INTERESTED PERSON TRANSACTIONS AND CONFLICTS OF INTERESTS For purposes of this section, the following definitions will apply:
(1) “our Group” means: (a) our Company;
(b) a subsidiary of our Company that is not listed on the SGX-ST or any approved exchange; or (c) an associated company of our Company that is not listed on the SGX-ST or any approved exchange and
which our Group and our interested person(s) have control.
(2) “approved exchange” means a stock exchange that has rules which safeguard the interests of shareholders against interested person transactions according to similar principles in Chapter 9 of the Listing Manual. (3) “interested person” means:
(a) a director, chief executive officer, or controlling shareholder of our Company; or (b) an associate of any such director, chief executive officer, or controlling shareholder.
In general, transactions between our Group and any of our interested persons would constitute interested person transactions for the purposes of Chapter 9 of the Listing Manual.
Details of the present and ongoing transactions as well as past transactions between our Group and our interested persons which are material in the context of the Offering are set out below. We have entered into certain other transactions with our interested persons which are material in the context of the Offering, as further disclosed in this section and the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Borrowings,” “Our History, Corporate Reorganization, Capitalization and Asset Swap and Divestment” and “Plan of Distribution — The Underwriting Agreements” of this offering document. Save as disclosed in these sections, there are no interested person transactions that are material in the context of the Offering for the last three financial years ended December 31, 2006, 2007 and 2008 and for the period from January 1, 2009 until the Latest Practicable Date. Save as otherwise provided in this section, investors, upon purchase of the Offering Shares, are deemed to have specifically approved these transactions with our interested persons and as such these transactions are not subject to Rules 905 and 906 of the Listing Manual to the extent that there are no subsequent changes to the terms of the agreements in relation to each of these transactions.
In line with the rules set out in Chapter 9 of the Listing Manual, a transaction which value is less than S$100,000 is not considered material in the context of the Offering and is not taken into account for the purposes of aggregation in this section.
PAST INTERESTED PERSON TRANSACTIONS
Details of the past transactions between our Group and interested persons which are material in the context of the Offering, for the past three financial years ended December 31, 2006, 2007 and 2008 and for the period from January 1, 2009 until the Latest Practicable Date are as follows:
2006 2007 2008
Period from January 1, 2009 until the Latest
Practicable Date Year Ended December 31,
S$ (million) S$ (million) S$ (million) S$ (million) Transactions with CapitaLand Group
(A) Loans from the CapitaLand Group 2,350.6 3,119.7 2,791.9 3,298.3 (B) Commission received from Beijing Xinjie
Real Estate (Development) Co., Ltd.
- - - 2.9
(C) Cost sharing agreements with CapitaLand (Hong Kong) Limited
- 0.3 0.1
-(D) Provision of property management services in relation to the Liang Court Shopping Centre
1.4 0.1 -
-(E) Lease with an associate of CapitaLand - - 0.1 0.1
Transactions with companies which are affiliated to Temasek
(F) Services provided by DBS Bank Ltd. and HwangDBS Investment Bank Berhad
- 0.3 0.6 0.1
(G) Sale of CapitaVouchers to companies affiliated to Temasek
0.4 0.8 1.3 0.1
Transactions with CapitaLand Group (A) Loans from the CapitaLand Group
CapitaLand and its wholly-owned subsidiary, CapitaLand Treasury Limited, have from time to time, extended loans to our Group for various purposes (the “Loans”). All of the Loans have been repaid as of the date of this offering document pursuant to the Capitalization. See “Our History, Corporate Reorganization, Capitalization and Asset Swap and Divestment” for more details.
For the past three financial years ended December 31, 2006, 2007 and 2008 and for the period from January 1, 2009 to the Latest Practicable Date, the Loans amounted to approximately S$2,350.6 million, S$3,119.7 million, S$2,791.9 million and S$3,298.3 million respectively. The largest amount outstanding during the period under review was S$3,562.4 million. The Loans were unsecured and were extended at interest rates ranging from 0.99% per annum to 6.25% per annum. As at the Latest Practicable Date, the aggregate amount outstanding on the Loans was S$3,298.3 million. The Loans were entered into in the ordinary course of business and were on an arm’s length basis, based on prevailing market interest rates at the time the Loans were extended to our Group.
Save for the standby financing relating to Orchard Turn Holding Pte. Ltd., we do not currently have any intention to obtain financing from the CapitaLand Group. In the event that any financing is sought from the CapitaLand Group in the future, such financing will be sought in accordance with the requirements relating to interested person transactions under Chapter 9 of the Listing Manual. See “Interested Person Transactions and Conflicts of Interests — Other Interested Person Transactions — Standby financing from CapitaLand” for more details. (B) Commission received from Beijing Xinjie Real Estate (Development) Co., Ltd.
Beijing Xinjie Real Estate (Development) Co., Ltd. (“BXRED”), which owns Raffles City Beijing, is an associate of CapitaLand and is therefore an interested person of our Group.
In April 2009, our subsidiary, CapitaLand Retail (Shanghai) Management & Consulting Co., Ltd. (“CRSM”), received a one-off leasing commission of approximately S$2.9 million from BXRED in return for leasing services that CRSM had provided to BXRED. The foregoing arrangement was entered into in the ordinary course of
business and the amount of commission paid to CRSM was on an arm’s length basis, based on normal commercial terms.
(C) Cost sharing agreements with CapitaLand (Hong Kong) Limited
CapitaLand (Hong Kong) Limited (“CHKL”) is a subsidiary of CapitaLand and is therefore an interested person of our Group.
Our subsidiary, CapitaLand Retail Hong Kong Investments Two (BV) Limited (“CRHKIT(BV)”), together with certain other subsidiaries of the CapitaLand Group, had in 2007 and 2008 entered into cost sharing agreements (the “Cost Sharing Agreements”) with CHKL pursuant to which CRHKIT(BV) and the other subsidiaries of the CapitaLand Group agreed to share the operating costs incurred by CHKL in relation to a shared office located in Hong Kong in the agreed proportions. Pursuant to the respective terms and conditions of the Cost Sharing Agreements, CHKL is entitled to have a 5.0% mark-up of the costs incurred and CRHKIT(BV) is required to reimburse CHKL, an amount equivalent to 12.5% of such costs on a half-yearly basis in 2007 and 10.0% of such costs on a quarterly basis in 2008. This cost sharing arrangement ceased in December 2008.
The amounts accrued or paid by CRHKIT(BV) to CHKL pursuant to the above arrangement for the financial years ended December 31, 2007 and 2008 were S$0.3 million and S$0.1 million respectively. As of the Latest Practicable Date, all such amounts have been fully paid. The Cost Sharing Agreements were entered into in the ordinary course of business and the amounts paid to CHKL were on an arm’s length basis, based on normal commercial terms.
(D) Provision of property management services in relation to the Liang Court Shopping Centre Somerset Investments Pte Ltd (“SIPL”) is a subsidiary of CapitaLand and is therefore an interested person of our Group.
In June 2001, our subsidiary, CapitaLand Retail Management Pte. Ltd. (“CRM”), entered into a property management agreement (the “Somerset Agreement”) with SIPL pursuant to which CRM agreed to provide property management services (such as operations, maintenance and marketing services) in respect of the Liang Court Shopping Centre for a period of 10 years commencing from July 1, 2001.
Under the terms and the conditions of the Somerset Agreement, CRM is entitled to receive a monthly fee and to be reimbursed in full for monthly expenditures incurred in respect of certain employees. The Somerset Agreement was mutually terminated in May 2006 and CRM received an early termination fee for the termination.
The amounts paid to us by SIPL pursuant to the arrangement above for the financial years ended December 31, 2006 and 2007 were S$1.4 million and S$0.1 million respectively. The Somerset Agreement was entered into in the ordinary course of business and the amounts received from Somerset were on an arm’s length basis, based on normal commercial terms.
(E) Lease with an associate of CapitaLand
In October 2007, the Malaysian branch office of our subsidiary, CapitaLand Retail Project Management Pte. Limited (“CRPM(MY)”), entered into a lease agreement to lease office space in a building in Kuala Lumpur, Malaysia owned by an associate of CapitaLand (the “CRPM Lease”). The CRPM Lease is for a term of three years commencing in December 2007 and rental (including related expenses) is payable every month. The CapitaLand Group had in August 2009 entered into an agreement to sell its interests in the associate to an unrelated third party and the sale was completed in October 2009.
The aggregate rentals paid by CRPM(MY) pursuant to the CRPM Lease for the financial year ended December 31, 2008 and for the period from January 1, 2009 to the Latest Practicable Date were approximately S$0.1 million and S$0.1 million respectively. The CRPM Lease was entered into in the ordinary course of business and the amounts paid by CRPM(MY) pursuant to the CRPM Lease were on an arm’s length basis, based on normal commercial terms.
Transactions with companies which are affiliated to Temasek
(F) Services provided by DBS Bank Ltd. and HwangDBS Investment Bank Berhad (“HwangDBS”) As of the Latest Practicable Date, Temasek and the companies under the Temasek group own in aggregate approximately 40.97% of CapitaLand. As such, companies which are affiliated to Temasek, that is, its subsidiaries and associates, are also interested persons of our Group.
DBS Group Holdings Ltd (“DBS”) is an associate of Temasek and is an interested person of our Group. As such, companies which are affiliated to DBS, that is, its subsidiaries and associates, are also interested persons of our Group. DBS Bank Ltd. is a subsidiary of DBS and HwangDBS is an associate of DBS and as such, both are interested persons of our Group.
We had engaged DBS Bank Ltd. and HwangDBS to provide us with certain financial and investment banking services for which we had paid fees. The aggregate amounts paid to DBS Bank Ltd. and HwangDBS for the financial years ended December 31, 2007 and 2008 and for the period from January 1, 2009 to the Latest Practicable Date were approximately S$0.3 million, S$0.6 million and S$0.1 million respectively. The engagements of DBS Bank Ltd. and HwangDBS for the provision of such financial and investment banking services were entered into in the ordinary course of business and the amount of fees paid to DBS Bank Ltd. and HwangDBS for such services was on an arm’s length basis, based on normal commercial terms.
(G) Sale of CapitaVouchers to companies affiliated to Temasek
CapitaVouchers are shopping vouchers issued by us and which are redeemable at most outlets in most of our shopping malls in Singapore in which we have an interest and manage.
StarHub Cable Vision Ltd. (“StarHub”) is a subsidiary of Temasek. As such, StarHub is an interested person of our Group.
CRM has, from time to time, sold CapitaVouchers to StarHub and DBS Bank Ltd. (a subsidiary of DBS) for distribution among their customers as part of their respective customer loyalty reward programmes. The CapitaVouchers were sold to these parties at discount of 3.0% of the face value of the CapitaVouchers. As of the Latest Practicable Date, all such discounts have ceased.
The aggregate amounts paid to us pursuant to the above sales for the past three financial years ended December 31, 2006, 2007 and 2008 and for the period from January 1, 2009 to the Latest Practicable Date were S$0.4 million, S$0.8 million, S$1.3 million and S$0.1 million respectively. The sale of CapitaVouchers to each of StarHub and DBS Bank Ltd. was on an arm’s length basis, based on normal commercial terms.
PRESENT AND ONGOING INTERESTED PERSON TRANSACTIONS
Details of the present and ongoing transactions between our Group and interested persons which are material in the context of the Offering, for the past three financial years ended December 31, 2006, 2007 and 2008 and for the period from January 1, 2009 until the Latest Practicable Date are as follows:
2006 2007 2008
Period from January 1, 2009 until the Latest
Practicable Date Year Ended December 31,
S$ (million) S$ (million) S$ (million) S$ (million) Transactions with the CapitaLand Group
(A) Provision of services by the CapitaLand Group . . . .
17.8 38.2 28.5 18.6
(B) Transactions with RCS Trust . . . - 0.6 0.6 0.6 (C) Transactions with CapitaLand (RCS)
Property Management Pte. Ltd. . . .
0.3 2.0 1.5 1.0
(D) Provision of information project
management services to CapitaLand ILEC Pte. Ltd. . . .
- - 0.2 0.1
(E) Mall management agreement with Shanghai Hua Qing Real Estate Development Co., Ltd. . .
2.0 2.4 2.5 2.5
(F) Provision of centre management services to Beijing Xinjie Real Estate (Development) Co., Ltd. . . .
- - - 0.1
(G) Transactions with CapitaLand Japan Kabushiki Kaisha . . . .
- - 1.3 1.7
(H) Lease agreement with CapitaLand Japan Kabushiki Kaisha . . . .
0.3 0.8 0.8 0.7
(I) Transactions with Central China Real Estate Group (China) Co., Ltd. . . .
- - 60.0
-Transactions with companies which are affiliated to Temasek
(J) Transactions in relation to the development management agreement entered into with a subsidiary of Temasek . . . .
10.7 5.4 2.5 2.1
(K) Transactions with DBS Bank Ltd. . . 0.9 1.6 2.0 2.0 (L) Waste disposal services provided by
SembWaste Pte. Ltd. . . .
- 0.2 0.2 0.1
Transactions with associates of Directors (M) Transactions with Raffles Medical Group Ltd . . . .
0.2 0.2 0.2 0.2
Transactions with the CapitaLand Group
(A) Provision of services by the CapitaLand Group
We have various arrangements (the “Initial Arrangement”) with the CapitaLand Group pursuant to which the CapitaLand Group provides various services to our Group such as:
(i) tax and internal audit services;
(iii) risk management, corporate communication and corporate social responsibility services: and (iv) use of office space and related services.
The amounts paid to the CapitaLand Group for the Initial Arrangement (including salaries and other reimbursements made in connection with the provision of the Initial Arrangement) for the past three financial years ended December 31, 2006, 2007 and 2008 and for the period from January 1, 2009 to the Latest Practicable Date were S$17.8 million, S$38.2 million, S$28.5 million and S$18.6 million respectively.
The amounts paid to the CapitaLand Group for the Initial Arrangement are on an arm’s length basis, based on normal commercial terms.
In connection with our proposed listing on the SGX-ST, we entered into a shared services agreement (the “Shared Services Agreement”) on October 30, 2009 with CapitaLand pursuant to which CapitaLand will provide to our Group advisory and other services in relation to treasury functions, administration, information technology, human resource, tax, internal audit, risk management and corporate communication services and marketing. In connection with the provision of these services, CapitaLand will recover its costs based on a formula which is consistently applied to its business units (including our Company). The allocation formula will take into account (a) the average of the total consolidated assets as at the beginning and end of the financial period for the business unit, (b) the relevant business unit’s costs, and (c) the average of CapitaLand’s shareholding interest in the respective business unit at the beginning and at the end of the financial period. The fee chargeable by CapitaLand will include a 5.0% mark-up to cover administrative costs unless varied by both parties in compliance with statutory requirements. The fee as computed is subject to a minimum of S$2.5 million per annum. The fee chargeable by CapitaLand is on a cost-recovery basis and is consistent with the basis upon which all the business units of CapitaLand (excluding Australand, which does not receive such services) are charged. The Shared Services Agreement will be subject to Rules 905 and 906 of the Listing Manual.
Additionally, we have entered into a sub-lease arrangement with CapitaLand Commercial Limited (“CCL”) pursuant to which, we have sub-leased office space in Singapore for a monthly fee of approximately S$242,000 (the “Sub-lease”). The Sub-lease was granted to us in the ordinary course of business and the amounts to be paid by us to CCL were negotiated on an arm’s length basis, based on normal commercial terms.
(B) Transactions with RCS Trust
RCS Trust is an associate of CapitaLand and is therefore an interested person of our Group.
Our subsidiary, CapitaLand Retail Project Management Pte. Limited (“CRPM”), had in September 2007 entered into an agreement (the “RCS PM Agreement”) pursuant to which we had agreed to provide as one of the joint project managers of RCS Trust, project management services to RCS Trust, including the provision of technical support and project management services (e.g. review of asset enhancement plans) for a monthly fee.
The aggregate amounts received by us pursuant to the above arrangement for the financial years ended December 31, 2007 and 2008 and for the period from January 1, 2009 to the Latest Practicable Date were S$0.3 million, S$0.3 million and S$0.2 million respectively. The above arrangement was entered into in the ordinary course of business and was on an arm’s length basis, based on normal commercial terms.
In addition, CRPM also provides, from time to time, ad-hoc services to RCS Trust relating to asset enhancement initiatives. The aggregate amounts paid to us for the provision of such services for the financial years ended December 31, 2007 and 2008 and for the period from January 1, 2009 to the Latest Practicable Date were S$0.3 million, S$0.3 million and S$0.4 million respectively. These services were provided in the ordinary course of business and were on an arm’s length basis, based on normal commercial terms.
(C) Transactions with CapitaLand (RCS) Property Management Pte. Ltd.
CapitaLand (RCS) Property Management Pte. Ltd. (“CRCSPM”) is a 40:60 joint venture between our Group and the CapitaLand Group respectively and is a subsidiary of CapitaLand. Accordingly, CRCSPM is an interested person of our Group.
Under an arrangement with CRCSPM, CRM, from time to time, seconds employees with the appropriate experience to CRCSPM for a period of time. Under this arrangement, CRCSPM pays to CRM an amount
equal to the staff cost incurred for the employees seconded with a 5.0% mark-up taking into account administrative costs.
The aggregate amounts received by us pursuant to the above secondment arrangement for the past three financial years ended December 31, 2006, 2007 and 2008 and for the period from January 1, 2009 to the Latest Practicable Date were S$0.3 million, S$2.0 million, S$1.5 million and S$1.0 million respectively. The above arrangement was entered into in the ordinary course of business and was on an arm’s length basis, based on staff costs incurred and taking into account administrative costs.
(D) Provision of information project management services to CapitaLand ILEC Pte. Ltd.
CapitaLand ILEC Pte. Ltd. (“ILEC”) is a subsidiary of CapitaLand and is therefore considered an interested person of our Group.
We had entered into an agreement with ILEC in October 2007 pursuant to which we had agreed to provide certain project management services to ILEC such as the provision of project management services for new information technology initiatives, the provision of technical services in the setting up and support of ILEC offices overseas and advising on the procurement of information technology equipment (the “ILEC Agreement”) for a monthly fee. The aggregate amounts received by us pursuant to the above arrangement for the financial year ended December 31, 2008 and for the period from January 1, 2009 to the Latest Practicable Date were S$0.2 million and S$0.1 million respectively. The ILEC Agreement was entered into in the ordinary course of business and the amounts received from ILEC are on an arm’s length basis and on a cost-recovery basis.
(E) Mall management agreement with Shanghai Hua Qing Real Estate Development Co., Ltd.
Shanghai Hua Qing Real Estate Development Co., Ltd. (“Shanghai Hua Qing”) is an associate of CapitaLand and is therefore an interested person of our Group.
In November 2003, our subsidiary, CRM, entered into a mall management agreement (the “Raffles City Shanghai Agreement”) with Shanghai Hua Qing, pursuant to which CRM agreed to provide mall management services (including operation, marketing and leasing services) in respect of the Raffles City Shanghai for a monthly fee. The aggregate amount of fees received by us pursuant to the Raffles City Shanghai Agreement for the past three financial years ended December 31, 2006, 2007 and 2008 and for the period from January 1, 2009 to the Latest Practicable Date were S$2.0 million, S$2.4 million, S$2.5 million and S$2.5 million respectively. The Raffles City Shanghai Agreement was entered into in the ordinary course of business and the amounts received from Shanghai Hua Qing are on an arm’s length basis, based on normal commercial terms.
In connection with our proposed listing on the SGX-ST and following the expiry of the Raffles City Shanghai Agreement, our subsidiary CRSM entered into an agreement with Shanghai Hua Qing on October 29, 2009 pursuant to which CRSM will provide to Shanghai Hua Qing with mall management services on terms identical to the Raffles City Shanghai Agreement (the “CRSM Hua Qing Agreement”). The CRSM Hua Qing Agreement was entered into on an arm’s length basis and based on normal commercial terms, as the fund has third party investors and as such had been approved by the investors collectively.
(F) Provision of centre management services to Beijing Xinjie Real Estate (Development) Co., Ltd. BXRED, which owns Raffles City Beijing, is an associate of CapitaLand and is therefore an interested person of our Group.
In April 2009, our wholly-owned subsidiary, CRSM, entered into an agreement with BXRED (the “BXRED Agreement”) pursuant to which CRSM agreed to provide centre management services to BXRED in relation to Raffles City Beijing for a monthly fee.
The amount received by us pursuant to the above agreement for the period from January 1, 2009 to the Latest Practicable Date was approximately S$0.1 million. The BXRED Agreement was entered into in the ordinary course of business and the amount received from BXRED was on an arm’s length basis, based on normal commercial terms.
(G) Transactions with CapitaLand Japan Kabushiki Kaisha
Since April 2008, our subsidiary, CapitaLand Retail Management Kabushiki Kaisha (“CRMKK”), has been seconding staff to CapitaLand Japan Kabushiki Kaisha (“CJKK”), a subsidiary of CapitaLand. Under this arrangement, CRMKK is reimbursed an amount equal to the staff costs incurred.
The amounts reimbursed to CRMKK under this arrangement for the financial year ended December 31, 2008 and for the period from January 1, 2009 to the Latest Practicable Date were approximately S$0.9 million and S$1.3 million respectively. The above arrangement was entered into in the ordinary course of business and the amounts received by CRMKK were on an arm’s length basis, based on staff costs incurred.
Additionally, CJKK has been providing (i) certain property management services to the entities within the Japan Fund, an associate of our Group controlled by us, and (ii) consultancy and advisory services to our subsidiary, CRMKK.
The amounts paid to CJKK for the above services for the financial year ended December 31, 2008 and for the period from January 1, 2009 to the Latest Practicable Date were approximately S$2.2 million and S$3.0 million respectively. The above arrangements were entered into in the ordinary course of business and the amounts paid to CJKK were on an arm’s length basis, based on normal commercial terms.
(H) Lease agreement with CapitaLand Japan Kabushiki Kaisha
In August 2006, our subsidiary, CRMKK, entered into a sub-lease agreement with CJKK to sub-lease an office space in a building in Tokyo, Japan (the “CJKK Lease”). The CJKK Lease is for a term of four-and-a-half years commencing from September 2006 and the monthly rental (including related and common operating expenses) is approximately equivalent to S$72,000.
The aggregate amounts paid by CRMKK in connection with the CJKK Lease for the past three financial years ended December 31, 2006, 2007, 2008 and for the period from January 1, 2009 to the Latest Practicable Date were approximately S$0.3 million, S$0.8 million, S$0.8 million and S$0.7 million respectively. The CJKK Lease was entered into in the ordinary course of business and the amounts paid by CRMKK pursuant to the CJKK Lease were arrived at on an arm’s length basis, and on a cost-sharing basis.
(I) Transactions with Central China Real Estate Group (China) Co., Ltd.
Central China Real Estate Group (China) Co., Ltd (“CCRE”) is an associate of CapitaLand. As such, CCRE is an interested person of our Group.
In 2008, CCRE entered into several sale and purchase agreements with our Group in relation to the acquisition of a shopping mall in China for an aggregate consideration of approximately S$60.0 million.
The aggregate amount that was paid to CCRE for the financial year ended December 31, 2008 was approximately S$42.0 million. No amounts were paid to CCRE for the period from January 1, 2009 to the Latest Practicable Date. As at the Latest Practicable Date, S$18.0 million remains payable under the sale and purchase agreements. The sales and purchase agreements were entered into in the ordinary course of business and were on an arm’s length basis, based on normal commercial terms.
Transactions with companies which are affiliated to Temasek
(J) Transactions in relation to the development management agreement entered into with a subsidiary of Temasek
In September 2003, our subsidiary, CRM, entered into a development management agreement (the “DM Agreement”) with a subsidiary of Temasek pursuant to which, CRM agreed to provide certain services in relation to the development of VivoCity, Singapore for a monthly fee. In connection with the DM Agreement, we had:
(i) provided advisory, project management and mall management services; and (ii) outsourced accounting and financing services,
The aggregate amounts received by us (which include the reimbursement of expenses) in connection with the DM Agreement for the past three financial years ended December 31, 2006, 2007 and 2008 and for the period from January 1, 2009 to the Latest Practicable Date were S$10.7 million, S$5.8 million, S$2.8 million and S$2.4 million respectively. The aggregate amounts paid by us in connection with the DM Agreement for the financial years ended December 31, 2007 and 2008 and for the period from January 1, 2009 to the Latest Practicable Date were S$0.4 million, S$0.3 million and S$0.3 million respectively. The amounts received and paid by us in connection with the DM Agreement decreased over the relevant period as the services that had been provided varied in scope in line with the different phases of development of the property. The DM Agreement was entered into in the ordinary course of business and the amounts received are on an arm’s length basis, based on normal commercial terms and the amounts which we would have charged for similar services which we provide in relation to other properties in Singapore. The DM Agreement will expire in March 2010.
(K) Transactions with DBS Bank Ltd.
DBS Bank Ltd. is a subsidiary of DBS and is an interested person of our Group.
Our subsidiary, Capita Card Pte. Ltd., had in 2006 entered into an agreement with DBS Bank Ltd., effective for a period of five years, in relation to the issuance of the CapitaCard, a co-brand debit card and credit card and the CapitaGift Card, a pre-paid disposable card. Under this arrangement, we receive (i) a percentage share of the commissions which DBS Bank Ltd. receives from the use of the CapitaCard and CapitaGift Card by card members, (ii) an annual sponsorship for events, advertising and roadshow space or any other purpose to promote the CapitaCard, (iii) a percentage share of the expired and unused pre-paid value remaining on CapitaGift Cards and (iv) a percentage share of the annual membership fees collected for the first four years from the time of issuance of a CapitaCard to any card members. Additionally, under the terms of the arrangement, Capita Card Pte. Ltd. is also required to contribute to the funding of CapitaCard’s loyalty program.
The aggregate amounts received by us in connection with the above arrangement for the past three financial years ended December 31, 2006, 2007 and 2008 and for the period from January 1, 2009 to the Latest Practicable Date were S$1.0 million, S$2.0 million, S$2.5 million and S$2.4 million respectively. The aggregate amounts paid by us in connection with the above arrangement for the past three financial years ended December 31, 2006, 2007 and 2008 and for the period from January 1, 2009 to the Latest Practicable Date were S$0.1 million, S$0.4 million, S$0.5 million and S$0.4 million respectively. The terms of the above arrangement were arrived at on an arm’s length basis, based on normal commercial terms.
(L) Waste disposal services provided by SembWaste Pte. Ltd.
SembWaste Pte. Ltd. is an affiliate of Temasek and is an interested person of our Group. Our subsidiary, Clarke Quay Pte. Ltd., had in 2006 and 2008, by way of open tender, engaged the services of SembWaste Pte. Ltd. to provide waste disposal services in relation to our Clarke Quay property.
The aggregate amounts paid by us to SembWaste Pte. Ltd. for the above arrangement for the financial years ended December 31, 2007 and 2008 and for the period from January 1, 2009 to the Latest Practicable Date were approximately S$0.2 million, S$0.2 million and S$0.1 million respectively. The above arrangement was entered into in the ordinary course of business and the amounts payable to SembWaste Pte. Ltd. are on an arm’s length basis, based on normal commercial terms.
Transactions with associates of Directors
(M) Transactions with Raffles Medical Group Ltd
Raffles Medical Group Ltd (“RMG”) is an associate of our Non-Executive Independent Director, Dr Loo Choon Yong. As such, companies which are affiliated with RMG, that is, its subsidiaries and associates, are also interested persons of our Group.
The RMG group of companies (the “RMG Group”) has, from time to time, provided healthcare insurance and various medical services to our employees which are paid for by our Group. The aggregate amounts paid to the RMG Group for the past three financial years ended December 31, 2006, 2007 and 2008 and for the period from January 1, 2009 to the Latest Practicable Date were S$0.2 million, S$0.2 million, S$0.2 million and S$0.2 million respectively. Such services were provided by the RMG Group in the ordinary course of business and the amounts paid to the RMG Group were on an arm’s length basis, based on normal commercial terms.
OTHER INTERESTED PERSON TRANSACTIONS
In addition to the transactions which our Group had entered into with interested persons, as disclosed above and in the sections entitled “Our History, Corporate Reorganization, Capitalization and Asset Swap and Divestment” and “Interested Person Transactions and Conflicts of Interests – Potential Conflicts of Interests,” we had also entered into the interested person transactions described below.
(A) Licence granted by CapitaLand for the use of Trademarks
CapitaLand has entered into the Licence Agreement with our Company on October 30, 2009, to grant us the licence to use, inter alia, the “CapitaMall,” “CapitaMalls,” CapitaMalls Asia,” “CapitaRetail,” “CapitaCard” and “CapitaVoucher” marks in our business for a nominal consideration of a one-off payment of S$1.00. However, if the Collaboration Agreement with CapitaLand is terminated, we will be required to pay an annual licence fee equal to 1.0% of the value of the total consolidated assets of our Group (based on our latest audited accounts) under the Licence Agreement. The licence may be terminated forthwith,inter alia, by CapitaLand when it holds less than an aggregate of 15.00% direct and deemed interest in the issued and paid-up share capital of our Company, or ceases to be our single largest shareholder based on the aggregate of its direct and deemed interest in the issued and paid-up share capital of our Company, or if we or our sub-licencees change our respective names or part thereof. We may terminate the licence by giving three months’ notice if CapitaLand holds less than an aggregate of 15.00% direct and deemed interest in the issued and paid-up share capital of our Company or upon all the entities in our Group and the associated companies in which we have an interest changing their names such that each of them no longer incorporates “CapitaMall,” “CapitaMalls,” “CapitaRetail,” “CapitaCard” or “CapitaLand” as part of their names. Notwithstanding the above, the use of certain marks by CMT and CRCT respectively, shall survive the termination of the Licence Agreement subject to certain exceptions. The terms of the above Licence Agreement are on an arm’s length basis, following negotiation between us and CapitaLand, each party having considered the benefits of the agreement to itself.
(B) Standby financing from CapitaLand
As of September 30, 2009, we hold, through a wholly-owned subsidiary, 50.00% of Orchard Turn Holding Pte. Ltd. The loan documents relating to the financing of the Orchard Turn Development contain covenants that require CapitaLand to hold, directly or through one or more of its wholly-owned subsidiaries, 50.00% of Orchard Turn Holding Pte. Ltd., which indirectly owns the Orchard Turn Development. We have commenced discussions with the relevant banks to obtain consent to waive these covenants in connection with the change in CapitaLand’s shareholding in our Company that will arise from CapitaLand’s sale of the Offering Shares in this Offering. CapitaLand has on October 30, 2009, provided us with a letter of offer pursuant to which it has undertaken that in the event that the relevant waivers are not granted, it will provide standby financing to Orchard Turn Holding Pte. Ltd. (through our Company) for Orchard Turn Holding Pte. Ltd. to meet its obligations under the loan documents relating to the financing of Orchard Turn Holding Pte. Ltd. for an amount of up to S$1.56 billion at an interest rate of 50 basis points above the Singapore Swap Offer Rate (“SOR”) per annum for the first six months, and 100 basis points above SOR per annum for the remaining duration of the loan. The terms of the above arrangement are on an arm’s length basis, as they are substantially the same as the existing loan.
(C) Credit Facilities from DBS Bank Ltd.
As of the date of this offering document, DBS Bank Ltd. has granted us a multi-currency revolving credit facility for an aggregate amount of S$300.0 million, with sub-limits of (i) up to S$5.0 million as an overdraft facility; and (ii) up to S$50.0 million as letter of guarantee and a long term guarantee facilities. The overdraft accrues interest at the prime lending rate of DBS Bank Ltd., while the multi-currency revolving credit facility accrues interest at rates to be agreed at the point of drawdown. The amounts guaranteed under the letter of guarantee and long term guarantee facilities accrue fees at the rate of 0.25% and 0.375% per annum respectively. The above facilities were granted to us in the ordinary course of business and are on an arm’s length basis, based on normal commercial terms. (D) Provision of indemnity by CapitaLand
In connection with the Offering, we have entered into the Offer Agreement for the sale of the Offering Shares to the public in Singapore, and the Purchase Agreement pursuant to which CapitaLand has agreed to sell, and each Joint Bookrunner and Underwriter is expected to purchase, the Offering Shares. See “Plan of Distribution” for more
details. The Offer Agreement and the Purchase Agreement are collectively referred to herein as the “Underwriting Agreements.”
Pursuant to a deed of indemnity entered into on November 17, 2009, CapitaLand has agreed to indemnify us for any claims, losses and expenses that may be brought against us in connection with (a) the execution of, and performance by us of our obligations and/or (b) any breach or alleged breach of the representations or warranties given by us, under the Underwriting Agreements.
REVIEW PROCEDURES FOR FUTURE INTERESTED PERSON TRANSACTIONS
All future interested person transactions will be reviewed and approved in accordance with the threshold limits set out under Chapter 9 of the Listing Manual, to ensure that they are carried out on normal commercial terms and are not prejudicial to our interests and the interests of our minority shareholders. In the event that such interested person transactions require the approval of our Board and the Audit Committee, relevant information will be submitted to the Board or the Audit Committee for review. In the event that such interested person transactions require the approval of shareholders, additional information may be required to be presented to shareholders and an independent financial adviser may be appointed for an opinion.
In the review of all future interested person transactions the following procedures will be applied:
(i) transactions (either individually or as part of a series or if aggregated with other transactions involving the same related party during the same financial year) equal to or exceeding S$100,000 in value but below 3.0% of the value of our Company’s net tangible assets will be subject to review by the Audit Committee at regular intervals;
(ii) transactions (either individually or as part of a series or if aggregated with other transactions involving the same related party during the same financial year) equal to or exceeding 3.0% but below 5.0% of the value of our Company’s net tangible assets will be subject to the review and prior approval of the Audit Committee. Such approval shall only be given if the transactions are on arm’s length commercial terms and are consistent with similar types of transactions made with non-interested parties; and
(iii) transactions (either individually or as part of a series or if aggregated with other transactions involving the same related party during the same financial year) equal to or exceeding 5.0% of the value of our Company’s net tangible assets will be reviewed and approved by the Audit Committee, prior to such transactions being entered into, which may, as it deems fit, request advice on the transaction from independent sources or advisers, including the obtaining of valuations from independent professional valuers.
Additionally, a register will be maintained to record all interested person transactions (incorporating the basis, amount and nature, on which they are entered into). The Audit Committee will review all interested person transactions to ensure that the prevailing rules and regulations of the SGX-ST (in particular, Chapter 9 of the Listing Manual) are complied with. We will also endeavour to comply with the recommendations set out in the Code of Corporate Governance.
The annual internal audit plan will incorporate a review of all interested person transactions entered into. The Audit Committee will review internal audit reports to ascertain that the guidelines and procedures established to monitor interested person transactions have been complied with. In addition, the Audit Committee will also review from time to time such guidelines and procedures to determine if they are adequate and/or commercially practicable in ensuring that transactions between us and our interested persons are conducted on arm’s length commercial terms. Transactions falling within the above categories, if any, will be reviewed quarterly by the Audit Committee to ensure that they are carried out on normal commercial terms and in accordance with the procedures outlined above. All relevant non-quantitative factors will also be taken into account. Such review includes the examination of the transaction and its supporting documents or such other data deemed necessary by our Audit Committee. The Audit Committee will also ensure that all disclosure, approval and other requirements on interested person transaction, including those required by prevailing legislation, the SGX-ST Listing Manual and relevant accounting standards, are complied with.
In the event that a member of the Audit Committee is interested in any interested person transaction, he will abstain from reviewing that particular transaction. We will also disclose the aggregate value of interested party transactions conducted during the current financial year in our annual report.
POTENTIAL CONFLICTS OF INTERESTS
We summarize below the potential conflicts of interests which may arise from the interests of our controlling shareholder, our Directors and their respective associates in any entity carrying on the same business as us. CapitaLand
CapitaLand is a company incorporated under the laws of Singapore. It has been listed on the Main Board of the SGX-ST since November 2000. CapitaLand is one of Asia’s largest real estate companies. It is a multi-local company with core businesses in real estate, hospitality and real estate financial services focused in growth cities in Asia Pacific, Europe and the Gulf Cooperation Council countries. CapitaLand is engaged in the investment in, and the development and management of, among other things, a large portfolio of properties, including integrated developments which have a retail component. As a result, there may be circumstances where our investments compete directly with such properties that the CapitaLand operates (by itself or with another joint venture partner). Additionally, a number of our Directors are also directors or key executives of CapitaLand and/or its subsidiaries. We currently conduct and will in the future conduct various interested person transactions with CapitaLand involving the development of joint projects and the provision and receipt of services. Our Non-Executive Chairman and Director, Mr Liew Mun Leong is the President and Chief Executive Officer of CapitaLand Group. Our Non-Executive Directors, Ms Chua Kheng Yeng Jennie and Mr Lim Tse Ghow Olivier are the Chief Corporate Officer and the Group Chief Financial Officer of CapitaLand respectively. Each of Mr Liew, Ms Chua and Mr Lim also hold directorships in certain CapitaLand’s subsidiaries.
In addition, Mrs Arfat Pannir Selvam and Dr Fu Yuning, our Non-Executive Independent Directors, are also non-executive independent directors of CapitaLand. Mrs Selvam and Dr Fu will not participate in any discussions of our Board of Directors in relation to any interested person transactions with the CapitaLand Group or any matters that might give rise to a conflict of interest with the CapitaLand Group and shall abstain from voting on any such proposals at any meeting of our Board of Directors.
Collaboration Agreement
To mitigate any potential conflict of interests, we have entered into a collaboration agreement, with CapitaLand on October 30, 2009 (the “Collaboration Agreement”) pursuant to which CapitaLand has undertaken to us that it shall not (and shall procure its subsidiaries and to the extent that it has knowledge, shall use its best endeavours to procure its Associated Companies not to), without our prior written consent (such consent not to be unreasonably withheld), for the duration of the Collaboration Agreement, engage in, carry on (whether alone or in partnership or joint venture with anyone else) or otherwise be interested in (whether as trustee, principal, agent, shareholder, unit holder or in any other capacity) any CapitaMalls Asia Business with the exception of the People’s Parade Mall in Wuhan City held by Somerset (Wuhan) Investments Pte Ltd, which will not be transferred to us prior to the Offering. CapitaLand has granted a right of first refusal in our favour to acquire its interest in People’s Parade Mall. See “— Potential Conflicts of Interests — Right of first refusal in respect of People’s Parade Mall in Wuhan City” for further details.
CapitaLand has undertaken that in the event that an opportunity relating to a Retail Focus Property, Retail Focus Fund or Retail Focus Entity has been identified or made available to any member of CapitaLand Group, where legally or contractually permissible, it shall, and shall procure its subsidiaries and shall use its best endeavours to procure its Associated Companies (to the extent that CapitaLand Group has knowledge that its Associated Company has such opportunity) to, inform or direct such opportunity to us as soon as reasonably practicable. In the event we decide not to pursue any such opportunity, CapitaLand will also not, without our prior written consent (such consent not to be unreasonably withheld), be able to pursue it as it would relate to CapitaMalls Asia Business. CapitaLand has also undertaken to us that, in the event that it, any of its subsidiaries and/or Associated Companies proposes to establish, sponsor and/or invest in any Non-Retail Focus Fund or, as the case may be, establish or invest in a Non-Retail Focus Entity (for which the GFA of the retail component is at least 20.0% of the GFA of all the assets, properties and developments held by such Non-Retail Focus Entity), CapitaLand shall, and shall procure its subsidiaries and shall use its best endeavours to procure its Associated Companies (to the extent that CapitaLand Group has knowledge that its Associated Company plans to establish, sponsor and/or invest in a Non-Retail Focus Fund, or, as the case may be, to establish or invest in a Non-Retail Focus Entity) to, where legally or contractually permissible, grant us the right of first refusal to participate in a pro rata interest in its equity participation in such
Non-Retail Focus Fund, or, as the case may be, such Non-Retail Focus Entity. The pro rata interest in relation to the Non-Retail Focus Fund shall be based on the proportion of the estimated GFA of the retail component of the portfolio relative to the estimated GFA of the aggregate portfolio of such Non-Retail Focus Fund (or any other measure which is mutually acceptable to both parties). The pro rata interest in relation to the Non-Retail Focus Entity shall be based on the proportion (calculated based on its effective interest) of the GFA of the retail component of all the assets, properties and developments held or proposed to be held by such Non-Retail Focus Entity relative to the GFA of all the assets, properties and developments held or proposed to be held by such Non-Retail Focus Entity (or based on any other measure which is mutually acceptable to both parties). Once we have been offered the opportunity to invest, regardless of whether we agree to acquire an interest, the Retail Focus Fund or, the Non-Retail Focus Entity shall thereafter not be obliged to offer opportunities to us to co-participate in its future investments.
CapitaLand has undertaken to us that, in the event that it, any of its subsidiaries and/or its Associated Companies proposes to acquire or invest in a Non-Retail Focus Property, CapitaLand shall, and shall procure its subsidiaries and shall use its best endeavours to procure its Associated Companies (to the extent that CapitaLand Group has knowledge that its Associated Company proposes to acquire or invest in such Non-Retail Focus Property) to, where legally or contractually permissible and as soon as reasonably practicable (a) inform us of such proposed equity investment in that Non-Retail Focus Property, and (b) grant us the right of first refusal to participate in a pro rata interest in CapitaLand Group’s equity participation in that Non-Retail Focus Property. The pro rata interest shall be based on the proportion of the GFA of the retail component of that Non-Retail Focus Property relative to the total GFA of that Non-Retail Focus Property (or based on any other measure which is mutually acceptable). We are required to notify CapitaLand within 14 days in writing on whether we wish to pursue the opportunity of acquiring the pro rata interest in such Non-Retail Focus Property. The above provision shall not apply to CapitaLand in relation to any Non-Retail Focus Property which is a mixed-use or integrated asset, property or development where the GFA of the retail component is less than 200,000 sq. ft.
CapitaLand has also undertaken to us that in the event that (a) it, any of its subsidiaries and/or Associated Companies owns or holds a Non-Retail Focus Property that, following the application for, and the receipt of, approval for re-zoning and/or change of use by the relevant regulatory authorities in relation to a proposed redevelopment or asset enhancement, will become a Retail Focus Property or (b) a Non-Retail Focus Entity acquired by CapitaLand, any of its subsidiaries and/or Associated Companies holds any Retail Focus Property (in each case, a “Potential Retail Focus Property”), CapitaLand shall, and shall procure its subsidiaries and shall use its best endeavours to procure its Associated Companies (to the extent that CapitaLand Group has knowledge that its Associated Company owns or holds such a Potential Retail Focus Property) to, where legally or contractually permissible and as soon as reasonably practicable, grant us a right of first refusal to acquire its stake, as well as the right of management, in such Potential Retail Focus Property in its entirety. We are required to notify CapitaLand within 14 days in writing on whether we wish to acquire the Potential Retail Focus Property.
CapitaLand may, directly or through its subsidiaries, enter into transactions that involve the provision of credit support or credit enhancement to unrelated parties. Such transactions would involve an underlying real estate and provide for an opportunity to buy such real estate at prices below market. For example, if a third party owns an asset but is unable to obtain good debt terms for the financing of that asset, CapitaLand may be approached to provide credit enhancement to debt providers such that in the event of a default, the debt providers have the right to “put” the asset to CapitaLand in exchange for a cash amount equal to the amount of debt outstanding. As such, the acquisition of the real estate will be at a discount. The provision of such credit support or credit enhancement would not typically require funding upfront. Under the terms of the Collaboration Agreement, CapitaLand has agreed that in the event that such an opportunity has been made available to any member of CapitaLand Group in relation to any Retail Focus Property, CapitaLand shall discuss with us and we will decide if we may be interested to pursue such opportunity with CapitaLand Group.
CapitaLand has agreed that in the event that an opportunity should arise for investment in a “white site,” we and CapitaLand shall take into consideration the applicable guidelines and requirements specifying the proportion of the site which may be utilised for retail purposes, and where there are no published guidelines or requirements, CapitaLand shall in good faith enter into discussions with us to explore how we may cooperate on terms which are mutually acceptable.
The above provisions shall not apply to the activities, assets, business and operations of Australand and the associated companies, listed REITs and private funds (as well as their managers) which were established or acquired by CapitaLand Group before the date of the Collaboration Agreement.
Under the Collaboration Agreement, we have also covenanted with CapitaLand that we shall not (and shall procure our subsidiaries and, to the extent that we have knowledge, shall use our best endeavours to procure our Associated Companies not to), without the prior written consent of CapitaLand (such consent not to be unreasonably withheld or delayed), for the duration of the Collaboration Agreement, engage in, carry on (whether alone or in partnership or joint venture with anyone else) or otherwise be interested in (whether as trustee, principal, agent, shareholder, unit holder or in any other capacity) any CapitaLand Business, except in relation to any co-participation in a Non-Retail Focus Property or Non-Retail Focus Fund made jointly with CapitaLand Group pursuant to the terms of the Collaboration Agreement. For the avoidance of doubt, CapitaLand Group acknowledges that we will not be in breach of this covenant by undertaking activities which are ancillary or incidental to our business such as advisory, promotional, marketing, branding, or sponsorship activities, including, without limitation, CapitaCard.
In the event that an opportunity relating to a Non-Retail Focus Property, Non-Retail Focus Fund or Non-Retail Entity has been identified or made available to our Group, we have undertaken to, where legally or contractually permissible, and shall procure our subsidiaries and shall use our best endeavours to procure our Associated Companies (to the extent that we have knowledge that our Associated Company has such opportunity) to inform or direct such opportunity to CapitaLand as soon as reasonably practicable, subject always to CapitaLand’s aforementioned undertaking to grant us a right of first refusal to participate in a pro rata interest in its equity participation in a Non-Retail Fund, Non-Retail Entity or Non-Retail Property, as the case may be, in accordance with the terms of the Collaboration Agreement.
In the event that we decide to proceed with an investment in a Retail Focus Entity, or as the case may be, a Retail Focus Property which includes a non-retail component, we will in good faith enter into discussions with CapitaLand to explore working together with CapitaLand Group in relation to the non-retail component of such Retail Focus Entity or, as the case may be, the non-retail component of such Retail Focus Property.
The above restrictions do not extend to the activities, assets, business and operations of the associated companies, listed REITs and private funds (as well as their managers) which were established or acquired by our Group before the date of the Collaboration Agreement.
The Collaboration Agreement will,inter alia, terminate when CapitaLand holds an aggregate of less than 15.00% direct and deemed interest in the issued and paid-up share capital of our Company or ceases to be our single largest shareholder based on the aggregate of its direct and deemed interests in the issued and paid-up share capital of our Company.
In relation to the foregoing:
“Associated Company” means, in relation to either CapitaLand or our Company, its unlisted associated company, other than those which are existing as of the date of the Collaboration Agreement. “Associated Company” shall not include or refer to any Retail Focus Fund or Non-Retail Focus Fund;
“CapitaLand Business” means all businesses (other than CapitaMalls Asia Business);
“CapitaLand Group” means CapitaLand and its subsidiaries and Associated Companies excluding our Group and Associated Companies;
“CapitaMalls Asia Business” means the business of the acquisition, ownership, development or redevelopment, management, operation, disposal and/or leasing, of Retail Focus Properties, the establishment, sponsorship, investment and/or management of Retail Focus Funds and the establishment, investment and/or management of Retail Focus Entities, in each case, whether directly or indirectly, and including, for the avoidance of doubt, the execution of agreements relating thereto;
“Retail Focus Entity” means any entity (whether listed or unlisted, and whether constituted as a corporation, trust, partnership or otherwise) which, as the case may be, shall include its subsidiaries and associated companies, if any, which carries on the business of acquisition, ownership, development or redevelopment, management, operation, disposal and/or leasing of Retail Focus Properties, as well as other assets, properties or developments, and where: (a) at least 65.0% of the GFA of all the completed or proposed to be completed assets, properties or developments held or proposed to be held by the entity is or is proposed to be sold or leased for retail use; or
(b) at least 65.0% of the rental income of all the completed or proposed to be completed assets, properties or developments held or proposed to be held by the entity is or is proposed to be derived from retail tenants; or (c) at least 65.0% of the value of all the completed or proposed to be completed assets, properties or developments held or proposed to be held by the entity (being the total amount invested or to be invested in such asset, property or development) is allocable to the retail component.
The above figures are calculated based on the effective interest held by the entity in each asset, property or development. In the event that such interest is held indirectly through other entities, the effective interest in the asset, property or development, as the case may be, shall be determined by multiplying the ownership interest of each such entity at each level.
For the avoidance of doubt, “Retail Focus Entity” shall not include or refer to any Retail Focus Fund or Retail Focus Property;
“Retail Focus Fund” means a fund or trust (whether constituted as a corporation, partnership or otherwise) with an investment mandate or investment objective that relates solely to the acquisition of, investment in, development or operation of, Retail Focus Properties;
“Retail Focus Property” refers to:
(a) a stand-alone retail asset, property or development of any size which shall include the retail component in a development where such retail component is or is proposed to be comprised in one or more lots in a strata title plan or proposed strata title plan (or its equivalent in the relevant jurisdiction); and/or
(b) a mixed-use or integrated asset, property or development where:
(i) at least 65.0% of the GFA of such completed or proposed to be completed asset, property or development is or is proposed to be sold or leased for retail use; or
(ii) at least 65.0% of its rental income is or is proposed to be derived from retail tenants; or
(iii) at least 65.0% of the value of the asset, property or development (being the total amount invested or to be invested in such asset, property or development) is allocable to the retail component; and (c) if applicable, the securities or equity, beneficial or other ownership interests in a single purpose company or
entity which holds (directly or indirectly) such property referred to in paragraphs (a) and/or (b) above. For the purpose of this definition, “single purpose” means a purpose that is focused or proposed to be focused on the acquisition and/or ownership of Retail Focus Property or Retail Focus Properties;
“Non-Retail Focus Entity” means any entity (whether listed or unlisted, and whether constituted as a corporation, trust, partnership or otherwise) which, as the case may be, shall include its subsidiaries and associated companies, if any, which carries on the business of acquisition, ownership, development or redevelopment, management, operation, disposal and/or leasing of Non-Retail Focus Properties, as well as other assets, properties or developments without a retail component, other than a Retail Focus Entity.
For the avoidance of doubt, “Non-Retail Focus Entity” shall not include or refer to any Non-Retail Focus Fund or Non-Retail Focus Property;
“Non-Retail Focus Fund” means a fund or trust (whether constituted as a corporation, partnership or otherwise) with an investment mandate or investment objective that relates solely to the acquisition of, investment in, development or operation of, Non-Retail Focus Properties;
“Non-Retail Focus Property” means:
(a) any asset, and/or a property or development (including any mixed-use or integrated development) which includes a retail component, other than a Retail Focus Property; and
(b) if applicable, the securities or equity, beneficial or other ownership interests in a single purpose company or entity which holds (directly or indirectly) such property or properties referred to in paragraph (a) above. For the purpose of this definition, “single purpose” means a purpose that is focused or proposed to be focused on the acquisition and/or ownership of Non-Retail Focus Property or Non-Retail Focus Properties.
We agreed upon the 65.0% threshold as described above based on a number of factors including the following: (a) the 65.0% threshold is in line with our business model of having a significant retail component comprised within the properties in our Group’s portfolio. As of the Latest Practicable Date, assets, properties and developments which satisfy the 65.0% threshold account for close to 90.0% of the total number of properties in our portfolio;
(b) the 65.0% threshold has also been used in the rights of first refusal granted by us to CRCT and then to the China Incubator Fund in relation to retail properties in which at least 65.0% of the GFA of the relevant project is let out for retail use or at least 65.0% of its rental income is derived from retail tenants; and
(c) in the event that a property does not satisfy the 65.0% threshold, we will continue to be entitled to participate in a pro rata interest in CapitaLand’s equity participation in such property. The pro rata interest will be the proportion of the GFA of the retail component of such property relative to the total GFA of such property or based on any measure which is mutually agreed, provided that the GFA of the retail component of such property is not less than 200,000 sq. ft.
Right of first refusal in respect of People’s Parade Mall in Wuhan City
People’s Parade Mall is a shopping mall in Wuhan City, China. As of date of this offering document, The Ascott Holdings Limited, a subsidiary of CapitaLand, has an interest in the entire issued share capital of Somerset (Wuhan) Investments Pte. Ltd. which in turn indirectly owns 100.00% of Wuhan New Minzhong Leyuan Co., Ltd, the asset holding company for People’s Parade Mall.
CapitaLand has granted us a right of first refusal over any proposed sale of its interests (direct or indirect) in People’s Parade Mall or the shares or equity interests of the company or entity which holds People’s Parade Mall, with effect from the date of listing of our Company (the “Wuhan ROFR”).
Provision of non-retail related services
The Shanghai branch of our subsidiary, CRSM, has provided and continues to provide property management services to a residential development in Shanghai developed by Shanghai Aoshun Property Co., Ltd. (“Aoshun”) which is a subsidiary of CapitaLand. We intend to cease the provision of these property management services to the residential development in Shanghai once another service provider has been appointed.
Additionally, we have been providing certain project management services to ILEC which is not engaged in the retail real estate business. See “— Present and Ongoing Interested Person Transactions — (D) Provision of information project management services to CapitaLand ILEC Pte. Ltd.” for more details. We are in the process of ceasing the provision of these project management services to ILEC.
Mitigation of potential conflicts of interests
In addition to the Collaboration Agreement described above, we also believe that any potential conflicts of interests with CapitaLand (including those arising from the interested person transactions mentioned above) are mitigated as follows:
(a) our Directors have a duty to disclose their interests in respect of any contract or proposed contract or any other proposal whatsoever in which they have any personal material interest (directly or indirectly), or any duties or interests arising from any office or property held by them which might conflict with their duties of interests as a Director. Upon such disclosure, such Directors shall not participate in any proceedings of our Board, and shall in any event abstain from voting, in respect of any such contract or proposed contract or any other proposal whatsoever in which the conflict of interests arises;
(b) the Audit Committee will review all interested person transactions for potential conflicts of interests. If a member of the Audit Committee has an interest in a transaction, he will abstain from participating in the review and approval process of the Audit Committee in relation to that transaction;
(c) we have established an annual internal audit plan which establishes the guidelines and procedures to monitor interested person transactions. See “— Review Procedures for Future Interested Person Transactions” for more details;
(d) upon our listing on the SGX-ST, we will be subject to the SGX-ST listing rules on interested person transactions. The objective of these rules is to ensure that our interested person transactions do not prejudice
the interests of our shareholders as a whole. These rules require us to make prompt announcements, disclosures in our annual report and/or seek shareholders’ approval for certain material interested person transactions. The Audit Committee may also have to appoint independent financial advisers to review such interested person transactions and opine on whether such transactions are fair and reasonable to us, and not prejudicial to our interests and the interests of our minority shareholders;
(e) the Nominating Committee will review and recommend nomination for re-appointment or re-election or renewal of appointment of our Directors;
(f) our Directors owe fiduciary duties to us, including the duty to act in good faith and in our best interests. Our Directors are also subject to a duty of confidentiality that precludes a Director from disclosing to any third party (including any of our shareholders or their associates) information that is confidential to us; and (g) CapitaLand’s audit committee (which includes Mrs Arfat Pannir Selvam who is also an Independent
Non-Executive Director of our Company and Mr James Koh Cher Siang who is the non-executive chairman of CMTML, a subsidiary of our Group and the REIT manager of CMT) will, following the listing of the Company on the SGX-ST, undertake the following additional responsibilities:
(i) review on a periodic basis the framework and processes established above for the implementation of the terms of the Collaboration Agreement in order to ensure that such framework and processes remain appropriate;
(ii) review and assess from time to time whether additional processes are required to be put in place to manage any material conflicts of interest within the CapitaLand Group and propose, where appropriate, the relevant measures for the management of such conflicts; and
(iii) review and resolve all conflicts of interest matters referred to it. Temasek Holdings (Private) Limited
Temasek is an Asia investment company headquartered in Singapore. Its portfolio covers a broad spectrum of industries: financial services; telecommunications and media; transportation and logistics; real estate; infrastructure, industrial and engineering; energy and resources; life sciences; consumer and lifestyle; and technology. As of the Latest Practicable Date, Temasek and the companies under the Temasek group own in aggregate approximately 40.97% of CapitaLand.
Mapletree Investments Pte Ltd is a wholly-owned subsidiary of Temasek and is a Singapore-based real estate company with real estate assets comprising office, logistics, industrial, business park as well as retail/lifestyle properties. In addition, Temasek may, from time to time, make investments in other retail real estate entities in the countries in which we operate. As a result, there may be circumstances where our investments compete directly with the investments of Temasek and Mapletree Investments Pte Ltd.
We believe that any potential conflicts of interests arising from the above relationship are mitigated by the following:
(a) there are currently no nominees of Temasek on our Board of Directors; and
(b) the respective boards of directors of Temasek and Mapletree Investments Pte Ltd are separate and distinct from our Board of Directors.
