CapitaCommercial Trust Frequently Asked Questions

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1 CapitaCommercial Trust Frequently Asked Questions What is CapitaCommercial Trust? CapitaCommercial Trust or ( CCT ) is Singapore s first commercial real estate investment trust (REIT). Its aim is to invest in commercial properties which are income producing. CCT will invest in and own seven commercial properties in Singapore comprising: - Capital Tower - 6 Battery Road - Starhub Centre - Robinson Point - Bugis Village - Golden Shoe Car Park - Market Street Car Park What was the criteria for choosing these seven properties? The seven properties are commercial properties, or properties that are predominantly used as commercial properties, located in Singapore which are 100% owned by the Group. What is a REIT? REIT stands for Real Estate Investment Trust. A REIT invests and owns property assets. From these assets, it will derive rental income. After paying certain property and administrative expenses, the REIT will pay out all, or substantially all, surplus income to unitholders. How will CCT be set up? Subject to shareholders and regulatory approvals, this involves 3 steps: i) CapitaLand will transfer the seven properties to a real estate investment trust (REIT) called CapitaCommercial Trust ( CCT ) ii) CCT units will then be distributed FREE to CapitaLand shareholders iii) CCT will be listed on the Singapore Stock Exchange via Introduction 1

2 By owning CCT units, what are the benefits to CapitaLand shareholders? CapitaLand aims to deliver more value to shareholders. Distributing FREE units in a real estate investment trust to shareholders will deliver to them a more tax efficient structure for holding investment properties. The benefits are as follow: i) High dividend payout Shareholders will receive a higher proportion of taxable income from the seven properties than was the case under CapitaLand ownership: at least 90% of CCT earnings (and 95% for period from Distribution in specie to FY2005) will be distributed to unitholders. ii) Stable and attractive distributions (earnings) - CCT income will come from rental collected from the seven properties with quality tenants and long leases. iii) Tax transparency for Singapore tax residents and other qualifying unitholders - Unitholders who are Singapore citizens or permanent residents tax resident in Singapore will receive their income distributions without having tax deducted at source. Distributions will be taxed at the level of the Qualifying Unitholders at their applicable income tax rates. How and when will income distribution be paid to unitholders? Any income distribution (in S$) will be paid from any income received by CapitaCommercial Trust after deducting all relevant costs on the Trust Level (debt interest payments, management fees etc) and the Property level (operating expenses etc.), i.e. taxable income. Taxable Income (if any) is distributed half-yearly for the periods ending 31 Dec and 30 June each year. The first distribution will be from the period of the date of Distribution in specie to 31 Dec For the period from the date of the Distribution in specie to financial year ending 31 Dec 2005, CCT will distribute 95% of its taxable income to Unitholders. Thereafter, CCT will distribute at least 90% of its taxable income, with the actual level of distribution to be determined at the Manager s discretion. Why is CCT only distributing 95% of its income, when other REITs give 100%? This provides CapitaLand with additional financial flexibility and greater cashflow management for working capital purposes. 2

3 Why is CapitaLand retaining 40% of CCT and not distributing all 100% to shareholders? How are the interests of CapitaLand and unitholders aligned? In deciding how much of CCT to distribute, CapitaLand aimed to give shareholders as much of CCT as possible, whilst retaining a sufficiently important stake to: - Demonstrate their confidence in CCT after listing; - Align their interests as Manager of CCT with the interests of unitholders How is CCT different from CapitaMall Trust (CMT)? Although both are REITs, CCT is Singapore s first commercial real estate investment trust which will invest in seven commercial properties in Singapore. CMT invests in retail properties (ie. shopping malls). Also, CCT will be distributed free to CL shareholders while CMT was launched through an IPO. How many CCT units will CapitaLand shareholders be receiving? Shareholders will receive 200 free CCT units for every 1,000 CapitaLand shares. What will happen if shareholders receive odd lots of CCT units? (less than 1000 shares) CapitaLand is applying to the SGX to set up a temporary odd-lot trading counter. If shareholders receive less than a full lot, they can adjust their holdings to the desired level by buying more shares to round up to 1,000. Do CapitaLand shareholders have to put in more money to own CCT units? CCT units will initially be distributed free to CapitaLand shareholders. When CCT is listed in the stock exchange, additional units may be purchased. How can CapitaLand shareholders obtain more details of CCT? More details in the form of the Introductory Document explaining the establishment of CCT will be sent to CapitaLand shareholders shortly. It will provide shareholders with more details on CCT including the rationale for its establishment, as well as recommendations. When will the Introductory Document be sent to CapitaLand shareholders? It will be sent to CapitaLand shareholders sometime in March

4 Will there be an Extraordinary General Meeting (EGM) for CapitaLand shareholders to approve the formation of CCT? Yes, an EGM is expected to be held in April CapitaLand shareholders will be informed. Can CapitaLand shareholders vote in the Extraordinary General Meeting (EGM)? CapitaLand shareholders can vote in the EGM. What are the key dates in the establishment of CCT? Despatch of Introductory Document March 2004 CapitaLand Extraordinary General Meeting (EGM) April 2004 Commencement of trading of CCT on SGX-ST May 2004 Why do CapitaLand shareholders have to wait until May 2004 before CCT units are distributed to them and traded on the SGX? The waiting period is for CapitaLand to obtain the necessary shareholder and regulatory clearances for the transaction. Can CPF funds be used to buy CCT after it is listed on the SGX? Yes, CCT is included under the CPF investment scheme. Once the units are listed in the Singapore Stock Exchange, investors could use their CPF Ordinary Account to purchase CCT units. 4

5 TAXATION ISSUES What is the tax treatment of the income distributions in Singapore? Unitholders who are Singapore citizens or permanent residents tax resident in Singapore will receive their income distributions without having tax deducted at source. Distributions will be taxed at the level of the Qualifying Unitholders (See question below) at their applicable income tax rates. This tax transparency offers Unitholders the benefit of pre-tax distributions. Distributions made to all other Unitholders will be subject to tax deducted at source at the prevailing corporate tax rate, which is currently 22.0% What is tax transparency and which investors enjoy tax transparency? Tax transparency means that income tax is not imposed on CCT s income in the hands of the trustee. For example, if 90% of the taxable income of the CCT is distributed to investors, that 90% portion of the taxable income would not be taxed in the hand of the trustee. Instead, you, as an investor, will pay tax on the distribution you received at your own marginal rate based on your tax bracket. Only qualifying Singapore tax residents have no tax deducted at source. Tax will be deducted at source from distribution made to non-qualifying unitholders. See table below:- 5

6 Singapore Citizens who are Tax Residents Permanent Residents who are Tax Residents CPF/SRS Funds Companies Incorporated and Tax Residents in Singapore Singapore branches of foreign companies that have obtained specific approval from IRAS to receive distribution without deduction of tax Non-corporate entities created or constituted in Singapore, e.g. Statutory Board/ Non Profit Organizations, Town Councils Nominees/Sub accounts Joint Holders Other Holders, e.g. foreign entities Enjoy tax transparency (received pre-tax distribution) Taxed deducted at source (received net of tax distribution) Would tax be imposed on capital gains when disposing of CCT units? It would depend on whether the gains are considered to be trading gains derived by the investor. If they are considered to be trading gains, the investor would be subject to Singapore income tax. Would tax be imposed on CCT if it disposes of its properties? It would depend on whether the gains are considered to be derived by CCT from a trade or business of dealing in properties. If they are so considered, CCT would be subject to tax on the gains from the disposal at the Trust level, and investors can claim a credit for the tax paid by the trustee on the gains when the gains are distributed to them. CCT s intention is to hold the properties for long term investment purposes. 6

7 IMPORTANT NOTICE The value of units in CapitaCommercial Trust ( CCT ) and the income derived from them may fall as well as rise. Units are not obligations of, deposits in, or guaranteed by, CapitaCommercial Trust Management Limited (as manager of CCT) (the Manager ), CapitaLand Limited or any of their respective affiliates and an investment in the units are subject to investment risks, including the possible loss of principal amount invested. CCT unitholders have no right to request the Manager to redeem or purchase their units for so long as the units are listed on Singapore Exchange Securities Trading Limited ( SGX-ST ). It is intended that unitholders may only deal in their units through trading on the SGX-ST. The listing of the units on the SGX-ST does not guarantee a liquid market for the units. This presentation contains forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of CCT or the Manager, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are also based on numerous assumptions regarding the Manager's present and future business strategies and the environment in which CCT or the Manager will operate in the future. As these statements reflect the Manager's current views concerning future events, these statements necessarily involve risks, uncertainties and assumptions. Actual future performance could differ materially from these forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, and you should read the introductory document to be issued in connection with the listing of CCT on the SGX-ST ( Introductory Document ) carefully before taking any action in respect of the units in CCT. The forecast and projected yields stated in this presentation are calculated based on the notional/illustrative price or price range stated herein. Such yields will vary accordingly for investors who purchase the units in the secondary market at a market price higher or lower than the illustrated price or price range. Potential investors should read the Introductory Document carefully for details of the forecasts and projections, consider the assumptions used and the investment risks involved and make their own assessment of the future performance of CCT before deciding whether to purchase units in CCT in the secondary market. These presentation slides are not an offer of securities for sale in the United States. Securities may not be sold in the United States unless they are registered or are exempt from registration. The Company does not intend to register any portion of this offering in the United States or to conduct a public offering in the United States. Any public offering of securities to be made in the United States will be made by means of a prospectus that will contain detailed information about the Company and its management, as well as financial statements. Copies of these presentation slides are not being, and should not be, distributed in or sent into the United States. It may be unlawful to distribute these materials in certain jurisdictions. 7