part of an item of property, plant and equipment. The estimated useful lives are as follows: Freehold and leasehold land and buildings Core component of hotel buildings - 50 years, or lease term if shorter Surface finishes and services of hotel buildings - 30 years, or lease term if shorter Furniture, fittings, plant and equipment and improvements - 3 to 20 years Residual values ascribed to the core component of hotel buildings depend on the nature, location and tenure of each hotel property. No residual values are ascribed to surface finishes and services of hotel buildings. Depreciation methods, useful lives and residual values are reviewed, and adjusted as appropriate, at each reporting date. 2.5 Intangible assets Goodwill Goodwill and negative goodwill arise on the acquisition of subsidiaries, associates and jointly-controlled entities. Acquisitions prior to 1 January 2001 Goodwill represented the excess of the cost of the acquisition over the Group s interest in the net fair value of the identifiable assets and liabilities of the acquiree. Goodwill and negative goodwill on acquisitions were written off against reserves in the year of acquisition. Goodwill and negative goodwill that had previously been taken to reserves are not taken to the income statement when (a) the business is disposed of or (b) the goodwill is impaired. Acquisitions occurring between 1 January 2001 and 1 January 2005 There was no goodwill arising from acquisition of subsidiaries occurring between 1 January 2001 and 1 January Acquisitions on or after 1 January 2005 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. 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. Goodwill is measured at cost less impairment losses. Goodwill is tested for impairment as described in Note Negative goodwill is recognised immediately in the income statement. City Developments Limited Annual Report

183 Notes to the Financial Statements Year ended 31 December Summary of significant accounting policies (cont d) 2.5 Intangible assets (cont d) Goodwill (cont d) Acquisitions of minority interest 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. Other intangible assets Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortisation and impairment losses. Other intangible assets are amortised in the income statement on a straight-line basis over their estimated useful lives of 15 years, from the date on which they are available for use. 2.6 Investment properties Investment properties are properties held either to earn rental income or capital appreciation or both. These do not include properties for sale in the ordinary course of business, or used in the production nor those used for the supply of goods or services or for administrative purposes. Investment properties are stated at cost less accumulated depreciation and impairment losses. Depreciation No depreciation is provided on freehold and 999-year leasehold land included in the investment properties. Depreciation is recognised in the income statement on a straight-line basis over the estimated useful lives (or lease term, if shorter) of each component investment properties. The estimated useful lives are as follows:- Freehold and leasehold properties - 50 years, or lease term if shorter Leasehold land - Lease term between 85 to 96 years Furniture, fittings, plant and equipment and improvements - 3 to 20 years Depreciation methods and useful lives are reviewed, and adjusted as appropriate, at each reporting date. Transfers Transfers to, or from, investment property shall be made where there is a change in use, evidenced by: (a) commencement of owner-occupation, for a transfer from investment properties to property, plant and equipment; (b) commencement of development with a view to sell, for a transfer from investment properties to development properties; and (c) end of owner-occupation, for a transfer from property, plant and equipment to investment properties. Change in accounting policy The Group and the Company adopted FRS 40 Investment Property on 1 January On adoption of FRS 40, the Group and the Company reclassified the carrying values of their investment properties and related plant and equipment and improvements to investment properties. However, these properties continue to be stated at cost less accumulated depreciation and impairment losses, which was the policy in use before 1 January 2007, when investment properties and related plant and equipment and improvements were accounted for under FRS 16 Property, Plant and Equipment. The change in accounting policy, which in the current financial statements was limited to a change in the descriptions of the properties, has been applied retrospectively in accordance to FRS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Except as disclosed above, the change in accounting policy had no impact on the opening accumulated profits of the Group and the Company, other financial statement line items and earnings per share. City Developments Limited Annual Report

184 Notes to the Financial Statements Year ended 31 December Summary of significant accounting policies (cont d) 2.7 Financial instruments Non-derivative financial instruments Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, interest-bearing borrowings, other liabilities and trade and other payables. Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. 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. Available-for-sale financial assets The Group s investments in certain equity 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 2.3), are recognised directly in equity. When an investment is derecognised, the cumulative gain or loss in equity is transferred to the income statement. Where an investment in an equity security classified as available-for-sale does not have a quoted market price in an active market and other methods of determining fair value do not result in a reasonable estimate, the investment is measured at cost less impairment losses. Financial assets at fair value through profit or loss An instrument is classified as at fair value through profit or loss if it is acquired principally for the purpose of selling in the short term or is designated as such upon initial recognition. Financial instruments are designated as financial assets at 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 designated as financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognised in the income statement. Others Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses. 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. Derivative financial instruments 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. City Developments Limited Annual Report

185 Notes to the Financial Statements Year ended 31 December Summary of significant accounting policies (cont d) 2.7 Financial instruments (cont d) 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 also 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 the Group s net investment in a foreign operation are recognised in the exchange fluctuation 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 of, 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. 2.8 Interest-free intercompany loans Loans to subsidiaries In the Company s financial statements, interest-free intercompany loans to subsidiaries are stated at fair value at inception. The difference between the fair values and the loan amounts at inception is recognised as additional investments in the Company s financial statements. Subsequently, these loans are measured at amortised cost using the effective interest method. Such balances are eliminated in full in the consolidated financial statements. Loans from subsidiaries In the Company s financial statements, interest-free intercompany loans from subsidiaries are stated at fair value at inception. The difference between the fair values and the loan amounts at inception is recognised as distribution income in the Company s income statement. Subsequently, these loans are measured at amortised cost using the effective interest method. Such balances are eliminated in full in the Group s consolidated financial statements. City Developments Limited Annual Report

186 Notes to the Financial Statements Year ended 31 December Summary of significant accounting policies (cont d) 2.9 Development properties Development properties are those properties which are held with the intention of development and sale in the ordinary course of business. They are stated at the lower of cost plus, where appropriate, a portion of 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 comprise 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 Consumable stocks Consumable stocks comprise principally food and beverage and other hotel related consumable stocks. Stocks are valued at the lower of cost and net realisable value. Cost is determined on a first-in, first-out basis Cash and cash equivalents 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 Impairment Impairment of financial assets A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. 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. Individually 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 and measured at amortised cost, the reversal is recognised directly in equity. For available-for-sale financial assets that are equity securities and measured at cost less impairment losses, an impairment loss is not reversed. Impairment of non-financial assets The carrying amounts of the Group s non-financial assets, other than consumable stocks 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, the recoverable amount is estimated at each reporting date, and as and when indicators of impairment are identified. City Developments Limited Annual Report

187 Notes to the Financial Statements Year ended 31 December Summary of significant accounting policies (cont d) 2.12 Impairment (cont d) Impairment of non-financial assets (cont d) 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. Impairment losses recognised in respect of cashgenerating 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 Share capital Ordinary share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects. Preference share capital Preference shares are classified as equity if they are non-redeemable or are redeemable but only at the option of the Company and dividend payments are discretionary. Dividends on preference shares classified as equity are recognised as distributions within equity. Dividends on non-redeemable preference shares are recognised as a liability in the period in which they are incurred Employee benefits Defined contribution plans Obligations for contributions to defined contribution plans are recognised as an expense in the income statement as incurred. Defined benefit plans The Group s net obligation in respect of defined benefit post-employment plans, including pension plans, is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in current and prior periods. That benefit is discounted to determine its present value, and the fair value of any plan assets is deducted. The discount rate is the yield at the balance sheet date on AA credit rated bonds that have maturity dates approximating the terms of the Group s obligations. The calculation is performed by a qualified actuary using the projected unit credit method. When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in the income statement on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in the income statement. The Group recognises all actuarial gains and losses arising from defined benefit plans directly in equity immediately. Long-term service benefits The Group s net obligation in respect of long-term service benefits, other than post-employment plans, is the amount of future benefit that employees have earned in return for their service in current and prior periods. The obligation is calculated using the projected unit credit method and is discounted to its present value and the fair value of any plan assets is deducted. The discount rate is the yield at the balance sheet date on AA credit rated bonds that have maturity dates approximating to the terms of the Group s obligations. City Developments Limited Annual Report

188 Notes to the Financial Statements Year ended 31 December Summary of significant accounting policies (cont d) 2.14 Employee benefits (cont d) Short-term benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans where 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. Share-based payment transactions The share-based incentive schemes allow the Group s employees to acquire shares of one of the Company s listed subsidiaries. The fair value of options and awards granted are recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to exercise options granted or for share awards to vest. The fair value of the share awards or grants are measured using a stochastic model, taking into account the performance conditions applying to the share options and awards. The amount recognised as an expense is adjusted to reflect the actual number of shares that vest except where forfeiture is due to share prices not achieving the threshold for vesting Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Onerous contracts A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations 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. Before a provision is established, the Group recognises any impairment loss on the assets associated with the contract. Capital expenditure A provision for capital expenditure is recognised for the Group s contractual obligation to incur capital expenditure under the terms of the hotel operating agreements Financial guarantee contracts Financial guarantees are financial instruments issued by the Group that requires the issuer to make specified payments to reimburse the holder for the loss it incurs because a specified debtor fails to meet payment when due in accordance with the original or modified terms of a debt instrument. Financial guarantee contracts entered into before 1 January 2006 Financial guarantee contracts are accounted for as insurance contracts. A provision is recognised based on 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. Financial guarantee contracts entered into on or after 1 January 2006 Financial guarantees are recognised initially at fair value and are classified as financial liabilities. 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. City Developments Limited Annual Report

189 Notes to the Financial Statements Year ended 31 December Summary of significant accounting policies (cont d) 2.17 Revenue recognition 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 an equitable interest, revenue is recognised as the acts are performed based on the percentage of completion method under Recommended Accounting Practice (RAP) 11 Pre-completion Contracts for the Sale of Development Property issued by the Institute of Certified Public Accountants of Singapore in October Under RAP 11, when (a) construction is beyond a preliminary stage, (b) minimum down payment criterion is met, (c) sale prices are collectible, and (d) aggregate sales proceeds and costs can be reasonably estimated, the percentage of completion method is an allowed alternative. If any of the above criteria are not met, pre-completion proceeds received are accounted for as deposits until such criteria are met. Under the percentage of completion method, the percentage of completion is measured by reference to the work performed, based on the ratio of costs incurred to date to the estimated total costs for each contract. Profits are recognised only in respect of finalised sales agreements to the extent that such profits relate to the progress of the construction work. The Group s current policy of recognising revenue using the percentage of completion method on its development projects in Singapore is an allowed alternative under RAP 11. The impact on the financial statements, had revenue on the Singapore projects been recognised using the completion of construction method, is as follows: Group $ 000 $ 000 Decrease in revenue 283, ,366 Decrease in profit for the year 341,872 67,916 Decrease in opening accumulated profits 144,114 76,198 Decrease in development properties as at 1 January 71,422 31,918 Decrease in development properties as at 31 December 239,884 71,422 Decrease in investments in jointly-controlled entities as at 1 January 87,942 51,102 Decrease in investments in jointly-controlled entities as at 31 December 292,912 87,942 Rental and car park income Rental income (net of any lease incentives) is recognised on a straight-line basis over the lease term. Contingent rentals, which include gross turnover rental, are recognised as income in the accounting period on a receipt basis. Car park income are recognised on an accrual basis. Hotel income Revenue from hotel operations is recognised on an accrual basis, upon rendering of the relevant services. Dividends Dividend income is recognised in the income statement when the shareholder s right to receive payment is established Operating leases 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. City Developments Limited Annual Report

190 Notes to the Financial Statements Year ended 31 December Summary of significant accounting policies (cont d) 2.19 Finance income and expense Finance income comprises mainly interest income on funds invested, mark-to-market gain on financial assets at fair value through profit or loss and gain on hedging instruments that are recognised in the income statement. Interest income is recognised as it accrues, using the effective interest method. Finance expense comprise interest expense on borrowings, amortisation of transactions costs capitalised, mark-to-market loss on financial assets at fair value through profit or loss and loss on hedging instruments that are recognised in the income statement. All 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 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 joint ventures to the extent that it is probable that they 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 by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, and current tax liabilities and assets are intended to be settled on a net basis. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the 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 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. The primary format, business segments, is based on the Group s internal reporting structure. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. The Group comprises three principal business segments, namely hotel operations, property development and rental properties. These segments operate in three principal geographical areas, namely, Asia, North America and Europe and Australia and New Zealand. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location where the services are rendered and the products are sold. Segment assets are based on the geographical location of the assets. City Developments Limited Annual Report

191 Notes to the Financial Statements Year ended 31 December Property, Plant and Equipment Freehold Furniture, and fittings, leasehold plant and Freehold Leasehold properties equipment land and land and Freehold Leasehold under and Renovationbuildings buildings properties properties development improvements in-progress Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Group Cost At 1 January 2006, as previously reported 4,036,962 2,045, ,475 1,034,197 48,310 1,378, ,925 9,110,390 Transfers to investment properties on the adoption of FRS 40 (628,714) (998,115) (402,475) (1,034,197) (57,873) (142,178) (3,263,552) At 1 January 2006, restated 3,408,248 1,047,110 48,310 1,320,423 22,747 5,846,838 Additions 1,584 3,706 54,744 68,348 36, ,887 Acquisition of subsidiaries 146, ,204 Disposals (515,399) (9,271) (272,831) (114) (797,615) Written off during the year (20) (25,665) (6) (25,691) Reclassifications and transfers 13,323 1,214 15,693 (30,230) Transfers from investment properties 2,131 2,131 Transfers to development properties (72,971) (2,634) (75,605) Translation differences on consolidation (73,825) (8,616) (23,422) 446 (105,417) At 31 December 2006, restated 2,907,144 1,036, ,054 1,079,912 29,348 5,155,732 At 1 January 2007, as previously reported 3,651,447 2,032, , , ,054 1,137,287 29,348 8,229,382 Transfers to investment properties on the adoption of FRS 40 (744,303) (995,988) (429,481) (846,503) (57,375) (3,073,650) At 1 January 2007, restated 2,907,144 1,036, ,054 1,079,912 29,348 5,155,732 Additions 38,906 9, ,943 56,091 19, ,099 Disposals (1,749) (114) (28,652) (30,515) Written off during the year (25,218) (25,218) Reclassifications and transfers 13,934 (872) 17,851 (30,913) Transfers to development properties (716) (716) Translation differences on consolidation (93,896) (35,329) 71 (32,524) (249) (161,927) At 31 December ,863,623 1,009, ,068 1,067,460 17,194 5,344,455 City Developments Limited Annual Report

192 Notes to the Financial Statements Year ended 31 December Property, Plant and Equipment (cont d) Freehold Furniture, and fittings, leasehold plant and Freehold Leasehold properties equipment land and land and Freehold Leasehold under and Renovationbuildings buildings properties properties development improvements in-progress Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Group Accumulated depreciation and impairment losses At 1 January 2006, as previously reported 564, , , , ,254 2,048,350 Transfers to investment properties on the adoption of FRS 40 (83,497) (153,701) (116,093) (280,596) (40,517) (674,404) At 1 January 2006, restated 481, , ,737 1,373,946 Charge for the year 19,855 6,191 78, ,060 Disposals (97,625) (23,368) (89,163) (210,156) Written off during the year (22,262) (22,262) Impairment losses 1,591 8,451 10,042 Transfers from investment properties Transfers to development properties (840) (1,139) (1,979) Translation differences on consolidation 3,874 3,081 1,337 8,292 At 31 December 2006, restated 408,135 96, ,975 1,262,691 At 1 January 2007, as previously reported 491, , , , ,189 1,910,553 Transfers to investment properties on the adoption of FRS 40 (83,408) (160,781) (139,787) (231,672) (32,214) (647,862) At 1 January 2007, restated 408,135 96, ,975 1,262,691 Charge for the year 18,932 5,278 66,705 90,915 Disposals (27,704) (27,704) Written off during the year (3,055) (3,055) Impairment losses 6,075 11,539 2,706 20,320 Reclassifications (4,345) 4,543 (198) Translation differences on consolidation (7,894) (7,207) (21,926) (37,027) At 31 December , , ,503 1,306,140 Carrying amount At 1 January 2006, restated 2,926, ,181 48, ,686 22,747 4,472,892 At 31 December 2006, restated 2,499, , , ,937 29,348 3,893,041 At 31 December ,442, , , ,957 17,194 4,038,315 During the financial year, interest capitalised as cost of property, plant and equipment amounted to $2,589,000 (2006: $526,000). City Developments Limited Annual Report

193 Notes to the Financial Statements Year ended 31 December Property, Plant and Equipment (cont d) Company Furniture, fittings, Freehold plant and Freehold Leasehold properties equipment land and land and Freehold Leasehold under and buildings buildings properties property development improvements Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Cost At 1 January 2006, as previously reported 408,428 93,732 11,238 8,359 48,310 99, ,527 Transfers to investment properties on the adoption of FRS 40 (214,264) (93,732) (11,238) (8,359) (9,367) (336,960) At 1 January 2006, restated 194,164 48,310 90, ,567 Additions 8,806 8,425 17,231 Disposals (191,594) (71,610) (263,204) Written off during the year (304) (304) At 31 December 2006, restated 2,570 57,116 26,604 86,290 At 1 January 2007, as previously reported 195,506 93,732 40,722 8,359 57,116 27, ,396 Transfers to investment properties on the adoption of FRS 40 (192,936) (93,732) (40,722) (8,359) (1,357) (337,106) At 1 January 2007, restated 2,570 57,116 26,604 86,290 Additions 39,109 1,211 40,320 Disposals (482) (482) Written off during the year (1,098) (1,098) At 31 December ,570 96,225 26, ,030 Accumulated depreciation and impairment losses At 1 January 2006, as previously reported 37,671 13,177 3,326 2,586 51, ,527 Transfers to investment properties on the adoption of FRS 40 (22,536) (13,177) (3,326) (2,586) (4,175) (45,800) At 1 January 2006, restated 15,135 47,592 62,727 Charge for the year 866 6,237 7,103 Disposals (16,001) (33,429) (49,430) Written off during the year (33) (33) At 31 December 2006, restated 20,367 20,367 At 1 January 2007, as previously reported 23,496 14,830 19,082 2,753 20,883 81,044 Transfers to investment properties on the adoption of FRS 40 (23,496) (14,830) (19,082) (2,753) (516) (60,677) At 1 January 2007, restated 20,367 20,367 Charge for the year 1,963 1,963 Disposals (443) (443) Written off during the year (1,059) (1,059) At 31 December ,828 20,828 Carrying amount At 1 January 2006, restated 179,029 48,310 42, ,840 At 31 December 2006, restated 2,570 57,116 6,237 65,923 At 31 December ,570 96,225 5, ,202 During the financial year, interest capitalised as cost of property, plant and equipment amounted to $419,000 (2006: $281,000). City Developments Limited Annual Report

194 Notes to the Financial Statements Year ended 31 December Property, Plant and Equipment (cont d) Property, plant and equipment with the following carrying values were acquired under finance lease arrangements: Group Company $ 000 $ 000 $ 000 $ 000 Freehold buildings 19,332 Furniture, fittings, plant and equipment and improvements , There is no acquisition by the Group of property, plant and equipment under finance leases during the year (2006: $306,000). In 2007, upon the Group and the Company assessing the carrying value of their property, plant and equipment for indications of impairment, the carrying amounts of certain property, plant and equipment of the Group were written down by $20,320,000 (2006: $10,042,000). The impairment losses were included in other operating expenses. An impairment loss of $2,706,000 (2006: $8,451,000) on a leasehold hotel located in the United Kingdom held by a subsidiary was recognised following an assessment by the subsidiary s management that there is a likelihood of exiting the lease when it expires in 2011 due to deterioration in the hotel business. The estimate of recoverable amount was based on the value-in-use of the said property using management s estimates of cash flows in the period to the expiry of the lease and a discount rate of 8.0% (2006: 7.8%) per annum. The 2007 impairment losses recognised relates to additions to property, plant and equipment capitalised during the year. The remaining impairment losses charged of $17,614,000 (2006: $1,591,000) were in relation to hotel properties. The estimates of recoverable amount were based on the value of hotel properties on the value-in-use basis determined by external valuers using discount rates ranging from 10.8% to 12.0% (2006: 14.0%) per annum as applicable to the nature and location of the assets in question. Included in property, plant and equipment are certain hotel properties of the Group with carrying value totalling $541,516,000 (2006: $1,576,760,000) which are mortgaged to certain financial institutions to secure credit facilities (refer to Notes 20 and 22 for more details of the facilities). City Developments Limited Annual Report

195 Notes to the Financial Statements Year ended 31 December Investment properties Group $ 000 Cost At 1 January 2006, as previously reported Transfers from property, plant and equipment on the adoption of FRS 40 3,263,552 At 1 January 2006, restated 3,263,552 Additions 13,270 Transfer to development properties (196,623) Transfers to property, plant and equipment (2,131) Translation differences on consolidation (4,418) At 31 December 2006, restated 3,073,650 At 1 January 2007, as previously reported Transfers from property, plant and equipment on the adoption of FRS 40 3,073,650 At 1 January 2007, restated 3,073,650 Additions 10,471 Translation differences on consolidation (3,072) At 31 December ,081,049 Accumulated depreciation and impairment losses At 1 January 2006, as previously reported Transfers from property, plant and equipment on the adoption of FRS ,404 At 1 January 2006, restated 674,404 Charge for the year 45,684 Transfer to development properties (69,202) Transfers to property, plant and equipment (748) Impairment loss 10,064 Write-back of impairment losses (10,886) Translation differences on consolidation (1,454) At 31 December 2006, restated 647,862 At 1 January 2007, as previously reported Transfers from property, plant and equipment on the adoption of FRS ,862 At 1 January 2007, restated 647,862 Charge for the year 42,989 Write-back of impairment losses (75,017) Translation differences on consolidation (3,038) At 31 December ,796 Carrying amount At 1 January 2006, restated 2,589,148 At 31 December 2006, restated 2,425,788 At 31 December ,468,253 Fair value At 31 December ,179,014 At 31 December ,334,488 City Developments Limited Annual Report

196 Notes to the Financial Statements Year ended 31 December Investment properties (cont d) Company $ 000 Cost At 1 January 2006, as previously reported Transfers from property, plant and equipment on the adoption of FRS ,960 At 1 January 2006, restated 336,960 Additions 146 At 31 December 2006, restated 337,106 At 1 January 2007, as previously reported Transfers from property, plant and equipment on the adoption of FRS ,106 At 1 January 2007, restated 337,106 Additions 302 At 31 December ,408 Accumulated depreciation and impairment losses At 1 January 2006, as previously reported Transfers from property, plant and equipment on the adoption of FRS 40 45,800 At 1 January 2006, restated 45,800 Charge for the year 4,813 Impairment loss 10,064 At 31 December 2006, restated 60,677 At 1 January 2007, as previously reported Transfers from property, plant and equipment on the adoption of FRS 40 60,677 At 1 January 2007, restated 60,677 Charge for the year 4,853 Write-back of impairment loss (10,064) At 31 December ,466 Carrying amount At 1 January 2006, restated 291,160 At 31 December 2006, restated 276,429 At 31 December ,942 Fair value At 31 December ,080 At 31 December ,354 City Developments Limited Annual Report

197 Notes to the Financial Statements Year ended 31 December Investment properties (cont d) Investment properties comprise commercial, residential and industrial properties that are leased to external customers. Generally, each of the leases is fixed for a period of 2 to 3 years or more, and subsequent renewals are negotiated at prevailing market rate and terms. The fair value of investment properties located in Singapore is based on in-house valuations conducted by a licensed appraiser who is also an officer of the Company. The licensed appraiser has appropriate recognised professional qualifications and has recent experience in the location and category of the investment properties being valued. The fair value is based on market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm s length transaction. The valuation is based on the income method which takes into consideration the estimated net rent (using the current and projected average rental rates and occupancy), and a capitalisation rate applicable to the nature and type of asset in question. As a check, a comparison is made against relevant market transactions. The fair value of investment properties located overseas is determined by independent licenced appraisers who have appropriate recognised professional qualification and recent experience in the location and category of the investment properties being valued. Fair values are determined having regard to recent market transactions for similar properties in the same locations. In 2007, upon the Group and the Company assessing the carrying values of their investment properties for indications of impairment, the Group and the Company reversed impairment losses of $75,017,000 (2006: $10,886,000) and $10,064,000 (2006: $Nil) respectively recognised in prior years as a result of an improvement in the property market in Singapore and Japan. The impairment losses reversed are reflected as reductions of other operating expenses. In 2006, both the Group and Company recognised an impairment loss of $10,064,000 which was included in other operating expenses. Investment properties of the Group with a total carrying amount of $953,660,000 (2006: $963,094,000) are mortgaged to certain financial institutions to secure credit facilities (refer to Notes 20 and 22 for more details of the facilities). 5 Investments in and balances with subsidiaries Investments in subsidiaries Company Note $ 000 $ 000 Unquoted shares, at cost 2,257,512 2,257,512 Discount implicit in non-current inter-company balances 9,269 9,441 Impairment losses (8,026) (47,271) 2,258,755 2,219,682 Balances with subsidiaries Amounts owing by subsidiaries - trade, interest-free 1,475 1,484 - non-trade, interest-free 840, ,416 - non-trade, interest-bearing 1,234, ,456 2,076,243 1,201,356 Impairment losses (35,029) (43,784) 2,041,214 1,157,572 Receivable within 1 year 11 1,913,317 1,020,370 Receivable after 1 year 9 127, ,202 2,041,214 1,157,572 Amounts owing to subsidiaries - trade, interest-free non-trade, interest-free 89, ,014 Repayable within 1 year 28 90, ,328 City Developments Limited Annual Report

198 Notes to the Financial Statements Year ended 31 December Investments in and balances with subsidiaries (cont d) The amounts owing by and to subsidiaries are unsecured. In respect of interest-bearing amounts, interest at 0.70% to 4.75% (2006: 0.47% to 4.02%) per annum was charged. The balances with subsidiaries that are presented as receivable or repayable within 1 year are receivable or repayable on demand. Included in amounts owing by subsidiaries receivable after 1 year is $48,975,000 (2006: $49,973,000) which form part of the Company s net investment in subsidiaries. Settlement of the loans is neither planned nor likely to occur in the foreseeable future. The change in impairment losses in respect of amounts owing by subsidiaries during the year is as follows: Company $ 000 $ 000 At 1 January 43,784 22,960 (Write-back)/Charge of impairment losses (8,755) 20,824 At 31 December 35,029 43,784 During the year, the Company assessed the recoverable amount of its investments in subsidiaries. Based on this assessment, the Company reversed impairment losses of $39,245,000 (2006: $29,110,000) on its investments in certain subsidiaries. Impairment losses were quantified under the value-in-use method using management s estimates of the future underlying cash flows in the subsidiaries expected in the future, and discount rates ranging from 3.8% to 4.3% (2006: 3.8% to 4.0%) per annum. The reversal of the impairment losses was a result of a recovery of the Singapore property market. Further details regarding subsidiaries are set out in Note Investments in and balances with associates Group Company Note $ 000 $ 000 $ 000 $ 000 Investments in associates 277, ,990 Balances with associates Amounts owing by associates - trade non-trade 2,244 2, Receivable: - Within 1 year After 1 year 9 2,244 2, Amounts owing to an associate payable within 1 year - trade 28 6,067 5,222 8 City Developments Limited Annual Report

199 Notes to the Financial Statements Year ended 31 December Investments in and balances with associates (cont d) The amounts owing by and to associates were unsecured and interest free. The amounts presented as receivable or repayable within 1 year are repayable on demand. The non-current amount owing by associates of $2,244,000 (2006: $Nil) comprises a foreign currency denominated loan to an associate for which settlement is neither planned nor likely to occur in the foreseeable future. As the amount is in substance a part of the Group s net investment in the entity, it is stated at cost. Included in the Group s investments in associates is an investment in the quoted equity of an associate whose fair value as at balance sheet date based on published price quotations is $744,750,000 (2006: $459,792,000). Further details regarding the associates are set out in Note 41. Summarised financial information relating to the associates, which is not adjusted for the percentage of ownership held by the Group, is as follows: $ 000 $ 000 Total assets 1,172, ,303 Total liabilities 370, ,564 Revenue 91,519 28,189 Profit after tax 41,145 15,035 7 Investments in and balances with jointly-controlled entities Investments in jointly-controlled entities Group Company Note $ 000 $ 000 $ 000 $ 000 Investments in jointly-controlled entities 553, ,014 37,385 52,495 Impairment losses (3,226) (2,441) 553, ,014 34,159 50,054 Balances with jointly-controlled entities Amounts owing by jointly-controlled entities: - trade, interest-free 2,217 6, ,683 - non-trade, interest-bearing 494, , , ,981 - non-trade, interest-free 360, , , , , ,664 Impairment losses (48,793) (92,700) (43,630) (92,700) 808, , , ,964 Receivable: - Within 1 year , , , ,964 - After 1 year 9 21,062 90, , , , ,964 City Developments Limited Annual Report

200 Notes to the Financial Statements Year ended 31 December Investments in and balances with jointly-controlled entities (cont d) Group Company Note $ 000 $ 000 $ 000 $ 000 Amounts owing to jointly-controlled entities: - trade, interest-free 1 - non-trade, interest-free 23,772 40,479 15, ,773 40,479 15,475 The change in impairment losses in respect of balances with jointly-controlled entities is as follows: Group Company $ 000 $ 000 $ 000 $ 000 At 1 January 92,700 60,000 92,700 60,000 (Write-back)/Charge of impairment losses (43,578) 32,700 (49,070) 32,700 Translation differences on consolidation (329) At 31 December 48,793 92,700 43,630 92,700 The amounts owing by and to jointly-controlled entities are unsecured. In respect of interest-bearing amounts, interest at rates ranging from 0.6% to 4.8% (2006: 0.6% to 4.5%) per annum and 1.5% to 2.5% (2006: 1.5% to 3.5%) per annum were charged by the Group and the Company respectively. The amounts presented as receivable or repayable within 1 year are repayable on demand. Included in the non-current amounts owing by jointly-controlled entities are foreign currency denominated loans to jointly-controlled entities amounting to $21,062,000 (2006: $10,879,000) for which settlement is neither planned nor likely to occur in the foreseeable future. As the amounts are in substance a part of the Group s net investment in the entities, they are stated at cost. The remaining non-current receivables from jointly-controlled entities are repayable on demand but are not expected to be repaid within the next 1 year. Further details regarding jointly-controlled entities are set out in Note 41. In total, the Group s share of the jointly-controlled entities results, assets, liabilities and commitments is as follows: Results $ 000 $ 000 Revenue and other operating income 795, ,494 Cost of sales and other expenses (464,244) (245,031) Profit before income tax 330, ,463 Income tax expense (50,744) (18,469) Minority interest (9,683) (9,082) Profit for the year 270, ,912 City Developments Limited Annual Report

201 Notes to the Financial Statements Year ended 31 December Investments in and balances with jointly-controlled entities (cont d) $ 000 $ 000 Assets and liabilities Non-current assets 583, ,879 Current assets 2,004, ,035 Total assets 2,588,021 1,371,914 Current liabilities (932,920) (474,772) Non-current liabilities (1,101,888) (608,128) Total liabilities (2,034,808) (1,082,900) Commitments Development expenditure contracted but not provided for in the financial statements: - land purchases for which deposits have been paid 129, ,468 - construction costs 130, , , ,071 Capital expenditure contracted but not provided for in the financial statements 1,867 Non-cancellable operating lease payables 1, Non-cancellable operating lease receivables 11,191 8,428 8 Financial assets Non-current financial assets Group Company $ 000 $ 000 $ 000 $ 000 Unquoted equity investments available for sale - fellow subsidiaries 3,388 3,372 3,290 3,290 - non-related companies 118,623 91,529 1,340 1, ,011 94,901 4,630 4,630 Impairment losses (5,249) (5,956) 116,762 88,945 4,630 4,630 Quoted equity investments available for sale - fellow subsidiaries 41,238 41,566 34,677 34,952 - non-related companies 25,880 22,347 67,118 63,913 34,677 34,952 Total 183, ,858 39,307 39,582 City Developments Limited Annual Report

202 Notes to the Financial Statements Year ended 31 December Financial assets (cont d) Group $ 000 $ 000 Current financial assets Quoted investments held for trading - equity investments 32,589 32,267 - debt securities ,270 Unquoted investments held for trading - equity investments 8,650 4,603 - bond funds 26,120 21,563 67,509 70,703 The unquoted investments available for sale and held for trading are measured at cost less impairment losses as the fair value cannot be determined reliably as there are restrictions in the ability to transfer these shares. In addition, the variability in the range of reasonable fair value estimates derived from valuation techniques is expected to be significant. The Group does not intend to dispose off these investments in the foreseeable future. Held-for-trading debt securities have interest rates of 8.5% (2006: 1.6% to 6.0%) per annum and mature within 1 year (2006: 50 months). 9 Other non-current assets Group Company Note $ 000 $ 000 $ 000 $ 000 Amounts owing by: - subsidiaries 5 127, ,202 - jointly-controlled entities 7 21,062 90,702 - associates 6 2,244 Deferred tax assets 27 3,158 4,800 Deposit receivables 4,472 3,993 Intangible assets Lease premium prepayments 217, , , , , ,202 Lease premium prepayments relate to the non-current portion of upfront premiums paid in respect of long leasehold land of hotel properties where land title is not anticipated to be passed to the Group. City Developments Limited Annual Report

203 Notes to the Financial Statements Year ended 31 December Development properties Group Company $ 000 $ 000 $ 000 $ 000 Properties in the course of development, at cost 2,351,166 1,482,940 1,422,570 1,052,360 Attributable profit 221,150 66, ,819 66,646 2,572,316 1,549,586 1,609,389 1,119,006 Progress billings (643,202) (182,671) (438,511) (154,581) 1,929,114 1,366,915 1,170, ,425 Properties for development and resale representing mainly land, at cost 269, ,764 Completed units, at cost 207, ,586 7, ,823 2,406,029 1,974,265 1,178,775 1,074,248 Allowance for foreseeable losses (76,919) (88,109) (1,032) 2,329,110 1,886,156 1,178,775 1,073,216 Share of jointly-controlled assets Properties in the course of development, at cost 280, , , ,632 Attributable profit 18,734 9,619 18,734 9, , , , ,251 Progress billings (61,818) (160,681) (61,818) (160,681) 237, , , ,570 Properties for development and resale representing mainly land, at cost 11,053 11,053 Completed units, at cost 11, ,033 11, , , , , ,910 Allowance for foreseeable losses (4,191) (4,191) 248, , , ,719 Total development properties 2,578,015 2,281,858 1,428,690 1,469,935 During the year, interest capitalised (net of interest income) as cost of development properties amounted to 36,453 17,741 18,105 15,414 The Group uses the percentage of completion method to recognise revenue on its development projects in Singapore. The impact on the financial statements, had revenue on the Singapore development projects been recognised using the completion of construction method, is set out in Note Development properties of the Group with a carrying amount of $155,614,000 (2006: $257,073,000) is mortgaged to a financial institution to secure a credit facility (refer to Note 20). City Developments Limited Annual Report

204 Notes to the Financial Statements Year ended 31 December Trade and other receivables Group Company Note $ 000 $ 000 $ 000 $ 000 Trade receivables 149, ,913 29,676 41,650 Impairment losses (4,319) (4,831) (2) (27) 145, ,082 29,674 41,623 Other receivables 30,571 41,394 8,361 7,840 Impairment losses (302) (304) (1,512) (1,514) 30,269 41,090 6,849 6,326 Deposits, prepayments and tax recoverable 102,848 84, Derivative financial instruments 94 Lease premium prepayments 2,141 2,252 Accrued receivables 12 7,789 6, Amounts owing by: - subsidiaries 5 1,913,317 1,020,370 - associates jointly-controlled entities 7 787, , , ,964 - fellow subsidiaries , ,409 1,076, ,328 2,278,295 1,376,141 The maximum exposure to credit risk for trade receivables, other receivables and amounts owing by subsidiaries, associates, jointly-controlled entities and fellow subsidiaries at the balance sheet date by business segment is: Group Company $ 000 $ 000 $ 000 $ 000 Property development 816, ,354 1,766, ,508 Hotel operations 135, , Rental properties 2,758 27, , ,155 Others 9,251 15, , , , ,787 2,277,670 1,375,692 City Developments Limited Annual Report

205 Notes to the Financial Statements Year ended 31 December Trade and other receivables (cont d) Impairment losses The ageing of trade receivables at the balance sheet date is: Group Impairment Impairment Gross losses Gross losses $ 000 $ 000 $ 000 $ 000 Not past due 79, , Past due 0 30 days 41, , Past due days 12, ,570 1,122 Past due days 3,706 1,527 4,193 1,244 More than 90 days 12,953 2,065 9,715 2, ,707 4, ,913 4,831 Company Not past due 26,293 37,321 Past due 0 30 days 1,463 3,156 Past due days 1, Past due days More than 90 days , , The change in impairment losses in respect of trade and other receivables during the year is as follows: Group Company $ 000 $ 000 $ 000 $ 000 At 1 January 5,135 7,723 1,541 1,631 Charge/(Write-back) of impairment losses 50 (795) (67) Impairment losses utilised (412) (1,608) (25) (4) Translation differences on consolidation (152) (185) (2) (19) At 31 December 4,621 5,135 1,514 1,541 The Group s historical experience in the collection of trade and other receivables falls within the recorded allowances. Due to this factor, management believes that no additional credit risks beyond amount provided for collection losses is inherent in the Group s trade and other receivables. Trade receivables that were not past due relate to a wide range of customers for whom there has not been a significant change in the credit quality. 12 Accrued receivables Accrued receivables represent mainly the remaining balances of sales consideration to be billed. In accordance with the Group's accounting policy, income is recognised on the sale of certain development properties on the progress of the construction work. Upon receipt of the Temporary Occupation Permit, the balance of sales consideration to be billed is included as accrued receivables. City Developments Limited Annual Report

206 Notes to the Financial Statements Year ended 31 December Amounts owing by and to fellow subsidiaries Group Company Note $ 000 $ 000 $ 000 $ 000 Amounts owing by fellow subsidiaries - trade non-trade 67 9,460 9, , ,409 Amounts owing to fellow subsidiaries - trade non-trade Fellow subsidiaries are subsidiaries of the immediate holding company which are subject to common control. The amounts owing by and to fellow subsidiaries are interest-free, unsecured and repayable on demand. 14 Cash and cash equivalents Group Company Note $ 000 $ 000 $ 000 $ 000 Amounts held under the Singapore development project rules, withdrawals from which are restricted to project-related payments 95,192 43,055 86,117 41,061 Fixed deposits placed with financial institutions which are: - fellow subsidiaries 38,051 21,054 - others 207, ,365 13,000 51, , ,419 13,000 51,976 Cash at banks and in hand 370, ,450 3,910 6,704 Cash and cash equivalents 711, , ,027 99,741 Bank overdrafts 19 (1,036) (2,319) Cash and cash equivalents in the consolidated cash flow statement 710, ,605 City Developments Limited Annual Report

207 Notes to the Financial Statements Year ended 31 December Share capital Company Number of Number of shares $ 000 shares $ 000 Issued and fully paid ordinary share capital with no par value: At 1 January 909,301,330 1,661, ,801, ,400 Issue of shares during the year 20,500,272 50,848 Transfer from share premium account to share capital upon implementation of the Companies (Amendment) Act ,165,931 At 31 December 909,301,330 1,661, ,301,330 1,661,179 Issued and fully paid non-redeemable convertible non-cumulative preference share capital with no par value: At 1 January 330,874, , ,874,257 16,544 Transfer from share premium account to share capital upon implementation of the Companies (Amendment) Act ,674 At 31 December 330,874, , ,874, ,218 Total share capital 1,991,397 1,991,397 Ordinary 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 General Meetings of the Company. All ordinary shares rank equally with regard to the Company s residual assets. On 11 May 2004, the Company issued 82,718,564 bonus warrants, which were subsequently listed on the Official List of the Singapore Exchange Securities Trading Limited on 13 May Each bonus warrant carried the right to subscribe in cash for one ordinary share of the Company at the exercise price of $2.50, subject to adjustments under certain circumstances in accordance with the terms and conditions of the bonus warrants as set out in a Deed Poll dated 6 May As at 31 December 2007, there were no outstanding bonus warrants as bonus warrants which were not exercised as at 10 May 2006 (date of expiry of the subscription rights comprised in the bonus warrants) had lapsed. In 2006, the Company issued 20,500,272 new ordinary shares arising from the exercise of subscription rights by bonus warrants holders. Preference share capital On 9 June 2004, the Company issued 330,874,257 non-redeemable convertible non-cumulative preference shares (Preference Shares), then of par value of $0.05 each, at an issue price of $1.00 each, which were subsequently listed on the Official List of the Singapore Exchange Securities Trading Limited on 14 June The Preference Shares are convertible at the sole option of the Company at any time on or after the second anniversary of the date of issue of the Preference Shares, into fully-paid ordinary shares of the Company at the conversion ratio of ordinary share for each Preference Share. City Developments Limited Annual Report

208 Notes to the Financial Statements Year ended 31 December Share capital (cont d) In the event the Company exercises its right of conversion, the Company shall pay to preference shareholders a one-off preference cash dividend at the fixed rate of 64% (net) of the issue price for each Preference Share (Additional Preference Dividend) and any preference dividend accrued but unpaid. As at 31 December 2007, a maximum number of 44,998,898 (2006: 44,998,898) ordinary shares are issuable upon full conversion at the sole option of the Company of all the Preference Shares. Holders of Preference Shares have no voting rights, except under certain circumstances provided for in the Companies Act as set out in the Company s Articles of Association. The Preference Shares rank: (i) (ii) pari passu without any preference or priority among themselves; and in priority over the ordinary shares in respect of (a) payment of the Preference Dividend (when, as and if declared) and the Additional Preference Dividend; and (b) in the event of a winding-up of or return of capital by the Company, payment of any Preference Dividend that has accrued to holders of Preference Shares and is unpaid, the Additional Preference Dividend (whether or not then due) as well as the amount paid up on the Preference Shares (including the premium paid thereon). Capital management The Group s primary objective in capital management is to maintain a strong capital base so as to maintain investor, creditor and market confidence, and to continue to maintain its future development and growth of the business. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders or issue new shares or other financial instruments. The Group monitors capital using a net debt equity ratio, which is defined as net borrowings divided by total capital employed (including minority interests). Group $ 000 $ 000 Total borrowings 4,039,498 3,356,061 Cash and cash equivalents (711,602) (776,924) Net debt 3,327,896 2,579,137 Total capital employed 6,916,397 6,380,099 Net debt equity ratio No changes were made to the above objectives, policies or process during the years ended 31 December 2006 and City Developments Limited Annual Report

209 Notes to the Financial Statements Year ended 31 December Reserves Group Company $ 000 $ 000 $ 000 $ 000 Capital reserve 147, ,132 63,743 63,743 Hedging reserve (189) (189) Fair value reserve 26,857 25,448 19,483 19,228 Share option reserve 4,964 2,757 Exchange fluctuation reserve 36,166 81,748 Accumulated profits 2,992,457 2,486,242 2,260,223 1,831,990 3,207,387 2,743,138 2,343,449 1,914,961 The capital reserve comprises mainly negative goodwill on the consolidation of subsidiaries. Hedging reserve comprises the Group s share of the hedging reserve of an associate which relates to the effective portion of the cumulative net change in fair value of cash flow hedging instruments relating to hedged transactions that have not yet occurred. The fair value reserve comprises the cumulative net change in the fair value of available-for-sale investments until the investments are derecognised. The share option reserve comprises the cumulative value of employee services received for the issue of share options. The exchange fluctuation reserve comprises: (a) foreign exchange differences arising from the translation of the financial statements of foreign entities whose functional currencies are different from the presentation currency of the Company; (b) the gain or loss on instruments used to hedge the Group s net investment in foreign entities that are determined to be effective hedges; and (c) exchange differences on monetary items which form part of the Group s net investment in foreign operations, provided certain conditions are met. The accumulated profits of the Group include profits of $333,901,000 (2006: $102,110,000) attributable to associates and jointlycontrolled entities. City Developments Limited Annual Report

210 Notes to the Financial Statements Year ended 31 December Total equity Share Share Capital Note capital premium reserve $ 000 $ 000 $ 000 Group At 1 January ,944 1,492, ,143 Translation differences arising on consolidation of foreign subsidiaries Exchange differences on hedges of net investment in foreign entities Exchange differences on monetary items forming part of net investment in foreign entities Change in fair value of equity investments available for sale Share of other reserve movements of an associate (3,351) Actuarial losses on defined benefit plans Net (losses)/gains recognised directly in equity (3,351) Profit for the year Total recognised income and expenses for the year (3,351) Issue of ordinary shares 15 50, Transfer from share premium account to share capital upon implementation of the Companies (Amendment) Act ,479,605 (1,492,727) Change of interest in subsidiaries 2,340 Value of employee services received for issue of share options Dividends 33 At 31 December ,991, ,132 City Developments Limited Annual Report

211 Notes to the Financial Statements Year ended 31 December 2007 Total attributable Share Exchange to equity Hedging Fair value option fluctuation Accumulated holders of Minority Total reserve reserve reserve reserve profits the Company interests equity $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ ,403 1, ,075 2,281,135 4,547,816 1,527,445 6,075,261 (54,861) (54,861) (55,272) (110,133) (1,324) (1,324) (113) (1,437) (4,142) (4,142) (3,739) (7,881) 4,045 4,045 4,045 (189) (3,540) (3,198) (6,738) (1,367) (1,367) (1,388) (2,755) (189) 4,045 (60,327) (1,367) (61,189) (63,710) (124,899) 351, , , ,966 (189) 4,045 (60,327) 350, , , ,067 51,251 51,251 13, ,347 9,487 11, ,822 (158,307) (158,307) (39,829) (198,136) (189) 25,448 2,757 81,748 2,486,242 4,734,535 1,645,564 6,380,099 City Developments Limited Annual Report

212 Notes to the Financial Statements Year ended 31 December Total equity (cont d) Share Capital Note capital reserve $ 000 $ 000 Group At 1 January ,991, ,132 Translation differences arising on consolidation of foreign subsidiaries Exchange differences on hedges of net investment in foreign entities Exchange differences on monetary items forming part of net investment in foreign entities Change in fair value of equity investments available for sale Actuarial losses on defined benefit plans Net gains/(losses) recognised directly in equity Profit for the year Total recognised income and expenses for the year Net return of capital to minority interests Value of employee services received for issue of share options Dividends 33 At 31 December ,991, ,132 City Developments Limited Annual Report

213 Notes to the Financial Statements Year ended 31 December 2007 Total attributable Share Exchange to equity Hedging Fair value option fluctuation Accumulated holders of Minority Total reserve reserve reserve reserve profits the Company interests equity $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 (189) 25,448 2,757 81,748 2,486,242 4,734,535 1,645,564 6,380,099 (37,017) (37,017) (27,094) (64,111) (407) (407) (368) (775) (8,158) (8,158) (6,693) (14,851) 1,409 1,409 1,409 (826) (826) (747) (1,573) 1,409 (45,582) (826) (44,999) (34,902) (79,901) 724, , , ,219 1,409 (45,582) 724, , , ,318 (23,735) (23,735) 2,207 2,207 1,993 4,200 (217,952) (217,952) (35,533) (253,485) (189) 26,857 4,964 36,166 2,992,457 5,198,784 1,717,613 6,916,397 City Developments Limited Annual Report

214 Notes to the Financial Statements Year ended 31 December Equity compensation benefits By the Company Under the terms of the City Developments Share Option Scheme 2001 (CDL Scheme), offers of the grant of options may be made to: (i) (ii) Group Employees and Parent Group Employees (both as defined in the CDL Scheme) which may be exercisable during an option exercise period commencing from the date that the option vests and expiring on the day preceding the tenth anniversary of its date of grant; and Non-Executive Directors, Parent Group Non-Executive Directors and Associated Company Employees (all three as defined in the CDL Scheme) which may be exercisable during an option exercise period commencing from the date that the option vests and expiring on the day preceding the fifth anniversary of its date of grant. Options granted under the CDL Scheme may have subscription prices that are, at the Scheme Committee s discretion, (i) Market Price Options; or (ii) Discount Price Options; or (iii) Incentive Price Options (all three as defined in the CDL Scheme). The aggregate number of ordinary shares over which options may be granted under the CDL Scheme on any date, when added to the number of ordinary shares issued and issuable in respect of all options granted under the CDL Scheme, shall not exceed 8% of the total number of issued ordinary shares in the capital of the Company on the day preceding the relevant date of grant. The aggregate number of ordinary shares which may be offered by way of grant of options to Parent Group Employees and Parent Group Non-Executive Directors collectively under the CDL Scheme shall not exceed 20% of the total number of ordinary shares available under the CDL Scheme. No options have been granted since the commencement of the CDL Scheme. There were no unissued shares of the Company under option as at the end of the financial year. The CDL Scheme shall continue to be in force at the discretion of the CDL Scheme Committee for a maximum period of 10 years commencing from its adoption on 30 January By Subsidiaries City e-solutions Limited The City e-solutions Limited Share Option Scheme (CES Scheme) was adopted by the shareholders of CES at the Annual General Meeting of CES held on 27 April The subscription price of the CES shares under the CES Scheme shall be a price determined by the CES Scheme Committee at its absolute discretion which may require the achievement of performance targets by the Grantee as specified by the CES Scheme Committee. The subscription price shall not be less than the highest of: (i) (ii) the official closing price of the CES shares as stated in the daily quotations sheet of the Hong Kong Stock Exchange on the Offer Date; the average of the official closing price of the CES shares as stated in the daily quotations sheets of the Hong Kong Stock Exchange for the five business days immediately preceding the Offer Date; and (iii) the nominal value of a CES share. During the financial year under review, (i) no options were granted to subscribe for ordinary shares of HK$1.00 each in CES; and (ii) no ordinary shares of HK$1.00 each in CES were issued pursuant to the CES Scheme. As at the end of the financial year, there were no unissued shares under options pursuant to the CES Scheme. The options granted by CES do not entitle the holders of the options, by virtue of such holding, to any rights to participate in any share issue of any other company. City Developments Limited Annual Report

215 Notes to the Financial Statements Year ended 31 December Equity compensation benefits (cont d) By Subsidiaries (cont d) Millennium & Copthorne Hotels plc Millennium & Copthorne Hotels plc (M&C) has the following share option schemes: (i) (ii) Millennium & Copthorne Hotels plc 2003 Executive Share Option Scheme; Millennium & Copthorne Hotels Executive Share Option Scheme; (iii) Millennium & Copthorne Hotels Sharesave Schemes 1996 and 2006; and (iv) Millennium & Copthorne Hotels Long-Term Incentive Plan. (i) Millennium & Copthorne Hotels plc 2003 Executive Share Option Scheme (a) The Millennium & Copthorne Hotels plc 2003 Executive Share Option Scheme (M&C 2003 Scheme) was approved by the shareholders at the Annual General Meeting of M&C held on 21 May There are 2 parts of the M&C 2003 Scheme, namely the Approved part for which approval from the United Kingdom Inland Revenue has been obtained, and the Unapproved part which is not designed for the United Kingdom Inland Revenue approval and which is used primarily where employees have more than 30,000 worth of outstanding approved options or are not based in the United Kingdom. Except to the extent required to obtain the United Kingdom Inland Revenue approval, the Approved and Unapproved parts of the M&C 2003 Scheme are in all material aspects identical. (b) Under the terms of the M&C 2003 Scheme, (i) (ii) All employees of M&C, its subsidiaries and joint ventures (including directors who are required to devote substantially the whole of their working time to the business of the M&C Group who are not within 6 months of contractual retirement ages) will be eligible to participate in the M&C 2003 Scheme. No option may be granted to an individual if it would cause the aggregate exercise price of options granted to him in any year under the M&C 2003 Scheme to exceed 200% of his basic salary, other than in exceptional circumstances (where the limit is 400% of basic salary). (iii) No payment will be required for the grant of an option. Acquisition price upon the exercise of an option will not be less than the higher of: - the average of the middle-market quotations of a share on the London Stock Exchange on the 3 dealing days immediately prior to grant date, provided that no such dealing day may fall prior to the date on which M&C last announced its results for any period; and - the nominal value of a share (unless the option is expressed to relate only to existing shares). (c) No options may be granted which would cause the number of shares issued or issuable pursuant to options granted in the previous 10 years under the M&C 2003 Scheme or under any other share option scheme, or issued in that period under any employee share scheme (other than an option scheme) to exceed 10% of M&C s issued ordinary share capital from time to time. Not more than 5% of M&C s issued ordinary share capital from time to time may relate to discretionary share schemes. City Developments Limited Annual Report

216 Notes to the Financial Statements Year ended 31 December Equity compensation benefits (cont d) Millennium & Copthorne Hotels plc (cont d) (ii) Millennium & Copthorne Hotels Executive Share Option Scheme (a) The Millennium & Copthorne Hotels Executive Share Option Scheme (M&C 1996 Scheme) is divided into two parts, Part A which was approved by the United Kingdom Inland Revenue under Schedule 9 of the United Kingdom Income and Corporation Taxes Act 1988 on 12 April 1996 and Part B, which was an unapproved executive share option scheme designed for the United Kingdom (UK) and non-uk executives of M&C. (b) Under the terms of Part A of the M&C 1996 Scheme, the board may offer any full time director or employee of M&C and its subsidiaries (M&C Group) (other than anyone within two years of retirement, or anyone who has a material interest in a close company and is thereby rendered ineligible under Paragraph 8, Schedule 9 of the United Kingdom Income and Corporation Taxes Act 1988), to participate in Part A of the M&C 1996 Scheme. A person is eligible to be granted an option under Part B if he is a director or employee of any member of the M&C Group which is required to devote the whole or substantially the whole of his working time to the service of any member of the M&C Group. Where an option has been exercised under Part B, the board may elect to pay cash to the executive concerned instead of issuing ordinary shares. (c) No option shall be granted under the M&C 1996 Scheme in the period of 5 calendar years beginning with the year 1996 which would, at the time they are granted, cause the number of shares in M&C which shall have been or may be issued in pursuance of options granted in that period, or shall have been issued in that period otherwise than in pursuance of options, under the M&C 1996 Scheme or under any other employees share option scheme adopted by M&C to exceed such number as representing 5% of the ordinary share capital of M&C in issue at that time. (d) No option shall be granted under the M&C 1996 Scheme in any year which would, at the time they are granted, cause the number of shares in M&C which shall have been or may be issued in pursuance of options granted in the period of 10 calendar years ending with that year, or have been issued in that period otherwise than in pursuance of options, under the M&C 1996 Scheme or under any other employees share scheme adopted by M&C to exceed such number as representing 10% of the ordinary share capital of M&C in issue at that time. (e) The total subscription price payable for ordinary shares under options granted in any 10-year period (leaving out of account options which have been exercised) to any person under the M&C 1996 Scheme may not exceed four times the higher of the executive s total annual remuneration at that time and the total remuneration paid by the M&C Group to the executive in the preceding 12 months. (iii) Millennium & Copthorne Hotels Sharesave Schemes 1996 and 2006 (a) The Millennium & Copthorne Hotels Sharesave Schemes 1996 and 2006 (M&C Sharesave Schemes) are the United Kingdom Inland Revenue approved schemes under which the executive directors of M&C and the M&C Group employees are eligible to participate. (b) Under the terms of the M&C Sharesave Schemes, M&C Group employees were to enter into a 3-year or 5-year savings contract, with an option to purchase shares at a pre-determined exercise price on maturity of the savings contract. The first such scheme was introduced in 1996 with a life of ten years. A replacement scheme was approved by the shareholders at M&C s Annual General Meeting on 4 May (c) No payment is required for the grant of an option. City Developments Limited Annual Report

217 Notes to the Financial Statements Year ended 31 December Equity compensation benefits (cont d) Millennium & Copthorne Hotels plc (cont d) (iii) Millennium & Copthorne Hotels Sharesave Schemes 1996 and 2006 (cont d) (d) The options may be exercised upon maturity provided that the monies agreed under the savings contract are fully paid and the participant continues to hold office or employment with M&C. The M&C Sharesave Schemes provide that shares in M&C can be purchased at the option price up to the value of the accrued savings and interests in the event of retirement at normal retirement age, redundancy, injury, disability or by the employees estate in the event of their death. (e) M&C may grant options up to the value of a savings contract at maturity. Participants cannot enter into contracts where their savings, in aggregate, would exceed 250 per month. (iv) Millennium & Copthorne Hotels Long-Term Incentive Plan The Millennium & Copthorne Hotels Long-Term Incentive Plan (LTIP) was approved at the M&C Annual General Meeting held on 4 May Under the terms of the LTIP, M&C is permitted to make both Performance Share Awards and Deferred Share Bonus Awards to an employee (including an executive director) of M&C or its subsidiaries. The level of awards made under the terms of the LTIP are determined by M&C s Remuneration Committee. Vesting of Performance Share Awards is subject to the achievement of stretching performance targets. Consistent with the performance measures for M&C s executive share options schemes, earnings per share (EPS) targets have been chosen so that participants are incentivised to deliver significant earnings growth which, in turn, should return substantial shareholder value. The performance condition applying to Performance Share Awards require M&C s EPS to grow, in real terms, over a period of three consecutive financial years after award. Performance Share Awards will vest on the third anniversary of the award being made, subject to the EPS growth targets being met. Awards will not be subject to re-testing. City Developments Limited Annual Report

218 Notes to the Financial Statements Year ended 31 December Equity compensation benefits (cont d) Details of the options granted under the M&C option schemes on the unissued ordinary shares of 0.30 each in a subsidiary, M&C, as at the end of the financial year, presented in Sterling Pound, are as follows: (i) Millennium & Copthorne Hotels plc 2003 Executive Share Option Scheme 2006 Options Options Options outstanding Options Options Options Options outstanding exercisable Date of Exercise as at granted exercised forfeited expired as at 31 as at 31 grant of price 1 January during during during during December December options per share 2006 the year the year the year the year Exercise period Part I ,822 (23,255) (1,292) 39,275 39, ,049 (10,284) (1) 51, ,703 (7,529) (7,529) 37, Part II ,126,129 (125,657) (453,230) 547, , ,720 (41,143) (220,658) 332, ,248 (143,065) (180,458) 352, ,575,671 (350,933) (863,168) 1,361, , Options Options Options outstanding Options Options Options Options outstanding exercisable Date of Exercise as at granted exercised forfeited expired as at 31 as at 31 grant of price 1 January during during during during December December options per share 2007 the year the year the year the year Exercise period Part I ,275 (20,837) (3,801) 14,637 14, ,764 (31,195) (10,284) 10,285 10, ,645 (7,529) 30, Part II ,242 (97,669) (20,258) 429, , ,919 (273,361) 59,558 59, ,725 (20,993) (96,549) 235, ,361,570 (444,055) (138,421) 779, ,795 City Developments Limited Annual Report

219 Notes to the Financial Statements Year ended 31 December Equity compensation benefits (cont d) (ii) Millennium & Copthorne Hotels Executive Share Option Scheme 2006 Options Options Options outstanding Options Options Options Options outstanding exercisable Date of Exercise as at granted exercised forfeited expired as at 31 as at 31 grant of price 1 January during during during during December December options per share 2006 the year the year the year the year Exercise period Part A ,509 6,509 6, ,526 (7,526) ,955 (8,955) ,594 (7,594) ,272 (41,376) (6,896) ,356 (17,829) 8,527 8, ,212 (74,325) (15,851) 15,036 15, Options Options Options outstanding Options Options Options Options outstanding exercisable Date of Exercise as at granted exercised forfeited expired as at 31 as at 31 grant of price 1 January during during during during December December options per share 2007 the year the year the year the year Exercise period Part A ,509 6,509 6, ,527 (8,527) ,036 (8,527) 6,509 6, Options Options Options outstanding Options Options Options Options outstanding exercisable Date of Exercise as at granted exercised forfeited expired as at 31 as at 31 grant of price 1 January during during during during December December options per share 2006 the year the year the year the year Exercise period Part B ,436 (40,436) ,670 (47,670) ,369 (10,414) (7,955) ,570 (5,570) ,231 (50,867) 69,364 69, ,714 (74,190) (30,810) (20,690) 6,024 6, ,418 (33,119) (28,358) 88,941 88, ,408 (170,963) (117,990) (61,126) 164, , Options Options Options outstanding Options Options Options Options outstanding exercisable Date of Exercise as at granted exercised forfeited expired as at 31 as at 31 grant of price 1 January during during during during December December options per share 2007 the year the year the year the year Exercise period Part B ,364 69,364 69, ,024 (6,024) ,941 88,941 88, ,329 (6,024) 158, ,305 City Developments Limited Annual Report

220 Notes to the Financial Statements Year ended 31 December Equity compensation benefits (cont d) (iii) Millennium & Copthorne Hotels Sharesave Schemes 1996 and Options Options Options outstanding Options Options Options Options outstanding exercisable Date of Exercise as at granted exercised forfeited expired as at 31 as at 31 grant of price 1 January during during during during December December options per share 2006 the year the year the year the year Exercise period ,134 (4,134) ,161 (10,435) (5,811) 5,915 5, ,341 (10,341) ,074 (1,586) 19, ,244 (98,000) (10,302) 13,942 13, ,417 (12,679) (36,461) 60, ,363 (4,347) 45, ,499 (2,933) 25, ,407 (16,236) 51, ,479 (8,368) 31, ,728 (1,840) 71, ,677 (4,953) 38, , ,405 (121,114) (92,837) (14,475) 363,098 19, Options Options Options outstanding Options Options Options Options outstanding exercisable Date of Exercise as at granted exercised forfeited expired as at 31 as at 31 grant of price 1 January during during during during December December options per share 2007 the year the year the year the year Exercise period ,915 (5,915) ,488 (17,221) 2,267 2, ,942 (13,942) ,277 (1,840) (2,528) 55, ,016 (40,507) (805) 3,704 3, ,566 (139) 25, ,171 (19,006) 32, ,111 (2,146) 28, ,888 (24,385) 47, ,724 (4,953) 33, ,919 (2,178) 29, ,094 (3,149) 18, ,098 54,013 (59,568) (58,484) (20,662) 278,397 5,971 City Developments Limited Annual Report

221 Notes to the Financial Statements Year ended 31 December Equity compensation benefits (cont d) (iv) Millennium & Copthorne Hotels plc Long-Term Incentive Plan Balance at Awards Awards Awards Awards beginning awarded vested forfeited expired Balance at Date of award of year during the year during the year during the year during the year end of year Vesting date , , ,152 (4,984) (60,313) 200, ,015 (176,007) 184, ,012 75, , ,027 (4,984) (236,320) 459,875 For options exercised during 2007, the weighted average share price at the date of exercise is 6.66 (2006: 4.70). Options were exercised on a regular basis throughout the year. The options outstanding as at 31 December 2007 have an exercise price in the range of to 5.20 and a weighted average contractual life of 4 years (2006: 6 years). 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 a stochastic model. The share option pricing model involves six variables, namely the exercise price, share price at grant date, expected life of option (note (a) below), expected volatility of share price (note (b) below), risk free interest rate and expected dividend yield (note (c) below). The variables used in estimating the fair value of options and awards granted under the M&C option schemes, presented in Sterling Pound, are as follows: 2007 Risk Awards/ Share price Expected Expected free Date of Options prevailing on Exercise Fair term Expected dividend interest grant granted date of grant price value (years) volatility yield rates LTIP (directors) , % LTIP (non-directors) , % Sharesave Scheme (3 year) , % 1.26% 5.31% Sharesave Scheme (5 year) , % 1.26% 5.21% 2006 LTIP (directors) , Nil % LTIP (non-directors) , Nil % Sharesave Scheme (3 year) , % 1.87% 4.74% Sharesave Scheme (5 year) , % 1.87% 4.71% Note (a) Directors: Non-directors: 30% exercise after 3 years if gain; 25% of the remainder in following years using reducing balance method; 1% exercise in years 4 to 10 (on reducing balance method) and the balance of options exercised at maturity (year 10) if in the money. 45% after 3 years if gain; 25% of the remainder in following years using reducing balance method; 10% exercise in years 1 to 3 (straight-line); 5% exercise on third anniversary; 5% exercise in years 4 to 10 (on reducing balance method) and the balance of options exercised at maturity (year 10) if in the money. Note (b) The expected volatility is based upon the movement in the share price over a certain period until the grant date. The length of the period is close to the expected term of the option granted. Note (c) The expected dividend yield is based upon dividends announced in the 12 months prior to grant calculated as a percentage of the share price on the date of grant. City Developments Limited Annual Report

222 Notes to the Financial Statements Year ended 31 December Interest-bearing borrowings Group Company Note $ 000 $ 000 $ 000 $ 000 Term loans 20 2,281,369 1,707,042 1,289, ,711 Finance lease creditors , Bonds and notes 22 1,597,367 1,557, , ,799 Bank loans ,682 75, ,682 75,281 Bank overdrafts 14 1,036 2,319 4,031,667 3,348,418 1,970,456 1,199,811 Repayable: - Within 1 year 796,290 1,031, , ,427 - After 1 year but within 5 years 3,180,132 2,316,947 1,566, ,384 - After 5 years 55,245 51,922 4,031,667 3,348,418 1,970,456 1,199, Term loans Group Company Note $ 000 $ 000 $ 000 $ 000 Secured 423, ,277 Unsecured 1,857,418 1,024,765 1,289, , ,281,369 1,707,042 1,289, ,711 Repayable: - Within 1 year 418, ,767 50, ,169 - After 1 year but within 5 years 1,859,244 1,173,275 1,239, ,542 - After 5 years 3,323 2,281,369 1,707,042 1,289, ,711 The term loans are obtained from banks and financial institutions. Group Company $ 000 $ 000 $ 000 $ 000 Secured term loans Repayable: - Within 1 year 1, ,083 - After 1 year but within 5 years 419, ,194 - After 5 years 3, , ,277 City Developments Limited Annual Report

223 Notes to the Financial Statements Year ended 31 December Term loans (cont d) The secured term loans are generally secured by: - mortgages on the borrowing subsidiaries development, investment and hotel properties (see Notes 10, 4 and 3); and - assignment of all rights and benefits to sale, lease and insurance proceeds in respect of development, investment and hotel properties. The Group s secured term loans bear interest at rates ranging from 2.33% to 9.37% (2006: 3.38% to 8.17%) per annum during the year. Group Company $ 000 $ 000 $ 000 $ 000 Unsecured term loans Repayable: - Within 1 year 417, ,684 50, ,169 - After 1 year but within 5 years 1,439, ,081 1,239, ,542 1,857,418 1,024,765 1,289, ,711 The Group s unsecured term loans bear interest at rates ranging from 1.14% to 7.42% (2006: 0.41% to 7.42%) per annum during the year. The Company s unsecured term loans bear interest at rates ranging from 1.85% to 4.57% (2006: 0.54% to 4.77%) per annum during the year. 21 Finance lease creditors At the balance sheet date, the Group and the Company had obligations under finance leases that are repayable as follows: Group Note Principal Interest Payments $ 000 $ 000 $ Repayable: - Within 1 year After 1 year but within 5 years Repayable: - Within 1 year 6,351 1,109 7,460 - After 1 year but within 5 years ,561 1,131 7,692 Company 2007 Repayable: - Within 1 year After 1 year but within 5 years Repayable: - Within 1 year After 1 year but within 5 years Under the terms of the lease agreements, no contingent rents are payable. The Group s and the Company s finance lease obligations bear interest at rates ranging from 3.33% to 8.00% (2006: 2.70% to 7.96%) and 6.51% (2006: 6.51%) per annum respectively during the year. City Developments Limited Annual Report

224 Notes to the Financial Statements Year ended 31 December Bonds and notes Group Company Note $ 000 $ 000 $ 000 $ 000 Secured 454, ,194 Unsecured 1,142,420 1,082, , , ,597,367 1,557, , ,799 Repayable: - Within 1 year 224, , , ,972 - After 1 year but within 5 years 1,320,745 1,143, , ,827 - After 5 years 51,922 51,922 1,597,367 1,557, , ,799 Secured bonds and notes Repayable: - Within 1 year 125,780 - After 1 year but within 5 years 454, , , ,194 Secured bonds and notes comprise the following: (i) (ii) $105 million (2006: $125 million) non-guaranteed secured notes (Notes) issued by a subsidiary bearing interest at rates of 5.49% to 6.11% (2006: 4.95% to 5.69%) per annum during the year. The Notes are redeemable at their principal amounts in February 2010 and are secured by a mortgage on the land and hotel building of a subsidiary and an assignment of insurance proceeds in respect of insurance over the said property; and $350 million (2006: $350 million) medium term notes (MTNs) which comprise 4 series of notes issued by a subsidiary as part of a $700 million secured MTN programme established in The MTNs bear interest at rates ranging from 3.73% to 3.88% (2006: 3.73% to 3.88%) per annum and are secured by a mortgage over the commercial building and land jointly owned by two subsidiaries, as well as rental and insurance proceeds to be derived from the said properties. Unless previously redeemed or purchased and cancelled, the MTNs are redeemable at their principal amounts on their respective maturity dates from January 2009 to October 2011 (2006: January 2009 to October 2011). Group Company $ 000 $ 000 $ 000 $ 000 Unsecured bonds and notes Repayable: - Within 1 year 224, , , ,972 - After 1 year but within 5 years 865, , , ,827 - After 5 years 51,922 51,922 1,142,420 1,082, , ,799 Unsecured bonds and notes comprise: (i) (ii) $530 million (2006: $518 million) MTNs which comprise 10 series of notes issued by the Company at various interest rates as part of a $700 million unsecured MTN programme established in The MTNs bear interest at rates ranging from 2.35% to 5.50% (2006: 2.35% to 5.50%) per annum. Unless previously redeemed or purchased and cancelled, the MTNs are redeemable at their principal amounts on their respective maturity dates from February 2008 to November 2014 (2006: from February 2007 to June 2010); $613 million (2006: $564 million) MTNs which comprise 12 series of notes issued by a subsidiary as part of a $1 billion unsecured MTN programme established in 2002 bearing interest at rates ranging from 3.02% to 7.12% (2006: 2.70% to 6.37%) per annum. Unless previously redeemed or purchased and cancelled, the MTNs are redeemable at their principal amounts on their respective maturity dates from December 2008 to September 2012 (2006: from June 2007 to April 2011). City Developments Limited Annual Report

225 Notes to the Financial Statements Year ended 31 December Bank loans Group Company Note $ 000 $ 000 $ 000 $ 000 Bank loans (unsecured) repayable within 1 year ,682 75, ,682 75,281 Interest is charged at 0.66% to 3.79% (2006: 0.31% to 3.96%) per annum during the year. 24 Employee benefits Group Company $ 000 $ 000 $ 000 $ 000 Net liability for: - defined benefit obligations 36,785 45,178 - short-term accumulating compensated absences 15,472 15,988 1,625 1,477 - long service leave ,717 61,514 1,625 1,477 Repayable: - Within 1 year 15,718 16,336 1,625 1,477 - After 1 year 36,999 45,178 52,717 61,514 1,625 1,477 Net liability for defined benefit obligations Present value of unfunded obligations 14,789 19,867 Present value of funded obligations 110, ,352 Fair value of plan assets (88,895) (87,041) Liability for defined benefit obligations 36,785 45,178 The Group operates various funded pension schemes which are established in accordance with local conditions and practices within the countries concerned. The most significant funds are described below: United Kingdom (UK) The Group makes contributions to a pension scheme (the Millennium & Copthorne Pension Plan) for its UK employees, which was set up in The scheme is a funded defined benefit arrangement with different categories of membership. The Trustees of the Plan have appointed Russell Investments Ltd (formerly known as The Frank Russell Company Limited) and Legal and General Investment Management Limited as the investment managers of the Millennium & Copthorne Pension Plan. The assets of the Millennium & Copthorne Pension Plan are held separately from those of the Group. City Developments Limited Annual Report

226 Notes to the Financial Statements Year ended 31 December Employee benefits (cont d) United Kingdom (UK) (cont d) The contributions required are determined by a qualified actuary on the basis of triennial valuations using the projected unit credit method. The last full actuarial valuation of this scheme was carried out by a qualified independent actuary as at 6 April 2005 and this has been updated on an approximate basis to 31 December The contributions of the Group during the year were 20.5% (2006: 20.5%) of pensionable salary, plus enhanced contributions of $3.3 million ( 1.1 million) per annum to remove the plan s deficit. The same rate of contribution is expected to be paid during As the defined benefit section is closed to new entrants, the current service cost, as a percentage of pensionable payroll is likely to increase as the membership ages, although it will be applied to a decreasing pensionable payroll. The assumptions which have the most significant effect on the results of the valuation are those relating to mortality, the discount rate and the rates of increase in salaries and pensions. Korea The Group makes contributions to a defined benefit pension plan for its employees. The contributions required are determined by an external qualified actuary using the projected unit credit method. The most recent valuation was carried out on 31 December The contributions of the Group were 10.9% (2006: 17.0%) of the employees earnings. The assumptions which have the most significant effect on the results of the valuations are those relating to the discount rate and the rate of increase in salaries. Taiwan The Group makes contributions to a defined benefit pension plan for its employees. The contributions required are determined by an external qualified actuary using the projected unit credit method. The most recent valuation was carried out on 31 December The contributions of the Group were 6% (2006: 6%) of the employees earnings. The assumptions which have the most significant effect on the results of the valuations are those relating to the discount rate and the rate of increase in salaries. The assets of each scheme have been taken at market value and the liabilities have been calculated using the following principal assumptions: UK Korea Taiwan UK Korea Taiwan Inflation rate 3.20% 2.50% 3.10% 2.30% Discount rate* 5.90% 7.00% 2.75% 5.23% 5.00% 2.50% Rate of salary increase 3.70% 5.00% 3.00% 3.60% 5.00% 3.00% Rate of pension increases 3.20% 3.10% Annual expected return on plan assets 7.24% 5.00% 2.75% 6.17% 4.00% 2.50% The life expectances underlying the value of the accrued liabilities for the Millennium & Copthorne Pension Plan, based on retirement age of 65, are as follows: years years Males Females The assumptions used by the actuaries are the best estimates chosen from a range of possible actuarial assumptions, which due to the timescale covered, may not be necessarily borne out in practice. The present value of the schemes liabilities are derived from cash flow projections over long periods and are inherently uncertain. The expected annual return on UK plan assets for 2007 of 7.24% (2006: 6.17%) has been calculated using a 7.70% (2006: 6.48%) return on equity (representing 75% (2006: 75%) of the plan assets) and a 5.90% (2006: 5.23%) return on bonds (representing 25% (2006: 25%) of the plan assets). * The discount rate used in respect of the UK pension scheme of 5.90% (2006: 5.23%) was based on the yield of the Merrill Lynch over-15 year AA rated corporate bond index. City Developments Limited Annual Report

227 Notes to the Financial Statements Year ended 31 December Employee benefits (cont d) Group $ 000 $ 000 Expense recognised in the income statement Current service costs 5,754 5,503 Interest on obligations 6,214 5,833 Expected return on plan assets (4,868) (4,104) Defined benefit obligation expenses 7,100 7,232 The expense is recognised in the following line items in the income statement: Cost of sales 3,201 2,342 Administrative expenses 3,275 4,690 Other operating expenses Defined benefit obligation expenses 7,100 7,232 Actual return on plan assets 3,152 5,235 Actuarial losses recognised directly in equity Cumulative amount at 1 January 22,176 17,724 Recognised during the year (1,988) 4,452 Cumulative amount at 31 December 20,188 22,176 Changes in the present value of defined benefit obligations Defined benefit obligations as at 1 January 132, ,063 Actuarial (gains)/losses (3,703) 5,583 Benefits paid (9,060) (10,248) Contributions received Interest cost 6,214 5,833 Service cost 5,754 5,503 Translation differences on consolidation (6,048) 2,160 Defined benefit obligations at 31 December 125, ,219 Changes in the fair value of plan assets Fair value of plan assets at 1 January 87,041 77,186 Expected return 4,868 4,104 Actuarial (losses)/gains (1,715) 1,131 Contributions by employees Contributions by employer 12,057 12,342 Benefits paid (8,750) (9,923) Translation differences on consolidation (4,910) 1,876 Fair value of plan assets at 31 December 88,895 87,041 City Developments Limited Annual Report

228 Notes to the Financial Statements Year ended 31 December Employee benefits (cont d) The fair values of plan assets in each category are as follows: Group $ 000 $ 000 Equity 49,190 48,067 Bonds 16,278 15,465 Cash 23,427 23,509 Fair value of plan assets 88,895 87,041 Trend analysis Amounts for the current and previous four periods are as follows: $ 000 $ 000 $ 000 $ 000 $ 000 Present value of defined benefit obligations (93,141) (112,989) (123,063) (132,219) (125,680) Fair value of plan assets 61,993 71,252 77,186 87,041 88,895 Deficit in the plan (31,148) (41,737) (45,877) (45,178) (36,785) Experience adjustments on plan liabilities (2,950) (597) (714) 2,158 (1,871) Changes in assumptions underlying the present value of plan liabilities 1,812 (10,248) (12,955) (7,741) 5,574 Actual return less expected return on plan assets 3, ,388 1,131 (1,716) 25 Other liabilities Group Company $ 000 $ 000 $ 000 $ 000 Advances from minority shareholders of subsidiaries (unsecured and interest charged at 1.5% per annum for 2006) 125 Deferred real estate tax payable in 10 equal annual instalments commencing in July ,892 6,115 Miscellaneous (principally deposits received and payables) 14,051 14,619 Rental deposits 38,902 27,313 4,198 2,957 Non-current retention sums payable 20,130 7,649 17,138 7,113 76,975 55,821 21,336 10,070 Repayable: - Within 1 year 2,236 2,498 - After 1 year 74,739 53,323 21,336 10,070 76,975 55,821 21,336 10,070 City Developments Limited Annual Report

229 Notes to the Financial Statements Year ended 31 December Provisions Onerous Capital contracts expenditure Total $ 000 $ 000 $ 000 Group At 1 January ,119 2,785 7,904 Provisions made 75 10,152 10,227 Provisions utilised (990) (3,917) (4,907) Translation differences on consolidation (174) 36 (138) At 31 December ,030 9,056 13,086 Current 9,622 Non-current 3,464 13,086 The onerous contracts relate to an onerous lease and the balance will be released over the life of the lease until The provisions for capital expenditure relate to the Group s obligations to incur capital expenditure under the term of the hotel operating agreements. 27 Deferred tax liabilities Movements in deferred tax assets and liabilities of the Group (prior to offsetting of balances) during the year are as follows: Group Deferred tax liabilities At Effect Transfer Transfer 1 January on the At Recognised to to Translation At , as adoption 1 January in income provision investments differences December previously of 2006, statement Recognised for in on 2006, reported FRS 40 restated (Note 31) in equity taxation associates consolidation restated $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Property, plant and equipment 502,290 (34,821) 467,469 6,537 (840) (14,676) 458,490 Investment properties 34,821 34, (454) 34,420 Financial assets 4,953 4, ,915 Development properties (4,619) (4,619) 18,124 13,505 Others (6,758) (6,758) 7,940 (36) 1, , ,866 32, (36) (840) (15,130) 513,476 Deferred tax assets Property, plant and equipment (35) 1 (34) Tax losses (53,765) (53,765) 20,929 3,059 (29,777) Others (8,552) (8,552) (12,884) 238 (21,198) (62,317) (62,317) 8,010 3,298 (51,009) 433, ,549 40, (36) (840) (11,832) 462,467 City Developments Limited Annual Report

230 Notes to the Financial Statements Year ended 31 December Deferred tax liabilities (cont d) At Effect Transfer 1 January on the At Recognised to Translation 2007, as adoption 1 January in income investments differences At 31 previously of 2007, statement Recognised in on December reported FRS 40 restated (Note 31) in equity associates consolidation 2007 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Group Deferred tax liabilities Property, plant and equipment 492,910 (34,420) 458,490 (50,212) 864 (19,742) 389,400 Investment properties 34,420 34,420 (635) (309) 33,476 Financial assets 5,915 5,915 (437) 5,478 Development properties 13,505 13,505 29,932 43,437 Others 1,146 1,146 2, , , ,476 (18,702) (401) 864 (20,051) 475,186 Deferred tax assets Property, plant and equipment (34) (34) 26 (8) Tax losses (29,777) (29,777) 7, (21,770) Others (21,198) (21,198) (11,203) 1, (29,754) (51,009) (51,009) (3,792) 1,704 1,565 (51,532) 462, ,467 (22,494) 1, (18,486) 423,654 Company At Effect 1 January on the At At , as adoption 1 January Recognised December previously of 2006, in income Recognised 2006, reported FRS 40 restated statement in equity restated $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Deferred tax liabilities Property, plant and equipment 19,618 (3,200) 16,418 (16,240) 178 Investment properties 3,200 3, ,336 Financial assets 4,442 4, ,808 Development properties (4,619) (4,619) 18,124 13,505 Others ,128 20,437 20,437 2, ,955 Deferred tax liabilities At Effect 1 January on the At 2007, as adoption 1 January Recognised At 31 previously of 2007, in income Recognised December reported FRS 40 restated statement in equity 2007 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Property, plant and equipment 3,514 (3,336) Investment properties 3,336 3,336 (298) 3,038 Financial assets 4,808 4,808 (530) 4,278 Development properties 13,505 13,505 23,562 37,067 Others 1,128 1, ,161 22,955 22,955 23,574 (530) 45,999 City Developments Limited Annual Report

231 Notes to the Financial Statements Year ended 31 December Deferred tax liabilities (cont d) 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 amounts, determined after appropriate offsetting, are as follows: Group Company Note $ 000 $ 000 $ 000 $ 000 Deferred tax assets 9 3,158 4,800 Deferred tax liabilities (426,812) (467,267) (45,999) (22,955) (423,654) (462,467) (45,999) (22,955) Deferred tax assets have not been recognised in respect of the following items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits therefrom: Group $ 000 $ 000 Deductible temporary differences 47, ,007 Tax losses 120, , , ,588 The deductible temporary differences do not expire under current tax legislations. The tax losses are subject to agreement by the tax authorities and compliance with tax regulations in the respective countries in which certain subsidiaries operate. The tax losses with expiry dates are as follows: Group $ 000 $ 000 Expiry dates - Within 1 to 5 years 6, Trade and other payables Group Company Note $ 000 $ 000 $ 000 $ 000 Trade payables 103,184 94,358 18,113 8,638 Deferred income 42,408 42, Accruals 329, , , ,451 Other payables 42,331 54, ,869 Rental and other deposits 29,575 38,851 2,545 12,755 Retention sums payable 7,389 9,812 5,744 9,089 Amounts owing to: - subsidiaries 5 90, ,328 - an associate 6 6,067 5, jointly-controlled entities 7 23,773 40,479 15,475 - fellow subsidiaries , , , ,253 City Developments Limited Annual Report

232 Notes to the Financial Statements Year ended 31 December Revenue Revenue of the Group includes property development income, income from owning and operating hotels, gross rental income, income from provision of information technology and procurement services, dividend income, project management and consultancy fees, property management fees, club income and net results from sale of investments but excludes intra-group transactions. Property development income consists mainly of sale proceeds of commercial and residential properties and projects under development. Group $ 000 $ 000 Dividends from investments: - fellow subsidiaries - quoted 4,243 2,502 - unquoted 3,375 2,532 - others - quoted equity investments 6,406 2,901 - unquoted equity investments 126 1,712 Hotel operations 1,986,513 1,846,378 Property development 861, ,980 Rental and car park income from investment properties 201, ,066 Others 42,185 37,733 3,106,106 2,546, Profit for the year The following items have been included in arriving at profit for the year: Other operating income Group $ 000 $ 000 Business interruption insurance proceeds 15,928 Exchange gain (net) 6,043 Gain on dilution and disposal of investment in an associate 8,228 Management fees and miscellaneous income 18,852 11,762 Profit on sale of investments Profit on sale of property, plant and equipment and long leasehold interests in hotels 1, ,581 29, ,519 Staff costs Wages and salaries 771, ,790 Contributions to defined contribution plans 27,469 16,340 Increase in liability for defined benefit plans 7,100 7,232 Value of employee services received for issue of share options 2,340 1,822 Increase/(Decrease) in liability for long service leave 32 (23) Increase in liability for short-term accumulating compensated absences , ,325 Less: Staff costs capitalised in: - development properties (1,026) (1,039) - property, plant and equipment (197) (73) 807, ,213 City Developments Limited Annual Report

233 Notes to the Financial Statements Year ended 31 December Profit for the year (cont d) Group $ 000 $ 000 Other expenses Allowance for foreseeable losses on development properties made/(written back) 16,783 (38,561) Amortisation of intangible assets Amortisation of upfront premiums on long leasehold land of hotel properties 2,223 2,314 Depreciation of: - investment properties 42,989 45,684 - property, plant and equipment 90, ,060 Direct operating expenses arising from rental of investment properties (excluding depreciation) 74,308 63,352 Exchange loss (net) 8,711 Write-back of impairment losses on investment properties (net) (75,017) (822) Impairment losses on property, plant and equipment 20,320 10,042 Charge/(Write-back) of impairment losses on: - trade and other receivables 50 (795) - deposits 3,133 - amounts owing by jointly-controlled entities (43,578) 32,700 Loss on liquidation of a jointly-controlled entity 24 1,247 Non-audit fees - auditors of the Company other auditors of the subsidiaries 2,300 1,801 Operating lease expenses 113,161 37,944 Property, plant and equipment written off 22,163 3,429 Finance income Interest income - associates fellow subsidiaries fixed deposits with financial institutions 33,604 24,827 - jointly-controlled entities 7,304 6,093 - others 104 1,303 Mark-to-market gain on financial assets held for trading (net) 7,427 8,919 Others Total finance income carried forward 49,218 42,468 City Developments Limited Annual Report

234 Notes to the Financial Statements Year ended 31 December Profit for the year (cont d) Group $ 000 $ 000 Total finance income brought forward 49,218 42,468 Finance costs Interest expense - banks 87,048 82,174 - bonds and notes 65,760 66,278 - others 588 4,619 Amortisation of transaction costs capitalised 3,639 3,633 Mark-to-market loss on financial assets held for trading 3,264 Others 105 Total finance costs 160, ,704 Finance costs capitalised in development properties and property, plant and equipment (40,918) (17,986) Finance costs charged to income statement 119, ,718 Net finance costs 70,268 96,250 Included in the mark-to-market loss on financial assets held for trading is a loss of $6,299,000 (2006: gain of $5,998,000) recognised on shares of a listed subsidiary which are held by the Group for trading purposes. As these shares are held for trading purposes, and not as part of the controlling block of shares held in the subsidiary, the relevant portion of equity represented is not consolidated. Finance costs of the Group and the Company have been capitalised at rates ranging from 0.37% to 6.27% (2006: 0.37% to 6.00%) and 0.37% to 4.57% (2006: 0.37% to 4.77%) per annum respectively for development properties and property, plant and equipment. 31 Income tax expense Group Note $ 000 $ 000 Current tax expense Current year 97,116 96,378 Overprovision in respect of prior years (9,228) (7,730) 87,888 88,648 Deferred tax expense Movements in temporary differences 58,684 39,853 Effect of changes in tax rates and legislations (59,421) 18 (Over)/Underprovision in respect of prior years (21,757) 5,575 Recognition of previously unrecognised deferred tax assets (4,782) 27 (22,494) 40,664 Total income tax expense 65, ,312 City Developments Limited Annual Report

235 Notes to the Financial Statements Year ended 31 December Income tax expenses (cont d) Group $ 000 $ 000 Reconciliation of effective tax rate Profit before income tax 954, ,278 Income tax using Singapore tax rate of 18% (2006: 20%) 171, ,456 Income not subject to tax (67,879) (62,893) Expenses not deductible for tax purposes - expenses 33,003 25,288 - write-back (14,130) Effect of changes in tax rates and legislations (59,421) 18 Effect of different tax rates in other countries 19,186 28,596 Effect of share of results of jointly-controlled entities 9,135 2,646 Unrecognised deferred tax assets 4,086 7,388 Tax effect of losses not allowed to be set off against future taxable profits 1,808 2,425 Tax incentives (131) (32) Utilisation of previously unrecognised deferred tax assets (1,108) (5,643) Overprovision in respect of prior years (30,985) (2,155) Recognition of previously unrecognised deferred tax assets (4,782) 65, , Earnings per share Basic earnings per share is calculated based on: Group $ 000 $ 000 Profit attributable to shareholders 724, ,659 Less: Dividends on non-redeemable convertible non-cumulative preference shares (12,904) (12,904) Profit attributable to ordinary shareholders after adjustment of non-redeemable convertible non-cumulative preference dividends 712, ,755 Group Number Number of shares of shares Weighted average number of ordinary shares outstanding during the year 909,301, ,756,707 Bonus element of warrants exercised in ,657,443 Weighted average number of ordinary shares 909,301, ,414,150 Basic earnings per share 78.3 cents 37.0 cents City Developments Limited Annual Report

236 Notes to the Financial Statements Year ended 31 December Earnings per share (cont d) Diluted earnings per share is based on: Group $ 000 $ 000 Profit attributable to shareholders after adjustment of non-redeemable convertible non-cumulative preference dividends 712, ,755 Add: Dividends on non-redeemable convertible non-cumulative preference shares 12,904 12,904 Net profit used for computing diluted earnings per share 724, ,659 For the purpose of calculating the diluted earnings per ordinary share, the weighted average number of ordinary shares in issue is adjusted to take into account the dilutive effect arising from the exercise of all outstanding bonus warrants and conversion of the non-redeemable convertible non-cumulative preference shares, with the potential ordinary shares weighted for the period outstanding. The effect of the potential ordinary shares on the weighted average number of ordinary shares in issue is as follows: Group Number Number of shares of shares Weighted average number of ordinary shares issued used in the calculation of basic earnings per share 909,301, ,414,150 Potential ordinary shares issuable under non-redeemable convertible non-cumulative preference shares 44,998,898 44,998,898 Weighted average number of ordinary shares issued and potential shares assuming full conversion 954,300, ,413,048 Diluted earnings per share 76.0 cents 36.6 cents 33 Dividends Company $ 000 $ 000 Special final ordinary dividend paid of 10.0 cents (2006: 5.0 cents) per ordinary share less tax at 18% (2006: 20%) in respect of financial year ended 31 December ,563 36,338 Final ordinary dividend paid of 7.5 cents (2006: 7.5 cents) per ordinary share less tax at 18% (2006: 20%) in respect of financial year ended 31 December ,922 54,507 Special interim ordinary dividend paid of 10.0 cents (2006: 7.5 cents) per ordinary share less tax at 18% (2006: 20%) in respect of financial year ended 31 December ,563 54,558 Non-cumulative preference dividend paid of 2.35 cents (2006: 2.41 cents) per preference share less tax at 18% (2006: 20%) 6,386 6,386 Non-cumulative preference dividend paid of 2.40 cents (2006: 2.46 cents declared) per preference share less tax at 18% (2006: 20%) 6,518 6, , ,307 City Developments Limited Annual Report

237 Notes to the Financial Statements Year ended 31 December Dividends (cont d) After the balance sheet date, the directors proposed the following ordinary dividends, which have not been provided for: Company $ 000 $ 000 Final tax exempt (one-tier) ordinary dividend of 7.5 cents per ordinary share (2006: 7.5 cents per ordinary share less tax at 18%) 68,198 55,922 Special final tax exempt (one-tier) ordinary dividend of 12.5 cents per ordinary share (2006: 10.0 cents per ordinary share less tax at 18%) 113,663 74, , , Acquisition of subsidiaries There were no acquisitions in the year ended 31 December On 30 November 2006, the Group acquired the remaining 50% interest in three foreign jointly-controlled entities in the business of hotel operations for a consideration of $51,934,000. In December 2006, these entities contributed an additional net loss of $1,289,000 to the consolidated profit for the year. If the acquisition had occurred on 1 January 2006, the Group s revenue and profit for the year would have been $2,563,956,000 and $559,384,000 respectively. There are no revisions to the purchase price allocation numbers that were included in the financial statements for the year ended 31 December The effect of the acquisition of the subsidiaries is set out below: Carrying Fair value Recognised amounts adjustments values $ 000 $ 000 $ 000 Property, plant and equipment (Note 3) 126,145 20, ,204 Consumable stocks Trade debtors 1,712 1,712 Other current assets 4,621 4,621 Cash at bank 3,260 3,260 Trade and other payables (10,067) (10,067) Amount owing to shareholder (39,680) (39,680) Long term loan (secured) (59,284) (59,284) Net identifiable assets 27,171 20,059 47,230 Amounts previously accounted for as jointly-controlled entities 4,704 Cash consideration paid, satisfied in cash 51,934 Cash acquired (3,260) Net cash outflow 48,674 City Developments Limited Annual Report

238 Notes to the Financial Statements Year ended 31 December Commitments The Group and the Company had the following commitments as at the balance sheet date: Group Company $ 000 $ 000 $ 000 $ 000 Development expenditure contracted but not provided for in the financial statements 1,100, , , ,608 Capital expenditure contracted but not provided for in the financial statements 161,600 13,727 Commitment in respect of purchase of properties for which deposits have been paid 8, ,097 Capital contribution to an associate and a jointly-controlled entity 86,679 In addition, the Group and the Company had the following commitments: (a) The Group holds a number of office facilities and hotel properties under operating leases. The leases typically run for an initial period of 1 to 30 years. The Group s and the Company s commitments for future minimum lease payments under noncancellable operating leases are as follows: Group Company $ 000 $ 000 $ 000 $ 000 Within 1 year 81,488 85,064 6,271 3,509 After 1 year but within 5 years 266, ,509 8,932 2,147 After 5 years 734, ,956 1,082,667 1,003,529 15,203 5,656 Contingent rents, generally determined based on a percentage of gross revenue and gross operating profit, of $43,727,000 (2006: $25,798,000) for the Group have been recognised as an expense in the income statement during the year. (b) The Group and the Company lease out some of their investment properties. Non-cancellable operating lease rentals are receivable as follows: Group Company $ 000 $ 000 $ 000 $ 000 Within 1 year 190, ,161 20,435 13,722 After 1 year but within 5 years 196, ,364 13,648 12,879 After 5 years 34,197 11, , ,808 34,083 26,601 Contingent rents, generally determined based on a percentage of tenants revenue, of $35,000 (2006: $77,000) and $Nil (2006: $42,000) have been recognised as income by the Group and the Company respectively in the income statement during the year. (c) Certain subsidiaries of the Group have obligations with the relevant authorities in Malaysia to reduce their present 100% interest in two hotel-owning subsidiaries to 51%, by sale of equity to Malaysians by 31 December City Developments Limited Annual Report

239 Notes to the Financial Statements Year ended 31 December Related parties Other than as disclosed elsewhere in the financial statements, the transactions with related parties based on terms agreed between the parties are as follows: Group Company $ 000 $ 000 $ 000 $ 000 Interest received and receivable from: - subsidiaries 18,627 3,563 - jointly-controlled entities 7,304 6,093 6,201 6,904 7,304 6,093 24,828 10,467 Management services fees received and receivable from: - subsidiaries 1,628 1,785 - fellow subsidiaries 1,489 1,347 1,296 1,071 - jointly-controlled entities 7,353 11,800 5,821 10,608 - an associate 9,802 3, ,644 16,678 8,794 13,483 Maintenance services fees received and receivable from: - fellow subsidiaries jointly-controlled entities Recovery of costs from: - subsidiaries 3,750 2,520 - jointly-controlled entities ,985 2,918 Rental received and receivable from: - subsidiaries 1, fellow subsidiaries an associate a related party 127 1, ,864 1,209 Sale of properties to: - key management personnel and their immediate families by jointly-controlled entities 27,520 27,520 - key management personnel and their immediate families by a joint venture in which the Company is a venturer 1,266 1,993 1,266 1,993 - a key management personnel and his immediate family 15,050 15,050 16,316 29,513 16,316 29,513 City Developments Limited Annual Report

240 Notes to the Financial Statements Year ended 31 December Related parties (cont d) Group Company $ 000 $ 000 $ 000 $ 000 Sale of long leasehold interests in hotels and property, plant and equipment to: - a subsidiary 1,504 - an associate 846, , , ,604 Interest paid and payable to a subsidiary 814 Management services fees paid and payable to: - immediate and ultimate holding company subsidiaries 192 1, ,583 Maintenance services fees paid and payable to subsidiaries 1,916 1,941 Professional fees paid and payable to firms of which directors of the Company are members: - charged to income statement included as cost of property, plant and equipment and cost of development properties 1, , , , Rental paid and payable to: - subsidiaries 3,753 3,745 - a jointly-controlled entity an associate 67,442 26,408 68,181 26,868 3,753 3,745 Short-term employee benefits paid and payable to key management personnel 20,519 12,281 19,852 11, Contingent liabilities (unsecured) As at the balance sheet date, the Group and the Company have the following indemnities and guarantees in issue: Group Company $ 000 $ 000 $ 000 $ 000 Guarantee issued on behalf of a subsidiary which will expire in ,287 37,112 Indemnities given to financial institutions for performance guarantees issued on behalf of: - subsidiaries 155, ,710 - jointly-controlled entities 18,756 4,391 18,756 4,391 18,756 4, , ,213 City Developments Limited Annual Report

241 Notes to the Financial Statements Year ended 31 December Financial risk management Financial risk management objectives and policies The Group is exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk and market risk, including interest rate risk, foreign currency risk and equity price risk. The exposure to equity price risks is, however, insignificant to the Group. The Group has a system of controls in place to maintain an acceptable balance between the cost of risks occurring and the cost of managing the risks. The management continually monitors the Group s risk management process to ensure that an appropriate balance between risk and control is achieved. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group s activities. The Audit Committee provides independent oversight to the effectiveness of the risk management process. It is, and has been throughout the current and previous financial year, the Group s policy that no derivatives shall be undertaken for speculative purposes except for its use as hedging instruments where appropriate and cost efficient. Credit risk The Group has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. The Group does not require collateral in respect of these financial assets. Transactions involving financial instruments are entered into only with counterparties that are of acceptable credit quality. Cash and fixed deposits are placed with banks and financial institutions which are regulated. The Group establishes an allowance for impairment that represents its estimate of the specific loss component in respect of trade and other receivables. The allowance account in respect of trade receivables and other receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible. At that point, the financial asset is considered irrecoverable and the amount charged to the allowance account is written off against the carrying amount of the impaired financial asset. In relation to financial guarantees issued by the Company on behalf of its subsidiaries or jointly-controlled entities, the credit risk, being the principal risk to which the Company is exposed, represents the loss that would be recognised upon a default by the subsidiary or jointly-controlled entity. There are no terms and conditions attached to the financial guarantee contracts that would have a material effect on the amount, timing and uncertainty of the Company s future cash flows. At the balance sheet date, there is no significant concentration of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheets. Liquidity risk The Group monitors its liquidity risk and maintains a level of cash and cash equivalents, and credit facilities deemed adequate by management to finance the Group s operations and to mitigate the effects of fluctuations in cash flows. City Developments Limited Annual Report

242 Notes to the Financial Statements Year ended 31 December Financial risk management (cont d) Liquidity risk (cont d) The following are the expected contractual undiscounted cash inflows/(outflows) of financial liabilities, including estimated interest payments and excluding the impact of netting agreements: Carrying amount Cash flows Contractual Within 1 Within More than cash flows year 1 to 5 years 5 years $ 000 $ 000 $ 000 $ 000 $ 000 Group 2007 Non-derivative financial liabilities Term loans 2,281,369 2,521, ,153 2,033,384 3,852 Finance lease creditors Bonds and notes 1,597,367 1,766, ,926 1,419,132 55,972 Bank loans 151, , ,075 Trade and other payables ( * ) 212, , ,762 Bank overdrafts 1,036 1,036 1,036 Other liabilities 76,975 76,975 2,236 73,260 1,479 4,321,404 4,730,490 1,143,262 3,525,925 61, Non-derivative financial liabilities Term loans 1,707,042 1,904, ,978 1,296,817 Finance lease creditors 6,561 7,692 7, Bonds and notes 1,557,215 1,737, ,653 1,264,453 Bank loans 75,281 75,434 75,434 Trade and other payables ( * ) 243, , ,617 Bank overdrafts 2,319 2,420 2,420 Other liabilities 55,821 55,821 2,498 41,531 11,792 3,647,856 4,026,885 1,412,060 2,603,033 11,792 Company 2007 Non-derivative financial liabilities Term loans 1,289,116 1,434,510 85,110 1,349,400 Finance lease creditors Bonds and notes 529, , , ,420 55,972 Bank loans 151, , ,075 Trade and other payables ( * ) 117, , ,709 Other liabilities 21,336 21,336 21,336 2,109,501 2,305, ,287 1,727,165 55, Non-derivative financial liabilities Term loans 606, , , ,990 Finance lease creditors Bonds and notes 517, , , ,525 Bank loans 75,281 75,434 75,434 Trade and other payables ( * ) 432, , ,162 Other liabilities 10,070 10,070 10,070 1,642,043 1,732,839 1,077, ,601 * Excluding accruals and deferred income City Developments Limited Annual Report

243 Notes to the Financial Statements Year ended 31 December Financial risk management (cont d) Market risk Market risk is the risk that changes in market prices, such as interest rates, foreign exchange rates and equity prices will affect the Group s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk. Interest rate risk The Group s exposure to interest rate risk relates primarily to its interest-bearing financial assets and debt obligations. The Group adopts a policy of managing its interest rate exposure by maintaining a debt portfolio with both fixed and floating interest rates. Where appropriate, the Group uses interest rate derivatives to hedge its interest rate exposure for specific underlying debt obligations. At 31 December 2007, the Group did not have interest rate swaps. Interest rates analysis In respect of interest-earning financial assets and interest-bearing financial liabilities, their nominal interest rates at the balance sheet date and carrying amounts are illustrated as below: Group 2007 Financial assets Interest rates per annum Carrying amount Floating Fixed Floating Fixed Note rate rate rate rate Total % % $ 000 $ 000 $ 000 Cash and cash equivalents 3.50 to to , , ,235 Amounts owing by jointly-controlled entities to , ,588 Investments in debt securities held for trading ,594 1,146,379 1,152,973 Financial liabilities Bank overdrafts (1,036) (1,036) Term loans 20 - secured 2.33 to 9.37 (423,951) (423,951) - unsecured 1.14 to 6.66 (1,857,418) (1,857,418) Finance lease creditors to 8.00 (213) (213) Bonds and notes 22 - secured 6.04 to to 3.88 (105,357) (349,590) (454,947) - unsecured 3.02 to to 5.50 (562,817) (579,603) (1,142,420) Bank loans (unsecured) to 2.85 (151,682) (151,682) (3,102,261) (929,406) (4,031,667) Total (3,095,667) 216,973 (2,878,694) City Developments Limited Annual Report

244 Notes to the Financial Statements Year ended 31 December Financial risk management (cont d) Interest rate risk (cont d) Interest rates analysis (cont d) Group 2006 Interest rates per annum Carrying amount Floating Fixed Floating Fixed Note rate rate rate rate Total % % $ 000 $ 000 $ 000 Financial assets Cash and cash equivalents 0.50 to to , , ,377 Amounts owing by jointly-controlled entities to , ,434 Investments in debt securities held for trading to ,270 12,270 38,463 1,145,618 1,184,081 Financial liabilities Bank overdrafts to 8.30 (2,319) (2,319) Term loans 20 - secured 3.97 to 8.17 (682,277) (682,277) - unsecured 0.49 to 7.42 (1,024,765) (1,024,765) Finance lease creditors to 7.96 (6,561) (6,561) Bonds and notes 22 - secured to 3.88 (125,780) (349,414) (475,194) - unsecured 2.70 to to 5.50 (602,214) (479,807) (1,082,021) Bank loans (unsecured) to 3.71 (75,281) (75,281) Advances from minority shareholders of subsidiaries (125) (125) (2,512,636) (835,907) (3,348,543) Total (2,474,173) 309,711 (2,164,462) City Developments Limited Annual Report

245 Notes to the Financial Statements Year ended 31 December Financial risk management (cont d) Interest rate risk (cont d) Interest rates analysis (cont d) Company 2007 Financial assets Interest rates per annum Carrying amount Note Floating Fixed Floating Fixed rate rate rate rate Total % % $ 000 $ 000 $ 000 Cash and cash equivalents 0.42 to ,549 97,549 Amounts owing by: - subsidiaries to to , ,654 1,234,106 - jointly-controlled entities to , , ,452 1,037,821 1,702,273 Financial liabilities Term loans (unsecured) to 3.39 (1,289,116) (1,289,116) Finance lease creditors (15) (15) Bonds and notes (unsecured) to 5.50 (529,643) (529,643) Bank loans (unsecured) to 2.85 (151,682) (151,682) (1,440,798) (529,658) (1,970,456) Total (776,346) 508,163 (268,183) 2006 Financial assets Cash and cash equivalents 2.95 to ,056 87,056 Amounts owing by: - subsidiaries to to , , ,456 - jointly-controlled entities to , ,981 60, , ,493 Financial liabilities Term loans (unsecured) to 4.57 (606,711) (606,711) Finance lease creditors (20) (20) Bonds and notes (unsecured) to to 5.50 (67,992) (449,807) (517,799) Bank loans (unsecured) to 3.71 (75,281) (75,281) (749,984) (449,827) (1,199,811) Total (689,231) 348,913 (340,318) City Developments Limited Annual Report

246 Notes to the Financial Statements Year ended 31 December Financial risk management (cont d) Interest rate risk (cont d) Sensitivity analysis For the variable rate financial assets and liabilities, a 100 bp increase at the balance sheet date would have the impact as shown below. A decrease in 100 bp in interest rate would have an equal but opposite effect. This analysis, which is based on average balance for the year of each interest-bearing financial asset and liability, assumes that all other variables, in particular foreign currency rates, remain constant and does not take into account effect of qualifying borrowing costs allowed for capitalisation. 100 basis points increase Group Company $ 000 $ 000 $ 000 $ 000 Profit before income tax (and accumulated profits) (22,840) (20,871) (10,844) (5,169) There is no impact on other components of equity. Foreign currency risk The Group is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in currencies other than the respective functional currency of the Group s entities. The currencies giving rise to this risk are primarily Singapore dollar, Euro, Japanese Yen, Sterling pound and United States dollar. The Group has a decentralized approach to the management of foreign exchange risk. The Group manages its foreign exchange exposure by adopting a policy of matching receipts and payments, and asset purchases and borrowings, in the currency of the relavant entity, where possible. Entities in the Group may have different approaches to the identification and management of this risk. Entities in the Group may borrow in currencies other than their functional currencies to fund investments that are denominated in their borrowing currencies. As at the balance sheet date, there are such borrowings denominated in Singapore dollar and United States dollar. Forward foreign exchange contracts are used purely as a hedging tool, where an active market for the relevant currency exists, to minimise the Group s exposure to movements in exchange rates on firm commitments and specific transactions. City Developments Limited Annual Report

247 Notes to the Financial Statements Year ended 31 December Financial risk management (cont d) Foreign currency risk (cont d) The Group s and Company s exposure to foreign currencies are as follows: Group 2007 Singapore Sterling United States Japanese dollar pound dollar Euro yen Others $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Financial assets 14,645 1,401 Other non-current assets (1) 5,397 Trade and other receivables (2) , Cash and cash equivalents 1,683 30,472 26,077 12, ,324 Interest-bearing borrowings (408,863) (289,509) (28,902) Trade and other payables (136) (12) (1,614) (3,987) (87) (407,048) 45,342 (257,319) 12,156 (32,825) 4, Financial assets 19,037 5, Other non-current assets (1) 10,879 Trade and other receivables (2) ,046 1,211 Cash and cash equivalents 3,779 15,080 15,490 2, ,301 Interest-bearing borrowings (287,064) (343,772) (29,531) Trade and other payables (97) (12) (1,292) (4,039) (140) (283,113) 34,189 (317,649) 7,926 (32,642) 4,189 Note: (1) Excluding deferred tax assets, intangible assets and lease premium prepayments. (2) Excluding lease premium prepayments. Company 2007 United States Hong Kong Thai Japanese dollar dollar baht yen Others $ 000 $ 000 $ 000 $ 000 $ 000 Other non-current assets 30,391 Trade and other receivables 15,739 (45) 110 (6) Cash and cash equivalents Interest-bearing borrowings (28,902) Trade and other payables (26,786) (11,409) (29) (62) (10,736) (11,289) 1,570 (68) 2006 Other non-current assets 30,676 Trade and other receivables 768 (19) 42, Cash and cash equivalents 6,097 1, Interest-bearing borrowings (29,531) Trade and other payables (67,251) (13,272) (6) (60) (60,386) (11,526) 42,888 1, City Developments Limited Annual Report

248 Notes to the Financial Statements Year ended 31 December Financial risk management (cont d) Foreign currency risk (cont d) Sensitivity analysis A 10% strengthening of the following major currencies against the functional currency of each of the Group s entities at the balance sheet date held by the Group and Company would increase/(decrease) profit or loss (and accumulated profits) and other components of equity (before any tax effect) by the amounts shown below. Similarly, a 10% weakening would have had the equal but opposite effect. This analysis assumes that all other variables, in particular interest rates, remain constant. Group Profit before Profit before income tax Equity income tax Equity $ 000 $ 000 $ 000 $ 000 Singapore dollar (40,705) (28,311) Sterling pound 4, ,419 United States dollar (26,271) 540 (32,852) 1,088 Euro 1, Japanese yen (3,283) (3,264) Company United States dollar (1,074) (6,038) Hong Kong dollar (1,129) (1,152) Japanese yen As at 31 December 2007, the Group has no outstanding forward exchange contracts (2006: $21 million). Changes in the fair value of forward exchange contracts that economically hedge monetary assets and liabilities in foreign currencies are recognised in the income statement (see Note 2.7). The net fair value of forward exchange contracts used by the subsidiary as economic hedges of monetary assets and liabilities in foreign currencies at 31 December 2007 was $Nil (2006: $94,000). These amounts are recognised as derivative financial instruments in the balance sheet. Estimation of fair values Investments in equity and debt securities The fair value of quoted investments that are classified as available for sale as well as quoted and unquoted investments held for trading are their quoted bid price at the balance sheet date. The fair values of unquoted securities classified as available for sale have not been determined as there is no quoted market price in an active market and other methods of determining fair value do not result in a reliable estimate. City Developments Limited Annual Report

249 Notes to the Financial Statements Year ended 31 December Financial risk management (cont d) Estimation of fair values (cont d) Amounts owing by subsidiaries, associates and jointly-controlled entities The fair values of amounts owing by subsidiaries, associates and jointly-controlled entities are estimated as the present value of future cash flows, discounted at market interest rates. Derivatives The fair value of forward exchange contracts is based on their quoted market price, if available. If a quoted market price is not available, fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual period to maturity of the contract using a risk-free interest rate (based on government bonds). Non-derivative financial liabilities Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the balance sheet date. For finance leases, the market rate of interest is determined by reference to similar agreements. Other financial assets and liabilities The carrying amounts of financial assets and liabilities with a maturity of less than one year (including trade and other receivables, cash and cash equivalents, trade and other payables and advances from minority shareholders of subsidiaries) are assumed to approximate their fair values because of the short period to maturity. All other financial assets and liabilities are discounted to determine their fair values. Recognised financial instruments The aggregate net fair values of financial assets and liabilities which are not carried at fair values in the balance sheet as at 31 December are represented in the following table: Group Financial assets Carrying Carrying amount Fair value amount Fair value $ 000 $ 000 $ 000 $ 000 Amounts owing by jointly-controlled entities 13,755 8,859 Deposit receivables 4,144 4,946 3,993 3,883 4,144 4,946 17,748 12,742 Financial liabilities Finance lease creditors (6,535) (6,427) Bonds and notes - secured (349,590) (355,647) (349,414) (350,040) - unsecured (529,606) (526,880) (259,827) (255,568) Long-term deposits (13,794) (10,587) (14,339) (11,351) (892,990) (893,114) (630,115) (623,386) Total (888,846) (888,168) (612,367) (610,644) Unrecognised gains 678 1,723 City Developments Limited Annual Report

250 Notes to the Financial Statements Year ended 31 December Financial risk management (cont d) Estimation of fair values (cont d) Recognised financial instruments (cont d) Carrying Carrying amount Fair value amount Fair value $ 000 $ 000 $ 000 $ 000 Company Financial asset Amounts owing by subsidiaries - non-trade, interest free 75,448 74,301 48,031 44,603 - non-trade, interest bearing 9,630 9,778 85,078 84,079 48,031 44,603 Financial liability Bonds and notes (unsecured) (479,644) (481,202) (259,827) (255,568) Total (394,566) (397,123) (211,796) (210,965) Unrecognised (losses)/ gains (2,557) Segment reporting Business Segments Property Hotel Rental development operations properties Others Total $ 000 $ 000 $ 000 $ 000 $ Segment revenue 861,791 1,986, ,467 56,335 3,106,106 Segment results 247, , ,242 30, ,903 Share of after-tax profit/(loss) of associates and jointly-controlled entities 258,989 11,161 17,326 (766) 286,710 Profit before income tax 506, , ,568 29, ,613 Income tax expense (65,394) Profit for the year 889,219 Significant Non-Cash Transactions Depreciation ,053 46, ,904 Amortisation 2, ,235 Impairment losses on property, plant and equitment and investment properties 20,320 (75,017) (54,697) City Developments Limited Annual Report

251 Notes to the Financial Statements Year ended 31 December Segment reporting (cont d) Business Segments (cont d) 2006 Property Hotel Rental development operations properties Others Total $ 000 $ 000 $ 000 $ 000 $ 000 Segment revenue 484,980 1,846, ,066 47,380 2,546,804 Segment results 132, ,796 22,535 34, ,410 Share of after-tax profit of an associate and jointly-controlled entities 93,381 8,802 7,512 5, ,868 Profit before income tax 225, ,598 30,047 39, ,278 Income tax expense (129,312) Profit for the year 562,966 Significant Non-Cash Transactions Depreciation ,429 48,242 1, ,744 Amortisation 204 5, ,961 Impairment losses on property, plant and equitment and investment properties 10,042 (822) 9,220 City Developments Limited Annual Report

252 Notes to the Financial Statements Year ended 31 December Segment reporting (cont d) Business Segments (cont d) 2007 Assets and Liabilities Property Hotel Rental development operations properties Others Total $ 000 $ 000 $ 000 $ 000 $ 000 Segment assets 3,588,985 4,519,429 2,914, ,941 11,367,061 Investments in associates (111,491) 341,926 47, ,615 Investments in jointly-controlled entities 355, ,916 11,454 (144) 553,213 3,944,972 4,593,854 3,268, ,977 12,197,889 Tax recoverable 17,503 Deferred tax assets 3,158 Total assets 12,218,550 Segment liabilities 2,036,638 1,670, , ,984 4,759,447 Deferred tax liabilities 426,812 Provision for taxation 115,894 Total liabilities 5,302,153 Capital expenditure , ,553 1, , Assets and Liabilities Segment assets 2,663,888 4,968,210 2,622, ,540 10,593,561 Investment in an associate (111,846) 228, ,990 Investments in jointly-controlled entities 188,395 98,104 12,237 (9,722) 289,014 2,852,283 4,954,468 2,863, ,818 10,999,565 Deferred tax assets 4,800 Total assets 11,004,365 Segment liabilities 1,264,360 1,709, ,628 83,318 4,046,298 Deferred tax liabilities 467,267 Provision for taxation 110,701 Total liabilities 4,624,266 Capital expenditure 2, ,481 44,593 2, ,161 City Developments Limited Annual Report

253 Notes to the Financial Statements Year ended 31 December Segment reporting (cont d) Geographical Segments North America Australia and Asia and Europe New Zealand Total $ 000 $ 000 $ 000 $ Revenue 1,676,282 1,243, ,594 3,106,106 Segment assets 8,595,421 3,085, ,001 12,197,889 Capital expenditure 342,349 43,524 31, , Revenue 1,164,184 1,188, ,442 2,546,804 Segment assets 7,059,291 3,505, ,606 10,999,565 Capital expenditure 111,724 55,829 10, , New accounting standards and interpretations not yet adopted The Group has not applied the following accounting standards (including its consequential amendments) and interpretations that have been issued as of the balance sheet date but are not yet effective: FRS 23 Borrowing Costs FRS 108 Operating Segments INT FRS 111 FRS 102 Group and Treasury Share Transactions INT FRS 112 Service Concession Arrangements FRS 23 will become effective for financial statements for the year ending 31 December FRS 23 removes the option to expense borrowing costs and requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. The Group s current policy is consistent with the FRS 23 requirement to capitalise borrowing costs. FRS 108 will become effective for financial statements for the year ending 31 December FRS 108, which replaces FRS 14 Segment Reporting, requires identification and reporting of operating segments based on internal reports that are regularly reviewed by the Group s chief operating decision maker in order to allocate resources to the segment and to assess its performance. Currently, the Group presents segment information in respect of its business and geographical segments (see note 39). At this juncture, the Group is reviewing the presentation of segment disclosures in respect of operating segments as stipulated under FRS 108. As this is a disclosure standard, it will have no impact on the financial position of the Group when implemented in Other than the change in disclosures relating to FRS 108, the initial application of these standards (and its consequential amendments) and interpretations is 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. City Developments Limited Annual Report

254 Notes to the Financial Statements Year ended 31 December Significant investments The following are the Group s significant investments: Subsidiaries Direct/Indirect Subsidiaries of the Company Effective Principal Country of Group Activity Incorporation Interest % % * * * * * * * * * * * * * * * * * 100G Pasir Panjang Road Pte Ltd Property holding Singapore Allinvest Holding Pte Ltd Property owner Singapore Aston Properties Pte Ltd Property owner, Singapore developer and investment holding Bloomsville Investments Pte Ltd Property owner, Singapore developer and investment holding CBM Pte. Ltd. (formerly known as City Provision of building Singapore Building Management Pte Ltd) maintenance, security, cleaning and related services to commercial and residential buildings CBM Parking Pte. Ltd. Provision of carpark Singapore operation, management and related services CDL Land Pte Ltd Property owner and Singapore developer CDL Management Services Pte. Ltd. Provision of project and Singapore property management and consultancy services CDL Properties Ltd Property owner and Singapore investment holding Central Mall Pte Ltd Property owner Singapore Cideco Pte. Ltd. Property owner Singapore City Capital Corporation Pte Ltd Property owner Singapore City Centrepoint Pte Ltd Property owner Singapore and investment holding City Condominiums Pte Ltd Property owner, Singapore developer and investment holding City Developments Realty Limited Investment in shares Singapore and investment holding City e-solutions Limited Investment holding Cayman Islands and provision of consultancy services City Serviced Offices Pte. Ltd. Operating serviced Singapore offices City Developments Limited Annual Report

255 Notes to the Financial Statements Year ended 31 December Significant investments (cont d) Subsidiaries (cont d) Direct/Indirect Subsidiaries of the Company (cont d) Effective Principal Country of Group Activity Incorporation Interest % % * * * * * Citydev Investments Pte. Ltd. Investment in shares Singapore and investment holding Citydev Real Estate (Singapore) Pte Ltd Property owner Singapore Cityview Place Holdings Pte. Ltd. Property owner Singapore and developer Darfera Pte Ltd Property owner Singapore and developer Eccott Pte Ltd Investment holding Singapore and property owner *** Educado Company Limited Investment in shares Hong Kong * * * Elishan Investments Pte Ltd Property owner Singapore Elite Holdings Private Limited Property owner Singapore and developer Empire City Consultant Pte Ltd Management of properties Singapore ^ empire Investments Limited Investment holding Bermuda * * * * * * * ** ** * ** Fairsteps Properties Pte. Ltd. Property owner, Singapore 100 developer and investment holding Glades Properties Pte. Ltd. Property owner, Singapore 100 developer and investment holding Guan Realty (Private) Limited Property owner Singapore and developer Highgrove Investments Pte Ltd Property owner Singapore Hong Leong Properties Pte. Limited Property owner Singapore Island City Garden Development Pte. Ltd. Property owner, Singapore developer and investment holding Land Equity Development Pte Ltd Property owner Singapore Lingo Enterprises Limited Property holding Hong Kong and property investment Millennium & Copthorne Hotels plc Investment holding United Kingdom North Bridge Commercial Complex Pte Ltd Property holding Singapore Pacific Height Enterprises Company Limited Property investment Hong Kong City Developments Limited Annual Report

256 Notes to the Financial Statements Year ended 31 December Significant investments (cont d) Subsidiaries (cont d) Direct/Indirect Subsidiaries of the Company (cont d) Effective Principal Country of Group Activity Incorporation Interest % % ** Palmerston Holdings Sdn. Bhd. Property owner Malaysia and developer ^ Reach Across International Limited Investment holding British Virgin Islands * * * * Republic Plaza City Club (Singapore) Owner and operator Singapore Pte Ltd of club Singapura Developments (Private) Limited Property owner, Singapore developer and investment holding Sunshine Plaza Pte Ltd Property owner, Singapore developer and investment holding Target Realty Limited Property owner, Singapore developer and investment holding **** Tianjin Trophy Real Estate Co., Ltd. Property investment People s Republic 100 of China * The Corporate Building Pte Ltd Property holding Singapore * The Corporate Office Pte Ltd Property holding Singapore * The Office Chamber Pte Ltd Property holding Singapore ^ Wideachieve Holdings Limited Investment holding British Virgin Islands Direct/Indirect Subsidiaries of Millennium & Copthorne Hotels plc ** ** ** ** ** ** ** Anchorage-Lakefront Hotel owner United States Limited Partnership of America Bostonian Hotel Limited Partnership Hotel owner United States of America CDL (New York) LLC Hotel owner United States of America CDL Hotels (Chelsea) Limited Hotel owner and operator United Kingdom CDL Hotels (Korea) Ltd. Hotel owner and operator Republic of Korea CDL Hotels (Malaysia) Sdn. Bhd. Hotel owner and operator Malaysia CDL Hotels (U.K.) Limited Hotel owner and operator United Kingdom City Developments Limited Annual Report

257 Notes to the Financial Statements Year ended 31 December Significant investments (cont d) Effective Principal Country of Group Activity Incorporation Interest % % Subsidiaries (cont d) Direct/Indirect Subsidiaries of Millennium & Copthorne Hotels plc (cont d) ** ** ** ** * ** ** ** ** ** ** ** * ** ** * CDL Hotels USA Inc. Hotel investment United States holding company of America CDL Investments New Zealand Limited Investment and property/ New Zealand management company CDL West 45 th Street LLC Hotel owner United States of America Chicago Hotel Holdings, Inc. Hotel owner and operator United States of America City Hotels Pte. Ltd. Hotel operator and Singapore investment holding company Copthorne Hotel (Birmingham) Limited Hotel owner and operator United Kingdom Copthorne Hotel (Gatwick) Limited Hotel owner and operator United Kingdom Copthorne Hotel (Manchester) Limited Hotel owner and operator United Kingdom Copthorne Hotel (Newcastle) Limited Hotel owner and operator United Kingdom Copthorne Hotel (Slough) Limited Hotel owner and operator United Kingdom Copthorne Hotel Holdings Limited Hotel investment United Kingdom holding company Copthorne Hotels Limited Hotel investment United Kingdom holding company Copthorne Orchid Hotel Singapore Hotel owner and operator Singapore Pte Ltd Gateway Regal Holdings LLC Hotel owner and operator United States of America Grand Plaza Hotel Corporation Hotel owner and operator Philippines and investment holding company Harbour View Hotel Pte. Ltd. Hotel operator Singapore ** Hong Leong Hotel Development Limited Hotel owner and operator Taiwan ^ Hong Leong Hotels Pte Ltd. Investment holding company Cayman Islands City Developments Limited Annual Report

258 Notes to the Financial Statements Year ended 31 December Significant investments (cont d) Subsidiaries (cont d) Direct/Indirect Subsidiaries of Millennium & Copthorne Hotels plc (cont d) Effective Principal Country of Group Activity Incorporation Interest % % ** * * ** ** ** ** ** * ** Hospitality Group Limited Holding company New Zealand Hospitality Holdings Pte. Ltd. Investment holding Singapore company King s Tanglin Shopping Pte. Ltd. Property owner Singapore London Britannia Hotel Limited Hotel owner and operator United Kingdom London Tara Hotel Limited Hotel owner and operator United Kingdom M&C Crescent Interests, LLC Property owner United States of America M&C Hotel Interest, Inc Hotel management United States services company of America M&C Hotels France SAS Hotel owner France M&C REIT Management Limited REIT investment Singapore management services Millennium & Copthorne Hotels Hotel investment New Zealand New Zealand Limited holding company * Millennium & Copthorne Hotels and resorts Singapore International Limited management ** Quantum Limited Holding company New Zealand * ** ** Republic Hotels & Resorts Limited Hotel operator and Singapore investment holding company RHM-88, LLC Hotel owner and operator United States of America WHB Biltmore LLC Hotel owner and operator United States of America Direct/Indirect Subsidiaries of City e-solutions Limited ** ** Richfield Hospitality, Inc. Investment holding and United States provision of hospitality of America related services Sceptre Hospitality Resources, Inc. Provision of reservation United States system services of America ^ SWAN Holdings Limited Investment holding Bermuda ** SWAN USA, Inc. Holding company United States of America City Developments Limited Annual Report

259 Notes to the Financial Statements Year ended 31 December Significant investments (cont d) Effective Principal Country of Group Activity Incorporation Interest % % Associates Associate of Millennium & Copthorne Hotels plc * CDL Hospitality Trusts See Note (1) Singapore Associate of City e-solutions Limited # Tune Hospitality Investments Developer and owner of a United Arab Emirates 21 - FZCO portfolio of no-frills limited service hotels in ASEAN Jointly-controlled Entities Jointly-controlled Entities of the Company * * * Aster Land Development Pte Ltd Property development Singapore and investment dealing activities Branbury Investments Ltd Property owner Singapore Burlington Square Investment Pte Ltd Property owner Singapore * * Burlington Square Properties Pte Ltd Property sales Singapore and ownership City Sunshine Holdings Pte. Ltd. Property owner Singapore ** * Exchange Tower Ltd. Investment holding Thailand Glengary Pte. Ltd. Property owner Singapore and developer # Grange 100 Pte. Ltd. Property investment Singapore 40 and owner * ** ** Granmil Holdings Pte Ltd Property owner Singapore and developer Krungthep Rimnam Ltd. Hotel business Thailand P.T. City Island Utama Property owner Indonesia and developer * Richmond Hotel Pte Ltd Property owner Singapore and developer # South Beach Consortium Pte. Ltd. Investment holding Singapore 33 * * * * Summervale Properties Pte. Ltd. Property owner Singapore 50 and developer TC Development Pte. Ltd. Property developer Singapore and owner Tomlinson Hotel Pte. Ltd. Hotel owner Singapore Tripartite Developers Pte. Limited Property developer Singapore City Developments Limited Annual Report

260 Notes to the Financial Statements Year ended 31 December Significant investments (cont d) Effective Principal Country of Group Activity Incorporation Interest % % Jointly-controlled Entities (cont d) Jointly-controlled Entity of Millennium & Copthorne Hotels plc ^ New Unity Holdings Limited Investment holding British Virgin Islands company Jointly-controlled Entity of City e-solutions Limited * Mindchamps Holdings Pte. Ltd. Provision of education and Singapore 26 - learning related services * ** *** **** ^ # Audited by KPMG Singapore Audited by other member firms of KPMG International Audited by S.Y. Yang & Company, Hong Kong Audited by Sino-Reality Certified Public Accountants, People s Republic of China Not subject to audit by law of country of incorporation Auditors have not been appointed as at 31 December 2007 Note (1) CDL Hospitality Trusts is a stapled group comprising CDL Hospitality Real Estate Investment Trust ( H-REIT ), a real estate investment trust, and CDL Hospitality Business Trust ( HBT ), a business trust. H-REIT has an investment strategy of investing directly or indirectly, in a diversified portfolio of income-producing real estate which is primarily used for hospitality and/or hospitality-related purposes, whether wholly or partially, and real-estate related assets in relation to the foregoing. HBT is a business trust which is dormant. It exists primarily as a master lessee of last resort and will become active if H-REIT is unable to appoint a master lessee for any of the Singapore hotels in its portfolio at the expiry of the relevant master lease agreement or for a newly acquired hotel. HBT may also become active if it undertakes certain hospitality and hospitality-related development projects, acquisitions and investments which may not be suitable for H-REIT. 42 Comparative figures Certain comparative figures have been restated due to the change in accounting policy as detailed in note 2.6. Certain items in the comparative figures have been reclassified to conform with the current year s presentation. City Developments Limited Annual Report

261 APPENDIX IV UNAUDITED FINANCIAL STATEMENTS OF CITY DEVELOPMENTS LIMITED AND ITS SUBSIDIARIES FOR THE SECOND QUARTER AND HALF YEAR ENDED 30 JUNE 2008 The information in this Appendix IV has been reproduced from the unaudited financial statements of City Developments Limited and its subsidiaries for the second quarter and half year ended 30 June 2008 and has not been specifically prepared for inclusion in this Information Memorandum and references to the page numbers herein are those as reproduced from the unaudited financial statements of City Developments Limited and its subsidiaries for the second quarter and half year ended 30 June

262 CITY DEVELOPMENTS LIMITED (REG. NO Z) UNAUDITED SECOND QUARTER AND HALF YEAR FINANCIAL STATEMENT FOR THE PERIOD ENDED 30 JUNE 2008 PART I INFORMATION REQUIRED FOR ANNOUNCEMENTS OF QUARTERLY (Q1, Q2 & Q3), HALF- YEAR AND FULL YEAR RESULTS 1(a) An income statement (for the group) together with a comparative statement for the corresponding period of the immediately preceding financial year. These figures have not been audited. The Group The Group Second quarter ended Half year ended 30 June Incr/ 30 June Incr/ (Decr) (Decr) S$'000 S$'000 % S$'000 S$'000 % Revenue 780, , ,539,516 1,544,285 (0.3) Cost of sales (337,516) (365,188) (7.6) (670,719) (776,047) (13.6) Gross profit 443, , , , Other operating income (2) 3,385 6,600 (48.7) 5,005 17,498 (71.4) Administrative expenses (3) (117,887) (130,397) (9.6) (248,328) (249,669) (0.5) Other operating expenses (4) (103,748) (109,648) (5.4) (206,837) (217,185) (4.8) Profit from operations 224, , , , Finance income (5) 7,772 10,069 (22.8) 16,062 30,677 (47.6) Finance costs (6) (24,907) (29,082) (14.4) (54,872) (59,257) (7.4) Net finance costs (17,135) (19,013) (9.9) (38,810) (28,580) 35.8 Share of after-tax profit of associates (7) 7,564 5, ,800 8, Share of after-tax profit of jointly-controlled entities (8) 33,494 84,194 (60.2) 90, ,853 (28.5) Profit before income tax (1) 248, , , , Income tax expense (9) (46,854) 13,169 NM (89,203) (12,998) Profit for the period 202, ,478 (22.4) 392, ,487 (4.9) Attributable to: Equity holders of the Company 165, ,434 (15.1) 330, , Minority interests 36,903 66,044 (44.1) 62,035 91,970 (32.5) Profit for the period 202, ,478 (22.4) 392, ,487 (4.9) Earnings per share - basic 17.5 cents 20.7 cents (15.5) 35.6 cents 34.5 cents diluted 17.3 cents 20.4 cents (15.2) 34.6 cents 33.6 cents 3.0 NM: Not Meaningful Page 1 260

263 CITY DEVELOPMENTS LIMITED (REG. NO Z) Notes to the Group's Income Statement: (1) Profit before income tax includes the following: The Group Second quarter ended 30 June The Group Half year ended 30 June S$'000 S$'000 S$'000 S$'000 Interest income 7,028 11,307 15,208 22,261 (Loss)/profit on sale of investments, property, plant and equipment (net) (603) (472) (585) 795 Investment income 2,984 3,848 3,837 5,069 Depreciation and amortisation (33,449) (34,865) (66,580) (69,342) Interest expenses (22,070) (28,057) (47,591) (57,248) Net exchange (loss)/gain (4,629) 2,487 (370) 2,287 Mark-to-market (loss)/gain on financial assets held for trading (net) (920) (1,290) (5,186) 8,364 (2) Other operating income, comprising mainly management fee, miscellaneous income and net exchange gain, decreased by $3.2 million for Q and $12.5 million for 1H The decreases were due to exchange loss arising from foreign loans and lower management fees. In addition, the profit from partial sale of stapled securities held in CDL Hospitality Trusts and the release of 1.0 million (approximately S$3.0 million) property tax provision set aside by its subsidiary, Millennium & Copthorne Hotels plc on the acquisition of Regal hotels located in United States in 1999 following protracted negotiations in Q had also attributed to the decline in 1H (3) Administrative expenses comprise mainly depreciation, hotel administrative expenses, operating lease expenses and salaries and related expenses, decreased by $12.5 million for Q and $1.3 million for 1H 2008 primarily due to lower salaries and related expenses. This is partially offset by higher rental expenses incurred for the leasing of hotels from CDL Hospitality Trusts. (4) Other operating expenses comprise mainly property taxes and insurance on hotels, hotel other operating expenses and professional fees. (5) Finance income comprises mainly interest income and mark-to-market gain on financial assets held for trading. The finance income is lower by $2.3 million for Q and $14.6 million for 1H 2008 on account of lower interest income earned from fixed deposits and decline in mark-to-market gain on financial assets held for trading. (6) Finance costs comprise primarily interest on borrowings, mark-to-market loss on financial assets held for trading and amortisation of capitalised transaction costs on borrowings. Finance costs decreased by $4.2 million and $4.4 million for Q and 1H 2008 respectively on account of lower average borrowings. (7) Share of after-tax profit of associates relates mainly to the Group s share of results of CDL Hospitality Trusts. Page 2 261

264 CITY DEVELOPMENTS LIMITED (REG. NO Z) (8) Share of after-tax profit of jointly-controlled entities decreased by $50.7 million for Q and $36.1 million for 1H 2008 primarily due to lower contributions from St. Regis Residences, The Marina Bay and Cuscaden Residences. (9) Income tax expense for the period is derived at by applying the varying statutory tax rates on the taxable profits/(losses) and taxable/deductible temporary differences of the different countries in which the Group operates. The Group The Group Second quarter Half year 30 June 30 June The tax charge/(credit) relates to the following: S$'m S$'m S$'m S$'m Profit for the period Under/(Over)provision in respect of prior periods 5.3 (59.0) 3.4 (62.9) 46.9 (13.2) The $59.0 million and $62.9 million write-back of overprovision of tax for Q and 1H 2007 are primarily due to changes made in the UK tax legislation on hotel tax allowances and reduction in tax rates in various geographical regions where the Group s operations are located. Excluding the under/(over)provision in respect of prior periods, the effective tax rate for the Group is 16.7% for Q (Q2 2007: 18.5%) and 17.8% for 1H 2008 (1H 2007: 17.8%). Page 3 262

265 CITY DEVELOPMENTS LIMITED (REG. NO Z) 1(b)(i) A balance sheet (for the issuer and group), together with a comparative statement as at the end of the immediately preceding financial year. Note < The Group > <-- The Company ----> As at As at As at As at S$'000 S$'000 S$'000 S$'000 Non-current assets Property, plant and equipment 3,835,218 4,038, , ,202 Investment properties 2,308,643 2,468, , ,942 Investments in subsidiaries - - 2,258,734 2,258,755 Investment in associates (1) 337, , Investments in jointly-controlled entities (2) 679, ,213 34,159 34,159 Investments in financial assets 175, ,880 36,379 39,307 Other non-current assets (3) 35, , , ,897 7,371,803 7,769,600 2,857,736 2,846,262 Current assets Development properties 2,838,673 2,578,015 1,632,706 1,428,690 Consumable stocks 12,076 14, Financial assets 34,873 67, Trade and other receivables 1,058,210 1,076,947 2,323,003 2,278,295 Cash and cash equivalents 573, ,602 54, ,027 4,517,629 4,448,950 4,010,013 3,810,012 Assets classified as held for sale (4) 487, Total assets 12,376,491 12,218,550 6,867,749 6,656,274 Equity attributable to equity holders of the Company Share capital 1,991,397 1,991,397 1,991,397 1,991,397 Reserves 3,256,284 3,207,387 2,325,227 2,343,449 5,247,681 5,198,784 4,316,624 4,334,846 Minority interests 1,628,111 1,717, Total equity 6,875,792 6,916,397 4,316,624 4,334,846 Non-current liabilities Interest-bearing borrowings* 2,903,052 3,235,377 1,636,572 1,618,809 Employee benefits 37,143 36, Other liabilities 60,533 74,739 19,868 21,336 Provisions 3,215 3, Deferred tax liabilities 428, ,812 72,574 45,999 3,432,072 3,777,391 1,729,014 1,686,144 Current liabilities Trade and other payables 650, , , ,932 Interest-bearing borrowings* 1,152, , , ,647 Employee benefits 14,734 15,718 1,615 1,625 Other liabilities 2,060 2, Provision for taxation 105, ,894 29,303 32,080 Provisions 7,150 9, ,932,318 1,524, , ,284 Liabilities classified as held for sale (4) 136, Total liabilities 5,500,699 5,302,153 2,551,125 2,321,428 Total equity and liabilities 12,376,491 12,218,550 6,867,749 6,656,274 * These balances are stated at amortised cost after taking into consideration the related transaction costs. Page 4 263

266 CITY DEVELOPMENTS LIMITED (REG. NO Z) Notes to the Balance Sheet of the Group 1) The increase is mainly due to additional investment in First Sponsor Capital Limited and share of profit of CDL Hospitality Trusts, partially offset by dividend received. 2) The increase is due primarily to share of jointly-controlled entities after-tax profit for the period. 3) The decrease is due to the reclassification of lease premium prepayments to property, plant and equipment. 4) The assets and liabilities classified as held for sale, in accordance to Singapore Financial Reporting Standards 105 Non-current assets held for sale and discontinued operations, comprised the following: a) A wholly-owned subsidiary of City Developments Limited had entered into a sale and purchase agreement on 19 June 2008 to sell Commerce Point for a total sale consideration of $180.7 million. Accordingly, the carrying amount of this property and liabilities directly associated with it had been transferred to Assets classified as held for sale and Liabilities classified as held for sale. The sale was completed on 3 July b) A wholly-owned subsidiary of Millennium & Copthorne Hotels plc, a 53% subsidiary of City Developments Limited, had entered into a conditional agreement on 24 June 2008 to sell the 100% holding in CDL Hotels (Korea) Limited for a total sale consideration of KRW468.6 billion. Completion of the transaction is expected to take place on 30 September 2008 (or such other dates as the parties agree). Henceforth, the associated assets and liabilities of CDL Hotels (Korea) Limited were transferred to Assets classified as held for sale and Liabilities classified as held for sale. 1(b)(ii) Aggregate amount of group s borrowings and debt securities. The Group s net borrowings refer to aggregate borrowings from banks, financial institutions and finance lease creditors, after deducting cash and cash equivalents. It excludes advances from minority shareholders of certain subsidiaries, deferred real estate taxes payable, retention sums payable, other payables and deposits received. Unamortised balance of transaction costs have not been deducted from the gross borrowings. As at As at 30/06/ /12/2007 S$'000 S$'000 Unsecured -repayable within one year 1,050, ,986 -repayable after one year 2,141,415 2,362,822 (a) 3,192,001 3,157,808 Secured -repayable within one year 102,578 2,206 -repayable after one year 858, ,484 (b) 960, ,690 Gross borrowings (a)+(b) 4,152,737 4,039,498 Less: cash and cash equivalents (592,250) (711,602) Net borrowings 3,560,487 3,327,896 Details of any collateral Where secured, borrowings are collateralised by: - mortgages on the borrowing companies development, investment and hotel properties; and - assignment of all rights and benefits to sale, lease and insurance proceeds in respect of development, investment and hotel properties. Page 5 264

267 CITY DEVELOPMENTS LIMITED (REG. NO Z) 1(c) A cash flow statement (for the group), together with a comparative statement for the corresponding period of the immediately preceding financial year. Second quarter ended Half year ended 30 June 30 June S$'000 S$'000 S$'000 S$'000 Operating Activities Profit before income tax 248, , , ,485 Adjustments for: Depreciation and amortisation 33,449 34,865 66,580 69,342 Dividend income (2,984) (3,848) (3,837) (5,069) Finance income (7,772) (10,069) (16,062) (30,677) Finance costs 24,907 29,082 54,872 59,257 Gain on disposal of investment in an associate - (3) - (1,257) (Gain)/loss on liquidation of jointly-controlled entities (346) 24 (346) 24 Loss on sale of property, plant and equipment Profit on sale of investments - (173) - (173) Property, plant and equipment w ritten off 3, , Share of after-tax profit of associates (7,564) (5,545) (10,800) (8,330) Share of after-tax profit of jointly-controlled entities (33,494) (84,194) (90,744) (126,853) Units in an associate receivable in lieu of fee income (1,526) - (3,792) - Value of employee services received for issue of share options ,344 1,123 Operating profit before w orking capital changes 258, , , ,077 Changes in w orking capital Development properties (88,915) 79,683 (242,955) (160,911) Stocks, trade and other receivables 9,982 (38,361) (2,011) (21,975) Trade and other payables 92,618 (3,903) 76,940 17,313 Employee benefits (908) (4,586) (1,591) (5,606) Cash generated from operations 271, , , ,898 Income tax paid (31,912) (41,310) (45,475) (47,454) Cash flows from operating activities carried forw ard 239, , , ,444 Page 6 265

268 CITY DEVELOPMENTS LIMITED (REG. NO Z) Second quarter ended Half year ended 30 June 30 June S$'000 S$'000 S$'000 S$'000 Cash flows from operating activities brought forward 239, , , ,444 Investing Activities Capital expenditure on investment properties (3,640) (2,438) (5,128) (3,813) Dividends received - an associate ,645 7,947 - financial investments 2,986 4,269 3,837 4,321 Interest received 6,031 10,875 14,041 23,388 Proceeds from sale of property, plant and equipment Proceeds from disposal of interest in an associate - 1,230-3,893 Proceeds from liquidation of a jointly-controlled entity Purchase of investments in associates (42,735) (4,551) (63,926) (4,551) Purchase of investments in jointly-controlled entities (43,203) (7,199) (43,203) (7,199) Disposal/(purchase) of financial assets 21,591 (3,952) 21,540 (28,900) Payments for purchase of property, plant and equipment (125,189) (32,640) (195,225) (111,115) Cash flows from investing activities (1) (183,457) (34,123) (252,667) (115,623) Financing Activities Advances from/(to) related corporations 34,780 (3,066) 21,138 (6,324) (Return of capital)/capital contribution from minority shareholders (15,484) 22,270 (15,484) 26,102 Dividends paid (239,098) (178,366) (239,098) (189,927) Finance lease payments (156) (315) (174) (3,402) Interest paid (including amounts capitalised as property, plant and equipment and development properties) (34,705) (43,746) (60,606) (76,051) Net proceeds/(repayment) from revolving credit facilities and short-term bank borrowings 132,948 28,602 (35,633) 286,222 Payment of financing transaction costs (273) (1,149) (513) (2,005) Proceeds from bank borrowings 65, , , ,263 Proceeds from issuance of bonds and notes - 168, , ,206 Increase in/(repayment of) other long-term liabilities (1,531) (767) Repayment of bank borrowings (60,085) (158,830) (64,132) (284,798) Repayment of bonds and notes - (160,392) (50,000) (450,920) Cash flows from financing activities (116,743) (222,121) (119,842) (100,401) Net decrease in cash and cash equivalents carried forward (60,996) (55,490) (104,826) (50,580) Page 7 266

269 CITY DEVELOPMENTS LIMITED (REG. NO Z) ` Second quarter ended Half year ended 30 June 30 June S$'000 S$'000 S$'000 S$'000 Net decrease in cash and cash equivalents brought forward (60,996) (55,490) (104,826) (50,580) Cash and cash equivalents at beginning of the period 656, , , ,605 Effect of exchange rate changes on balances held in foreign currencies (4,670) 18,593 (14,731) 15,288 Cash and cash equivalents at end of the period 591, , , ,313 Cash and cash equivalents comprise:- Cash and cash equivalents as shown in the Balance Sheet 573, , , ,972 Cash and cash equivalents included in assets classified as held for sale 18,453-18,453 - Bank overdrafts included in interest-bearing borrowings (1,241) (1,659) (1,241) (1,659) 591, , , ,313 Notes to consolidated cash flow statement (1) The Group had net cash outflow for investing activities of $183.5 million for Q (Q2 2007: cash outflow of $34.1 million) and $252.7 million for 1H 2008 (1H 2007: cash outflow $115.6 million). This is due mainly to additional investment in First Sponsor Capital Limited, investment in a joint venture in Russia, purchase of freehold interest of the Copthorne Hotel Auckland Harbour City and cost incurred for renovation at Millennium Bostonian and Millennium Knickerbocker which is still in the progress. Page 8 267

270 CITY DEVELOPMENTS LIMITED (REG. NO Z) 1(d)(i) A statement (for the issuer and group) showing either (i) all changes in equity or (ii) changes in equity other than those arising from capitalisation issues and distributions to shareholders, together with a comparative statement for the corresponding period of the immediately preceding financial year. < Attributable to equity holders of the Company > Exch. The Group Share Cap. Other Fluct. Accum. Minority Total Capital Res. Res.* Res. Profits Total Interests Equity S$m S$m S$m S$m S$m S$m S$m S$m At 1 January , , , , ,916.4 Translation differences on consolidation of foreign subsidiaries (38.3) - (38.3) (41.2) (79.5) Exchange differences on monetary items forming part of net investments in foreign entities (15.0) - (15.0) (5.0) (20.0) Change in fair value of equity investments available for sale - - (2.8) - - (2.8) - (2.8) Share of other reserve movement of an associate - - (0.3) - - (0.3) (0.3) (0.6) Net losses recognised directly in equity - - (3.1) (53.3) - (56.4) (46.5) (102.9) Profit for the period Total recognised income and expenses for the period - - (3.1) (53.3) (21.4) 87.2 Value of employee services received for issue of share options At 31 March , (17.2) 3, , , ,004.3 Translation differences on consolidation of foreign subsidiaries (31.7) - (31.7) (38.5) (70.2) Exchange differences on monetary items forming part of net investments in foreign entiites (3.1) - (3.1) (1.1) (4.2) Change in fair value of equity investments available for sale - - (2.7) - - (2.7) - (2.7) Share of other reserve movement of an associate Net losses recognised directly in equity - - (2.5) (34.8) - (37.3) (39.4) (76.7) Profit for the period Total recognised income and expenses for the period - - (2.5) (34.8) (2.5) Change of interest in subsidiaries (15.5) (15.5) Value of employee services received for issue of share options Dividends (188.3) (188.3) (50.8) (239.1) At 30 June , (52.0) 3, , , ,875.8 * Other reserves comprise mainly Fair Value Reserve arising from available-for-sale investments. Page 9 268

271 CITY DEVELOPMENTS LIMITED (REG. NO Z) < Attributable to equity holders of the Company > Exch. The Group Share Cap. Other Fluct. Accum. Minority Total Capital Res. Res.* Res. Profits Total Interests Equity S$m S$m S$m S$m S$m S$m S$m S$m At 1 January , , , , ,380.1 Translation differences on consolidation of foreign subsidiaries (9.4) - (9.4) (2.9) (12.3) Exchange differences on hedge of net investments in foreign entities (0.2) - (0.2) (0.1) (0.3) Exchange differences on monetary items forming part of net investments in foreign entiites (1.9) - (1.9) (1.7) (3.6) Change in fair value of equity investments available for sale Share of hedging reserve of an associate - - (0.1) - - (0.1) (0.1) (0.2) Actuarial losses on defined benefit plans (1.0) (1.0) (0.9) (1.9) Net gains/(losses) recognised directly in equity (11.5) (1.0) (8.6) (5.7) (14.3) Profit for the period Total recognised income and expenses for the period (11.5) Change of interest in subsidiaries Value of employee services received for issue of share options Dividends (5.1) (5.1) At 31 March , , , , ,517.1 Translation differences on consolidation of foreign subsidiaries Exchange differences on hedge of net investments in foreign entities (1.3) - (1.3) (1.6) (2.9) Exchange differences on monetary items forming part of net investments in foreign entiites Change in fair value of equity investments available for sale Share of hedging reserve of an associate - - (0.1) - - (0.1) (0.1) (0.2) Actuarial losses on defined benefit plans (1.5) (1.5) (1.4) (2.9) Net gains/(losses) recognised directly in equity (1.5) Profit for the period Total recognised income and expenses for the period Change of interest in subsidiaries Acquisition of interest in a subsidiary Value of employee services received for issue of share options Dividends (136.9) (136.9) (47.9) (184.8) At 30 June , , , , ,697.2 * Other reserves comprise mainly Fair Value Reserve arising from available-for-sale investments. Page

272 CITY DEVELOPMENTS LIMITED (REG. NO Z) The Company Share Capital Fair Value Accumulated Capital Reserve Reserve Profits Total S$m S$m S$m S$m S$m At 1 January , , ,334.8 Change in fair value of equity investments available for sale Net gain recognised directly in equity Profit for the period Total recognised income and expenses for the period At 31 March , , ,380.5 Change in fair value of equity investments available for sale - - (2.5) - (2.5) Net loss recognised directly in equity - - (2.5) - (2.5) Profit for the period Total recognised income and expenses for the period - - (2.5) Dividends (188.3) (188.3) At 30 June , , ,316.6 Page

273 CITY DEVELOPMENTS LIMITED (REG. NO Z) The Company Share Capital Fair Value Accumulated Capital Reserve Reserve Profits Total S$m S$m S$m S$m S$m At 1 January , , ,906.4 Change in fair value of equity investments available for sale Net gain recognised directly in equity Profit for the period Total recognised income and expenses for the period At 31 March , , ,950.5 Change in fair value of equity investments available for sale Net gain recognised directly in equity Profit for the period Total recognised income and expenses for the period Dividends (136.9) (136.9) At 30 June , , ,146.3 Page

274 CITY DEVELOPMENTS LIMITED (REG. NO Z) 1(d)(ii) Details of any changes in the company's share capital arising from rights issue, bonus issue, share buy-backs, exercise of share options or warrants, conversion of other issues of equity securities, issue of shares for cash or as consideration for acquisition or for any other purpose since the end of the previous period reported on. State also the number of shares that may be issued on conversion of all the outstanding convertibles as well as the number of shares held as treasury shares, if any, against the total number of issued shares excluding treasury shares of the Company, as at the end of the current financial period reported on and as at the end of the corresponding period of the immediately preceding financial year. Ordinary share capital There was no change in the Company s issued share capital during the three months ended 30 June Preference share capital There was no change in the Company s issued preference share capital during the three months ended 30 June As at 30 June 2008, the maximum number of ordinary shares that may be issued upon full conversion of all of the non-redeemable convertible non-cumulative preference shares of the Company ( Preference Shares ) at the sole option of the Company is 44,998,898 ordinary shares (30 June 2007: 44,998,898 ordinary shares). 1(d)(iii) To show the total number of issued shares excluding treasury shares as at the end of the current financial period and as at the end of the immediately preceding year. The Company did not hold any treasury shares as at 30 June 2008 and 31 December The total number of issued ordinary shares (excluding treasury shares) as at 30 June 2008 and 31 December 2007 is 909,301,330. The total number of issued Preference Shares as at 30 June 2008 and 31 December 2007 is 330,874,257. 1(d)(iv) A statement showing all sales, transfers, disposal, cancellation and/or use of treasury shares as at the end of the current financial period reported on. There were no sales, transfers, disposal, cancellation and/or use of treasury shares during the three months ended 30 June Whether the figures have been audited or reviewed and in accordance with which auditing standard or practice. The figures have neither been audited nor reviewed by our auditors. 3. Where the figures have been audited or reviewed, the auditors report (including any qualifications or emphasis of a matter). Not applicable. Page

275 CITY DEVELOPMENTS LIMITED (REG. NO Z) 4. Whether the same accounting policies and methods of computation as in the issuer s most recently audited annual financial statements have been applied. The Group has applied the same accounting policies and methods of computation in the financial statements for the current financial period as those applied in the Group's most recently audited financial statements for the year ended 31 December If there are any changes in the accounting policies and methods of computation, including any required by an accounting standard, what has changed, as well as the reasons for, and the effect of, the change. There was no change in the accounting policies and methods of computation. 6. Earnings per ordinary share of the group for the current financial period reported on and the corresponding period of the immediately preceding financial year, after deducting any provision for preference dividends. Second quarter ended Half year ended 30 June 30 June Basic Earnings per share (cents) Diluted Earnings per share (cents) Earnings per share is calculated based on: a) Profit attributable to equity holders of the parent (S$'000) (*) 158, , , ,131 b) Weighted average number of ordinary shares in issue: - basic 909,301, ,301, ,301, ,301,330 - diluted (**) 954,300, ,300, ,300, ,300,228 * After deducting preference dividends of $6,419,000 declared in Q (Q2 2007:$6,386,000). ** For computation of diluted earnings per share, the weighted average number of ordinary shares has been adjusted for any dilutive effect of potential ordinary shares arising from the conversion of all preference shares. 7. Net asset value (for the issuer and group) per ordinary share based on the total number of issued shares (excluding treasury shares) of the issuer at the end of the:- (a) current financial period reported on; and (b) immediately preceding financial year. The Group The Company 30/6/ /12/ /6/ /12/2007 S$ S$ S$ S$ Net Asset Value per ordinary share based on the number of issued 909,301,330 ordinary shares (excluding treasury shares) as at 30 June 2008 (909,301,330 ordinary shares (excluding treasury shares) as at 31 December 2007) Page

276 CITY DEVELOPMENTS LIMITED (REG. NO Z) 8. A review of the performance of the group, to the extent necessary for a reasonable understanding of the group s business. It must include a discussion of the following:- (a) any significant factors that affected the turnover, costs, and earnings of the group for the current financial period reported on, including (where applicable) seasonal or cyclical factors; and (b) any material factors that affected the cash flow, working capital, assets or liabilities of the group during the current financial period reported on. Group Performance The Group s profit before income tax increased for both Q and 1H 2008 by 0.7% and 13.1% respectively, compared to the same corresponding periods in 2007 despite the sub-prime woes. Profit before income tax for 1H 2008 increased to $481.4 million (1H 2007: $425.5 million). For 1H 2007, the Group benefited from substantial one-off tax credits as a result of changes in the UK tax legislation on hotel tax allowances and reduction in tax rates in various geographical regions where the Group s hotel operations are located. Despite the absence of these tax credits in 1H 2008, the Group s profit after tax and minority interest for 1H 2008 increased 3.0% to $330.1 million as compared to $320.5 million in 1H The Group s net profits are core earnings and do not include valuation differences arising from investment properties as the Group adopted the conservative policy of stating them at cost less accumulated depreciation and impairment losses, unlike other listed major developers. Basic earnings per share for 1H 2008 increased 3.2% to 35.6 cents (1H 2007: 34.5 cents). Property development segment remains the main contributor of the Group s profit before tax. Hotel operations continued to be the second biggest contributor to the Group s results. Profit contribution from rental properties had also shown a significant increase of 84.9% to $49.6 million, as compared to 1H Property The property market for Q continued to be subdued. GDP for Q fell to 2.1% compared to 9.1% for Q Though residential property prices remained steady, with a small increase of 0.2% in the price index, transaction volume continued to be low. The sub-prime woes and credit crunch have created poor sentiments and their effects are broader than anticipated. Total turnover for the industry in the first half of the year was 2,147 units, a far cry from the record turnover of 9,385 units in the same period in Nevertheless, Q recorded higher transaction volume with 1,417 units sold, an increase of 94% compared to the 730 units sold during Q The Group just launched 25 units in Phase 1 of the boutique, 77-unit freehold Shelford Suites in June. 16 units have been sold to-date. Anticipating the growth of the mass market, the Group also began previewing its joint-venture project Livia, a 724-unit development at Pasir Ris near Changi Airport, Singapore Expo and Changi Business Park, towards the end of Q When Phase 1 of Livia comprising 360 units, was launched in the first week of July 2008, it was met with overwhelming response with more than 300 units sold. The Group has a 51% share in Livia and profits from this project have not been recognised yet, as construction has just begun. During the year, the Group continued to book in profits from its pre-sold projects namely City Square Residences, Tribeca, The Solitaire, One Shenton and Cliveden at Grange. It also booked in profits from its joint-venture projects such as The Marina Bay, St. Regis Residences, Botannia, The Sentosa Cove, Parc Emily and Ferraria Park. Page

277 CITY DEVELOPMENTS LIMITED (REG. NO Z) The office sector continued to remain steady. The Group s office portfolio continued to enjoy healthy occupancy of over 94% with upward rental revision upon renewal of existing tenancies. Although rental increase has moderated compared to last year, the Group enjoyed good rental growth of 24.3% in 1H 2008 as compared to 1H In June 2008, the Group contracted to sell one of its non-core office assets Commerce Point, for a total consideration of $180.7 million. The sale was completed in July and profits will be booked in Q The securing of tenants for the Group s mega retail complex, City Square Mall continued to progress at a healthy pace. Most of the anchor tenants have already been confirmed and the rest of the space is being taken up progressively. The complex is expected to open for business in Q4 next year. Hotel Millennium & Copthorne Hotels plc (M&C), in which the Group has a 53% interest, achieved a credible set of half year results, in line with its expectations. Revenue for the half year was up by 2.2% to million at constant exchange rates, with hotel revenue growth up by 4.9% to million. M&C Group RevPAR rose 6.0% to for 1H 2008 at constant exchange rates. M&C s net profit before tax for the first half of the year went up 9.2% to 60.3 million, from 55.2 million for 1H Its profit after tax and minority interest for 1H 2008 amounted to 40.4 million, down by 23.3% from 52.7 million in 1H The decline is largely due to M&C benefiting from the changes made in the UK tax legislation in respect of the removal of claw back on hotel tax allowances and reduction in tax rates totalling 17.9 million, which were factored into its 1H 2007 results. The comparison is therefore not like-for-like. In Australia/New Zealand, there was a significant slowdown in general property market conditions. Excluding this property operations, M&C s profit before tax increased by 17.1% for 1H 2008 compared to 1H Hotel operations continued to perform strongly in Singapore, New York and London, although they were partially offset by slower growth in Regional UK and New Zealand, and the impact of the major renovation and total refurbishment works at the Millennium Bostonian in Boston and the Millennium Knickerbocker in Chicago. All the new rooms for these hotels are expected to be completed in August In particular, Singapore experienced healthy growth with a RevPAR increase of 33.3% over Expansion in Asia continued with three more hotels opened in China. After the 352-room Millennium Harbourview Hotel Xiamen (formerly the Crown Plaza Harbourview Hotel Xiamen) contracted under a franchise agreement was opened in January, the 521-room Grand Millennium Beijing was officially opened in April, and the 453-room Copthorne Hotel Qingdao (formerly Hotel Equatorial Qingdao), also contracted under a franchise agreement, in May. In the Middle East, M&C opened four new properties under management contracts, namely, the 352- room Grand Millennium Dubai, the 163-room Copthorne Hotel Dubai, the Al Jahrah Copthorne Hotel & Resort M&C s first property in Kuwait and finally, the 108-room Kingsgate Abu Dhabi Hotel. Page

278 CITY DEVELOPMENTS LIMITED (REG. NO Z) On 24 June 2008, M&C announced the proposed disposal of CDL Hotels (Korea) Limited, a whollyowned subsidiary of M&C with one principal asset, namely the Millennium Seoul Hilton Hotel. The total sale consideration for the 100% holding in the issued share capital in CDL Hotels (Korea) Limited has been agreed at KRW billion (or approximately million based on an exchange rate of 1 to KRW 2,014.9), subject to certain completion adjustments. The disposal is expected to result in a pre-tax profit of approximately million, subject to exchange rate and completion adjustments and net of adjustment costs. Completion of the proposed disposal is expected to take place on 30 September 2008 or such other date as the parties may agree. This sale value is once again a testament to M&C s ability to maximise shareholder value. Notwithstanding the credible results of M&C for 1H 2008, the effect of translating the results at a weakening exchange rate of the Sterling Pound against the Singapore Dollar has resulted in the decline in revenue and profit before tax contributions of the hotel operations. Please also refer to Section 14 for review of the Group s performance by business segments. 9. Where a forecast, or a prospect statement, has been previously disclosed to shareholders, any variance between it and the actual results. The Group s performance for the period under review is in line with its expectations as disclosed in the announcement of results for the first quarter ended 31 March A commentary at the date of the announcement of the significant trends and competitive conditions of the industry in which the group operates and any known factors or events that may affect the group in the next reporting period and the next 12 months. Property With the global economy experiencing a slow-down and credit crunch, compounded by the weak US market, the Singapore economy is inevitably not spared these economic challenges. It is not surprising that many sectors, including the property market, are affected somewhat. The Group is optimistic that under this challenging economic situation lies tremendous opportunities. With its relatively low gearing, the Group is well-positioned with financial prowess to explore various opportunistic investments, at the appropriate time. We have continued to remain nimble and agile in our business approach, committed to finding innovative ways which will be beneficial to our shareholders. The Group is pleased to announce that it will be issuing Singapore s first Islamic Sukuk-Ijarah unsecured financing arrangement, under a proposed $1 billion Islamic Multi-Currency Medium Term Notes (MTN) Programme. This is the first-of-its kind product in Singapore and the Group is excited to be the pioneer for this MTN programme to tap new markets and investors. This issuance marks a milestone for Singapore as the city develops Islamic Finance as an alternative mode for investment and fund raising. This programme will provide the Group with a diversified, alternative and non-traditional financing stream to further enhance its war-chest. The Group will make further announcements on this development in due course. The Group has a diversified portfolio of land bank that caters to the high-end, mid-tier and mass market segments, which it has strategically accumulated at relatively low cost over the years. This enables the Group to adapt to market conditions and tailor its launches to meet changes in market demands. In October 2004, the Group kick-started the property market with the successful launch of The Marina Bay and it continued with timely launches, from 2005 to 1H 2007, of premium properties and innovative lifestyle concepts to meet pent-up demand. Prices of the luxury properties during this period experienced phenomenal growth and the Group managed to lock-in good profits. With the current upward trend for the mass market segment, the Group launched Livia to much success. Despite the high development cost in today s operating climate, the Group has the option to price its launches competitively to sell due to its low land cost as in the case of Livia, and yet still be able to attain healthy profits. Page

279 CITY DEVELOPMENTS LIMITED (REG. NO Z) A few high-end property buyers, who had bought their properties at lower prices at the early stages, could have resorted to panic-selling in the secondary market, for reasons of their own. However, these unusual, low transacted prices should not represent the overall market price and sentiments for the highend market. The slow down in the property market is not as widespread as some may believe. Some research reports have projected oversupply for the residential market. However, the oversupply projection may not happen materially. Firstly, in today s environment, land cost is becoming increasingly more expensive in land scarce Singapore. Under current operating climate, where there is a credit crunch, developers will likely be more cautious in their purchase or tender for land. Secondly, construction costs have also escalated significantly. Developers who delay their residential launches may hold back on their construction plans. Thirdly, the construction industry may continue to face delivery pressures. Even the government has also recently announced the postponement of some public sector projects to ease pressure on construction resources. All these factors have an impact on the supply which may not be as high as some have anticipated. Depending on when market sentiments improve, the paced launches will likely lead to another bottle-neck of pent-up demand in the years to come. Ultimately, sentiments are fundamentally the most important factor in the demand and supply equation. The Group has two projects in the pipeline to launch, namely the 336-unit freehold development at Thomson area called The Arte and the 228-unit exclusive luxury residences at The Quayside Collection at Sentosa Cove. The Group has the option to either proceed to launch and make good profits as its land cost was not high or alternatively, wait for the right time to launch so as to maximise its profits substantially. In view of the very good sales, the Group will be releasing Phase 2 of the remaining units in its Livia project at Pasir Ris. The Group will proceed to construct developments where it has favourably secured reasonable construction cost from reputable and strong construction companies, even before launching them. Construction of the hotel and the residences at The Quayside Collection at Sentosa Cove has already started. Land parcels at Sentosa Cove which are extremely exclusive, limited and difficult to acquire, have all been sold. The Group is therefore confident that the prospects for The Quayside Collection will be good, especially when the Sentosa Integrated Resort (IR) is expected to be completed in It is therefore under no pressure to launch especially since its land cost was low. When the Group decides to launch, it can book in more profits based on the stage of construction at the time of sales. Office leasing is expected to remain strong. Even if there should be a decline in rental rates, the renewed rental rates will still be much higher than compared to the doldrum years when some tenancy agreements were locked in at extremely low rates for a long period of time. A number of the Group s leases are up for renewal at higher rates and its investment properties which it has chosen to carry at cost, will provide good rental yields. The Group has the option to either keep its assets and enjoy the higher yields or dispose some of them, so as to build its war-chest for good acquisition opportunities which may become available at some point in time. Diversification The Group s exposure to overseas regional developments is largely through its portfolio of M&C hotels and joint-venture investments. M&C remains committed to its twin strategy of being both an owner and operator of hotels. It will continue to review and evaluate the potential of its hotel assets, especially since many of its hotels were bought at a low cost and have since appreciated in value. When the opportunity arises, it may unlock the capital value of its assets, such as in the case of its recent disposal of Millennium Seoul Hilton Hotel. Page

280 CITY DEVELOPMENTS LIMITED (REG. NO Z) The Group will continue to explore emerging markets. It had explored Vietnam previously but it found the market at a cyclical high which was not sustainable. Given its current high inflation environment and credit crunch, there may be potential opportunities at some future date. The Group has some investments in China but they are not significant. It has some equity interest in the 521-room Grand Millennium Beijing and owns an almost-completed office project in Tianjin. Currently, the Group has relatively more presence in Thailand. Its early direct investment in the commercial development Exchange Tower, is about 90% occupied. Through Real Estate Capital Asia Partners, L.P (RECAP), a private estate fund, its investment in the 605-unit Millennium Sukhumvit in Bangkok is substantially sold and the mega Jungceylon complex, located at Patong Beach, Phuket s largest shopping mall (approximately 1.5 million square feet) on the island is enjoying good occupancy. This complex was timely acquired at a much lower cost as compared to today s replacement cost. The Group s 421-room Millennium Resort Patong Phuket, located next to the mall, which was officially opened recently, has good potential. Hotel The rate of growth has slowed in Asia in June and July of In this uncertain economic environment, M&C will be more vigilant in controlling costs and in reacting quickly to changing market conditions. Even with a slow-down of the hospitality market in Asia, this will need to be taken into context. Growth in this region (especially in Singapore) has escalated tremendously and it is not realistic to expect continuous linear growth. Even if there is moderation due to the uncertain economic environment, the sector is still performing much better than before the sub-prime woes. While there may be a slower growth, it is highly unlikely to result in a steep downhill decline. Companies are likely to cut back on their corporate travel spending especially for high-end hotels. M&C on the other hand, will benefit from this as the majority of its hotels are in the four-star category and it anticipates a shift in customers selecting this class of hotels instead. M&C expects the RevPAR growth trend of the second quarter to continue into the third quarter, with RevPAR already up by 6.7% in July With its diversified geographical spread, strong balance sheet and low gearing, M&C is in a good position to take advantage of any attractive opportunities that may arise. Furthermore, M&C has 38.6% interest in the Singapore-listed CDL Hospitality Trusts which provides good yields to investors and can also be strategically used as another vehicle for its expansion at the right time. M&C will continue its expansion into key gateway cities in Asia and the Middle East. Two hotels operating under management contracts will open later in the year in China, namely in Chengdu and Wuxi. In the Middle East, a further eight management contracts were signed, with seven in the United Arab Emirates and one in Kuwait. These properties are due to open between 2009 and 2011, and will account for another 2,300 additional rooms. This brings M&C s worldwide pipeline to 4,555 rooms (17 hotels). The 25.1 million major renovation and complete refurbishment at the Millennium Bostonian in Boston and the Millennium Knickerbocker in Chicago will reposition both hotels which are prominently sited in prime locations, into better properties that can charge higher hotel rates than currently. Page

281 CITY DEVELOPMENTS LIMITED (REG. NO Z) Group Prospects The Group has locked in substantial profits from its property sales and its investment properties will provide good yield, even if there is no growth or a decline in rental rates from its peak. We are confident that hotel operations will continue to be a big contributor to the Group s performance. While the Singapore economy remains subdued, it is still fundamentally sound, with no shortage of housing loans, strong governance and a pro-business environment. As Singapore continues to attract foreign talent, these new residents will seek housing options. With our housing loans at low interest rates and present high inflationary trend, this environment is conducive for real estate investments which augur well for the Singapore property market. The plans to develop Singapore into a global city are still progressing well with many of the upcoming developments such as the highly anticipated IRs currently under construction. The Marina Bay IR is poised to attract new large-scale meetings, incentives, conventions, and exhibitions (MICE) business while the other IR at Sentosa, with the largest Universal Studios in Asia, will be a major attraction for leisure travellers. Singapore will also be the host for the inaugural Youth Olympics in The current slow-down in the economy is different from the Asian Financial Crisis of The Group has very little unsold residential stock, a healthy balance sheet and locked-in profits yet to be recognised from its pre-sold residential units. The Group is confident of Singapore s prospects, especially given the Republic s strong fundamentals. When the two IRs become operational, the tourism market in Singapore will experience a new stream of tourist arrivals as well as strong growth in the property market as witnessed in cities like Macau. In the meantime, we will wait for the right time to seize opportunities. The Group is confident of remaining profitable in the next 12 months. 11. Dividend (a) Current Financial Period Reported On Any dividend declared for the current financial period reported on? Yes. The Company had on 14 May 2008 declared a tax-exempt (one-tier) non-cumulative preference dividend to holders of City Developments Limited Preference Shares of 1.94 cents per Preference Share, calculated at the dividend rate of 3.9% per annum of the issue price of $1.00 for each Preference Share, for the dividend period from 31 December 2007 to 29 June The said preference dividend was paid on 30 June Page

282 CITY DEVELOPMENTS LIMITED (REG. NO Z) (b) Corresponding Period of the Immediately Preceding Financial Year Any dividend declared for the corresponding period of the immediately preceding financial year? Yes Name of Dividend Special Interim Ordinary Dividend Preference Dividend Date of payment 30 October July 2007 Dividend Type Cash Cash Dividend Amount (in 10.0 cents (gross) per Ordinary 1.93 cents (net) per Preference Share cents) Share Dividend rate (in %) N.A. 3.9% (net) per annum on the issue price of each Preference Share Dividend period N.A. From 31 December 2006 to 29 June 2007 (both dates inclusive) Issue price N.A. $1.00 per Preference Share Tax rate 18% 18% (c) Date payable Not applicable. (d) Books Closure Date Not applicable. 12. If no dividend has been declared/recommended, a statement to that effect. Not applicable. Page

283 CITY DEVELOPMENTS LIMITED (REG. NO Z) 13. Segmented revenue and results for business or geographical segments (of the group) in the form presented in the issuer s most recently audited annual financial statements, with comparative information for the immediately preceding year. By Business Segments Revenue The Group Second quarter ended Half year ended 30 June 30 June S$'000 S$'000 S$'000 S$'000 Property Development 219, , , ,384 Hotel Operations 487, , , ,968 Rental Properties 61,532 48, ,686 95,465 Others 12,580 13,923 24,479 27, , ,216 1,539,516 1,544,285 Profit before tax (*) Property Development 147, , , ,696 Hotel Operations 74,000 87, , ,402 Rental Properties 24,452 13,934 49,593 26,816 Others 2,662 12,129 2,789 31, , , , ,485 * Includes share of after-tax profit of associates and jointly-controlled entities. Page

284 CITY DEVELOPMENTS LIMITED (REG. NO Z) 14. In the review of performance, the factors leading to any material changes in contributions to turnover and earnings by the business or geographical segments. Property Development Revenue increased by 3.9% for Q to $219.1 million (Q2 2007: $210.9 million) but declined by 3.5% for 1H 2008 to $453.2 million (1H 2007: $469.4 million). Pre-tax profit of $147.8 million and $302.9 million registered for Q and 1H 2008 respectively were 10.5% and 27.4% higher as compared to the corresponding period for Projects that contributed to both revenue and profit for 2008 include City Square Residences, Botannia, One Shenton, Cliveden at Grange, The Solitaire, Tribeca and sale of land banks in New Zealand. In accordance to the Group s policy of equity accounting for the results of its jointly-controlled entities, whilst revenue from The Marina Bay, Parc Emily, The Sentosa Cove, Ferraria Park and St. Regis Residences, had not been consolidated into the Group s total revenue, the Group s share of profits arising from these joint venture developments had been included in pre-tax profit. The increase in revenue for Q was primarily due to revenue recognised for Cliveden at Grange and One Shenton, partially offset by decrease in contribution from Monterey Park, Residences@Evelyn, Savannah CondoPark, The Imperial, The Pier at Robertson, Chelsea Garden and lower sale of land banks in New Zealand. The marginal decline in 1H 2008 revenue was mainly due to the fact that projects such as Butterworth Lane, Monterey Park, The Imperial, The Pier at Robertson, Savannah CondoPark, Residences@Evelyn which had contributed to revenue for 1H 2007, were fully sold by end of This was partially mitigated by revenue accounted for The Solitaire, One Shenton and Cliveden at Grange in 1H The increase in pre-tax profits for Q and 1H 2008 was on account of higher profit margins achieved for projects launched in recent years. Hotel Operations Revenue declined by 2.8% to $487.5 million (Q2 2007: $501.5 million) for Q and 0.9% for 1H 2008 to $943.1 million (1H 2007: $952.0 million) respectively. Pre-tax profit for this segment reported a decrease of 15.4% to $74.0 million (Q2 2007: $87.5 million) for Q and 2.6% to $126.1 million (1H 2007: $129.4 million) for 1H The decrease in both revenue and pre-tax profits for Q and 1H 2008 was mainly due to weakening of sterling pound and US dollar against Singapore dollars, in which the Group s hotel operations in United Kingdom and United States were one of the main contributors. This was however partially mitigated by improvement in the Group s RevPAR, backed by the strong demand in Singapore, London and New York despite Millennium Bostonian in Boston and Millennium Knickerbocker in Chicago currently undergoing renovation. Page

285 CITY DEVELOPMENTS LIMITED (REG. NO Z) Rental Properties Revenue increased by 26.0% for Q to $61.5 million (Q2 2007: $48.8 million) and 24.3% to $118.7 million (1H 2007: $95.5 million) for 1H 2008 on account of general improvements in both average rental rates and occupancy. Pre-tax profit increased by 76.3% to $24.5 million (Q2 2007: $13.9 million) for Q and 85.1% to $49.6 million (1H 2007: $26.8 million) for 1H These increases were a result of higher rental income, the recovery of some property taxes from tenants and increased profit contribution from CDL Hospitality Trusts. Others Revenue, comprising mainly building maintenance contracts, project management, club operations and dividend income, has remained relatively constant at $12.6 million for Q (Q2 2007: $13.9 million) and $24.5 million for 1H 2008 (1H 2007: $27.5 million). Pre-tax profit for this segment had fallen by 77.7% to $2.7 million in Q (Q2 2007: $12.1 million) and 91.1% to $2.8 million in 1H 2008 (1H 2007: $31.6 million). The decline was a result of exchange loss on foreign currency loans and higher mark-to-market loss on financial assets held for trading recognised in 2008 as opposed to mark-to-market gains recorded in 2007 in light of the bearish stock market. 15. A breakdown of the total annual dividend (in dollar value) for the issuer s latest full year and its previous full year. Total Annual Net Dividend (Refer to Para 16 of Appendix 7.2 for the required details) Full Year Full Year S$'000 S$'000 Ordinary 68,198 55,922 Special 188, ,121 Preference 12,904 12,904 Total 269, ,947 The final tax exempt (one-tier) ordinary dividend and special final tax exempt (one-tier) ordinary dividend for the year ended 31 December 2007 of 7.5 cents and 12.5 cents respectively per ordinary share have been approved by the ordinary shareholders at the Annual General Meeting held on 24 April 2008 and the dividend amounts are based on the number of issued ordinary shares as at 8 May A breakdown of sales and operating profit after tax for first half year and second half year Not applicable. Page

286 CITY DEVELOPMENTS LIMITED (REG. NO Z) 17. Interested Person Transactions Interested Persons Aggregate value of all interested person transactions conducted for the quarter ended 30 June 2008 under the IPT Mandate pursuant to Rule 920 (excluding transactions less than $100,000) Hong Leong Investment Holdings Pte. Ltd. Group of companies Property-related : (property management and maintenance services, managing agent's services, security services and cleaning services) $1,077,870 Total $1,077,870 Directors and their immediate family members Nil BY ORDER OF THE BOARD Shufen Catherine Shufen Loh Company Secretary 14 August 2008 Page

287 CITY DEVELOPMENTS LIMITED (REG. NO Z) CONFIRMATION BY THE BOARD The Directors of the Company hereby confirm, to the best of their knowledge, nothing has come to the attention of the Board of Directors which may render the Group s unaudited financial results for the second quarter and the half year ended 30 June 2008 to be false or misleading in any material respect. On behalf of the Board of Directors Kwek Leng Beng Kwek Leng Joo Executive Chairman Managing Director Singapore, 14 August 2008 Page

288 APPENDIX V UNAUDITED FINANCIAL STATEMENTS OF CITY DEVELOPMENTS LIMITED AND ITS SUBSIDIARIES FOR THE THIRD QUARTER AND NINE MONTHS ENDED 30 SEPTEMBER 2008 The information in this Appendix V has been reproduced from the unaudited financial statements of City Developments Limited and its subsidiaries for the third quarter and nine months ended 30 September 2008 and has not been specifically prepared for inclusion in this Information Memorandum and references to the page numbers herein are those as reproduced from the unaudited financial statements of City Developments Limited and its subsidiaries for the third quarter and nine months ended 30 September

289 CITY DEVELOPMENTS LIMITED (REG. NO Z) UNAUDITED THIRD QUARTER AND NINE-MONTH FINANCIAL STATEMENT FOR THE PERIOD ENDED 30 SEPTEMBER 2008 PART I INFORMATION REQUIRED FOR ANNOUNCEMENTS OF QUARTERLY (Q1, Q2 & Q3), HALF- YEAR AND FULL YEAR RESULTS 1(a) An income statement (for the group) together with a comparative statement for the corresponding period of the immediately preceding financial year. These figures have not been audited. The Group The Group Third quarter ended 9-month period ended 30 September Incr/ 30 September Incr/ (Decr) (Decr) S$'000 S$'000 % S$'000 S$'000 % Revenue 688, ,151 (13.6) 2,227,720 2,340,436 (4.8) Cost of sales (285,331) (363,985) (21.6) (956,050) (1,140,032) (16.1) Gross profit 402, ,166 (6.8) 1,271,670 1,200, Other operating income (2) 48,718 7, ,723 24, Administrative expenses (3) (130,427) (130,867) (0.3) (378,755) (380,536) (0.5) Other operating expenses (4) (107,199) (104,096) 3.0 (314,036) (321,281) (2.3) Profit from operations 213, , , , Finance income (5) 4,833 4, ,895 35,255 (40.7) Finance costs (6) (32,099) (27,810) 15.4 (86,971) (87,067) (0.1) Net finance costs (27,266) (23,232) 17.4 (66,076) (51,812) 27.5 Share of after-tax profit of associates (7) 3,692 1, ,492 10, Share of after-tax profit of jointly-controlled entities (8) 30,346 62,420 (51.4) 121, ,273 (36.0) Profit before income tax (1) 220, ,276 (10.0) 702, , Income tax expense (9) (48,625) (44,063) 10.4 (137,828) (57,061) Profit for the period 172, ,213 (14.5) 564, ,700 (8.1) Attributable to: Equity holders of the Company 150, ,489 (11.0) 480, ,006 (1.8) Minority interests 21,291 31,724 (32.9) 83, ,694 (32.6) Profit for the period 172, ,213 (14.5) 564, ,700 (8.1) Earnings per share - basic 16.6 cents 18.6 cents (10.8) 52.2 cents 53.2 cents (1.9) - diluted 15.8 cents 17.8 cents (11.2) 50.4 cents 51.3 cents (1.8) Page 1 287