CIRCULAR DATED 16 MARCH 2004 This Circular is important and requires your immediate attention. If you are in any doubt as to the action you should take, you should consult your stockbroker, bank manager, accountant, solicitor or other professional adviser immediately. If you have sold or transferred all your shares in the capital of CapitaLand Limited (the ``Company''), you should immediately forward this Circular together with the Notice of Extraordinary General Meeting and the accompanying Proxy Form to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for onward transmission to the purchaser or transferee. Singapore Exchange Securities Trading Limited assumes no responsibility for the correctness of any of the statements made, reports contained or opinions expressed in this Circular. CAPITALAND LIMITED (Incorporated in the Republic of Singapore) CIRCULAR TO SHAREHOLDERS in relation to the proposed (I) DISTRIBUTION IN SPECIE OF UNITS IN CAPITACOMMERCIAL TRUST TO THE SHAREHOLDERS OF CAPITALAND LIMITED; AND (II) MODIFICATIONS TO THE CAPITALAND SHARE OPTION PLAN, THE CAPITALAND PERFORMANCE SHARE PLAN AND THE CAPITALAND RESTRICTED STOCK PLAN Joint Financial Advisers to the Company in relation to the Distribution In Specie IMPORTANT DATES AND TIMES: Last Date and Time for Lodgement of Proxy Form : 10 April 2004 at 10.30 a.m. Date and Time of Extraordinary General Meeting : 12 April 2004 at 10.30 a.m. (or as soon thereafter following the conclusion or adjournment of the Annual General Meeting of the Company to be held at 10.00 a.m. on the same day and at the same place) Place of Extraordinary General Meeting : STI, 168 Robinson Road Level 9, Capital Tower Singapore 068912 IMPORTANT NOTICE TO OVERSEAS SHAREHOLDERS Set out below are certain guidelines on the distribution of the CCT Units to Overseas Shareholders in Australia, Hong Kong, Malaysia, The Netherlands, the United Kingdom and the United States. Further details on the distribution of and the entitlement of Overseas Shareholders to the CCT Units are set out on pages 25 to 27 of this Circular. Australia This Circular is for the exclusive use of Shareholders in connection with the proposed Capital Reduction and Distribution In Specie. No product disclosure statement (``PDS'') is required under the Corporations Act 2001 and no such document has been or will be prepared or lodged with the Australian Securities and Investments Commission. No conduct in relation to the Distribution In Specie has been authorised by CapitaLand to occur in Australia. The CCT Units are being distributed for the purposes outlined in paragraph 2 ``Background to and Rationale for the Distribution In Specie'' of Section I of the Letter to Shareholders, and not for the purpose of Shareholders selling or transferring the CCT Units, or granting, issuing or transferring interests in, or options or warrants over, the CCT Units. Shareholders must not distribute this Circular in Australia or engage in any conduct in relation to the CCT Units that would require the preparation of a PDS, CCT to be registered as a managed investment scheme, or require an Australian Financial Services Licence (where an appropriate licence is not already held). Any sale of the CCT Units must be on the SGX-ST or to a person to whom it would be lawful to offer the CCT Units without them being given a PDS. Hong Kong This Circular is for the exclusive use of Shareholders in connection with the proposed Capital Reduction and Distribution In Specie. Accordingly, this Circular must not be distributed, published or reproduced (in whole or in part), disclosed by Shareholders to any other person in Hong Kong or used for any purpose in Hong Kong other than in connection with Shareholders' consideration of the Capital Reduction and the Distribution In Specie. This Circular does not constitute an offer or invitation for the sale or purchase of securities in Hong Kong and shall not form the basis of any contract. Malaysia Overseas Shareholders in Malaysia should note that the distribution of the CCT Units to them is subject to the approval of the Securities Commission of Malaysia. An application has been made to the Securities Commission of Malaysia for such approval but there is no assurance that such approval will be given or obtained in time for the distribution of the CCT Units. If such approval is not given or not obtained in time for the distribution of the CCT Units, or if the approval is subject to compliance with conditions or requirements which, in the view of the Directors, are onerous by reasons of costs, delay or otherwise, such Overseas Shareholders will not receive their entitlements to the CCT Units, but will receive the net proceeds of the sale of the CCT Units which they otherwise would have been entitled to, in the manner set out herein. The Netherlands The CCT Units will not be offered, sold, transferred or delivered, whether directly or indirectly, as part of their initial distribution or any time thereafter, to any individual or legal entity situated in The Netherlands other than to individuals or legal entities who or which trade or invest in securities in the conduct of their profession or business within the meaning of the Exemption Regulation of December 21 1995 issued pursuant to The Netherlands Securities Market Supervision 1995 Act (``Wet Toezicht Effectenverkeer 1995''). These include, but are not limited to, banks, brokers, securities institutions, insurance companies, pension funds, investment institutions, other institutional investors and other parties, including treasury departments of commercial enterprises and ®nance companies of groups, who or which trade or invest in securities in the conduct of a business or profession. United Kingdom This Circular was prepared solely for the use of and is directed in the United Kingdom at Overseas Shareholders in the United Kingdom having professional experience in matters relating to investments that are ``Investment Professionals'' as de®ned by Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001. Subject to the applicable provisions of the laws of the United Kingdom, the Distribution In Specie will be available to Overseas Shareholders in the United Kingdom and the CCT Units will be distributed to such Overseas Shareholders. Overseas Shareholders in the United Kingdom who do not have professional experience in such matters relating to investments should not rely on this Circular. United States The CCT Units have not been and will not be registered under the U.S. Securities Act of 1933 as amended, for offer or sale as part of their distribution and, subject to certain exceptions, may not be offered or sold in the United States or to U.S. persons. The CCT Units are not transferable except in accordance with the restrictions described herein. CONTENTS Page DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 INDICATIVE TIMETABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 LETTER TO SHAREHOLDERS Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (I) (II) (III) 7 THE PROPOSED DISTRIBUTION IN SPECIE OF UNITS IN CAPITACOMMERCIAL TRUST TO SHAREHOLDERS OF CAPITALAND LIMITED 1. Summary Information on CCT . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2. Background to and Rationale for the Distribution In Specie . . . . . . . . . . . 15 3. Financial Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 4. How the Capital Reduction and the Distribution In Specie will be Implemented . 22 5. Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 6. Shareholders' Entitlement to the CCT Units . . . . . . . . . . . . . . . . . . . 25 THE PROPOSED MODIFICATIONS TO THE CAPITALAND SHARE OPTION PLAN, THE CAPITALAND PERFORMANCE SHARE PLAN AND THE CAPITALAND RESTRICTED STOCK PLAN 1. The Share Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 2. The Proposed Modi®cations to the Share Plans . . . . . . . . . . . . . . . . . 28 3. Rationale for the Proposed Modi®cations . . . . . . . . . . . . . . . . . . . . 28 4. Shareholders' Approval. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 GENERAL 1. Directors' Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 2. Irrevocable Undertaking given by STPL . . . . . . . . . . . . . . . . . . . . . 30 3. Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . 30 4. Action to be taken by Shareholders . . . . . . . . . . . . . . . . . . . . . . . 30 5. Directors' Responsibility Statement . . . . . . . . . . . . . . . . . . . . . . . 31 6. Financial Advisers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 7. Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 APPENDIX 1 Pro Forma Financial Statements of the Group . . . . . . . . . . . . . . . . . . . . . . . . 32 APPENDIX 2 The Proposed Modi®cations to the Share Plans . . . . . . . . . . . . . . . . . . . . . . . 35 APPENDIX 3 Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 NOTICE OF EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . . . . . . . 40 PROXY FORM 1 DEFINITIONS In this Circular, the following de®nitions apply throughout except where the context otherwise requires: ``Act'' : The Companies Act, Chapter 50 of Singapore ``Australand'' : Australand Property Group ``Award'' : A contingent award of Shares granted pursuant to the CapitaLand Performance Share Plan and/or the CapitaLand Restricted Stock Plan ``Bondholders'' : Holders of the Convertible Bonds ``Books Closure Date'' : A date to be announced on which the Transfer Books and the Register of Members of the Company will be closed in order to determine the entitlement of Shareholders to the CCT Units for the purpose of the Distribution In Specie ``CapitaLand'' or the ``Company'' : CapitaLand Limited ``CapitaLand Group'' or the ``Group'' : CapitaLand, its subsidiaries, associated companies and joint ventures ``Capital Reduction'' : The proposed capital reduction exercise under Section 73 of the Act to be carried out by the Company to effect the Distribution In Specie ``CCL'' : CapitaLand Commercial Limited ``CCT'' : CapitaCommercial Trust ``CCT Unit'' or ``Unit'' : A unit representing an undivided interest in CCT ``CDP'' : The Central Depository (Pte) Limited ``CFL'' : CapitaLand Financial Limited ``CFSL'' : CapitaLand Financial subsidiary of CFL ``CMT'' : CapitaMall Trust ``COI'' : CapitaLand (Of®ce) Investments Pte Ltd ``Commercial Property'' : Property used, or predominantly used, for commercial purposes ``commercial purposes'' : In relation to the Manager's investment strategy in real estate, means all categories of commercial use including, but not limited to, of®ce, car park, retail and other commercial uses, but speci®cally excluding real estate which is in the nature of retail shopping malls or buildings which are used, or predominantly used, for retail purposes ``Convertible Bonds'' : The S$380,000,000 5/8% convertible bonds due 2007 issued by the Company, convertible by the Bondholders into Shares ``CPF'' : Central Provident Fund ``DBS Bank'' : DBS Bank Ltd 2 Services Limited, a wholly-owned ``Deposited Property'' : All the assets of CCT, including the Properties held in its portfolio ``Directors'' : The directors of the Company as at the date of this Circular ``Distribution In Specie'' : The proposed distribution in specie of approximately 60% of the total number of issued CCT Units to Shareholders, on the basis of 200 CCT Units for every 1,000 Shares held as at the Books Closure Date, by way of the Capital Reduction ``EBIT'' : Earnings before interest and taxation ``EBITDA'' : Earnings before interest, taxation, depreciation and amortisation ``Effective Date'' : The date on which the Capital Reduction becomes effective ``EGM'' : The extraordinary general meeting of the Company to be held on 12 April 2004 (and any adjournment thereof) ``EPS'' : Earnings per share ``ERCC'' : Executive Resource and Compensation Committee, a board committee of the Company ``FY'' : Financial year ended or ending 31 December ``High Court'' : The High Court of the Republic of Singapore ``Introductory Document'' : Introductory document dated 16 March 2004 issued in conjunction with the listing of CCT on the SGX-ST by way of an introduction ``IRAS'' : Inland Revenue Authority of Singapore ``JPMorgan'' : J.P. Morgan (S.E.A.) Ltd ``KPMG'' : KPMG Singapore ``Latest Practicable Date'' : The latest practicable date prior to the printing of this Circular, being 10 March 2004 ``Listing Date'' : The date of admission of CCT to the Of®cial List of the SGX-ST and the date on which trading of the CCT Units commences ``Listing Manual'' : SGX-ST Listing Manual ``Manager'' : CapitaCommercial Trust Management Limited, as the manager of CCT ``MAS'' : Monetary Authority of Singapore ``NAV'' : Net asset value ``Net Lettable Area'' : Comprises the ¯oor area in a building that is to be leased, excluding common areas such as common corridors, lift shafts, ®re escape staircases and toilets, and is usually the area in respect of which rent is payable. In the case of shophouses, Net Lettable Area includes toilets and, where the letting is for an entire shophouse, includes staircases and toilets ``NTA'' : Net tangible assets 3 ``Overseas Shareholders'' : Shareholders whose registered addresses appearing in the Company's Register of Members or Depository Register (as the case may be) are outside Singapore ``PATMI'' : Pro®t after taxation and minority interests ``PREMAS'' : PREMAS International Limited ``Properties'' : The seven commercial properties comprising Capital Tower, 6 Battery Road, Starhub Centre, Robinson Point, Bugis Village, Golden Shoe Car Park and Market Street Car Park ``Property Companies'' : The respective owners of the Properties being (i) Capital Tower Pte Ltd; (ii) Clover Properties Pte Ltd; (iii) Cuppage Centre Pte Ltd; (iv) Robinson Point Pte Ltd; (v) Rochor Square Pte Ltd; (vi) Golden Square Pte Ltd; and (vii) CapitaLand Market Street Pte Ltd ``Property Fund Guidelines'' : The guidelines for real estate investment trusts issued by the MAS as Appendix 2 to The Code of Collective Investment Schemes ``Proposed Listing'' : The proposed listing of CCT on the SGX-ST by way of an introduction ``Raf¯es Holdings'' : Raf¯es Holdings Limited ``Registrar'' : The Registrar of Companies and Businesses in Singapore ``REIT'' : Real estate investment trust ``Retained Holding'' : The CCT Units amounting to approximately 40% of the issued CCT Units retained and held by CapitaLand's wholly-owned subsidiaries after the completion of the Capital Reduction and the Distribution In Specie ``ROA'' : Return on assets ``ROE'' : Return on equity ``Securities Account'' : A securities account or sub-account maintained by a Depositor with CDP ``SGX-ST'' : Singapore Exchange Securities Trading Limited ``Shares'' : Ordinary shares of S$1.00 each in the capital of the Company ``Shareholders'' : The registered holders of the Shares, except that where the registered holder is CDP, the term ``Shareholders'' shall, in relation to those Shares, mean Depositors whose Securities Accounts are credited with those Shares ``Share Options'' : Share options to subscribe for new Shares granted pursuant to the CapitaLand Share Option Plan ``Share Plans'' : The CapitaLand Share Option Plan, CapitaLand Performance Share Plan and CapitaLand Restricted Stock Plan collectively, which were approved and adopted by the Company on 16 November 2000 ``STPI'' : ST Property Investments Pte Ltd 4 ``STPL'' : Singapore Technologies Pte Ltd ``Substantial Shareholder'' : A person who, in accordance with the Act, has an interest in not less than 5% of the issued voting Shares of the Company ``Tax Ruling'' : The tax ruling dated 10 December 2003 issued by IRAS on the taxation of CCT and its Unitholders, including any modi®cation, amendment and revision that may be made to it up to the date of this Circular ``The Ascott Group'' : The Ascott Group Limited ``Trust Deed'' : The Trust Deed dated 6 February 2004 made between the Trustee and the Manager constituting CCT ``Trustee'' : Bermuda Trust (Singapore) Limited, as the trustee of CCT ``Unitholder'' : The registered holder for the time being of a Unit, including persons so registered as joint holders, except where the registered holder is CDP, the term ``Unitholder'' shall, in relation to Units registered in the name of CDP, mean, where the context requires, the Depositor whose Securities Account with CDP is credited with Units ``$'' or ``S$'' and ``cents'' : Singapore dollars and cents, respectively ``US$'' : United States dollars ``per cent'' or ``%'' : Per centum or percentage The terms ``Depositor'' and ``Depository Register'' shall have the meanings ascribed to them respectively in Section 130A of the Act. Except where speci®cally de®ned, the terms ``we'', ``us'' and ``our'' in this Circular refer to the Group. Words importing the singular shall, where applicable, include the plural and vice versa. Words importing the masculine gender shall, where applicable, include the feminine and neuter genders. References to persons shall include corporations. Any reference in this Circular to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word de®ned under the Act or any statutory modi®cation thereof and not otherwise de®ned in the Circular shall have the same meaning assigned to it under the Act or any statutory modi®cation thereof, as the case may be. Any reference to a time of day in this Circular is made by reference to Singapore time unless otherwise stated. 5 INDICATIVE TIMETABLE The following are the indicative dates and times for the Capital Reduction and the Distribution In Specie: Last date and time for lodgement of Proxy Forms for the EGM : 10 April 2004 at 10.30 a.m. Date and time of EGM : 12 April 2004 at 10.30 a.m. (or as soon thereafter following the conclusion or adjournment of the Annual General Meeting of the Company to be held at 10.00 a.m. on the same day and at the same place) Expected date for ®ling application with High Court : 13 April 2004 Expected date for High Court approval of the Capital Reduction : 4 May 2004 Expected Books Closure Date for the Distribution In Specie : 14 May 2004 at 5.00 p.m. Expected Effective Date of the Capital Reduction and the Distribution in Specie : 18 May 2004 Expected date for crediting CCT Units into the Securities Accounts of Shareholders : 18 May 2004 Expected date for commencement of trading of CCT Units on the SGX-ST : 19 May 2004 Notes: (1) The timetable above is only indicative and the actual dates of the above events in italics will be announced in due course. (2) Proxy Forms should be duly completed and deposited at the registered of®ce of the Company at 168 Robinson Road, # 30-01 Capital Tower, Singapore 068912, not less than 48 hours before the time appointed for the EGM. Completion and return of a Proxy Form will not preclude a Shareholder from attending and voting in person at the EGM in place of his proxy. 6 CAPITALAND LIMITED (Incorporated in the Republic of Singapore) Directors: Registered Of®ce: Philip Yeo Liat Kok (Chairman) Hsuan Owyang (Deputy Chairman) Liew Mun Leong (President & CEO) Andrew Buxton Sir Alan Cockshaw Richard Edward Hale Lim Chin Beng Peter Seah Lim Huat Sum Soon Lim Jackson Peter Tai Lucien Wong Yuen Kuai 168 Robinson Road # 30-01 Capital Tower Singapore 068912 To: 16 March 2004 The Shareholders of CapitaLand Limited Dear Sir/Madam (I) THE PROPOSED DISTRIBUTION IN SPECIE OF UNITS IN CAPITACOMMERCIAL TRUST TO SHAREHOLDERS OF CAPITALAND LIMITED; AND (II) THE PROPOSED MODIFICATIONS TO THE CAPITALAND SHARE OPTION PLAN, THE CAPITALAND PERFORMANCE SHARE PLAN AND THE CAPITALAND RESTRICTED STOCK PLAN INTRODUCTION Since CapitaLand was established following the merger of DBS Land Limited and Pidemco Land Limited in November 2000 (the ``Merger''), we have pursued a strategy of enhancing Shareholder returns through: ^ Raising asset productivity; ^ Expanding overseas; and ^ Growing higher value-added services. In another decisive step to deliver on our key business objectives, we announced on 6 February 2004 our intention to establish a new REIT1 to be known as CapitaCommercial Trust. CCT will be created in three distinct steps: Step 1 The following seven commercial properties are transferred into a new REIT called CCT: ^ ^ ^ ^ 1 Capital Tower 6 Battery Road Starhub Centre Robinson Point ^ ^ ^ Bugis Village Golden Shoe Car Park Market Street Car Park REITs are trusts that invest primarily in investment quality real estate with the aim of providing investors with regular and stable income distributions. An example of such a REIT is CMT which we launched in July 2002 and is today listed on the SGX-ST. 7 Step 2 Subject to Shareholders' approval, we will distribute in specie approximately 60% of the issued units in CCT to Shareholders. As a Shareholder, you will own an interest in these Properties directly rather than indirectly through your investment in the Shares (as is currently the case). You will receive CCT Units in proportion to your shareholdings in CapitaLand. For every 1,000 Shares that you own, you will receive 200 CCT Units. This will be done by means of the Capital Reduction and the Distribution In Specie. Step 3 CCT will be listed on the SGX-ST by way of an introduction, and trading of CCT Units will commence. As a Shareholder, you will then hold listed investments in both CapitaLand and CCT. To demonstrate our commitment to CCT, we will retain (through our wholly-owned subsidiaries) approximately 40% of the issued CCT Units. We believe that the creation of CCT and the distribution of CCT Units to all our Shareholders will bene®t both Shareholders and the Group. Shareholders will benefit as follows: ^ You will receive a capital distribution from the Company in the form of publicly listed CCT Units that will be separately listed and traded on the SGX-ST. ^ You will receive a significantly higher proportion of the taxable income from the Properties under CCT ownership than would be the case under CapitaLand ownership. For the period from the date of the Distribution In Specie to 31 December 2004 and for FY2005, CCT will distribute 95.0% of its taxable income to Unitholders. Thereafter, CCT will distribute at least 90.0% of its taxable income. ^ You stand to benefit from tax transparency granted to CCT if you are a Qualifying Unitholder (as defined on page 13 of this Circular), as CCT distributions will be received by you on a gross basis and you pay tax subsequently at your own applicable income tax rate. ^ You stand to benefit from the tax exemption as announced in the 2004 Budget on distributions from CCT (excluding distributions of franked dividends) if you are an individual holding the CCT Units as investment assets, irrespective of your nationality or tax residence status. This is provided you do not hold the CCT Units through a partnership. ^ You may also bene®t from a potential re-rating of CapitaLand's share price given the strategic implications of the Distribution In Specie for the Group, including those described immediately below. The Distribution In Specie is expected to deliver the following benefits to the Group: ^ Achieve a more balanced portfolio of assets and income streams. ^ Enhance the capital productivity of the Group and improve ROA and ROE by reducing ownership of capital intensive investment properties whilst continuing to generate fee income from the continued management of the Properties and increasing the Group's relative weighting of higher yielding assets. ^ Expand the Group's property funds management platform which allows us to increase our fee-based income and deliver a larger business footprint with substantially less capital employed. 8 We are also taking the opportunity to propose, for your approval, certain modi®cations to the provisions of the Share Plans to bring them in line with current market practice. The purpose of this Circular is to provide you with details of the Capital Reduction and the Distribution In Specie, as well as details on the proposed modi®cations to the Share Plans, and to seek your approval for the same at the EGM, notice of which is set out on pages 40 to 41 of this Circular. The Board recommends you to vote in favour of the Capital Reduction and the Distribution In Specie, and urges you to complete, sign and return the Proxy Form enclosed with this Circular as soon as possible and in any event no later than 10.30 a.m. on 10 April 2004. Alternatively, the Board welcomes you to attend the EGM in person to cast your vote. If the Capital Reduction and the Distribution In Specie are approved by Shareholders at the EGM, no further action will be required on your part to receive the CCT Units. If you hold your Shares through CDP, your Securities Account will be credited with CCT Units on or around 18 May 2004. Alternatively, if you hold your Shares in scrip, you will be credited with CCT Units on or around 18 May 2004 by the entry of your name on the Register of Unitholders to be maintained by the Trustee. The CCT Units are expected to commence trading on the SGXST on or around 19 May 2004. 9 (I) THE PROPOSED DISTRIBUTION IN SPECIE OF UNITS IN CAPITACOMMERCIAL TRUST TO SHAREHOLDERS OF CAPITALAND LIMITED 1. SUMMARY INFORMATION ON CCT You should also have received, together with this Circular, the Introductory Document which sets out detailed information on CCT, including its properties and business, selected pro forma ®nancial information, pro®t forecast and pro®t projection, risk factors and distribution policy. Please read the Introductory Document carefully. The following is a summary of selected information on CCT, and should be read in conjunction with the Introductory Document. 1.1 Property Portfolio 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. There is no overlap with the investment mandate of CMT which invests in properties which are used, or predominantly used, for retail purposes. At the time of the Distribution In Specie, CCT holds the following Properties, some of which are among Singapore's ®nest landmark assets: Committed Occupancy as at 31 Dec 2003 Building Description Title Capital Tower Grade A 52-storey intelligent of®ce building located along Robinson Road in Singapore's prime business district Leasehold estate expiring 31 December 2094 Grade A 42-storey of®ce building with four-storey podium located in the heart of Raf¯es Place, Singapore's ®nancial and commercial hub Leasehold estate expiring 19 April 2825 10-storey of®ce building with retail space on the ®rst storey and a food court on the second storey, located in the prime Orchard Road shopping belt Leasehold estate expiring 31 January 2095 21-storey of®ce building located within 10 minutes' walk of the Raf¯es Place MRT station Freehold 34 three-storey pre-Second World War shophouses that were restored in 1991, located in the Bugis Street/Queen Street area Leasehold estate expiring 30 March 2088(2) 10-storey building located on the western end of Market Street, next to Raf¯es Place Leasehold estate expiring 31 January 2081 100.0%(3) Eight-storey building bounded by Market Street, Cross Street and Cecil Street, located near Raf¯es Place Leasehold estate expiring 31 March 2073 100.0%(5) 100.0% Appraised Value(1) (S$' million) 793.9 ............................................................................................................................................................................................................................................................................................................ 6 Battery Road 91.2% 675.2 ............................................................................................................................................................................................................................................................................................................ Starhub Centre 100.0% 266.1 ............................................................................................................................................................................................................................................................................................................ Robinson Point 72.6% 119.8 ............................................................................................................................................................................................................................................................................................................ Bugis Village 89.9% 56.5(2) ............................................................................................................................................................................................................................................................................................................ Golden Shoe Car Park 72.1(4) ............................................................................................................................................................................................................................................................................................................ Market Street Car Park Average/Total 94.9% 10 34.9 2,018.5 Notes: (1) Appraised value as at 31 December 2003, as provided by Knight Frank Pte Ltd. (2) Takes into account the right of the President of the Republic of Singapore, as lessor under the State Lease for Bugis Village, to terminate the State Lease on 1 April 2019 upon payment of a sum of S$6,610,208.53 plus accrued interest. As at the date of this Circular, the CapitaLand Group is not aware of any intention on the part of the lessor to exercise such a right. (3) Percentage refers to the committed occupancy of the retail and of®ce components of the building. (4) The space on the second and third storeys (which was granted to the Ministry of the Environment of Singapore, free of rent, for use as a food centre) is excluded from the valuation. (5) Percentage refers to the committed occupancy of the retail component of the building. We believe that CCT's portfolio of seven commercial properties listed above offers a number of key investment attractions to Unitholders: 1.2 ^ Scale Ð CCT owns a portfolio comprising the seven Properties, which have been independently valued at S$2,018.5 million as at 31 December 2003. CCT's initial portfolio represents one of the largest Commercial Property portfolios in Singapore and will provide sufficient diversification and scale to support the acquisition of additional properties without materially changing CCT's investment profile. The Manager intends to leverage off this quality as a platform for growth in the future. ^ Quality and location Ð 68.0% of the total portfolio by Net Lettable Area comprises Grade A office buildings in the Central Business District, namely Capital Tower and 6 Battery Road, and more than 70.0% of the total gross rent2 for the month ended 31 December 2003 is derived from these two buildings. The Properties are variously located in the prime Raffles Place, Shenton Way, Tanjong Pagar, Orchard Road and Bugis micro-markets for Commercial Properties, and are either in close proximity to or adjacent to Mass Rapid Transit (``MRT'') stations. ^ Occupancy and renewals Ð The Properties enjoy high, consistent and stable occupancy rates. Based on committed leases, the Properties had an occupancy rate of 94.9% as at 31 December 2003 (compared to a market occupancy rate of 82.1%) and for FY2003, the renewal rate of the Properties (in terms of total Net Lettable Area covered by the expired leases) was 72.6%. The portfolio's occupancy and renewal levels demonstrate the high quality of both the portfolio and its management personnel, who have largely been retained by CCT. ^ Diverse tenant base Ð The Properties have a diverse tenant base with 234 international and local tenants as at 31 December 2003 across a variety of business sectors, but with a predominance of foreign financial institutions, multinational corporations, a Government investment corporation as well as companies in the CapitaLand Group. ^ Long land leases Ð A signi®cant proportion of the Properties is either freehold or held on long land leases in Singapore's prime business district. Robinson Point, for instance, is a freehold property while the land lease for 6 Battery Road is for a term of 999 years expiring in the year 2825. As at 31 December 2003, these two properties together accounted for 34.5% of the total Net Lettable Area and 39.4% of the aggregate appraised value of all the Properties, and are expected to generate cash ¯ow streams over a longer period of time. The remaining Properties are primarily held on 99-year tenure leases. Key Features of CCT Beyond the exposure to a large, high quality and diversi®ed portfolio, we believe that CCT will offer Unitholders the following attractions: Strategy to provide regular and stable distributions One of CCT's primary objectives will be to provide Unitholders with regular and stable distributions on a semi-annual basis. The stability of CCT's distributions is underpinned by 2 Consists of base rental income (after rent rebates, where applicable, but excluding turnover rent) and tenant service charge, which is a contribution paid by tenants towards the property expenses of each Property. 11 the diversity of its tenant base and their business sectors as well as the high, consistent and stable occupancy rates experienced by the Properties. In accordance with market practice for listed REITs in Singapore, and to further enhance the stability of CCT's distributions, the Manager has agreed to receive such proportion of its management fees in respect of the period from the date of the Distribution In Specie to 31 December 2004 and FY2005 as would be required to support, to the extent possible, the projected distributions during the said periods, in the form of CCT Units (rather than cash). For each of the years ending 31 December 2006, 2007 and 2008, the Manager shall continue this practice to support, to the extent possible, a distribution per CCT Unit of 5.68 cents. This should not be construed in any way as a forecast or projection of CCT's results of operations for the years ending 31 December 2006, 2007 and 2008 or of the prospective returns on CCT Units. Experienced and professional management Unitholders will bene®t from the experience of key staff members of the Manager in the Singapore Commercial Property market as well as the strengths and experience in property management of CapitaLand Commercial Management Pte. Ltd., the property manager of the Properties. The management fees payable to the Manager have a substantial performancebased element which is designed to align the interests of the Manager with those of the Unitholders, and which provides the Manager with an incentive to both grow revenue and minimise operating costs. Opportunities for future growth through active asset management The Manager will endeavour to increase the property yield of CCT's property portfolio and, correspondingly, the net asset value per CCT Unit through active asset management of CCT's property portfolio, by: (i) raising or maintaining occupancy levels across the Properties; (ii) diversifying the tenant base; (iii) developing proactive marketing plans; and (iv) minimising property expenses in order to maximise returns from CCT's property portfolio. Opportunities and a strategy for future growth through acquisitions Various characteristics of CCT would enable it to make appropriate and potentially yieldaccretive acquisitions that are expected to maintain or enhance returns to Unitholders and provide potential for net asset growth. These characteristics include: Ð CCT's initial portfolio of the seven Properties (independently valued at an aggregate of S$2,018.5 million as at 31 December 2003), which provides sufficient diversification and scale to support the acquisition of additional properties without materially changing CCT's investment profile; Ð The financial flexibility provided by CCT's conservative capital structure; and Ð CCT's suf®ciently wide mandate to invest in ``income producing properties that are used, or predominantly used, for commercial purposes''. CCT has a competitive advantage in the acquisition of Commercial Properties as CCT's relationship with CapitaLand provides CCT with access to the Group's market expertise, experience, knowledge and business network as well as a right of ®rst refusal over properties with certain speci®ed characteristics which may in the future be identi®ed and targeted for acquisition by CCL or any of its subsidiaries. CapitaLand's interests substantially aligned with interests of Unitholders Through its wholly-owned subsidiaries, CapitaLand will retain an approximately 40% stake in CCT following the completion of the Distribution In Specie. To demonstrate its commitment to CCT, CapitaLand has voluntarily subjected the Retained Holding to a lock-up arrangement which will be maintained for a period of one year from and including the Listing Date. Although the relevant subsidiary or subsidiaries of CapitaLand will be at liberty to sell or dispose their CCT Units after the one-year period, CapitaLand (directly or through its subsidiaries) intends to be a long-term investor in CCT and to hold a substantial interest in CCT. 12 Further details on such lock-up arrangement can be found on page 147 of the Introductory Document. Conservative capital structure The Manager aims to optimise CCT's capital structure and cost of capital within the borrowing limits set out in the Property Funds Guidelines, and intends to use a combination of debt and equity to fund future acquisitions and property enhancements. CCT will have, at the Listing Date, an initial level of indebtedness of S$580.0 million, or 28.0% of the value of its Deposited Property (based on the pro forma consolidated balance sheet as at 31 December 2003). By adopting this conservative gearing level, CCT will maintain operating ¯exibility when considering future acquisition opportunities and capital expenditure requirements. Distribution policy For the period from the date of the Distribution In Specie to 31 December 2004 and for FY2005, CCT will distribute 95.0% of its taxable income to Unitholders. Thereafter, CCT will distribute at least 90.0% of its taxable income in accordance with the Tax Ruling, with the actual level of distribution to be determined at the Manager's discretion. Setting the initial distribution policy of CCT at 95.0% of taxable income rather than 100.0% provides CCT with additional ®nancial ¯exibility, enhanced cash ¯ow management for working capital purposes and the ability to fund unexpected capital expenditure. The Manager will continually seek to maximise the payout ratio while ensuring that CCT retains suf®cient cash for funding and operational requirements. Tax transparency for Qualifying Unitholders Qualifying Unitholders will be taxed at the level of the Unitholders at their applicable income tax rates rather than at CCT level. ``Qualifying Unitholders'' refer to: (a) tax resident Singapore-incorporated companies; (b) bodies of persons registered or constituted in Singapore (for example, town councils, statutory boards, registered charities, registered co-operative societies, registered trade unions, management corporations, clubs and trade and industry associations); and (c) Singapore branches of foreign companies which have presented a letter of approval from IRAS granting a waiver from tax deducted at source in respect of distributions from CCT. This tax transparency offers Qualifying Unitholders the bene®t of pre-tax distributions. Distributions made to all other non-individual Unitholders will be subject to tax deducted at source at the prevailing corporate tax rate. This tax deducted at source is not a ®nal tax. These non-individual Unitholders can use the tax deducted as a set off against their Singapore income tax liabilities. Tax exemption for distributions made to certain individuals The Singapore Government announced in the 2004 Budget on 27 February 2004 that distributions from REITs that are authorised under Section 286 of the Securities and Futures Act, Chapter 289 of Singapore (``SFA'') (excluding distributions out of franked dividends) derived on or after 1 January 2004 by individuals will be exempted from tax. This tax exemption does not apply to distributions that are derived through a partnership or are considered as gains or pro®ts from any trade, business or profession (i.e. distributions assessable to tax under Section 10(1)(a) of the Income Tax Act, Chapter 134 of Singapore (the ``Income Tax Act'')). 13 Following this announcement and subject to the legislation of the tax exemption as announced, distributions made to individuals, irrespective of their nationality or tax residence status, who hold the CCT Units as investment assets will be tax exempt. Distributions made to individuals who hold the CCT Units as trading assets or through a partnership will be taxed at the applicable income tax rates of these individuals. IRAS has also con®rmed that all individuals, other than those who hold the CCT Units through a partnership, will receive their distributions from CCT free of tax deducted at source. 1.3 Selected Financial Information Number of CCT Units in issue 839,116,700 Aggregate appraised value of the Properties as at 31 December 2003, based on independent valuation done by Knight Frank Pte Ltd S$2,018.5 million Net property income in FY2003 (pro forma) S$94.7 million Taxable income available for distribution to Unitholders in FY2003 (pro forma) S$71.5 million Total Unitholders' funds as at 31 December 2003 (pro forma) NAV per CCT Unit as at 31 December 2003 (pro forma) S$1,459.8 million S$1.74(1) Note: (1) The NAV per CCT unit has been revised from S$1.75 (as stated in the Company's announcement dated 6 February 2004) to S$1.74, as CCT managed to obtain a higher level of borrowings of S$580 million from the capital markets through the issuance of commercial mortgage backed securities by a conduit special purpose company. The level of borrowings the Manager estimated it was able to obtain at the time the Company's announcement was made on 6 February 2004 was approximately S$570 million and the NAV per CCT unit of S$1.75 was computed based on this level of borrowings. The Capital Reduction and the Distribution In Specie will be made at the NAV of the Properties of S$1,459.8 million as at 31 December 2003, which translates into S$1.74 per CCT Unit (after taking into account expenses relating to the establishment of CCT and the issue of the CCT Units). The NAV was arrived at by deducting net liabilities from the aggregate appraised value of the Properties. The price at which the CCT Units will trade when trading commences on the SGX-ST will be determined by the market, which is likely to take into account CCT's forecast distribution income and the yields offered by comparable investment alternatives. The table on page 103 of the Introductory Document provides an illustrative market price range of a CCT Unit and its corresponding distribution yield. 1.4 Listing on the Main Board of the SGX-ST CCT will be listed on the Main Board of the SGX-ST by way of an introduction. CCT has received a letter of eligibility from the SGX-ST for the listing and quotation of the CCT Units on the Main Board of the SGX-ST. Admission to the Of®cial List of the SGX-ST is not to be taken as an indication of the merits of the introduction, CCT, the Manager or the CCT Units. 1.5 Powers of the Manager and Trustee The Manager has general power of management over the assets of CCT. The Manager's main responsibility is to manage CCT's assets and liabilities for the bene®t of Unitholders. The Manager also sets the strategic direction of CCT and makes recommendations to the Trustee on the acquisition, divestment or enhancement of assets of CCT in accordance with its stated investment strategy. 14 The Trustee is Bermuda Trust (Singapore) Limited. The Trustee's powers and duties include: (a) acting as trustee of CCT and, in such capacity, safeguarding the rights and interests of the Unitholders, for example, by satisfying itself that transactions it enters into for and on behalf of CCT with a related party of the Manager or CCT are conducted on normal commercial terms, are not prejudicial to the interests of CCT and the Unitholders, and in accordance with all applicable requirements of the Property Funds Guidelines and/or the Listing Manual relating to the transaction in question; (b) holding the assets of CCT on trust for the benefit of the Unitholders; and (c) exercising all the powers of a trustee and the powers that are incidental to the ownership of the assets of CCT. Further details on the Trustee's powers and duties can be found on page 159 of the Introductory Document. 1.6 Interested Person Transactions relating to CCT You should note that by voting in favour of the Capital Reduction and the Distribution In Specie, you are deemed to have speci®cally approved the interested person transactions described in the sections ``The Manager and Corporate Governance Ð Related Party Transactions In Connection with the Setting Up of CapitaCommercial Trust'' and ``The Manager and Corporate Governance Ð Certain Other Related Party Transactions'' of the Introductory Document. 2. BACKGROUND TO AND RATIONALE FOR THE DISTRIBUTION IN SPECIE 2.1 Our strategy since the formation of CapitaLand Since CapitaLand was established after the Merger, we have sought to increase total returns to Shareholders through three main thrusts: 2.2 ^ Raise asset productivity by achieving higher asset turnover, divesting low-yielding assets and reducing ownership of capital intensive properties whilst continuing to generate fee income from the continued management of such properties; ^ Expand overseas; and ^ Grow higher value-added services. How we have delivered on our strategy in the past three years We have raised asset productivity through the following measures: (a) We have increased the Group's asset turnover, in particular by stepping up our residential property development business, notably in China and Australia. We have launched a number of highly successful residential developments in Shanghai in the last two years. These include Summit Residences, La Cite and Oasis Riviera. In Australia, our subsidiary, Australand, has sold approximately 7,700 land lots, houses and apartment units during FY2002 and FY2003. (b) We have embarked on a number of initiatives to improve the yields of our investment properties. Plaza Singapura, a retail mall located in Singapore's prime shopping district, was refurbished and repositioned for higher yield. Clarke Quay, a shopping precinct located alongside the Singapore River, is being revitalised through an iconic development based on a unique design by Alsop, a renowned firm of architects. We are also re-developing the office property One George Street. 15 (c) We have adopted a more capital-efficient growth model through the use of property funds and REITs. We pioneered the first REIT in Singapore, with the launch of CMT in July 2002. The creation of CMT enabled us to increase our capital productivity through the transfer of three retail malls to CMT while continuing to provide property and fund management services for these malls. In December 2003, we launched the approximately S$500 million CapitaRetail Singapore Limited fund (``CRS'') to invest in three retail malls, namely Lot One Shoppers' Mall, Bukit Panjang Plaza and Rivervale Mall. We will earn fee-based income for rendering property and fund management services to CRS. (d) We have lightened our asset base considerably. The Group has monetised over S$3 billion worth of assets since the Merger. Major monetisation projects undertaken by the Company and its subsidiaries include the sale of Pidemco Centre (now known as One George Street), The Adelphi and part of Temasek Tower to the Eureka Of®ce Fund in 2001, and the sale of Raf¯es Holdings' 55.0% stake in Raf¯es City (Private) Limited also in 2001; the sale of Ascott's stake in Somerset Grand Shanghai serviced residence and the initial public offering of CMT in 2002; and the sale of Brown's Hotel by Raf¯es Holdings in 2003. We have increased overseas contribution: (e) Over the past three years, we have strengthened our real estate businesses in overseas markets such as Australia and China and expanded our hospitality businesses globally. We are now one of the top foreign developers in Shanghai while our subsidiary, Australand, is a leading home builder in Australia. In 2001, our hotel subsidiary, Raf¯es Holdings, acquired SwissoÃtel Holding AG, signi®cantly increasing its global presence. In the last three years, our serviced residence subsidiary, The Ascott Group, also expanded its portfolio signi®cantly through acquisitions. These included the pan-European Citadines Group and the Oakford chain in Australia. Our overseas revenue has increased from 50.6% of the total revenue in FY2000 to 64.3% in FY2003. More signi®cantly, overseas EBIT has risen to 81.3% of total EBIT in FY2003 compared with a loss in FY2000. We have grown the range of our value-added services. In the process, we have reduced our reliance on income derived from asset ownership and increased our fee-based income: (f) We have grown our retail management business significantly. The number of malls owned and/or managed by the Group has grown to 33 by the end of 2003, making the Group one of the largest mall managers in Asia. Apart from Lot One Shoppers' Mall, Bukit Panjang Plaza and Rivervale Mall, all of which were acquired through CRS, in 2003, we also acquired La Park Mizue, a retail mall in Tokyo, while CMT expanded its retail portfolio to four properties with the acquisition of IMM Building. All these acquisitions, which are or will be held in property funds or REITs, are part of our strategy to grow our retail management business while keeping our equity investment low. (g) Our hospitality subsidiaries, The Ascott Group and Raffles Holdings, have expanded their portfolio of managed properties in line with their strategy to grow through feebased management contracts. In 2003, The Ascott Group signed on six new management contracts in Malaysia, Thailand, Australia, China and the United Arab Emirates. In the same year, Raffles Holdings secured four management contracts in Japan, Thailand and The Grenadines. (h) We have set up a business unit to provide real estate financial products and services. While the first steps in developing financial products and services were taken by Pidemco Land Limited prior to the Merger, we stepped up our efforts to grow this business in the last two years. Leveraging on our real estate domain knowledge and financial skills, the products and services provided by CFL include REITs, property funds, mezzanine financing and financial advisory and structuring services. As at 31 December 2003, CFL has S$3.1 billion of assets under its fund management business, and has also advised on financial structuring of transactions involving assets worth a total of S$2.0 billion. 16 (i) 2.3 Our property services subsidiary, PREMAS, has evolved into a total real estate management company, providing technology-based products and services. These include facility management for high-tech industries, total building management and energy management. With this change in focus, PREMAS is targeting new industrial segments which include pharmaceutical, semi-conductor and wafer fabrication plants. Why the launch of CCT will be another signi®cant step for the Group One of our foremost corporate objectives has been to transform the Group from a Singaporefocused asset-heavy property developer and owner into an international real estate group with fund management services as a key component of its more capital-ef®cient business portfolio. We believe that the launch of CCT will represent another major step towards achieving this goal. 2.3.1 Achieve a more balanced portfolio of asset mix and income streams The Distribution In Specie will enable us to further re-balance our income streams and asset mix across our various geographic markets, property sectors and business units. Diversi®cation across Geographic Markets When CapitaLand was established in 2000, we stated our plan to reduce the Singapore commercial portfolio subject to market conditions. As the pie charts below illustrate, the Distribution In Specie will enable us to move signi®cantly closer to that objective, by reducing our ownership of assets in Singapore from S$10,864 million (61.9% of total assets) to S$9,395 million (58.4% of total assets) assuming for balance sheet purposes that the Distribution In Specie had been effected on 31 December 2003. The Distribution In Specie will also result in more balanced income streams across the geographic markets in which we operate. For FY2003, the Group derived 81.3% of its EBIT from its overseas operations. Assuming that the Distribution In Specie had occurred on 1 January 2003 for the purposes of the pro®t and loss accounts, this percentage would have risen to 86.2%. Before the Distribution In Specie FY2003 Assets: S$17.6 billion After the Distribution In Specie FY2003 Assets: S$16.1 billion 41.6% 38.1% 61.9% Singapore Overseas 17 58.4% Before the Distribution In Specie FY2003 EBIT: S$596 million After the Distribution In Specie FY2003 EBIT: S$562 million 13.8% 18.7% 81.3% 86.2% Singapore Overseas If provisions were excluded from the calculation to give a normalised effect, overseas EBIT for FY2003 would have been 64.6% of the Group's EBIT and it will rise to 69.9% assuming that the Distribution In Specie had occurred on 1 January 2003. The pie charts above show that our overseas markets are able to generate proportionately higher EBIT relative to asset base, as compared to the mature Singapore market, hence the bene®t of reducing our capital concentration in Singapore. With the Distribution In Specie, the Group will become less dependent on the mature Singapore property market for earnings, and will increase its emphasis on other geographic markets with higher growth potential. Diversi®cation across Property Sectors The Distribution In Specie will also have a tangible impact on the percentage of the Group's total assets accounted for by of®ce properties. As the following pie charts illustrate, had the Distribution In Specie taken place on 31 December 2003 for balance sheet purposes, the Group's exposure to of®ce properties would have been reduced from 32.7% to 26.6%. The Distribution In Specie will allow the Group to reduce its dominant weighting of of®ce assets to a more balanced 26.6%, roughly equal to the Group's weighting of assets in the residential sector. Before the Distribution In Specie FY2003 Property value: S$14.5 billion 11.8% 9.6% After the Distribution In Specie FY2003 Property value: S$13.3 billion 1.1% 12.9% 22.9% 1.2% 25.0% 10.5% 4.7% 5.1% 2.7% 14.5% 32.7% 2.9% Residential Industrial Serviced Residences Office Mixed Developments Others 18 15.8% Retail Hotel 26.6% Diversi®cation across Business Units With the Distribution In Specie, the Group will derive a greater percentage of its EBIT from its local and international residential development activities, which generate higher pro®t margins and higher ROA. The pie charts below show that for FY2003, the Group derived 15.3% of its EBIT from its commercial and ®nancial business unit. Had the Distribution In Specie occurred on 1 January 2003, this percentage would have been reduced to 10.3%. As at 31 December 2003, the commercial and ®nancial business unit accounted for 38.0% of the Group's total assets. Had the Distribution In Specie taken place on 31 December 2003, this percentage would have been 32.3% instead. Before the Distribution In Specie FY2003 EBIT: S$596 million After the Distribution In Specie FY2003 EBIT: S$562 million 7.2% 6.8% 10.3% 15.3% 10.1% 10.7% 9.2% 9.7% 58.6% Commercial & Financial 62.1% Residential Ascott Before the Distribution In Specie FY2003 Assets: S$17.6 billion Raffles PREMAS & Others After the Distribution In Specie FY2003 Assets: S$16.1 billion 3.9% 3.5% 14.1% 15.4% 32.3% 38.0% 12.2% 13.3% 35.1% 32.2% Commercial & Financial 2.3.2 Residential Ascott Raffles PREMAS & Others Enhancing capital productivity and improving ROA and ROE The transfer of the Properties into CCT followed by the distribution of approximately 60% of the CCT Units to Shareholders will reduce the Group's total assets by 8.4% or S$1,469 million on a pro forma basis. The Group's EBIT, however, will only be reduced by a lesser 5.6% or S$33.4 million on a pro forma basis. The combined effect of a greater reduction in assets than income is an improvement in the Group's ROA. 19 The low reduction in income is made possible by the fact that the Group will receive approximately 40% of the distributions of CCT from its Retained Holding, while receiving 100% of CCT's property and fund management fees. Shareholders, as owners of approximately 60% of CCT, will receive much higher distributions from the Properties under CCT ownership than they currently do under CapitaLand ownership. By distributing approximately 60% of CCT Units to Shareholders, the Group's shareholders' funds will be reduced by 15.0%. However, as PATMI will only be reduced by a lesser 8.8% or S$9.3 million on a pro forma basis, the combined effect of a greater reduction in the Group's shareholders' funds than income is an improvement in the Group's ROE. As a result of the above enhancement of capital productivity, the ROA of the Group for FY2003 would have increased from 2.62% to 2.66% while the ROE of the Group for FY2003 would have risen from 1.73% to 1.87%, both on a pro forma basis. While the FY2003 pro forma ROA and ROE improvements are modest, the capital productivity improvements are lasting and sustainable bene®ts for CapitaLand and Shareholders. Undertaking the Distribution In Specie is expected to lead to greater ROA and ROE bene®ts in future years. 2.3.3 Increased fee income from an expanded property funds management platform Our existing property funds management platform which includes CMT, CRS, Eureka Of®ce Fund, CapitaLand China Residential Fund and IP Property Fund Asia, will be substantially expanded by the creation of CCT. This important platform allows us to increase our feebased income and deliver a larger business footprint with substantially less capital employed than direct ownership of assets. The attraction of fee-based income derived from funds management operations includes the fact that it is less vulnerable to swings in assets values, while strong fee income growth can be achieved from existing vehicles under management through asset enhancement and property acquisitions, again with little additional capital investment by us. The creation of CCT will enable us to increase our recurring fee-based income without the Group having to own 100% of the Properties as was previously the case. 2.3.4 Higher and more regular dividend income for Shareholders CCT, as a REIT, will distribute to its Unitholders a signi®cantly higher proportion of taxable income received from the Properties than was the case under their CapitaLand ownership. For the period from the date of the Distribution In Specie to 31 December 2004 and for FY2005, CCT will distribute 95.0% of its taxable income to Unitholders. Thereafter, CCT will distribute at least 90.0% of its taxable income in accordance with the Tax Ruling. 2.3.5 Tax Transparency for Qualifying Unitholders and Tax Exemption for certain individuals Apart from receiving higher total gross dividends after the Distribution In Specie, you also stand to bene®t from tax transparency granted to CCT if you are a Qualifying Unitholder, as CCT distributions will be received by you on a gross basis and you pay tax subsequently at your own applicable income tax rate. IRAS has con®rmed that if you are an individual, irrespective of your nationality or tax residence status, you will receive distributions from CCT free of tax deducted at source. This tax transparency does not apply if you hold the CCT Units through a partnership. If you hold the CCT Units as investment assets, you will be exempt from tax on such distributions. However, if you hold the CCT Units as trading assets or through a partnership, you will be taxed on distributions from CCT at your applicable personal income tax rate. 20 In addition, whereas you will effectively pay tax at the prevailing corporate tax rate on Singapore dividends received from companies under the one-tier tax system, which will be fully implemented in 2008, you will have the bene®t of paying tax on distributions from CCT at your own applicable income tax rate. If you are an individual who holds the CCT Units as investment assets and these CCT Units are not held through a partnership, you will have the bene®t of not having to pay tax on distributions from CCT. 2.4 The Group remains a leading Asia-Paci®c property player Notwithstanding the transfer of the Properties, the Group will remain a leading property company in Asia-Paci®c with total assets of S$16,089 million, as shown in the table below: As at 31 December 2003 Before the Distribution In Specie (S$ 'million) After the Distribution In Specie (S$ 'million) 17,558 16,089 (8.4) 6,078 5,164 (15.0) Total assets Shareholders' funds Change (%) After the Distribution In Specie, the Group will continue to retain its strong presence in Singapore's residential and commercial property sectors. The Group will also continue to expand internationally, with an already strong presence in the Australian property market; in China through various property investments in Chinese gateway cities such as Beijing and Shanghai; and by growing its activities in Thailand, Japan and other countries. 3. FINANCIAL EFFECTS The pro forma financial effects of the Distribution In Specie on selected financial measures and ratios of the Group are set out below, and have been computed using the latest audited consolidated figures of the Group, on the basis that the Distribution In Specie is accounted for in the Group's accounts at net book value, and that the Distribution In Specie had taken place: (a) for the purposes of the balance sheet, on 31 December 2003, being the date to which the latest full-year audited accounts of the Group were made up; and (b) for the purposes of the pro®t and loss accounts, on 1 January 2003, being the start of the latest audited ®nancial year. As these ®nancial effects are based on the Company's audited consolidated ®nancial results for FY2003 and are presented for illustration purposes only, they will not re¯ect the future ®nancial position of the Group following completion of the Capital Reduction and the Distribution In Specie in 2004. Before the Distribution In Specie (S$'000) After the Distribution In Specie(1), (2) (S$'000) Pro®t & Loss Account EBIT 595,591 562,200 PATMI 105,254 95,953 EPS (basic) (cents) 4.2 3.8 EPS (fully diluted) (cents) 4.2 3.8 Issued share capital 2,517,350 2,517,350 Share premium account 3,429,376 2,544,289 Shareholders' funds 6,077,579 5,163,556 NTA 6,041,438 5,127,415 Balance Sheet 21 Before the Distribution In Specie (S$'000) NTA per Share (S$) After the Distribution In Specie(1), (2) (S$'000) 2.40 2.04 Total borrowings 7,548,334 7,018,993 Cash and cash equivalents 1,476,486 1,450,754 Net borrowings 6,071,848 5,568,239 ROA 2.62% 2.66% ROE 1.73% 1.87% Financial Ratios Debt equity ratio 0.75 0.78 Interest cover ratio 3.67 4.04 Interest servicing ratio 5.52 5.87 De®nitions Used (a) EPS (basic) = PATMI 7 weighted average number of Shares in issue during the year (b) EPS (fully diluted) = PATMI 7 weighted average number of Shares adjusted for effects of certain Share Options which are dilutive. In this regard, the Convertible Bonds and Share Options whose conversion or exercise prices which are above S$1.55, the closing market share price as at 31 December 2003, are disregarded. (c) NTA per Share = (shareholders' funds - intangible assets) 7 number of Shares in issue as at year-end (d) ROA = (pro®t after tax + interest expense) 7 average total assets (e) ROE = PATMI 7 average shareholders' funds (f) Debt equity ratio = net borrowings 7 (shareholders' funds + minority interests) (g) Interest cover ratio = EBITDA 7 net interest expense (h) Interest servicing ratio = operating cash ¯ow 7 net interest paid Notes: (1) Post-Distribution In Specie pro forma ®nancial effects on the pro®t and loss account are arrived at after accounting for adjustments which are expected to occur every year. One-off ®nance and transaction costs to be charged to the pro®t and loss account in the year the Capital Reduction occurs are not taken into account. (2) Such ®nancial effects do not take into account the impact of any conversion of the Convertible Bonds or exercise of the Share Options. Detailed pro forma ®nancial statements of the Group after the establishment of CCT and the Distribution In Specie are set out in Appendix 1 to this Circular. 4. HOW THE CAPITAL REDUCTION AND THE DISTRIBUTION IN SPECIE WILL BE IMPLEMENTED 4.1 Key Steps The Capital Reduction and the Distribution In Specie will involve the reduction of the amount standing to the credit of the share premium account of the Company by a maximum amount of approximately S$952 million, assuming that all outstanding Share Options and Convertible Bonds, which are exercisable or convertible into Shares (as the case may be) as at the Latest Practicable Date are exercised or converted prior to the Books Closure Date. As at the Latest Practicable Date, the Company has an authorised share capital of S$4,000,000,000 and US$172,500 divided into 4,000,000,000 Shares and 172,500 redeemable convertible cumulative preference shares of US$1.00 each respectively. The issued and paid-up share capital of S$2,518,630,013 is divided into 2,518,630,013 Shares. As at the Latest Practicable Date, there were S$380,000,000 outstanding Convertible Bonds held by the Bondholders exercisable into 162,685,161 Shares, and there were 90,626,758 outstanding Share Options granted to eligible participants under the Share Plans. Out of the 90,626,758 Share Options, 26,285,585 Share Options are exercisable into 26,285,585 Shares as at the Latest Practicable Date. 22 Depending on the number of new Shares which may be issued as a result of the possible exercise of the Share Options or conversion of the Convertible Bonds prior to the Books Closure Date, the aggregate sum to be distributed to Shareholders pursuant to the Capital Reduction amounts to a maximum of approximately S$952 million based on the enlarged issued share capital of CapitaLand, assuming that all outstanding Share Options and the Convertible Bonds which are exercisable or convertible into Shares (as the case may be) as at the Latest Practicable Date are exercised or converted prior to the Books Closure Date. Such an aggregate sum will be distributed to Shareholders by way of a distribution in specie of a total of up to 541,520,152 CCT Units, representing approximately 64.5% of the total number of units in CCT, to Shareholders in proportion to the number of Shares that you are holding as at the Books Closure Date. For every 1,000 Shares that you hold on the Books Closure Date, you will be entitled to receive 200 CCT Units. The CCT Units will be distributed to you free of encumbrances and together with all rights attaching thereto on and from the date the Distribution In Specie is effected. 4.2 Effect of the Capital Reduction and Distribution In Specie The effect of the Capital Reduction and the Distribution In Specie is to return to Shareholders an aggregate sum of up to approximately S$952 million in the form of CCT Units to be distributed to Shareholders on a pro rata basis as set out above. The issued and paid-up share capital of the Company will remain the same after the Distribution In Specie, and accordingly there will be no change in the number and par value of the ordinary shares in the capital of the Company held by the Shareholders immediately after the Capital Reduction and the Distribution In Specie. Pursuant to the Share Plans and the terms and conditions of the Convertible Bonds, the subscription price of each Share Option or the number of Shares comprised in each Share Option, the number of Shares comprised in each Award and the conversion price of each Convertible Bond will be adjusted as a consequence of the Capital Reduction and the Distribution In Specie. For the Share Options and Awards, such adjustments to be made to the subscription prices of or number of Shares comprised in the Share Options and the number of Shares comprised in the Awards shall come into effect upon written noti®cation of the adjustments to the holders of the Share Options and Awards in accordance with the rules of the Share Plans. For the Convertible Bonds, such adjustments to be made to the conversion price shall come into effect on the Effective Date. 4.3 Con®rmation from Auditors KPMG has con®rmed that as at 31 December 2003, the Company's share premium account amounting to S$2,161 million is suf®cient to effect the Capital Reduction and the Distribution In Specie. 4.4 No Payment Required Shareholders should note that they will not be required to pay for any CCT Units received pursuant to the Distribution In Specie. 4.5 Conditions The Capital Reduction and the Distribution In Specie are subject to, inter alia, the following: (a) the approval of Shareholders for the Capital Reduction and the Distribution In Specie at the EGM; (b) the Capital Reduction being approved and confirmed by the High Court and a copy of the Order of Court approving the Capital Reduction being electronically filed with the Registrar; and (c) such other regulatory approvals as may be required. 23 4.6 Suspension of the Share Plans To facilitate the distribution in specie of the CCT Units and for ease of administration, the exercise of the Share Options and the grant of Awards under the Share Plans (as the case may be) will be suspended for a period to be determined by the Directors, up to and including the Books Closure Date. 4.7 Date of Crediting Subject to the above conditions being satis®ed, it is expected that the Securities Accounts of Shareholders who are Depositors will be credited with CCT Units on or about 18 May 2004. Shareholders who are not Depositors will be credited with CCT Units on or about 18 May 2004 by the entry of their names on the Register of Unitholders to be maintained by the Trustee. Please refer to ``Shareholders' Entitlement to the CCT Units'' on pages 25 to 27 of this Circular for further details. 5. TAXATION 5.1 Tax Implications on the Company 5.1.1 Income Tax The Distribution In Specie should not give rise to adverse income tax implications on the Company to the extent that the Capital Reduction is made out of the Company's contributed capital, as de®ned under the Income Tax Act. On the basis that the effect of the Capital Reduction and the Distribution In Specie is to return to Shareholders a total of up to approximately S$952 million in the form of CCT Units, the Company has suf®cient contributed capital to effect the Capital Reduction wholly out of its contributed capital. 5.1.2 Stamp Duty The Commissioner of Stamp Duties has indicated in a letter dated 28 November 2003 that instruments executed for the disposal of CCT Units will not be subject to stamp duty. Accordingly, the Distribution In Specie, as well as any instrument executed to effect the Distribution In Specie, will not be subject to stamp duty. 5.2 Tax implications on Shareholders Shareholders should note that the statements below are not to be regarded as tax advice or a complete and comprehensive analysis of all tax implications on Shareholders arising from the Distribution In Specie, the ownership and subsequent disposal of CCT units. The statements do not purport to deal with the tax consequences applicable to all categories of Shareholders. The statements are of a general nature and are based on Singapore tax laws in effect and on administrative and judicial interpretations of these tax laws, as of the Latest Practicable Date, all of which are subject to change and any such changes may take effect on a retroactive basis. Shareholders should consult their own professional advisers on the tax implications that may apply to their own individual circumstances. Shareholders who may be subject to tax in a jurisdiction other than Singapore should also consult their own professional advisers. 5.2.1 Income Tax On the basis that the Company will be making the Capital Reduction out of its contributed capital and does have suf®cient contributed capital for this purpose, the Distribution In Specie will be treated as a return of capital to Shareholders. A return of capital is generally not liable to income tax. Should the return of capital received by a Shareholder exceed his cost of investment in the Shares, the excess may be subject to tax in certain circumstances, for example, where a Shareholder holds the Shares as trading assets of a trade or business of dealing in shares. 24 5.2.2 Stamp Duty The Commissioner of Stamp Duties has indicated in a letter dated 28 November 2003 that instruments executed for the disposal of CCT Units will not be subject to stamp duty. Accordingly, a disposal of a CCT Unit by any Shareholder will not be subject to stamp duty. 6. SHAREHOLDERS' ENTITLEMENT TO THE CCT UNITS 6.1 Notice of Books Closure Date An announcement will be made to notify Shareholders of the Books Closure Date in due course. As the Books Closure Date will be announced before the High Court's approval and con®rmation for the Capital Reduction, the Books Closure Date will be subject to the High Court's con®rmation and approval for the Capital Reduction. Con®rmation of the Books Closure Date will be announced upon the High Court's approval and con®rmation for the Capital Reduction. 6.2 Entitlement Pursuant to the Capital Reduction and Distribution In Specie, Shareholders will receive one CCT Unit for every ®ve Shares held as at the Books Closure Date, with any fraction of a CCT Unit arising from the Distribution In Specie to be disregarded. For example, for every 1,000 Shares held by the Shareholders as at the Books Closure Date, each Shareholder will receive 200 CCT Units. 6.3 Scripless Shares In the case of Shareholders being Depositors, entitlements to the CCT Units will be determined on the basis of the number of Shares standing to the credit of their respective Securities Accounts as at the Books Closure Date. Following the Books Closure Date, CDP will credit their Securities Accounts with the relevant number of CCT Units and will send each such Depositor a noti®cation letter con®rming the number of CCT Units that has been credited to his Securities Account. 6.4 Scrip Shares In the case of Shareholders not being Depositors, entitlements to the CCT Units will be determined on the basis of their holdings of Shares appearing in the Register of Members of the Company as at the Books Closure Date. Shareholders not being Depositors who have not already done so, are requested to take the necessary action to ensure that the Shares owned by them are registered in their names or in the names of their nominees by the Books Closure Date. Following the Books Closure Date, the names of each Shareholder not being a Depositor as well as relevant number of CCT Units held by each such Shareholder will be entered into the Register of Unitholders maintained by the Trustee. The entries in the Register of Unitholders shall be conclusive evidence of the number of CCT Units held by each Shareholder not being a Depositor. Shareholders not being Depositors should note that they will not be able to trade in such CCT Units on the SGX-ST unless they make appropriate arrangements for such CCT Units to be held by CDP and recorded as such in the Register of Unitholders maintained by the Trustee. 6.5 CPF Funded Shareholders In the case of Shareholders who have purchased Shares using their CPF funds, entitlements to the CCT Units will be determined on the basis of the number of Shares standing to the credit of their respective Investment Accounts (``CPFIA'') as at the Books Closure Date. Following the Books Closure Date, CDP will credit their CPFIAs with the relevant number of CCT Units. Each such Shareholder will be sent a noti®cation letter con®rming the number of CCT Units that has been credited to his CPFIA. 25 6.6 Overseas Shareholders 6.6.1 General Where the Directors are of the view that the distribution of the CCT Units to any Overseas Shareholders may infringe any relevant foreign law or necessitate compliance with conditions or requirements which they regard as onerous by reasons of costs, delay or otherwise, the CCT Units which such Overseas Shareholders would have been entitled to pursuant to the Capital Reduction and the Distribution In Specie (the ``Overseas Shareholders' CCT Units'') will not be transferred to such Overseas Shareholders. Instead, the Overseas Shareholders' CCT Units will be transferred to nominee(s) appointed by the Company, who shall sell the Overseas Shareholders' CCT Units and thereafter, distribute the aggregate amount of the net proceeds, after deducting all dealing and other expenses in connection therewith, proportionately among such Overseas Shareholders in accordance with their respective entitlements to the CCT Units as at the Books Closure Date in full satisfaction of their rights to the CCT Units to which they would otherwise have become entitled under the Capital Reduction and the Distribution In Specie, and where the net proceeds to which any particular Overseas Shareholder is entitled shall be less than S$10.00, such net proceeds shall be retained for the bene®t of the Company, and no Overseas Shareholder shall have any claim whatsoever against CDP and the Company in connection therewith. 6.6.2 Australia This Circular is for the exclusive use of Shareholders in connection with the proposed Capital Reduction and Distribution In Specie. No product disclosure statement (``PDS'') is required under the Corporations Act 2001 and no such document has been or will be prepared or lodged with the Australian Securities and Investments Commission. No conduct in relation to the Distribution In Specie has been authorised by CapitaLand to occur in Australia. The CCT Units are being distributed for the purposes outlined in paragraph 2 ``Background to and Rationale for the Distribution In Specie'' above, and not for the purpose of Shareholders selling or transferring the CCT Units, or granting, issuing or transferring interests in, or options or warrants over, the CCT Units. Shareholders must not distribute this Circular in Australia or engage in any conduct in relation to the CCT Units that would require the preparation of a PDS, CCT to be registered as a managed investment scheme, or require an Australian Financial Services Licence (where an appropriate licence is not already held). Any sale of the CCT Units must be on the SGX-ST or to a person to whom it would be lawful to offer the CCT Units without them being given a PDS. 6.6.3 Hong Kong This Circular is for the exclusive use of Shareholders in connection with the proposed Capital Reduction and Distribution In Specie. Accordingly, this Circular must not be distributed, published or reproduced (in whole or in part), disclosed by Shareholders to any other person in Hong Kong or used for any purpose in Hong Kong other than in connection with Shareholders' consideration of the Capital Reduction and the Distribution In Specie. This Circular does not constitute an offer or invitation for the sale or purchase of securities in Hong Kong and shall not form the basis of any contract. 6.6.4 Malaysia Overseas Shareholders in Malaysia should note that the distribution of the CCT Units to them is subject to the approval of the Securities Commission of Malaysia. An application has been made to the Securities Commission of Malaysia for such approval but there is no assurance that such approval will be given or obtained in time for the distribution of the CCT Units. If such approval is not given or not obtained in time for the distribution of the CCT Units, or if the approval is subject to compliance with conditions or requirements which, in the view of the Directors, are onerous by reasons of costs, delay or otherwise, such Overseas Shareholders will not receive their entitlements to the CCT Units, but will receive the net proceeds of the sale of the CCT Units which they otherwise would have been entitled to, in the manner set out in paragraph 6.6.1 above. 26 6.6.5 The Netherlands The CCT Units will not be offered, sold, transferred or delivered, whether directly or indirectly, as part of their initial distribution or any time thereafter, to any individual or legal entity situated in The Netherlands other than to individuals or legal entities who or which trade or invest in securities in the conduct of their profession or business within the meaning of the Exemption Regulation of December 21 1995 issued pursuant to The Netherlands Securities Market Supervision 1995 Act (``Wet Toezicht Effectenverkeer 1995''). These include, but are not limited to, banks, brokers, securities institutions, insurance companies, pension funds, investment institutions, other institutional investors and other parties, including treasury departments of commercial enterprises and ®nance companies of groups, who or which trade or invest in securities in the conduct of a business or profession. Overseas Shareholders in The Netherlands who are not individuals or legal entities who or which trade or invest in securities in the conduct of their profession or business within the meaning of the Exemption Regulation of December 21 1995 issued pursuant to Wet Toezicht Effectenverkeer 1995 will instead receive the net proceeds of the sale of the CCT Units which they otherwise would have been entitled to, in the manner set out in paragraph 6.6.1 above. 6.6.6 United Kingdom This Circular was prepared solely for the use of and is directed in the United Kingdom at Overseas Shareholders in the United Kingdom having professional experience in matters relating to investments that are ``Investment Professionals'' as de®ned by Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001. Subject to the applicable provisions of the laws of the United Kingdom, the Distribution In Specie will be available to Overseas Shareholders in the United Kingdom and the CCT Units will be distributed to such Overseas Shareholders. Overseas Shareholders in the United Kingdom who do not have professional experience in such matters relating to investments should not rely on this Circular. 6.6.7 United States The CCT Units have not been and will not be registered under the U.S. Securities Act of 1933 as amended (the ``Securities Act''), for offer or sale as part of their distribution and may not be offered, sold or delivered in the United States or to, or for the account or bene®t of, any U.S. person, unless the CCT Units are registered under the Securities Act or an exemption from the registration requirements of the Securities Act is available, in each case in accordance with all applicable securities laws of the states of the United States. 6.7 Odd-lot Trading The CCT Units will be traded in board lots of 1,000 units. However, a temporary odd-lot counter will be set up for two calendar months from the date for commencement of trading of CCT Units on the SGX-ST (``Concession Period'') to allow trading in board lots of 100 CCT Units. CCT Units are expected to commence trading on or about 19 May 2004. To provide Unitholders a more economical avenue to trade and/or round up their odd lots of CCT Units, CapitaLand has arranged for DBS Vickers Securities (S) Pte Ltd (``DBSV'') to offer concessionary brokerage rates for the trading in CCT Units during the Concession Period. The minimum brokerage fee payable by those who trade on the temporary odd-lot counter during the Concession Period through DBSV will be S$20.00 per contract, instead of the usual S$30.00. After the Concession Period, Unitholders can trade in odd lots of CCT Units in the SGX-ST's Unit Share Market which allows trading of odd lots with a minimum of one CCT Unit. For trades in board lots of 1,000 CCT Units, the usual brokerage fee applies. 27 (II) THE PROPOSED MODIFICATIONS TO THE CAPITALAND SHARE OPTION PLAN, THE CAPITALAND PERFORMANCE SHARE PLAN AND THE CAPITALAND RESTRICTED STOCK PLAN 1. THE SHARE PLANS The Share Plans were adopted on the merger of DBS Land Limited and Pidemco Land Limited in November 2000 to establish CapitaLand. A summary of the rules of the Share Plans was set out in the Appendix 6 of the Scheme Document dated 21 September 2000 issued to the shareholders of DBS Land Limited. We are proposing certain modi®cations to the provisions of the Share Plans to bring the Share Plans in line with current market practice. 2. THE PROPOSED MODIFICATIONS TO THE SHARE PLANS We propose to modify Rule 11.1 of the CapitaLand Share Option Plan, and Rule 9.1 of each of the CapitaLand Performance Share Plan and the CapitaLand Restricted Stock Plan. Existing Rule 11.1 of the CapitaLand Share Option Plan and existing Rule 9.1 of each of the CapitaLand Performance Share Plan and the CapitaLand Restricted Stock Plan permit the ERCC to adjust outstanding Share Options or Awards (as the case may be) if a variation in the issued ordinary share capital (whether by capitalisation of pro®t or reserve or rights issue, reduction, subdivision, consolidation, distribution or otherwise) shall take place. Rule 11.1 of the CapitaLand Share Option Plan and Rule 9.1 of each of the CapitaLand Performance Share Plan and the CapitaLand Restricted Stock Plan currently do not have any provisions for adjustments to be made in the event of a declaration of a special dividend (whether in cash or in specie). Normally such a declaration does not involve a variation in the issued ordinary share capital of the Company. We propose that Rule 11.1 of the CapitaLand Share Option Plan and Rule 9.1 of each of the CapitaLand Performance Share Plan and the CapitaLand Restricted Stock Plan be modi®ed to give the ERCC the discretion to adjust the outstanding Share Options or Awards (as the case may be) in the event that the Company makes a declaration of a special dividend (whether in cash or in specie). Such provisions are also proposed to be modi®ed to give the ERCC the discretion to adjust the outstanding Share Options or Awards in the event the Company varies its reserves. Any determination by the ERCC as to whether to make an adjustment and if so, the manner in which such an adjustment should be made, would have to be con®rmed by the auditors of the Company to be fair and reasonable. Further, the ERCC would also have to bear in mind, and comply with, Rule 850(2) of the Listing Manual when determining the manner in which any adjustments should be made, which provides that any adjustments made must be made in such a way that a participant of the Share Plans will not receive a bene®t that a Shareholder does not receive. 3. RATIONALE FOR THE PROPOSED MODIFICATIONS Currently the adjustments to outstanding Share Options or Awards (as the case may be) may only be made in the event of a variation in the issued ordinary share capital of the Company, for example, where the Company implements a bonus issue of ordinary shares. Paying a special dividend or otherwise making a distribution out of the Company's reserves will have the same dilution effect on the Share Options and Awards as a distribution out of the Company's issued ordinary share capital. Just as the Share Plans permit adjustments to the Share Options and Awards to be made in the event of a variation in the share capital, adjustments should similarly be permitted in the event of a special dividend or a variation in the Company's reserves. 28 The proposed alterations to Rule 11.1 of the CapitaLand Share Option Plan and Rule 9.1 of each of the CapitaLand Performance Share Plan and the CapitaLand Restricted Stock Plan will give the ERCC the ability and the discretion to determine whether an adjustment should be made (and if so, the manner in which it should be made) where the interests of participants of the Share Plans are diluted due to a variation in the reserves of the Company or a declaration of a special dividend (whether in cash or in specie). While the ERCC may have such discretion, any adjustment would have to be con®rmed by the auditors of the Company to be fair and reasonable and cannot be made in a way that would confer a bene®t not received by Shareholders as required in Rule 850(2) of the Listing Manual. 4. SHAREHOLDERS' APPROVAL The proposed modi®cations are subject to approval of Shareholders at the EGM. Details to the proposed modi®cations to Rule 11.1 of the CapitaLand Share Option Plan and Rule 9.1 of each of the CapitaLand Performance Share Plan and the CapitaLand Restricted Stock Plan are set out in Appendix 2 to this Circular. 29 (III) GENERAL 1. DIRECTORS' RECOMMENDATION 1.1 The Capital Reduction and the Distribution In Specie Having considered the terms of and the rationale for the Capital Reduction and the Distribution In Specie, the Directors are of the opinion that the Capital Reduction and the Distribution In Specie are in the interests of the Company and the Shareholders. Accordingly, the Directors recommend that Shareholders vote in favour of Resolution 1, being the Special Resolution relating to the Capital Reduction and the Distribution In Specie. 1.2 The Proposed Modi®cations to the Share Plans As all the Directors hold Share Options or Awards (as the case may be) under the Share Plans, they will accordingly abstain from making any recommendation on the proposed modi®cations to the Share Plans to Shareholders. 2. IRREVOCABLE UNDERTAKING GIVEN BY STPL As at the Latest Practicable Date, STPL is a majority shareholder of the Company and has given an irrevocable undertaking to the Company to vote, or procure the voting of, all the Shares in which it and its wholly-owned subsidiary, STPI, have a bene®cial interest, as re¯ected in the Depository Register and/or the Register of Members of the Company 48 hours before the EGM, in favour of the Special Resolution to approve the Capital Reduction and the Distribution In Specie at the EGM. 3. EXTRAORDINARY GENERAL MEETING The EGM, notice (the ``Notice'') of which is set out on pages 40 to 41 of this Circular, will be held at STI, 168 Robinson Road, Level 9 Capital Tower, Singapore 068912 on 12 April 2004 at 10.30 a.m. (or as soon thereafter following the conclusion or adjournment of the Annual General Meeting of the Company to be held at 10.00 a.m. on the same day and at the same place) for the purposes of considering and, if thought ®t, passing with or without any modi®cations, the resolutions set out in the Notice. A Depositor shall not be regarded as a Shareholder entitled to attend the EGM and to speak and vote thereat unless he is shown to have Shares entered against his name in the Depository Register, as certi®ed by CDP as at 48 hours before the EGM. 4. ACTION TO BE TAKEN BY SHAREHOLDERS 4.1 Abstention from voting As required under Rule 859 of the Listing Manual, any Shareholder who is eligible to participate in the Share Plans (such as, inter alia, employees of the Company and its subsidiaries) must abstain from voting in the EGM in respect of Resolution 2, being the Ordinary Resolution relating to the proposed modi®cations to the Share Plans. Such Shareholder should also decline to accept appointment as proxies for any Shareholder to vote in respect of Resolution 2, unless the Shareholder concerned shall have given instructions in his proxy form as to the manner in which his vote is to be cast in respect of Resolution 2. 4.2 Appointment of Proxies You will ®nd enclosed with this Circular the Notice and a Proxy Form. If you are unable to attend the EGM and you wish to appoint a proxy to attend and vote on your behalf, you should complete, sign and return the attached Proxy Form in accordance with the instructions printed thereon as soon as possible and, in any event, so as to reach the registered of®ce of the Company at 168 Robinson Road, # 30-01 Capital Tower, Singapore 068912, not later than 48 hours before the time ®xed for the EGM. Your completion and return of a Proxy Form will not prevent you from attending and voting in person at the EGM if you so wish. 30 5. DIRECTORS' RESPONSIBILITY STATEMENT The Directors (including those who may have delegated detailed supervision of this Circular) collectively and individually accept responsibility for the accuracy of the information given in this Circular and con®rm, having made all reasonable enquiries, that to the best of their knowledge and belief, the facts stated and opinions expressed in this Circular are fair and accurate in all material respects as at the date of this Circular and that there are no material facts the omission of which would make any statement in this Circular misleading in any material respect. Where information has been extracted or reproduced from published or otherwise publicly available sources, the sole responsibility of the Directors has been to ensure through reasonable enquiries that such information is accurately extracted from such sources or, as the case may be, re¯ected or reproduced in this Circular. 6. FINANCIAL ADVISERS 6.1 Financial Advisers The Company has appointed CFSL, DBS Bank and JPMorgan as its ®nancial advisers in respect of the Capital Reduction and the Distribution In Specie. CFSL is an indirect whollyowned subsidiary, and the real estate ®nancial services arm, of CapitaLand. CFSL has been granted a capital markets services licence under the SFA by MAS for the regulated activities of dealing in securities and advising on corporate ®nance. The Company will also pay to CFSL, DBS Bank and JPMorgan customary fees for acting as ®nancial advisers, as well as its legal and other expenses. 6.2 Responsibility Statement CFSL, DBS Bank and JPMorgan, as ®nancial advisers to the Company in respect of the Capital Reduction and the Distribution In Specie, each acknowledges that, based on the information provided by the Company and having made reasonable enquiries and to the best of its knowledge and belief, this Circular constitutes full and true disclosure of all material facts on the Capital Reduction and Distribution In Specie. Where the information has been extracted from published or publicly available sources or otherwise based on information provided by the Company, the sole responsibility of each of CFSL, DBS Bank and JPMorgan has been to ensure that such information is accurately extracted from these sources or, as the case may be, re¯ected or reproduced in this Circular. 7. ADDITIONAL INFORMATION Your attention is drawn to the additional information as set out in the Appendices to this Circular. Yours faithfully For and on behalf of the Board of Directors of CAPITALAND LIMITED Philip Yeo Liat Kok Chairman 31 APPENDIX 1 PRO FORMA FINANCIAL STATEMENTS OF THE GROUP Balance Sheet as at 31 December 2003 S$'000 As at 31 December 2003 (audited) Adjustments pursuant to the Distribution In Specie Pro Forma Non-Current Assets Property, Plant and Equipment 1,318,015 Intangible Assets (441) (1) 36,141 Investment Properties 6,583,170 Properties Under Development 1,317,574 36,141 (2,018,500) (1) 156,635 4,564,670 156,635 Interest in Associated Companies 1,741,210 Interest in Joint Venture Companies 1,269,743 1,269,743 51,241 51,241 193,061 193,061 Deferred Tax Assets 16,797 16,797 Other Non-Current Assets 37,771 37,771 11,403,784 9,960,419 3,552,375 3,552,375 Interest in Partnerships Financial Assets 575,576 (2) 2,316,786 Current Assets Development Properties for Sale Consumable Stock 14,752 Trade and Other Receivables 952,587 Financial Assets 158,416 Cash and Cash Equivalents 1,476,486 14,752 (144) (1) 952,443 158,416 (25,732) (1) 1,450,754 6,154,616 6,128,740 720 720 Less: Current Liabilities Bank Overdrafts Trade and Other Payables 1,361,502 Short Term Loans 1,051,868 Current Portion of Term Loans 1,361,502 (529,341) (3) 510,873 Current Portion of Debt Securities 1,129,061 Provision for Taxation 196,505 522,527 510,873 1,129,061 (5,484) (1) 191,021 4,250,529 3,715,704 1,904,087 2,413,036 Term Loans 3,399,964 3,399,964 Debt Securities 1,455,848 Net Current Assets Less: Non-Current Liabilities Deferred Tax Liabilities 94,072 Deferred Income 22,965 Other Non-Current Liabilities 273,415 32 1,455,848 (5,205) (1) 88,867 22,965 (15,188) (1) 258,227 5,246,264 5,225,871 8,061,607 7,147,584 S$'000 As at 31 December 2003 (audited) Adjustments pursuant to the Distribution In Specie Pro Forma Representing: Share Capital 2,517,350 2,517,350 (914,023) (4) Reserves 3,560,229 Share Capital and Reserves 6,077,579 5,163,556 Minority Interests 1,984,028 1,984,028 8,061,607 7,147,584 2,646,206 Notes: 1. These adjustments represent the assets and liabilities of the Property Companies being deconsolidated from the Group. 2. This represents the Group's interest in CCT net of its share of transaction costs. 3. This relates to a reduction in borrowings as a result of the net cash consideration received from CCT. 4. 5. This adjustment relates to the Capital Reduction and the related transaction costs effected through the Group's reserves. The above pro forma ®nancial statements do not take into account the effects of any conversion of Convertible Bonds or exercise of Share Options. 33 Pro®t & Loss Account for FY2003 S$'000 FY2003 (audited) Revenue 3,830,086 Cost of Sales (2,800,906) Gross pro®t 1,029,180 Recurring(1) Adjustments pursuant to the Distribution In Specie (107,400) (3) 18,696 (4) (4) Recurring(1) Pro Forma One-off(2) Adjustments pursuant to the Distribution In Specie AllInclusive(2) Pro Forma 3,722,686 3,722,686 (2,782,210) (2,782,210) 940,476 940,476 Other operating income 236,233 (46) 236,187 236,187 Administrative expenses (554,489) 1,866 (4) (552,623) (552,623) Other operating expenses (173,231) 26,631 (5) (146,600) (146,600) Pro®t from Operations 537,693 Finance costs (240,767) 23,716 (6) (217,051) 477,440 (7,330) (9) (224,381) 477,440 Ð associated companies 84,022 26,862 (7) 110,884 (14,481) (10) 96,403 Ð joint venture companies (18,806) (18,806) (18,806) Ð partnerships (7,318) (7,318) (7,318) Share of results of: Pro®t before taxation 354,824 Taxation (150,292) Pro®t after taxation Minority interests Net pro®t attributable to shareholders 345,149 323,338 (149,918) (149,918) 204,532 195,231 173,420 (99,278) (99,278) (99,278) 105,254 95,953 74,142 374 (8) Notes: 1. ``Recurring Pro Forma'' is arrived at after accounting for those types of adjustments which are expected to occur every year (``Recurring Adjustments''). 2. ``All-Inclusive Pro Forma'' includes, besides Recurring Adjustments, one-off ®nance and transaction costs to be charged to the pro®t and loss account in the year the Capital Reduction exercise occurs. 3. This represents the revenue of the Property Companies being de-consolidated from the Group (S$119,919,000) partially offset by certain management fees earned (S$12,519,000) under the CCT structure. 4. These adjustments represent certain cost of sales, other operating income and administrative expenses of the Property Companies being de-consolidated from the Group. 5. This relates to a reduction in the Group's share of revaluation de®cits of the Properties as a result of a reduction in ownership in the Property Companies after the proposed Distribution In Specie. 6. This represents the net reduction in ®nance costs upon repayment of certain borrowings of the Group from the net cash consideration received from CCT. 7. This represents the Group's share of results of CCT, computed based on its 40% interest held, determined in accordance with the Group's accounting policies. 8. This relates to the net tax effects on the Group's earnings after the proposed Distribution In Specie. 9. This relates to a one-off ®nance cost incurred for a standby credit facility in connection with the Capital Reduction exercise. 10. This represents the Group's share of the one-off transaction costs borne by CCT charged to the Pro®t and Loss Account in accordance with the Group's accounting policies. 11. The above pro forma ®nancial statements do not take into account the effects of any conversion of Convertible Bonds or exercise of Share Options. 34 APPENDIX 2 THE PROPOSED MODIFICATIONS TO THE SHARE PLANS The proposed modi®cations to the Share Plans are set out below. For ease of reference and where appropriate, the full text of the relevant Rules of the Share Plans which are proposed to be modi®ed have been reproduced. The CapitaLand Share Option Plan Existing Rule 11.1 11.1 If a variation in the issued ordinary share capital of the Company (whether by way of a capitalisation of profits or reserves or rights issue, reduction, subdivision, consolidation, distribution or otherwise) shall take place, then:± (a) the Subscription Price of the Shares, the nominal amount, class and/or number of Shares comprised in an Option to the extent unexercised; and/or (b) the nominal amount, class and/or number of Shares over which future Options may be granted under the Plan, shall be adjusted in such manner as the Committee may determine to be appropriate. Proposed modi®cation to Existing Rule 11.1 Existing Rule 11.1 shall be deleted in its entirety and the following substituted therefor: 11.1 If a variation in the share capital or reserves of the Company (whether by way of a capitalisation of profits or reserves or rights issue, reduction, subdivision, consolidation, distribution or otherwise) shall take place or if the Company shall make a declaration of a special dividend (whether in cash or in specie), then the Committee may as it deems appropriate determine whether:± (a) the Subscription Price of the Shares, the nominal amount, class and/or number of Shares comprised in an Option to the extent unexercised; and/or (b) the nominal amount, class and/or number of Shares over which future Options may be granted under the Plan, shall be adjusted and, if so, the manner in which such adjustment shall be made. Any adjustment under this Rule 11 shall be made in a way that a Participant will not receive a bene®t that a holder of Shares does not receive. The CapitaLand Performance Share Plan Existing Rule 9.1 9.1 If a variation in the issued ordinary share capital of the Company (whether by way of a capitalisation of profits or reserves or rights issue, reduction, subdivision, consolidation, distribution or otherwise) shall take place, then:± (a) the nominal amount, class and/or number of Shares which are the subject of an Award to the extent not yet Vested; and/or (b) the nominal amount, class and/or number of Shares in respect of which future Awards may be granted under the Plan, shall be adjusted in such manner as the Committee may determine to be appropriate. 35 Proposed modi®cation to existing Rule 9.1 Existing Rule 9.1 shall be deleted in its entirety and the following substituted therefor: 9.1 If a variation in the share capital or reserves of the Company (whether by way of a capitalisation of profits or reserves or rights issue, reduction, subdivision, consolidation, distribution or otherwise) shall take place or if the Company shall make a declaration of a special dividend (whether in cash or in specie), then the Committee may as it deems appropriate determine whether:± (a) the nominal amount, class and/or number of Shares which are the subject of an Award to the extent not yet Vested; and/or (b) the nominal amount, class and/or number of Shares in respect of which future Awards may be granted under the Plan, shall be adjusted and, if so, the manner in which such adjustment shall be made. Any adjustment under this Rule 9 shall be made in a way that a Participant will not receive a bene®t that a holder of Shares does not receive. The CapitaLand Restricted Stock Plan Existing Rule 9.1 9.1 If a variation in the issued ordinary share capital of the Company (whether by way of a capitalisation of profits or reserves or rights issue, reduction, subdivision, consolidation, distribution or otherwise) shall take place, then:± (a) the nominal amount, class and/or number of Shares which are the subject of an Award to the extent not yet Vested; and/or (b) the nominal amount, class and/or number of Shares in respect of which future Awards may be granted under the Plan, shall be adjusted in such manner as the Committee may determine to be appropriate. Proposed modi®cation to existing Rule 9.1 Existing Rule 9.1 shall be deleted in its entirety and the following substituted therefor: 9.1 If a variation in the share capital or reserves of the Company (whether by way of a capitalisation of profits or reserves or rights issue, reduction, subdivision, consolidation, distribution or otherwise) shall take place or if the Company shall make a declaration of a special dividend (whether in cash or in specie), then the Committee may as it deems appropriate determine whether:± (a) the nominal amount, class and/or number of Shares which are the subject of an Award to the extent not yet Vested; and/or (b) the nominal amount, class and/or number of Shares in respect of which future Awards may be granted under the Plan, shall be adjusted and, if so, the manner in which such adjustment shall be made. Any adjustment under this Rule 9 shall be made in a way that a Participant will not receive a bene®t that a holder of Shares does not receive. 36 APPENDIX 3 ADDITIONAL INFORMATION 1. SHARE CAPITAL As at the Latest Practicable Date, the issued and paid-up share capital of the Company comprises 2,518,630,013 Shares. As at the Latest Practicable Date, the Company has an aggregate of 90,626,758 outstanding options granted to eligible participants under the Share Plans to subscribe for new Shares at exercise prices ranging from S$1.02 to S$2.68 for each new Share. 2. DISCLOSURE OF INTERESTS 2.1 Directors The interests of the Directors in the Shares as recorded in the Register of Directors' Shareholdings as at the Latest Practicable Date are set out below: Name of Director ------- Direct Interest ------ ----- Indirect Interest ---- No. of Issued Shares % No. of Issued Shares % Number of Shares comprised in outstanding options granted by the Company Philip Yeo Liat Kok Ð Ð Ð Ð 617,700 Hsuan Owyang Ð Ð Ð Ð 790,000 Ð Ð Ð Ð 4,327,000 50,000 Ð Ð Ð 233,850 Sir Alan Cockshaw Ð Ð Ð Ð 724,630 Richard Edward Hale Ð Ð Ð Ð 344,850 Lim Chin Beng Ð Ð Ð Ð 600,010 113,000 Ð Ð Ð 270,000 Ð Ð Ð Ð 637,700 50,000 Ð Ð Ð 500,000 Ð Ð Ð Ð 383,850 Liew Mun Leong (1) Andrew Buxton Peter Seah Lim Huat Sum Soon Lim Jackson Peter Tai Lucien Wong Yuen Kuai Note: (1) Mr Liew Mun Leong has also been granted conditional awards of 250,000 and 400,000 performance shares under the CapitaLand Performance Share Plan to be delivered after 2004 and 2005 respectively. The actual number of performance shares to be delivered will depend on the achievement of set targets over a three year period. For achievements that are below 80% of the targets, no performance shares will be given while for achievements that exceed targets, more performance shares than the original award could be delivered up to a maximum of 200% of the original award. 37 2.2 Substantial Shareholders The interests of the Substantial Shareholders in the Shares as recorded in the Register of Substantial Shareholders as at the Latest Practicable Date are set out below: Name of Substantial Shareholder ------- Direct Interest ------ ------- Indirect Interest ------ -------- Total Interest ------- No. of Issued Shares No. of Issued Shares No. of Issued Shares % ST Property Investments Pte Ltd 328,344,838 13.04 Ð Singapore Technologies Pte Ltd 1,120,748,933 44.50 406,019,838 Ð Ð 1,579,369,271 Temasek Holdings (Private) Limited % % Ð 328,344,838 13.04 (1) 16.12 1,526,768,771 60.62 (2) 62.71 1,579,369,271 62.71 Notes: (1) ST Property Investments Pte Ltd (``STPI'') is a wholly-owned subsidiary of Singapore Technologies Pte Ltd (``STPL''). By virtue of Section 7 of the Companies Act, Chapter 50, STPL is deemed to have an interest in (a) the 328,344,838 Shares held by STPI; (b) the 1,300,000 Shares held by other companies within the Singapore Technologies group; and (c) the 76,375,000 Shares subject to the terms of securities lending agreements entered into with ®nancial institutions. (2) Temasek Holdings (Private) Limited (``Temasek'') directly holds 81.3% of the issued share capital of STPL and has a deemed interest (by virtue of Section 7 of the Companies Act, Chapter 50) in the 18.7% of the issued share capital of STPL held by Singapore Technologies Holdings Pte Ltd (``STH'') by virtue of STH being wholly-owned by Temasek. Accordingly, Temasek is deemed to be interested in 1,526,768,771 Shares held by the Singapore Technologies group by virtue of the foregoing and 52,600,500 Shares held by other companies within the Temasek group. Temasek is wholly-owned by the Minister for Finance (Incorporated). 3. MATERIAL LITIGATION As at the Latest Practicable Date, the Directors are not aware of any litigation, claims or proceedings pending or threatened against the Company or any of its subsidiaries or any facts likely to give rise to any litigation, claims or proceedings which, in the opinion of the Directors, might materially and adversely affect the ®nancial position of the Company and its subsidiaries taken as a whole. 4. CONSENTS CFSL, DBS Bank, JPMorgan, KPMG and Knight Frank Pte Ltd have given and have not withdrawn their written consents to the issue of this Circular with the inclusion herein of their names and all references to their names in the form and context in which they appear. 5. VOTING Pursuant to the Articles of Association of the Company, a resolution put to the vote of a general meeting of the Company shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded by: (a) the chairman of the general meeting; (b) any member of the Company present in person or by proxy and entitled to vote thereat; (c) a member of the Company present in person or by proxy and representing not less than one-tenth of the total voting rights of all the members of the Company having the right to vote at the general meeting; or (d) a member of the Company present in person or by proxy and holding Shares conferring a right to vote at the general meeting being Shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid on all the Shares conferring that right; 38 provided always that no poll shall be demanded on the choice of a chairman or on a question of adjournment. A demand for a poll may be withdrawn only with the approval of the general meeting. Unless a poll is demanded a declaration by the chairman of the general meeting of the Company that a resolution has been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the minute book, shall be conclusive evidence of that fact without proof of the number or proportion of the votes recorded for or against such resolution. If a poll is duly demanded, it shall be taken in such manner (including the use of ballot or voting papers or tickets) as the chairman of the general meeting may direct, and the result of the poll shall be deemed to be the resolution of the general meeting at which the poll was demanded. The chairman of the general meeting may (and if so directed by the general meeting shall), appoint scrutineers and may adjourn the general meeting to some place and time ®xed by him for the purpose of declaring the result of the poll. In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the general meeting at which the show of hands takes place or at which the poll is demanded shall be entitled to a casting vote. A poll demanded on any question shall be taken either immediately or at such subsequent time (not being more than 30 days from the date of the general meeting) and place as the chairman of the general meeting may direct. No notice need be given of a poll not taken immediately. The demand for a poll shall not prevent the continuance of the general meeting for the transaction of any business other than the question on which the poll has been demanded. No objection shall be raised as to the admissibility of any vote except at the general meeting or adjourned general meeting at which the vote objected to is or may be given or tendered and every vote not disallowed at such meeting shall be valid for all purposes. Any such objection shall be referred to the chairman of the general meeting whose direction shall be ®nal and conclusive. On a poll, votes may be given either personally or by proxy and a person entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way. 6. DOCUMENTS AVAILABLE FOR INSPECTION Copies of the following documents may be inspected at the registered office of the Company at 168 Robinson Road, # 30-01 Capital Tower, Singapore 068912, during normal office hours from the date of this Circular up to and including the date of the EGM: (a) the Memorandum and Articles of Association of the Company; (b) the annual reports of the Company for FY2001 and FY2002, and the audited financial statements for FY2003; (c) the auditors' letter of confirmation referred to in paragraph 4.3 of Section I of the Letter to Shareholders on page 23 of this Circular; (d) the rules of the Share Plans; and (e) the letters of consent from CFSL, DBS Bank, JPMorgan, KPMG and Knight Frank Pte Ltd referred to in paragraph 4 above. 39 CAPITALAND LIMITED (Incorporated in the Republic of Singapore) NOTICE OF EXTRAORDINARY GENERAL MEETING NOTICE IS HEREBY GIVEN that an Extraordinary General Meeting of CapitaLand Limited (the ``Company'') will be held at STI, 168 Robinson Road, Level 9 Capital Tower, Singapore 068912, on 12 April 2004 at 10.30 a.m. (or as soon thereafter following the conclusion or adjournment of the Annual General Meeting of the Company to be held at 10.00 a.m. on the same day and at the same place) for the purpose of considering and, if thought ®t, passing with or without amendment, the following Resolutions, of which Resolution 1 will be proposed as a Special Resolution, and Resolution 2 will be proposed as an Ordinary Resolution: SPECIAL RESOLUTION Resolution 1: Approval for the Capital Reduction and the Distribution In Specie That: (a) the sum standing to the credit of the share premium account of the Company be reduced by a maximum of S$952 million (the ``Capital Reduction''), with such reduction to be effected by the distribution in specie of the said sum in the form of units (``CCT Units'') in CapitaCommercial Trust (the ``Distribution In Specie'') free of encumbrances and together with all rights attaching thereto on and from the date the Distribution In Specie is effected, to existing Shareholders, as at such date to be determined by the Directors of the Company as the date on which the Register of Members and the Transfer Books of the Company will be closed (the ``Books Closure Date''), in the proportion of one CCT Unit for every five shares held by the Shareholders as at the Books Closure Date, fractional entitlements to be disregarded and to be disposed of or dealt with in such manner and for such purpose as the Directors deem fit in the interests of the Company; and (b) the Directors of the Company and each of them be and is/are hereby authorised and empowered to complete and to do all such acts and things, and to approve, modify and execute such documents, as they may consider necessary or expedient to give effect to the Capital Reduction and the Distribution In Specie. ORDINARY RESOLUTION Resolution 2: Proposed Modi®cations to the CapitaLand Share Option Plan, the CapitaLand Performance Share Plan and the CapitaLand Restricted Stock Plan That: (a) Rule 11.1 of the CapitaLand Share Option Plan be and is hereby modified, in the manner and to the extent as set out in Appendix 2 to the circular to shareholders dated 16 March 2004 (the ``Circular''); (b) Rule 9.1 of the CapitaLand Performance Share Plan be and is hereby modified, in the manner and to the extent as set out in Appendix 2 to the Circular; and (c) Rule 9.1 of the CapitaLand Restricted Stock Plan be and is hereby modi®ed, in the manner and to the extent as set out in Appendix 2 to the Circular. By Order of the Board Tan Wah Nam Company Secretary 16 March 2004 40 Notes: 1. A member of the Company entitled to attend and vote at the Meeting is entitled to appoint not more than two proxies to attend and vote in his stead. 2. A member of the Company which is a corporation is entitled to appoint its authorised representative or proxy to vote on its behalf. 3. A proxy need not be a member of the Company. 4. The instrument appointing a proxy must be deposited at the registered of®ce of the Company at 168 Robinson Road, # 30-01 Capital Tower, Singapore 068912, not less than 48 hours before the time set for the Meeting. 41 This page has been intentionally left blank. CAPITALAND LIMITED IMPORTANT (Incorporated in the Republic of Singapore) If you have used your CPF moneys to buy shares in the capital of CapitaLand Limited, this Circular is forwarded to you at the request of your CPF Approved Nominees and is sent solely for information only. PROXY FORM Ð EXTRAORDINARY GENERAL MEETING This Proxy Form is not valid for use by such CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them. (Name) *I/We of being a member/members of CAPITALAND LIMITED (the ``Company'') hereby appoint: Name Address NRIC/ Passport Number (Address) Proportion of my Shareholdings (%) and/or (delete as appropriate) or, failing him/her, the Chairman of the Meeting as my/our proxy/proxies to attend and to vote for me/ us on my/our behalf and, if necessary, to demand a poll, at the Extraordinary General Meeting of the Company to be held at STI, 168 Robinson Road, Level 9 Capital Tower, Singapore 068912 on 12 April 2004 at 10.30 a.m. (or as soon thereafter following the conclusion or adjournment of the Annual General Meeting of the Company to be held at 10.00 a.m. on the same day and at the same place) and at any adjournment thereof. (Please indicate with an ``X'' in the spaces provided whether you wish your vote(s) to be cast for or against the Resolutions as set out in the Notice of Extraordinary General Meeting. In the absence of speci®c directions, the proxy/proxies will vote or abstain as he/they may think ®t, as he/they will on any other matter arising at the Extraordinary General Meeting). For Against Resolution 1 (Special Resolution) To approve the Capital Reduction and the Distribution In Specie Resolution 2 (Ordinary Resolution) To approve the modi®cations to the Share Plans Dated this day of 2004 Total number of Shares held 4 Signature(s) of Member(s) or Common Seal IMPORTANT: PLEASE READ NOTES TO PROXY FORM OVERLEAF. NOTES TO PROXY FORM: 1. Please insert the total number of ordinary shares you hold. If you have ordinary shares entered against your name in the Depository Register (as de®ned in section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of ordinary shares. If you have ordinary shares registered in your name in the Register of Members, you should insert that number of ordinary shares. If you have ordinary shares entered against your name in the Depository Register as well as ordinary shares registered in your name in the Register of Members, you should insert the aggregate number of such ordinary shares. If you do not insert any number, this Proxy Form shall be deemed to relate to all the ordinary shares held by you. 2. A member of the Company entitled to attend and vote at a Meeting of the Company is entitled to appoint one or two proxies to attend and vote on his behalf. Such proxy need not be a member of the Company. 3. If the Chairman of the Meeting is appointed as proxy, this Proxy Form shall be deemed to confer on him the right to nominate a person to vote on his behalf on a show of hands. 4. Where a member appoints two proxies, the appointments shall be invalid unless he speci®es the proportion of his shareholding (expressed as a percentage of the whole) to be represented by each proxy. 5. This Proxy Form must be deposited at the registered of®ce of the Company at 168 Robinson Road, # 30-01 Capital Tower, Singapore 068912, not less than 48 hours before the time set for the Extraordinary General Meeting. 6. This Proxy Form must be under the hand of the appointer or of his attorney duly authorised in writing. A corporation which is a member must execute this Proxy Form either under its seal or under the hand of a director or an of®cer or attorney duly authorised. 7. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks ®t to act as its representative at the Extraordinary General Meeting, in accordance with section 179 of the Companies Act, Chapter 50 of Singapore. 8. The Company shall be entitled to reject this Proxy Form if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor speci®ed in this Proxy Form. In addition, in the case of a member whose shares are entered in the Depository Register, the Company may reject this Proxy Form if the member, being the appointor, is not shown to have such shares entered against his name in the Depository Register as at 48 hours before the time set for the Extraordinary General Meeting, as certi®ed by The Central Depository (Pte) Limited to the Company. 9. There are no rights of appraisal or similar rights of dissenters. 10. Proxies may be revoked at any time prior to the Extraordinary General Meeting. Proxies are deemed to be revoked if a Shareholder attends and votes at the Extraordinary General Meeting. SNP-RR Donnelley Financial 6415436
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