PARTICULARS TO BE INCLUDED IN AN OFFER INFORMATION STATEMENT OFFER INFORMATION STATEMENT

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1 PARTICULARS TO BE INCLUDED IN AN OFFER INFORMATION STATEMENT OFFER INFORMATION STATEMENT A copy of this Offer Information Statement has been lodged with the Monetary Authority of Singapore (the Authority ). The Authority assumes no responsibility for the contents of this Offer Information Statement. Lodgment of this Offer Information Statement with the Authority does not imply that the Securities and Futures Act, Chapter 289 of Singapore, or any other legal or regulatory requirements, have been complied with. The Authority has not, in any way, considered the merits of the units being offered, or in respect of which an invitation is made, for investment. CAPITACOMMERCIAL TRUST (a unit trust constituted on 6 February 2004 under the laws of the Republic of Singapore) Date of lodgment: 21 April 2005

2 In this Offer Information Statement, capitalised terms not otherwise defined herein have the meaning given to them in the Glossary on pages 22 to 26 of this Offer Information Statement. Any discrepancies between the listed figures and totals below are due to rounding. In the Offer Information Statement, provide the following information: (a) the address of the registered office of the manager of the Fund (the Manager ); The registered office of the Manager, CapitaCommercial Trust Management Limited, is at 39 Robinson Road, #18-01 Robinson Point, Singapore (b) the business carried on and to be carried on by the Fund and the general development of the business since inception of the Fund, indicating any material change in the affairs of the Fund since the last annual report; Business carried on by the Fund and the general development of the business since inception of the Fund CapitaCommercial Trust ( CCT ) is a Singapore-based unit trust established with the objective of owning and investing in real estate and real estate-related assets which are income-producing and used, or predominantly used, for commercial purposes. CCT currently owns one of the largest commercial property portfolios in Singapore, which comprises seven properties in the central business district of Singapore: Capital Tower, 6 Battery Road, Starhub Centre, Robinson Point, Bugis Village, Golden Shoe Car Park and Market Street Car Park (together, the Existing Properties and each, an Existing Property ). CCT was established with the objective of producing regular and stable distributions of income for unitholders of CCT ( Unitholders ) by employing a conservative capital structure with appropriate debt and equity strategies. CCT also aims to achieve long-term capital growth by, among other things: (i) (ii) actively implementing strategies with the objective of maximising returns from CCT s existing commercial space; and selectively acquiring properties that meet the Manager s investment criteria. 1

3 The Manager does not expect the business currently carried on by CCT to change in any material aspect for the foreseeable future. The general development of the business of CCT since its inception is set out below: Date Significant developments 6 February 2004 : The establishment of CCT pursuant to a trust deed dated 6 February 2004 (the Trust Deed ). 23 February 2004 : CCT acquired all the shares of six property holding companies which respectively owned Capital Tower, Starhub Centre, Robinson Point, Bugis Village, Golden Shoe Car Park and Market Street Car Park. 1 March 2004 : Capital Tower, Starhub Centre, Robinson Point, Bugis Village, Golden Shoe Car Park and Market Street Car Park were transferred to CCT as distribution in specie after the member s voluntary liquidation of the aforementioned property holding companies. Separately, CCT directly acquired 6 Battery Road. 11 May 2004 : Units in CCT ( Units ) were listed on the Main Board of Singapore Exchange Securities Trading Limited (the SGX- ST ) and commenced trading on the SGX-ST on a when issued basis. 15 May 2004 : 503,896,645 Units were distributed by CapitaLand Limited to its shareholders by way of a capital reduction and distribution in specie. 17 May 2004 : The Units commenced trading on the SGX-ST on a ready basis. 16 July 2004 : The Manager announced CCT s first interim financial results for the period 15 May 2004 to 30 June 2004, which showed that CCT s actual distributable income had exceeded the forecast stated in CCT s introductory document dated 16 March 2004 (the Introductory Document ) for the same period by 8.1%. 2

4 13 October 2004 : The Manager announced CCT s financial results for the period 15 May 2004 to 30 September 2004 and that CCT s actual distributable income had exceeded the forecast stated in the Introductory Document for the same period by 11.0%. 19 January 2005 : The Manager announced CCT s financial results for the financial period 15 May 2004 to 31 December 2004 and that CCT s actual distributable income had exceeded the forecast stated in the Introductory Document for the same period by 11.2%. A distribution of 3.99 cents per Unit in respect of the said period was also announced. 2 February 2005 : The Manager announced that HSBC Institutional Trust Services (Singapore) Limited (in its capacity as trustee of CCT, the Trustee ) had entered into a conditional put and call option agreement with The Hongkong and Shanghai Banking Corporation Limited ( HSBC ), the vendor of HSBC Building, for the sale and purchase of HSBC Building. 18 April 2005 : The Manager announced CCT s financial results for the period 1 January 2005 to 31 March 2005 and that CCT s actual distributable income had exceeded the forecast stated in the Introductory Document for the same period by 13.5%. CCT has an opportunity to enlarge its portfolio with the purchase of HSBC Building. The Manager is in favour of the acquisition of HSBC Building by CCT (the Acquisition ) as it believes that the inclusion of the property to CCT s portfolio will be beneficial to CCT and its Unitholders. The Manager s rationale for the Acquisition is set out in Appendix 1 of this Offer Information Statement. In addition, further information about HSBC Building and certain pro forma financial information relating to the Acquisition can be found in Appendix 2 of this Offer Information Statement. Material changes in the affairs of the Fund since the last annual report Save as disclosed herein, there have been no material changes in the affairs of CCT since its annual report for the financial period 15 May 2004 to 31 December

5 (c) the description of, and number of units being offered by the Fund; The Manager proposes to issue 57,154,000 new Units (the New Units ) at the issue price of S$1.38 per New Unit (the Issue Price ). Certain information about the status of the New Units and the effect of the proposed issue of New Units on CCT s distribution periods are set out below. Status of the New Units The New Units will only be entitled to participate in the distributable income of CCT for the period from the date of their issue (the Issue Date ) to the last day of the current semiannual distribution period (30 June 2005) whereas the existing Units are entitled to participate in CCT s distributable income in respect of the entire current semi-annual distribution period from 1 January 2005 to 30 June 2005 (the Current Distribution Period ). From the next distribution period following the Current Distribution Period, the New Units will rank pari passu in all respects with the then existing Units, including the right to any distributions which may be paid for that distribution period (1 July 2005 to 31 December 2005) as well as all distributions thereafter. For the avoidance of doubt, the New Units will not be entitled to participate in the distribution of any distributable income accrued by CCT prior to the Issue Date. Upon issue and allotment, the New Units will only be entitled to participate in the distributable income of CCT for the period from the Issue Date to the last day of the Current Distribution Period (30 June 2005) whereas the existing Units are entitled to participate in CCT s distributable income in respect of the whole of the Current Distribution Period. Temporary separate trading counter for the New Units As the New Units will not be entitled to participate in CCT s distributable income for the period from 1 January 2005 to the day immediately prior to the Issue Date, it is necessary for the New Units to trade under a temporary separate trading counter on the SGX-ST for the period commencing from the Issue Date to the last day of cum-distribution trading for both the New Units as well as the existing Units in respect of the Current Distribution Period, which is expected to be in July After the last day of cum-distribution trading, the New Units trading on the temporary separate trading counter as well as the existing Units will be aggregated and traded under the same trading counter on the SGX-ST on the next Market Day, i.e. the first day of ex-distribution trading for both the New Units and the existing Units. 4

6 (d) the offer price, any discount or commission given to the underwriter (if any), and the estimated net proceeds on an aggregate basis to be derived by the Fund from the sale of the units being offered; if it is not possible to state the offer price or the discount or commission, the method by which it is to be determined must be explained; Issue price : S$1.38 per New Unit Underwriting and selling commissions : Approximately S$1.3 million Other fees and expenses (including professional fees and expenses) Estimated net proceeds (being the gross proceeds from the Equity Fund Raising less the estimated amount of underwriting and selling commissions as well as the other fees and expenses (including professional fees and expenses) incurred by CCT in connection with the Equity Fund Raising) : Approximately S$0.7 million : Approximately S$77.0 million The Trust Deed provides that, in respect of an issue of new Units other than by way of a rights issue offered on a pro rata basis to all existing Unitholders (such as the issue of new Units for the purpose of an equity fund raising), the issue price of such new Units must not reflect more than a 5.0% discount to the volume weighted average price for trades done for a full Market Day on the day the placement agreement relating to such issue is signed or, if trading in the Units is not available for a full Market Day, for the preceding Market Day up to the time such a placement agreement is signed. The Issue Price as agreed between the Manager and the Joint Lead Managers and Underwriters (as defined below) represents a 3.5% discount to the volume weighted average price for trades done for the full Market Day immediately preceding 21 April 2005 (the day the Placement Agreement (as defined below) was signed) and for the half Market Day on 21 April 2005 up to the time trading on the SGX-ST closes at p.m.. In arriving at the Issue Price, the Manager and the Joint Lead Managers and Underwriters have taken into account, among other things, the forecast accrued distribution of approximately 2.11 cents for the financial period 1 January 2005 to 28 April 2005 (the day immediately preceding the expected date of completion of the Acquisition and the issue of New Units). 5

7 (e) the range of the closing market price during the 90 days preceding the latest practicable date prior to the lodgment of the Offer Information Statement ( Latest Practicable Date ); Range of closing market price during the 90-day period preceding the Latest Practicable Date (13 December 2004 to 15 April 2005) : Between S$1.23 per Unit and S$1.58 per Unit (f) the principal purposes for which the estimated net proceeds to be derived by the Fund from the sale of the units being offered are intended to be used and the approximate amount intended to be used for each such purpose; if any material amounts of other funds are to be used in conjunction with the proceeds for such purposes, the amounts and sources of such other funds; The principal purposes for which the estimated net proceeds to be derived by the Fund from the sale of the units being offered are intended to be used and the approximate amount intended to be used for each such purpose The Manager intends to use the net proceeds of the Equity Fund Raising to partly finance the Acquisition. The Manager will make appropriate announcements of the utilisation of the proceeds of the Equity Fund Raising as and when such funds are disbursed. The estimated total acquisition costs of HSBC Building (excluding the costs relating to the Equity Fund Raising) amount to approximately S$153.9 million, comprising the purchase price of HSBC Building (S$147.0 million), the sum of S$5.0 million set aside for the purpose of carrying out certain facade works on HSBC Building to be undertaken by HSBC, the acquisition fee payable to the Manager pursuant to the Trust Deed (S$1.5 million) and other fees and expenses (including professional fees and expenses) incurred or to be incurred by the Manager in connection with the Acquisition (S$0.4 million). The Singapore Government announced in the 2005 Budget on 18 February 2005 that stamp duty on the instruments of transfer of Singapore properties into real estate investment trusts already listed, or to be listed, on the SGX-ST will be remitted for a five-year period. Following this announcement, CCT has obtained confirmation from the Commissioner of Stamp Duties that the stamp duty (approximately S$4.4 million) payable on the sale and purchase agreement to be entered into between the Trustee and HSBC for HSBC Building is remitted. The amount and sources of such other funds to be used in conjunction with the proceeds derived by the Fund from the sale of the units The Manager intends to finance the remaining costs of the Acquisition through additional borrowings to be incurred by CCT of approximately S$77.0 million (the Proposed Borrowings ) under a S$160.0 million unsecured 1-year bridging loan facility granted by 6

8 HSBC (the HSBC Facility ). The actual amount to be borrowed will represent the difference between the total acquisition costs of HSBC Building and the net proceeds of the Equity Fund Raising. (g) the place where the Fund was constituted and the date of constitution; CCT was constituted in Singapore on 6 February 2004 pursuant to the Trust Deed. (h) the names and addresses of the directors of the Manager as at the Latest Practicable Date; The names and addresses of the directors of the Manager (the Directors ) are set out in Appendix 5 of this Offer Information Statement. (i) the unitholders fund and borrowings of the Fund, as of the Latest Practicable Date showing: (i) in the case of the unitholders fund, the number of units issued and outstanding; or (ii) in the case of borrowings, the total amount of the borrowings outstanding, together with the rate of interest (whether fixed or floating) payable thereon; (i) Unitholders Fund As at the Latest Practicable Date, there were 839,116,700 Units issued and outstanding. (ii) Borrowings CCT currently has the following loan facilities granted by Silver Loft Investment Corporation Limited (collectively, the Silver Loft Loan Facilities ), which were fully drawn down on 16 March 2004: (a) (b) a five-year term loan facility of S$153.3 million (of which the initial three years are at a fixed interest rate of 2.40% per annum and the subsequent two years are at a floating interest rate of 0.70% per annum over the relevant swap rate); a five-year callable loan facility of S$250.3 million (of which the initial two years are at a fixed interest rate of 1.90% per annum and the subsequent three years are at a floating interest rate of 0.55% per annum over the relevant swap rate); 7

9 (c) a five-year term loan facility of S$80.0 million at a fixed interest rate of 3.32% per annum; and (d) a five-year term loan facility of S$96.4 million at a fixed interest rate of 3.77% per annum. CCT also has an unsecured omnibus line facility from DBS Bank Ltd ( DBS Bank ) of up to S$5.0 million, which comprises an overdraft facility of S$5.0 million and a letter of guarantee facility of S$2.0 million (together, the DBS Omnibus Line Facility ). The terms of the DBS Omnibus Line Facility provide that the aggregate utilisation for both the overdraft facility and the letter of guarantee facility shall not exceed S$5.0 million. Additionally, CCT has the HSBC Facility, which carries an interest rate of 0.25% per annum over the relevant swap rate. As at the Latest Practicable Date, the Silver Loft Loan Facilities have been fully drawn down to the amount of S$580.0 million while letters of guarantee for an aggregate amount of S$1.2 million have been issued under the DBS Omnibus Line Facility. The HSBC Facility has not been drawn upon as at the Latest Practicable Date but is intended to be drawn down on the completion of the Acquisition (which is also the proposed Issue Date). (j) the manner in which the units being offered are to be distributed, giving particulars of any outstanding or proposed underwriting, including the name and address of each underwriter; The Equity Fund Raising The Equity Fund Raising consists of: (i) (ii) an offering of 28,000,000 New Units at the Issue Price to the public in Singapore through the automated teller machines ( ATMs ) of DBS Bank (including POSB ATMs) on a firstcome, first-served basis (the "ATM Offering"); and a private placement of 29,154,000 New Units to institutional and certain other investors (the Private Placement ). The Manager has made an application to the SGX-ST for the admission of the 57,154,000 New Units to the Official List of the SGX-ST as well as for the dealing and quotation of the New Units on the Main Board of the SGX-ST. The completion of the Equity Fund Raising and the issue of the New Units are conditional on receiving such approvals from the SGX-ST. DBS Bank has been appointed financial advisor for the Equity Fund Raising. 8

10 DBS Bank and HSBC (together, the Joint Lead Managers and Underwriters ) have been appointed as the joint lead managers and underwriters for the Equity Fund Raising. The addresses of the Joint Lead Managers and Underwriters are as follows: (i) (ii) DBS Bank 6 Shenton Way DBS Building Tower One Singapore HSBC 21 Collyer Quay #14-01 HSBC Building Singapore Underwriting by the Joint Lead Managers and Underwriters Under the placement agreement dated 21 April 2005 (the Placement Agreement ) entered into between the Manager and the Joint Lead Managers and Underwriters, the Equity Fund Raising is underwritten by the Joint Lead Managers and Underwriters at the Issue Price. Additional information on the ATM Offering The ATM Offering will be opened to the public from a.m. on 22 April 2005 and will close at a.m. on 23 April 2005, subject to an earlier closure at the discretion of DBS Bank (in consultation with the Manager) in the event that the New Units offered under the ATM Offering are fully taken up. The New Units under the ATM Offering will be offered at the Issue Price to the public in Singapore through the ATMs of DBS Bank (including POSB ATMs) on a first-come, firstserved basis. The minimum application under the ATM Offering is for 1,000 New Units. An applicant may apply for a larger number of New Units under the ATM Offering in integral multiples of 1,000, subject to a maximum of 500,000 New Units per applicant. Only one application for the New Units under the ATM Offering may be made for the benefit of one person. Multiple applications for the New Units under the ATM Offering will not be accepted. Please refer to Appendix 9 for additional terms and conditions for the ATM Offering. The directors of the Manager (the Directors ) and their immediate family, as well as other individual Substantial Unitholders are permitted to apply for the New Units under the ATM Offering as the SGX-ST has waived Rule 812 of the Listing Manual of the SGX-ST (the Listing Manual ) to permit such applications by the aforementioned persons. To the extent that there are New Units under the ATM Offering which are not taken up, such New Units will be aggregated and sold at the discretion of the Joint Lead Managers and Underwriters (in consultation with the Manager). Where an application under the ATM Offering is rejected or accepted in part only, or where the SGX-ST s approval in principle for the admission of the New Units to the SGX-ST s Official List is not granted, the full amount or the balance of the application moneys, as the case may be, will be refunded (without interest or any share of revenue or other benefit arising therefrom) by being automatically credited to the DBS Bank (including POSB) account(s) of the applicant(s), at the risk of the applicant(s), provided that the remittance in 9

11 respect of such application(s) which has been presented for payment or other process has been honoured and the application moneys received in the designated unit issue account. Additional information on the Private Placement The Manager has also obtained a waiver of Rule 812(1) from the SGX-ST to permit the placement of New Units to The Capital Group Companies, Inc, (the Capital Group ) (a Substantial Unitholder) under the Private Placement so as to enable Capital Group to maintain its proportionate unitholdings at its pre-placement level (in percentage terms) as at the Latest Practicable Date. In connection with the proposed placement of New Units to Capital Group, the Manager certifies that it is independent of the Capital Group, and will announce any such placement and the rationale for it accordingly. (k) the income, prospects and distributions of the Fund, together with: (i) the following information in respect of the Fund for the financial period commencing from 15 May 2004 (being the date 503,896,645 Units were distributed by CapitaLand Limited to its shareholders by way of a distribution in specie) to 31 December 2004 (being the date on which the last audited balance sheet of the Fund was made up) in the following format: Period 15 May 2004 to 31 December 2004 Notes: Net investment income before tax (S$ 000) Taxable income available for distribution to Unitholders (S$ 000) Extraordinary items (S$ 000) Distribution per Unit (cents) 35,119 35, (1) Being 100.0% of taxable income. Actual amount distributed to Unitholders was S$33.5 million, i.e. 95% of taxable income. (2) Calculated based on 95.0% of taxable income, being the actual amount distributed to Unitholders. 10

12 (ii) a statement as to the financial and business prospects of the Fund, together with any material information which will be relevant thereto, including all special business factors or risks (if any) which are unlikely to be known or anticipated by the general public and which could materially affect profits; and Financial and business prospects of CCT Since the inception of CCT, the Manager has endeavoured to increase the property yield of CCT s property portfolio and achieve long-term capital growth through active asset management of CCT s property portfolio. The Manager intends to continue to focus on proactive management by: raising or maintaining occupancy levels of all the Existing Properties as well as properties to be acquired in the future through the effective management of lease renewals, diligent pursuit of lease opportunities and maximisation of tenant retention; diversifying the tenant base; developing pro-active marketing plans; and minimising expenses in order to maximise returns from CCT s property portfolio. Significant trends and competitive conditions of the commercial property market The Singapore economy grew by 6.5% in the fourth quarter of 2004, bringing growth for the full year to 8.4%. Robust economic growth has spearheaded the recovery in the Singapore property market in 2004 and an improved business environment has led to an increase for demand for office space. However, the Ministry of Trade and Industry s first quarter advanced estimates for 2005 points to a slower gross domestic product growth of 2.4%, mainly as a result of a sharp reduction in biomedical manufacturing, following an exceptionally high growth in the fourth quarter of Despite the slower economic growth, the office leasing market in the first quarter of 2005 remained strong, extending gains from While recovery of the office property market in 2004 was mainly limited to the prime office sub-market, market recovery has become more broad-based, generated by a wider spectrum of office tenants such as professional services, asset management, hedge funds and selective enterprises in the manufacturing sector. Prime office rents continued their upward movement in the first quarter of 2005, averaging at S$4.65 per square foot per month and representing an increase of 5.7% from the previous quarter. This may be due in part to more competitive bidding by tenants for the tightening supply of quality office space 1. 1 CB Richard Ellis (Pte) Ltd has not given its consent to the inclusion of the information extracted from its Singapore Market View Q report available at While the Manager has taken reasonable actions to ensure that the relevant statements from the report are reproduced in their proper form and context, and that the information is extracted accurately and fairly from the report, neither the Manager nor its advisers has conducted an independent review of the information contained in the report or verified the accuracy of the contents of the relevant statements. 11

13 According to URA statistics 2, the supply of new office space was limited to 48,700 sqm nett in One George Street (40,300 sqm nett) was the only major office building that was completed during the year. No major office building is expected to come on stream until 2006, by which time 3 Church Street (31,600 sqm gross) and One Raffles Quay (139,580 sqm gross) are expected to be complete. This bodes well for the office property market in the near future and the Manager expects the market to strengthen further in Outlook for the financial year ending 31 December 2005 The prime office sub-market will continue to be the most resilient. Prime office rents are likely to extend on 2004 s gains through the year. The flight to quality trend is expected to continue in 2005 and more upside potential will be seen in rents for quality office space especially in the Raffles Place area while poorer quality office space is likely to face downward pressure in rents. While the Singapore Government has estimated slower economic growth of 3.0% to 5.0% in 2005, the Manager does not expect major negative impact on the office property market in light of the limited new supply of office property coming on stream. Subject to the local economy maintaining its growth and the assumptions as set out in Appendix 3 of this Offer Information Statement, the Manager expects to deliver a DPU of 6.31 cents for the financial year ending 31 December Profit Forecast The table in Appendix 3 on pages 41 and 42 of this Offer Information Statement summarises CCT s forecast net investment income and distributable income for the forecast period 29 April 2005 to 31 December 2005 (the Profit Forecast ). The Profit Forecast should be read together with the accompanying assumptions and sensitivity analysis in Appendix 3 of this Offer Information Statement and the report of KPMG (the Independent Accountants ) in Appendix 4 of this Offer Information Statement. Other Material Information special business factors or risks (if any) which are unlikely to be known or anticipated by the general public and which could materially affect profits There may be potential conflicts of interest between CCT, the Manager and CapitaLand Limited ( CapitaLand ). The Manager is an indirect wholly owned subsidiary of CapitaLand. CapitaLand, its subsidiaries and associates are engaged in the investment in, and the development and management of, among others, properties used or predominantly used for commercial purposes. Some of these properties compete directly with the properties in CCT s portfolio for tenants. Furthermore, CapitaLand may invest in other real estate investment trusts in the future and such other real estate investment trusts may also compete directly with CCT. There can be no assurance that the interests of CCT will not conflict with or be subordinated to those of CapitaLand in such circumstances. 2 URA has not given its consent to the inclusion of the statistics. While the Manager has taken reasonable actions to ensure that the relevant URA statistics are reproduced in their proper form and context, and that the relevant statistics are extracted accurately and fairly, neither the Manager nor its advisers has conducted an independent review or verified the accuracy of the relevant statistics. 12

14 CapitaLand currently has an indirect holding in 335,220,055 Units (comprising approximately 40.0% of all the Units in issue). Furthermore, a majority of the Board of Directors of the Manager are representatives of CapitaLand, with the balance comprising independent Directors. In addition, CapitaLand Commercial Management Pte. Ltd., an indirect wholly owned subsidiary of CapitaLand, has been appointed as the property manager (the Property Manager ) of the Existing Properties and all future properties to be acquired by CCT. As a result of the foregoing, the strategy and activities of CCT may be influenced by the overall interests of CapitaLand. There can be no assurance that conflicts of interest may not arise between CCT and CapitaLand in the future. Furthermore, there can be no assurance that the Property Manager will not favour properties that CapitaLand has retained in its own property portfolio over those owned by CCT when providing such services to CCT, which would lead to lower occupancy rates and/or lower rental income for CCT s property portfolio and could adversely affect the amount of distributable income available to Unitholders. In the event CCT acquires properties from CapitaLand or parties related to CapitaLand, there can be no assurance that the terms and conditions of such acquisitions or the negotiations with respect to such acquisitions (in particular with respect to the representations, warranties and/or indemnities agreed upon) will not be adverse to CCT or will be conducted on an arm s length basis. Notwithstanding the foregoing, when CCT acquires other assets from CapitaLand or parties related to CapitaLand, the Manager will obtain appraisals from independent parties and comply with all other requirements applicable to such transactions under the Property Funds Guidelines in Appendix 2 of the Code on Collective Investment Schemes issued by the Authority (the Property Funds Guidelines ) and the Listing Manual. In any event, related party transactions entered into by CCT in the future (including acquisitions of assets from CapitaLand or parties related to CapitaLand), depending on the materiality of such transactions, will need to comply with certain requirements under the Property Funds Guidelines and the Listing Manual and may also need to be publicly announced and/or require the approval of Unitholders. Related party transactions will also have to be (i) decided by a majority vote of the Directors (including the vote of at least one independent Director), (ii) reviewed and/or approved by the Manager s audit committee and (iii) reviewed and approved by the Trustee. CCT is reliant on some of the Existing Properties for a substantial portion of its property income and a decline in the income contribution from such of the Existing Properties will adversely affect CCT. CCT is currently dependent on Capital Tower and 6 Battery Road for a substantial portion of its property income and such dependence is expected to continue for CCT s next financial year. Significant disruption to the business and operations at either Capital Tower or 6 Battery Road would have a greater effect on CCT s financial condition and results of operations than similar occurrences at the other Existing Properties. See the charts in Appendix 2 Effect of the Acquisition on CCT s Income Diversification of this Offer Information Statement for more details. The amount CCT may borrow is limited, which may affect the operations of CCT. Under the Property Funds Guidelines, CCT is generally only permitted to borrow up to 35.0% of the value of its gross assets (the Deposited Property ). While the Property Funds Guidelines provide that if (i) all the borrowings of a property fund are rated at least A (including any sub- 13

15 categories or gradations therein) by Fitch Inc., Moody s or Standard and Poor s or (ii) the credit rating of the fund is rated at least A (including any sub-categories or gradations therein) by Fitch Inc., Moody s or Standard and Poor s, the fund may borrow more than 35.0% of the value of the fund s deposited property, CCT will not be able to take advantage of this exception to the borrowing limit as it does not satisfy either of the above two conditions. Adverse business consequences of this limitation on borrowings on CCT may include: an inability to fund capital expenditure requirements in relation to CCT s existing portfolio or in relation to the future acquisitions of properties by CCT to expand its portfolio; a decline in the value of the Deposited Property may cause the borrowing limit to be exceeded, thus affecting CCT s ability to incur further borrowings; and cash flow shortages (including with respect to required distributions), which CCT might otherwise be able to resolve by borrowing funds. CCT depends on certain key personnel and the loss of any key personnel may adversely affect its operations. CCT s success depends partly upon the continued service and performance of members of the Manager s senior management team and certain key senior personnel. These key personnel may leave the Manager in the future or compete with it and CCT. The loss of any of these key employees could have a material adverse effect on CCT s business, results of operations and financial condition. A substantial number of tenancies for the Existing Properties are for periods of up to three years, which exposes the Existing Properties to significant rates of lease expiries each year. A substantial number of the tenancies for the Existing Properties are for periods of up to three years, which reflects the general practice in the Singapore commercial property market for rental tenancies to take the form of a rolling three-year agreement. As a result, each of the Existing Properties experiences lease cycles in which a substantial number of leases expire each year. This exposes CCT to certain risks, including risks of reduced occupancy levels resulting from vacancies following the expiry or non-renewal of leases, which will in turn reduce CCT s gross revenue. In addition, the amount of rent and the terms on which lease renewals and new leases are agreed may be less favourable than current leases. If a large number of tenants do not renew their leases in a year with a high rate of lease expiries, or if new tenants do not enter into leases on terms that are as favourable or more favourable than the terms of the expiring leases, it could have a material adverse effect on the relevant property and affect CCT s financial performance and distributable income. The gross revenue earned from, and the value of, properties held by CCT may be adversely affected by a number of factors. The gross revenue earned from, and the value of, CCT s properties may be adversely affected by a number of factors, including: vacancies following expiry or termination of leases that lead to reduced occupancy rates which will lead to a reduction of CCT s property income and its ability to recover certain operating costs through tenant service charge; 14

16 the Manager s ability to collect rent from tenants on a timely basis or at all; the amount and extent to which CCT is required to grant rental rebates to tenants due to market pressure; tenants seeking the protection of bankruptcy laws which could result in delays in the receipt of rent payments, inability to collect rentals at all or delays in the termination of a tenant s lease, or which could hinder or delay the re-letting of the space in question or the sale of the relevant property; the amount of rent payable by tenants and the terms on which lease renewals and new leases are agreed being less favourable than current leases; the local and international economic climate and real estate market conditions (such as oversupply of, or reduced demand for, commercial space, changes in market rental rates and operating expenses of CCT s properties); the Manager s ability to provide adequate management and maintenance or to purchase adequate insurance; competition for tenants from other similar properties which may affect rental or occupancy levels at CCT s properties; and 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 relating 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 condemnation and redevelopment. The loss of key tenants or a downturn in the business of CCT s tenants could have an adverse effect on its financial condition and results of operations. CCT s financial condition and results of operations and ability to make distributions may be adversely affected by the bankruptcy, insolvency or downturn in the business of its key tenants, including the decision by any such tenants not to renew their leases or, in cases where a key tenant has termination rights exercisable by written notice, to terminate their leases before they expire. The 10 largest tenants in the Existing Properties and HSBC Building (together, the Enlarged Portfolio ) in terms of gross rental income 1 together account for 56.1% of the total pro forma gross rental income of the Enlarged Portfolio and 56.8% of the total lettable area of the 1 Based on gross rental income for the month of December 2004 for the Existing Properties and the expected gross rental income from HSBC Building in CCT s first month of ownership. 15

17 Enlarged Portfolio 1. The Manager expects that CCT will continue to be dependent upon these tenants for a significant portion of its property income. If these key tenants do not renew their leases at expiry, or if they reduce their leased space in CCT s properties, this could adversely affect the property income of CCT. CCT may be adversely affected by the illiquidity of real estate investments. CCT invests primarily in real estate which entails a higher level of risk than a portfolio which has a diverse range of investments. Real estate investments, particularly investments in high value properties such as those in which CCT intends to invest, are relatively illiquid. Such illiquidity may affect CCT s ability to vary its investment portfolio or liquidate part of its assets in response to changes in economic, real estate market or other conditions. Moreover, CCT may face difficulties in securing timely and commercially favourable financing in asset-based lending transactions secured by real estate due to the illiquid nature of real estate assets. These factors could have an adverse effect on CCT s financial condition and results of operations, with a consequential adverse effect on CCT s ability to make distributions to Unitholders. While the Existing Properties and HSBC Building are located in Singapore, CCT s future acquisitions may be located elsewhere in the region, which exposes CCT to economic and real estate market conditions as well as laws, regulations and policies governing real estate investment in such other countries. While the Existing Properties and HSBC Building are located in Singapore, CCT s future acquisitions may be located elsewhere in the region. Investment in properties in such other countries will expose CCT to the local real estate market conditions in these countries, including the risk of a prolonged downturn in economic conditions. An economic decline in any one or more of the countries in which the properties of CCT are located could adversely affect CCT s results of operations and future growth. Other local real estate market conditions which may adversely affect the performance of CCT include the attractiveness of competing commercial properties or, for example, if there is an oversupply of commercial space or reduced demand for commercial space. Further, CCT will be subject to foreign real estate laws, regulations and policies with regard to its property investments in foreign countries. There might be negative impact on a property of CCT in a foreign country as a result of measures and policies adopted by the relevant governments and regulatory authorities at national, provincial or local levels, such as government control over property investments or regulations in relation to foreign exchange. Legal protection and recourse available to CCT in certain countries may be limited. In addition, the income and gains derived from investment in properties in such other countries will be subject to various types of taxes in these countries, including income tax, withholding tax, capital gains tax and any other taxes that may be imposed specifically for ownership of real estate. All these taxes, which are subject to changes that may lead to an increase in tax rates or the introduction of new taxes, could adversely affect and erode the returns from these properties and hence the yield to investors. There is also no assurance that CCT will be able to repatriate to Singapore the income and gains derived from investment in properties outside Singapore on a timely and regular basis. The inability to repatriate the income and gains to Singapore will affect CCT s ability to make distributions to Unitholders out of such income and gains. CCT may also be exposed to risk associated with the exchange rate fluctuations between the Singapore dollar and the local currency of the country in which the property investments are 1 Based on the net lettable area of the Existing Properties as at 31 December 2004 and the net lettable area of HSBC Building upon completion of the Acquisition. 16

18 made which could reduce the Singapore dollar value of income and distributions which CCT receives from those investments. The actual performance of CCT, the Existing Properties and HSBC Building could differ materially from the forward-looking statements in this Offer Information Statement. This Offer Information Statement contains forward-looking statements (including the Profit Forecast) regarding the forecast financial performance of CCT, the Existing Properties and HSBC Building. These forward-looking statements are based on a number of assumptions, which are subject to significant uncertainties and contingencies, many of which are outside of CCT s control. Some or all of the events and circumstances contained in these forward-looking statements may not occur as expected, or events and circumstances, which are not currently anticipated, may arise. As a result, actual results and performances of CCT, the Existing Properties or HSBC Building may differ materially from that forecast or projected in these forward-looking statements. (iii) a statement by the Manager whether, in its reasonable opinion, the working capital available to the Fund as at the Latest Practicable Date is sufficient for present requirements and, if insufficient, how the additional working capital thought by the Manager to be necessary, is proposed to be provided; The Manager confirms that, in its reasonable opinion, after taking into account the loan facilities available to CCT and the estimated net proceeds from the Equity Fund Raising, the working capital available to CCT as at the Latest Practicable Date is sufficient for the present requirements of CCT. (l) the number of units of the Fund owned by each person who has an interest of not less than 5.0% of all the units in the Fund ( Substantial Unitholder ) (as recorded in the Register of Substantial Unitholders of the Fund) at the Latest Practicable Date; The number of Units owned by each Substantial Unitholder (as recorded in the Register of Substantial Unitholders of CCT) as at the Latest Practicable Date is set out in Appendix 6 of this Offer Information Statement. (m) information on any legal or arbitration proceedings, including those which are pending or known to be contemplated, which may have or have had in the last 12 months before the Latest Practicable Date, a material effect on the Fund s financial position or profitability; To the best of the Manager s knowledge and belief, there are no legal or arbitration proceedings, including those which are pending or known to be contemplated, which, in the opinion of the Manager, may have or have had in the last 12 months before the Latest 17

19 Practicable Date, a material effect on the financial position or profitability of CCT. (n) the prices at which units of the Fund have been issued for cash, or traded, within the period commencing on the date after the listing date of the Fund to the Latest Practicable Date; for units which have been traded, give the price range and volume traded for each of those months; for units which have been issued during those months, state the number of units issued at each price; if any units have been issued for services, state the nature and value of the services and give the name and address of the person who received the units; Units issued for cash or services No Units have been issued by CCT for cash or services within the period commencing on 12 May 2004 (being the date immediately after CCT was listed on the SGX-ST) to the Latest Practicable Date. Prices of Units traded The closing price range for the Units and the volume of Units traded on the SGX-ST (on a monthly basis) within the period commencing on 12 May 2004 (being the date immediately after CCT was listed on the SGX-ST) to the Latest Practicable Date are set out in Appendix 7 of this Offer Information Statement. (o) a summary of each material contract, other than a contract entered into in the ordinary course of business, to which the trustee of the Fund (in its capacity as trustee of the Fund) is a party, for the period commencing after the Fund was listed on the Singapore Exchange Securities Trading Limited until the Latest Practicable Date, including the date of, parties to and general nature of the contract, and the amount of any consideration passing to or from the Fund; There were no material contracts entered into by the Trustee or the Manager, other than contracts entered into in CCT s ordinary course of business for the period from 12 May 2004 (being the date immediately after CCT was listed on the SGX-ST, and ending on the Latest Practicable Date) save for the loan and security documents entered into by the Trustee in connection with the borrowings described in paragraph (i) above. Separately, the Manager entered into the Placement Agreement with the Joint Lead Managers and Underwriters on 21 April

20 (p) the last available audited consolidated balance sheet of the Fund; The last audited balance sheet of CCT is set out in Appendix 8 of this Offer Information Statement. (q) a table or statement indicating: (i) the consolidated net tangible asset ( NTA ) per unit of the Fund as of the date on which the last audited balance sheet was made up; and The NTA per Unit at 31 December 2004 (being the date on which the last audited balance sheet of CCT was made up) was S$1.64. (ii) the effect of the Equity Fund Raising on the NTA per unit. On the assumption that the Equity Fund Raising is carried out and the Proposed Borrowings are incurred by CCT to finance the Acquisition, the pro forma financial effects of the proposed issue of the New Units under the Equity Fund Raising on the NTA per Unit as at 31 December 2004, as if CCT had purchased HSBC Building on 15 May 2004 (the date of the distribution in specie of 503,896,645 Units by CapitaLand to its shareholders), and held and operated it through to 31 December 2004, are as follows: Effects of the Equity Fund Raising and the Acquisition Before the Acquisition After the Acquisition 1 NTA (S$ 000) 1,373,647 1,454,367 Units in issue ( 000) 839, ,271 NTA per Unit (S$) Adjusted NTA per Unit (S$) Notes: (1) The pro forma financial effects are based on the assumption that (i) CCT s gearing is increased to 31.0%, (ii) 57.2 million New Units are issued pursuant to the Equity Fund Raising at the Issue Price of S$1.38 per New Unit and (iii) the aggregate acquisition costs of HSBC Building is S$153.9 million. (2) Excluding the distributable income distributed to Unitholders on 28 February 2005 for the financial period 15 May 2004 to 31 December 2004 for the Existing Properties and the pro forma distributable income attributable to HSBC Building. The decrease in NTA per Unit and adjusted NTA per Unit after the Acquisition (as set out in the table above) is a result of the New Units being issued at an Issue Price below the NTA per Unit and the adjusted NTA per Unit before the Acquisition. 19

21 (r) particulars of all other material information relating to the units being offered and not disclosed pursuant to sub-paragraphs (a) to (q). Save as disclosed in this Offer Information Statement, including the Appendices to this Offer Information Statement, the Manager is not aware of any other material facts relating to the Equity Fund Raising. 20

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23 GLOSSARY In this Offer Information Statement, the following definitions apply throughout unless otherwise stated: Acquisition : The proposed acquisition of HSBC Building by CCT ATM : Automated teller machine ATM Offering : The offering of 28,000,000 New Units at the Issue Price to the public in Singapore through the ATMs of DBS Bank (including POSB ATMs) on a first-come, firstserved basis Authority : Monetary Authority of Singapore Base Fee : The base fee of 0.1% per annum of the value of the Deposited Property payable to the Manager pursuant to the Trust Deed Capital Group : The Capital Group Companies, Inc CapitaLand : CapitaLand Limited CapitaLand Group : CapitaLand and its subsidiaries CCT : CapitaCommercial Trust CDP : The Central Depository (Pte) Limited Committed Leases : All current leases in respect of the Existing Properties as at 31 December 2004 or leases, with commencement dates after 31 December 2004, which have been entered into or renewed between the Trustee and tenants pursuant to signed commitments to lease and, where applicable in the context, the sevenyear lease in respect of HSBC Building which HSBC will enter into with the Trustee (as the trustee of CCT) upon completion of the Acquisition Committed Occupancy : Occupancy rate based on Committed Leases CPF : Central Provident Fund Current Distribution Period : The current semi-annual distribution period from 1 January 2005 to 30 June