Delivering Performance CapitaRetail China Trust Annual Report 2014 Corporate Profile First and only China shopping mall real estate investment trust in Singapore CapitaRetail China Trust (CRCT) is the first and only People’s Republic of China shopping mall real estate investment trust (REIT) in Singapore, with a portfolio of 10 income-producing shopping malls. Listed on the Singapore Exchange Securities Trading Limited (SGX-ST) on 8 December 2006, it is established with the objective of investing on a long-term basis in a diversified portfolio of income-producing real estate used primarily for retail purposes and located primarily in China, Hong Kong and Macau. The geographically diversified portfolio of quality shopping malls is located in six of China’s cities. The malls are CapitaMall Xizhimen, CapitaMall Wangjing, CapitaMall Grand Canyon, CapitaMall Anzhen and CapitaMall Shuangjing in Beijing; CapitaMall Qibao in Shanghai; CapitaMall Minzhongleyuan in Wuhan, Hubei Province; CapitaMall Erqi in Zhengzhou, Henan Province; CapitaMall Saihan in Huhhot, Inner Mongolia; and CapitaMall Wuhu in Wuhu, Anhui Province. All the malls in the portfolio are positioned as one-stop family-oriented shopping, dining and entertainment destinations for the sizeable population catchment areas in which they are located, and are accessible via major transportation routes or access points. A significant portion of the properties’ tenancies consists of major international and domestic retailers such as Walmart, Carrefour and the Beijing Hualian Group (BHG) under master leases or long-term leases, which provide CRCT Unitholders with stable and sustainable returns. The anchor tenants are complemented by popular specialty brands such as UNIQLO, ZARA, Vero Moda, Sephora, Watsons, KFC, Pizza Hut and BreadTalk. CRCT is managed by an external manager, CapitaRetail China Trust Management Limited (CRCTML or the Manager), which is an indirect wholly-owned subsidiary of CapitaLand Limited, one of Asia’s largest real estate companies headquartered and listed in Singapore. Vision Sustainable and resilient REIT with a professionally managed portfolio of quality retail real estate across China. Mission Deliver sustainable income growth to our Unitholders and value add to the community and stakeholders by enhancing organic growth through proactive asset management; creating new value through innovative asset enhancement strategies; and capitalising on yield-accretive acquisitions. Contents 02 04 10 11 13 14 16 24 25 27 44 47 53 Financial Highlights Letter to Unitholders Trust Structure Organisation Structure Growth Strategies Portfolio at a Glance Board of Directors Year in Brief Trust Management Team Corporate Governance Enterprise Risk Management Operations Review Financial Review 56 59 61 63 64 66 68 76 147 148 150 IBC Capital Management Investor & Media Relations Unit Price Performance Corporate Social Responsibility People & Talent Management Portfolio Summary Portfolio Details Financial Statements Interested Person Transactions Unitholders’ Statistics Mall Directory Corporate Information Delivering Performance With a clear focus and disciplined approach towards executing our strategies, CapitaRetail China Trust (CRCT) continued to deliver a strong performance in 2014. With our portfolio of 10 quality shopping malls in major Chinese cities, we have leveraged on our expertise in proactive mall management and asset enhancement to create resilient and growing returns for our Unitholders. CRCT will continue to strengthen our portfolio and seek suitable expansion opportunities as we tap on China’s rising consumption to enhance Unitholder value. Highlights of 2014 Net Property Income Total Deposited Properties S$2.3 billion S$132.4 million Distribution Per Unit 9.82 cents Distributable Income 10 S$80.9 Portfolio Occupancy Rate 95.9% million properties Aggregate Leverage Total Returns for the Year 28.7% 28.4% Annual Shopper Traffic Tenants’ Sales 89.8 RMB1,630 million per square metre Delivering Performance | 01 Financial Highlights Gross Revenue (S$ million) Net Property Income (S$ million) 132.41 203.31 152.5 119.0 2010 160.1 131.9 2011 77.2 2012 2013 2014 Distributable Income (S$ million) 2010 52.2 2010 103.0 2012 2013 85.8 2011 70.1 8.36 8.70 9.54 2010 1 9.02 9.82 57.2 2011 2012 2013 2014 2010 2011 2012 Net Asset Value Per Unit (S$) 1.17 2014 Distribution Per Unit (cents) 80.9 66.8 99.7 1.48 1.33 1.31 2011 2012 2013 1.63 2014 Includes new contribution from CapitaMall Grand Canyon which was acquired on 30 December 2013. 02 | CapitaRetail China Trust Annual Report 2014 2013 2014 Balance Sheet As at 31 December Total Assets (S$’000) Total Deposited Properties2 (S$’000) Net Assets Attributable to Unitholders (S$’000) Total Borrowings (S$’000) Market Capitalisation (S$ million) Net Asset Value Per Unit (S$) Portfolio Property Valuation (S$’000) Financial Ratios As at 31 December Earnings Per Unit (cents) Distribution Per Unit (cents) Net Tangible Assets Per Unit (S$) Aggregate Leverage5 (%) Interest Cover (times) Management Expense Ratio6 (%) Financial Derivatives 20101 20111 20121 20131 20141 1,274,478 1,536,268 1,648,791 2,184,291 2,358,062 1,229,196 1,482,001 1,623,824 2,155,554 2,328,008 734,507 401,958 775 1.17 1,215,089 913,839 433,048 792 1.33 1,440,620 978,742 465,847 1,232 1.31 1,476,988 1,186,951 713,458 1,068 1.48 2,058,094 1,349,738 672,893 1,337 1.63 2,250,7833 20101 17.84 8.36 1.17 31.1 6.2 1.0 20111 18.22 8.70 1.33 28.0 7.3 0.9 20121 19.524 9.54 1.31 28.0 8.5 1.0 20131 17.52 9.02 1.48 32.6 8.5 0.9 20141 17.69 9.82 1.63 28.7 5.6 1.0 As at 31 December Net Fair Value of Financial Derivatives7 (S$ million) Proportion of Financial Derivatives to Net Assets Attributable to Unitholders (%) 1 2 3 4 5 6 7 20141 (7.1) (0.5) The financial year from 1 January to 31 December. All the assets of CRCT (or proportional share if CRCT owns less than 100% of a Barbados Company as defined in the CRCT Prospectus dated 29 November 2006 (CRCT Prospectus) and/or a Project Company (as defined in the CRCT Prospectus)) including the properties and all the authorised investment of CRCT for the time being held or deemed to be held upon the trust under the trust deed dated 23 October 2006 as amended by the First Supplemental Deed dated 8 November 2006, Second Supplemental Deed dated 15 April 2010, Third Supplemental Deed dated 5 April 2012 and Fourth Supplemental Deed dated 14 February 2014 (collectively, the Trust Deed), and excluding undistributed income at the year end. Based on valuation as at 31 December 2014. Portfolio property valuation included the valuation of the 10 malls and the carrying amount of CapitaMall Minzhongleyuan’s three residential units. Refer to page 104 for the details of the valuers as at 31 December 2014. The figure has been restated for the effect of preferential offering completed on 20 November 2013. The aggregate leverage is calculated based on total borrowings and deferred payments over the total assets. Total assets included the hedging effects on the net assets denominated in Renminbi (RMB). Refers to the expenses of CRCT excluding property expenses and interest expenses but including performance component of CRCTML’s management fees, expressed as a percentage of weighted average net assets. Financial derivatives include non-deliverable forwards and interest rate swaps which CRCT entered into as a form of hedging against the underlying foreign currency and interest rate risks. The net fair value derivative represented a negative 0.5% over the net assets of CRCT as at 31 December 2014. Delivering Performance | 03 Letter to Unitholders (Left) Liew Cheng San Victor, Chairman (Right) Tony Tan Tee Hieong, Chief Executive Officer With CapitaMall Grand Canyon’s maiden contribution, gross revenue surged 24.2% year-on-year to RMB987.6 million and net property income (NPI) increased 25.7% to RMB643.1 million for FY 2014. Besides the lift provided by CapitaMall Grand Canyon’s contribution, we also recorded robust organic growth in several of our other malls. On a same mall basis1, gross revenue and net property income grew 6.8% and 9.2% year-on-year respectively. 04 | CapitaRetail China Trust Annual Report 2014 Dear Unitholders, On behalf of the Board of Directors of the Manager, we are pleased to present the Annual Report for the financial year ended 31 December 2014 (FY 2014). Despite the headwinds in China’s economy in FY 2014, we continued to press on and achieved another year of solid performance. Delivering strong performance With CapitaMall Grand Canyon’s maiden contribution, gross revenue surged 24.2% year-on-year to RMB987.6 million and net property income (NPI) increased 25.7% to RMB643.1 million for FY 2014. Besides the lift provided by CapitaMall Grand Canyon’s contribution, we also recorded robust organic growth in several of our other malls. On a same mall basis1, gross revenue and net property income grew 6.8% and 9.2% year-on-year respectively. For FY 2014, distributable income increased 15.4% year-on-year to S$80.9 million. Unitholders received a distribution per unit (DPU) of 4.99 cents in September 2014 and will be receiving a DPU of 4.83 cents in March 2015. Total DPU for FY 2014 was 9.82 cents, an 8.9% increase compared to FY 2013. Based on CRCT’s closing price of S$1.615 on 31 December 2014, the distribution yield was 6.1%. Our proactive approach towards mall management has enabled us to stay ahead of our competition and remain popular among tenants and shoppers. For FY 2014, tenants’ sales increased 16.2%1 - above the national average retail sales growth of 12.0%2 and shopper traffic grew 3.9%1. We committed 650 leases with an average increase of 23.1% over preceding rental rates. The strong average increase in rent was mainly attributed to CapitaMall Grand Canyon’s robust rental reversion of 43.1%. CapitaMall Wangjing and CapitaMall Saihan also recorded high rental reversions of 29.8% and 20.7% respectively. As at 31 December 2014, committed occupancy for the portfolio remained high at 95.9%, and valuation of our malls was RMB10.6 billion – 5.7% higher than a year ago. CRCT’s unit price appreciated 21.4% in FY 2014, outperforming the Straits Times Index, the FTSE Straits Times Real Estate Index and the FTSE Straits Times Real Estate Investment Trust Index. Including the distribution payout of 9.32 cents3, CRCT generated a high total return of 28.4% for Unitholders in FY 2014. Positioning for growth In end-2013, we completed the acquisition of CapitaMall Grand Canyon, a quality shopping mall located in Fengtai District, South Beijing. It is the third largest property (based on NPI contribution) in our portfolio and contributed 13.5% to FY 2014 NPI. Upon completion of the acquisition, we reconfigured the mall’s retail units to optimise the usage of floor space, adjusted the tenant mix to meet the changing needs and aspirations of our shoppers, and organised many exciting marketing and promotional events to drive shopper traffic and tenants’ sales. We widened our food and beverage (F&B) selections by bringing in popular F&B tenants such as Nanjing Impressions (南京大牌档), Golden Tripod Attic (金鼎轩), Sunshine Kitchen (汤城小厨) and Childhood Villas (童年小筑). Committed occupancy increased to 99.7% as at 31 December 2014 and rental reversion was a strong 43.1% for FY 2014. We will continue to finetune our offerings and upgrade the infrastructure to cater to our shoppers’ needs, and strengthen our position in South Beijing. We are confident that CapitaMall Grand Canyon will continue to be one of our key growth engines in FY 2015. On 1 May 2014, we reopened CapitaMall Minzhongleyuan in Wuhan after a 10-month closure to carry out extensive asset enhancement works. We performed a major overhaul to reinforce the building’s interior infrastructure and improve the layout to achieve better efficiency and higher rentals. We also rejuvenated the building’s façade while retaining its historical charm, and differentiated our offerings by introducing new-to-market concepts. The revamped mall was well-received by both tenants and shoppers. In order to facilitate the construction of the new subway Line 6 linking Hankou and Hanyang, the Wuhan government announced on 1 August 2014 an extensive road closure at the section of Zhongshan Avenue where CapitaMall Minzhongleyuan is located. While we expect shopper traffic and tenants’ sales to be temporarily affected during this two-year road closure, CapitaMall Minzhongleyuan stands to benefit from greater accessibility once Line 6 becomes operational by end-2016. It will also enjoy proximity to the Jianghan Road subway interchange for Line 2 and Line 6, which is a critical transport hub linking Hankou, Hanyang and Wuchang – the three main areas of Wuhan. Delivering Performance | 05 Letter to Unitholders CapitaMall Wuhu, located in Wuhu – the second largest city in Anhui Province – has been undergoing major tenant adjustments to cater to the changing environment. One of the key improvements included reconfiguring Level 4 into an F&B and entertainment zone. A popular buffet restaurant Guonei Guowai (锅内锅外) will be opening in the rezoned area in the second quarter of 2015. The mall is committed to bring in more quality new retailers to enhance the shopping experience. We continue to unlock and enhance the value of our two largest malls, CapitaMall Xizhimen and CapitaMall Wangjing, in Beijing. We broadened the F&B selections and refreshed the fashion and beauty offerings in both malls. Established retailers such as Green Tea (绿茶), Yun Hai Yao (云海肴), Etude House, Charles & Keith and L’OCCITANE opened to overwhelming response from shoppers. Both malls achieved robust growth in FY 2014. CapitaMall Xizhimen registered a 13.8% year-onyear increase in NPI, while CapitaMall Wangjing recorded an 11.2% increase. With solid footfall and rising tenants’ sales, both malls were able to retain strong performing tenants while attracting popular new retailers. We will continue to actively engage our tenants and shoppers as we keep abreast of the latest retail trends. During the year, we successfully refinanced a S$100.0 million loan with extended maturity to 2020. Overall cost of borrowings was 3.32%. As at 31 December 2014, CRCT’s borrowings totalled S$672.9 million, of which 72.6% were fixed and 95.6% were unencumbered. Aggregate leverage was a healthy 28.7%. To date, we have refinanced the S$88.0 million term loan which matured in February 2015. Caring for the community As our shopping malls form an integral part of the communities where they are located, we are proud to support various community programmes and adopt green initiatives that promote sustainable growth. Strengthening our financial position In line with our prudent and proactive approach towards capital management, we continued to enhance our funding structure and strategy in FY 2014. In 2014, we carried out “My Schoolbag”, one of CapitaLand’s key annual corporate social responsibility programmes, for the fifth consecutive year. Staff volunteers from CapitaMall Xizhimen, CapitaMall Wangjing and CapitaMall Saihan actively participated in this meaningful programme, where new schoolbags are given to underprivileged children. Last year, each schoolbag contained more than 100 items, including arts and crafts materials and a water bottle on top of basic stationery items. Funding for the programme was donated by CapitaLand Hope Foundation, the philanthropic arm of CapitaLand, and our shoppers. This is the first time that My Schoolbag has canvassed for donations from the public. CapitaMall Wangjing and CapitaMall Minzhongleyuan were among several CapitaMalls in China that rallied shoppers to support this meaningful cause. We applied the Distribution Reinvestment Plan that we established in March 2013 to the distributions paid out in March 2014 and September 2014. We received good support from our Unitholders, with participation rates of 41.9% and 29.6% respectively. Our malls continued to make a positive impact on their local communities in their own ways. For example, CapitaMall Wangjing organised a winter clothes donation drive for the poor in the rural regions of West China, and CapitaMall Grand Canyon held a charity concert to rally shoppers to donate 06 | CapitaRetail China Trust Annual Report 2014 necessities to orphans. CapitaMall Xizhimen and CapitaMall Grand Canyon also held events for shoppers to adopt stray cats and dogs. We continued to step up efforts to conserve our environment for future generations, and actively engaged our stakeholders through a series of activities to raise awareness of climate change and to reduce energy consumption. A key highlight was our annual participation in Earth Hour 2014, when six of our malls – CapitaMall Xizhimen, CapitaMall Wangjing, CapitaMall Grand Canyon, CapitaMall Qibao, CapitaMall Saihan and CapitaMall Wuhu – turned off their façade and non-essential lights throughout the night. As part of our green effort, CapitaMall Qibao set up a rooftop farm to encourage urban residents to get closer to nature and enjoy the process of growing their own food. Since opening in 2013, the farm has been gaining popularity among schools and families. In an effort to promote green transportation, CapitaMall Qibao also held a cycling event that received overwhelming response from the local communities. Moving forward China’s economy grew 7.4%2 and retail sales increased 12.0%2 year-on-year to RMB26.2 trillion2 in 2014. Urban disposable income per capita and expenditure per capita grew 9.0%2 and 5.8%2 year-on-year respectively. In 2014, the Chinese government continued to place a strong emphasis on quality long-term growth. Going forward, the Chinese leaders have affirmed that there will be greater focus on in-depth structural reforms, which will drive domestic consumption and support the governing of the country. We believe the Chinese government’s efforts to build a sustainable 1 2 3 economy and enhance social stability will benefit CRCT’s business in the long run. The Chinese Academy of Social Sciences, China’s official think-tank, has forecast 2015 GDP growth to be around 7.0%. In FY 2015, we will continue to strengthen the competitiveness of our portfolio and ensure our malls stay ahead of the game. With the financial flexibility provided by our robust balance sheet, we are actively looking out for suitable acquisition opportunities to propel our next phase of growth. With our proven track record, we are confident that CRCT will continue to deliver sustainable and resilient growth to our Unitholders in the coming year. Acknowledgements We wish to express our deepest appreciation to our Board of Directors, shoppers, tenants, business partners and staff for their contributions and unwavering support in FY 2014. We welcome Professor Tan Kong Yam, who joined us on 31 October 2014. With his expertise and experience, we are confident that he will contribute significantly to our Board. Last but not least, we thank you, our Unitholders, for your confidence and trust in us. We look forward to your continued support in 2015 and beyond. Liew Cheng San Victor Chairman Tony Tan Tee Hieong Chief Executive Officer 26 February 2015 Excluding CapitaMall Minzhongleyuan, which reopened on 1 May 2014 and CapitaMall Grand Canyon, which was acquired on 30 December 2013. Source: National Bureau of Statistics of China. Comprising DPU of 4.33 cents paid out in March 2014 and 4.99 cents paid out in September 2014. Delivering Performance | 07 致信托单位持有人之信函 尊敬的信托单位持有人, 我们谨代表管理人董事会呈报截至2014年12月31日财政 年度(2014财年)的致信托单位持有人报告。 尽管中国经济在2014年增长放缓,凯德商用中国信托仍继 续前进并取得丰硕业绩。 业绩表现强劲 2014财年,首次贡献收入的凯德MALL•大峡谷推动总收 入同比去年剧增24.2%达9.876亿人民币,净物业收入增长 25.7%达6.431亿人民币。除了凯德MALL•大峡谷贡献收入 的有利因素外,其他购物中心也取得强劲的内部增长。按同 个购物中心基准1计算,总收入和净物业收入分别同比去年 增长6.8%和9.2%。 2014财年,可派发收入同比去年增加15.4%,达8,090万新 元。单位持有人在2014年9月获得每单位派息4.99新分,并 将在2015年3月获得每单位派息4.83新分。2014财年的每 单位派息总额为9.82新分,较2013财年增加8.9%。按凯德 商用中国信托于2014年12月31日的闭市价1.615新元计算, 派息率为6.1%。 积极的购物中心管理方式不仅让我们在竞争中保持领先 地位,还让我们继续受到租户以及消费者的欢迎。2014财 年,我们的租户销售额增长16.2%1(高于国内12.0% 2 的平 均零售销售额增长),客流则增长3.9%1。2014年度签定的 650份租约较之前租约平均租金增长23.1%;这主要归功 于凯德MALL•大峡谷,其租金大幅增加43.1%。此外,凯德 MALL•望京和凯德MALL•赛罕租金也分别大幅增加29.8% 和20.7%。截止至2014年12月31日,旗下购物中心的整体 出租率保持在95.9%的高位。整体购物中心估值也较去年 上升5.7%达106亿人民币。 2014财年,凯德商用中国信托的单位价格上升21.4%,表 现超越海峡时报指数、富时海峡时报不动产指数和富时 海峡时报不动产投资信托指数。包括9.32新分 3 的派息在 内,凯德商用中国信托于2014财年为单位持有人带来高达 28.4%的总回报。 蓄势待发 2013年底,我们完成了对凯德MALL•大峡谷的收购。这个 高品质的购物中心座落于北京南部的丰台区,是凯德商用 中国信托旗下的第三大物业,2014财年净物业收入占整体 的13.5%。 08 | CapitaRetail China Trust Annual Report 2014 收购完成后,我们重新规划购物中心的零售单位布局,优化 楼面空间的使用,调整租户组合,以满足消费者不断变化的 需求和期望。我们还组织了多场精彩的市场推广和促销活 动,以吸引客流和提高租户销售额。我们提供更多的餐饮选 择,引进南京大牌档、金鼎轩、汤城小厨和童年小筑等多家 受欢迎的餐饮品牌租户。截至2014年12月31日,出租率增至 99.7%,且2014财年租金大幅增长43.1%。我们将继续完善 品牌组合,提升基础设施,以迎合消费者的需求,巩固在北 京南部的地位。我们相信,凯德MALL•大峡谷在2015财年 仍将是凯德商用中国信托一个主要的增长引擎。 2014年5月1日,位于武汉的凯德新民众乐园在关闭10个月进 行大规模资产改良工程后重新开业。我们进行了重大翻修, 强化了大厦的内部基础设施,改善了布局,以提升使用效率 和提高租金。我们在保持大厦历史韵味的同时也修复了其外 立面,并通过引进首次登陆市场的零售概念,让我们的服务 脱颖而出。翻新后的购物中心深受租户和消费者欢迎。 为兴建连接汉口与汉阳的新地铁6号线,武汉政府在2014年 8月1日宣布,凯德新民众乐园所在的中山大道地段封路,为 期两年。尽管我们预期客流和租户销售额在封路期间会暂 时受到影响,但一旦6号线在2016年底开通运营后,该地区 的交通便利性将大幅度提升,凯德新民众乐园也会从中受 益。届时,该购物中心将邻近2号线与6号线的江汉路地铁 转换站,这是连接武汉三个主要区域汉口、汉阳和武昌的关 键交通枢纽。 位于安徽省第二大城市芜湖的凯德广场•芜湖,正在进行 大规模的租户调整以适应不断变化的环境。其中一项主要 改造工程包括将四楼改造成餐饮和休闲娱乐区。重新布局 后,时下颇受欢迎的自助餐厅锅内锅外将于2015年第二季 度进驻。该购物中心将竭力招揽更多高品质的新零售商进 驻,以提升购物体验。 我们将继续发掘并提升位于北京的两家最大购物中心凯 德MALL•西直门和凯德MALL•望京的价值。我们在该两 家购物中心引入更多的餐饮选择,并更新了时装和美容 品牌。绿茶、云海肴、Etude House、Charles & Keith 和L’OCCITANE等著名零售商的进驻,受到消费者的热 烈欢迎。2014财年,两家购物中心均实现强劲增长。凯德 MALL•西直门的净物业收入同比去年增长13.8%,而凯德 MALL•望京则增长11.2%。凭藉稳定的客流和不断增长的 租户销售额,两家购物中心在保留业绩表现优异的租户的 同时,也吸引新的知名品牌进驻。我们将继续紧贴最新的 零售潮流,积极与租户和消费者保持互动。 财务状况稳健 秉承审慎与积极的资本管理方法,我们在2014财年继续优 化资金架构和策略。 我们为2014年3月和2014年9月的派息,采用了于2013年 3月设立的配售再投资计划。此计划获得了单位持有人的 大力支持,参与度分别高达41.9%和29.6%。 在这一年内,我们成功为一笔1亿新元的借款进行再融资, 并将借款期延至2 02 0年。整体借款成本为3.32%。截至 2014年12月31日,凯德商用中国信托的总借款为6.729亿 新元,其中72.6%为定息借款,95.6%为无产权负担借款。 负债比率则为28.7%,表现稳健。迄今为止,我们已成功地 为于2015年2月到期的8,800万新元债务进行再融资。 关爱社会 凯德商用中国信托旗下的购物中心已成为所在社区不可或 缺的一部分,我们非常荣幸能够支持各项社区活动并通过 绿色行动推动可持续发展。 2014年,我们连续第五年参与凯德集团名为“凯德•我的第 一个书包”的标志性年度企业社会责任项目。凯德MALL• 西直门、凯德MALL•望京及凯德MALL•赛罕的员工踊跃参 与了此项有意义的活动,充当志愿者向弱势学生捐赠新书 包。去年,每个书包都包含100多件文具,除了基本的文具 外,还包括工艺美术材料以及一个水壶。该活动的资金由 凯德集团旗下的慈善专属基金凯德希望基金及消费者捐 赠。凯德MALL•望京和凯德新民众乐园连同其他凯德旗 下的购物中心,号召消费者支持此项有意义的活动,这是 凯德•我的第一个书包活动首次面向公众筹募善款。 我们的购物中心也继续以各自的方式在其所在的社区发挥 正面影响。例如,凯德MALL•望京为中国西部农村地区贫 困人士组织了一次冬衣募捐,而凯德MALL•大峡谷则举办 了一场慈善音乐会,呼吁消费者为孤儿捐赠生活必需品。 凯德MALL•西直门和凯德MALL•大峡谷还举办收养流浪 猫和流浪狗的活动。 为了下一代,我们继续努力保护环境,并通过一系列推动 改善气候变化和减少能源消耗的活动与我们的利益相关者 互动。其中一个亮点,是我们为响应2014年地球一小时活 动,把六家购物中心(凯德MALL•西直门、凯德MALL•望 京、凯德MALL•大峡谷、凯德七宝购物广场、凯德MALL• 赛罕及凯德广场•芜湖)的外墙灯和非主要的照明灯彻夜 关闭。 1 2 3 作为绿色行动的一部分,凯德七宝购物广场开辟屋顶农 场,鼓 励城镇 居民走 进 大自然,体 验自己种 植食 物的过 程。自2013年开办以来,该农场已受到了学校及家庭的热 烈欢迎。为倡导绿色出行,凯德七宝购物广场还举办了一 场骑自行车活动,在当地社区引起了热烈反响。 锐意进取 2014年,中国经济增长7.4% 2 ,零售销售额同比去年增长 12.0% 2,达26.2万亿人民币2。城镇居民人均可支配收入和 人均支出同比去年分别增长9.0% 2 和5.8%2。 2014年,中国政府继续着眼于高质量的长期增长。展望未 来,中国领导人已表明将更注重深层次的结构改革,从而 拉动内需,助力国家治理。长远而言,我们相信中国政府努 力推动经济的可持续发展和促进社会稳定,将有利于凯德 商用中国信托的业务。中国的官方智库中国社会科学院预 测,2015年的国内生产总值将会增长7.0%左右。 2015财年,我们将继续提高组合的竞争力,确保在竞争中 处于领先地位。凭藉稳健的资产负债表所带来的灵活融资 能力,我们正积极物色合适的收购机会,以期推进下一阶 段的增长。鉴于优异的业绩记录,我们相信凯德商用中国 信托将在来年继续为我们的单位持有人带来可持续和具韧 性的增长。 致谢 我们借此机会对董事会、消费者、租户、业务伙伴及员工于 2014财年作出的贡献及持续的支持表示深切的感激。 我们谨此欢迎陈光炎教授于2014年10月31日加入董事会。 相信他的专长及经验将会对董事会作出重大贡献。 最后,衷心感谢各位单位持有人一直以来对我们的信心及 信任。我们也期待在2015年及以后继续获得您的支持。 廖青山 主席 陈智雄 首席执行官 2015年2月26日 不包括于2014年5月1日重新开业的凯德新民众乐园和于2013年12月30日收购的凯德MALL•大峡谷。 资料来源:中国国家统计局。 包括于2014年3月支付的每单位派息4.33新分和于2014年9月支付的每单位派息4.99新分。 Delivering Performance | 09 Trust Structure Singapore Unitholders Holding of Units The Manager CapitaRetail China Trust Management Limited Distributions Management Services Trustee Fees Management Fees Acts on behalf of Unitholders The Trustee HSBC Institutional Trust Services (Singapore) Limited Barbados Singapore Dividends, Interest Income and Principal Repayment of Shareholder’s Loans Dividends Ownership and Shareholder’s Loans Ownership and Shareholder’s Loans Singapore Companies Barbados Companies China Dividends 51.0% Ownership and Shareholder’s Loans 100% Ownership and Shareholder’s Loans Proportionate Share of Dividends, Interest Income and Principal Repayment of Shareholder’s Loans 100% Ownership and Shareholder’s Loans Project Companies Project Company Dividends, Interest Income and Principal Repayment of Shareholder’s Loans Net Property Income Ownership Properties (Excluding CapitaMall Wuhu) Property Management Services Property Manager’s Fees The Property Managers 10 | CapitaRetail China Trust Annual Report 2014 Ownership Net Property Income CapitaMall Wuhu Property Manager’s Fees Property Management Services The Property Manager Organisation Structure The Manager CapitaRetail China Trust Management Limited Board of Directors Audit Committee Chief Executive Officer Finance Team Investment and Asset Management Team Investor Relations Team Delivering Performance | 11 Growth Strategies Integrated Retail Real Estate Management Platform CRCT enjoys access to CapitaLand’s integrated shopping mall business model, with in-house capabilities in retail real estate investment, development, mall operations, asset management and fund management. Net Property Income Distributions Unitholders Retail Real Estate Ownership Investment Retail Real Estate Management Property Management Retail Management & Operational Leasing Retail Real Estate Capital Management Strategic Marketing Design & Development Management As the Manager, we seek to drive continued growth of CRCT through the following threepronged strategy: 1.Enhancing Organic Growth through Proactive Asset Management Most of our leases provide for an annual step-up in the base rent and for rent to be payable on the basis of the higher of either base rent or a percentage of tenants’ gross sales turnover, thereby providing stability and potential upside in rental income. Apart from organic growth through rental receipts, we work closely with the mall managers to identify improvements to the malls’ retail offerings and tenant mix, and carry out marketing and promotional initiatives to drive up shopper traffic and non-rental income. 2.Creating New Value through Innovative Asset Enhancement Strategies We also actively explore innovative asset enhancement initiatives to improve the returns of our malls. These include the reconfiguration of the retail units or floor plates to achieve better efficiency and higher rental potential, and retrofitting and refurbishing the malls to maintain their appeal to tenants and shoppers. Asset Management Strategic Planning & Investment Fund Structuring & Management 3.Capitalising on Yield-Accretive Acquisitions Growth Model We are always identifying and evaluating yield-accretive acquisition opportunities from our secured and proprietary pipeline, and other third-party vendors. CRCT is provided with long-term growth potential from its rights of first refusal to purchase assets held by CapitaMalls China Income Fund, CapitaMalls China Income Fund II (previously known as CapitaMalls China Incubator Fund), CapitaMalls China Income Fund III (previously known as CapitaMalls China Development Fund II), CapitaMalls China Development Fund III, as well as CapitaMalls Asia, which is the wholly-owned shopping mall business unit of CapitaLand Limited, one of Asia’s largest real estate companies headquartered and listed in Singapore. In evaluating acquisition opportunities, we will focus on properties which can maintain or enhance CRCT’s distribution yield; the properties’ potential asset enhancement opportunities; and properties with potential to demonstrate strong growth in occupancy rates, sustainable rental yields, and quality tenant and lease profiles. Delivering Performance | 13 Portfolio at a Glance 2. CapitaMall Wangjing 1. CapitaMall Xizhimen 3. CapitaMall Grand Canyon 4. CapitaMall Anzhen 5. CapitaMall Shuangjing 14 | CapitaRetail China Trust Annual Report 2014 6. CapitaMall Saihan Beijing 1. CapitaMall Xizhimen 2. CapitaMall Wangjing 3. CapitaMall Grand Canyon 4. CapitaMall Anzhen 5. CapitaMall Shuangjing Huhhot 6. CapitaMall Saihan Zhengzhou 7. CapitaMall Erqi Shanghai 8. CapitaMall Qibao Wuhu 9. CapitaMall Wuhu Wuhan 10. CapitaMall Minzhongleyuan 7. CapitaMall Erqi 9. CapitaMall Wuhu 8. CapitaMall Qibao 10.CapitaMall Minzhongleyuan Delivering Performance | 15 Board of Directors 1 2 3 4 5 6 7 1 2 3 4 5 6 7 Liew Cheng San Victor Lim Ming Yan Fong Heng Boo Christopher Gee Kok Aun Ng Kok Siong Professor Tan Kong Yam Tony Tan Tee Hieong 16 | CapitaRetail China Trust Annual Report 2014 Chairman & Non-Executive Independent Director Deputy Chairman & Non-Executive Non-Independent Director Non-Executive Independent Director Non-Executive Independent Director Non-Executive Non-Independent Director Non-Executive Independent Director Chief Executive Officer & Executive Non-Independent Director Liew Cheng San Victor, 68 Chairman Non-Executive Independent Director Bachelor of Social Sciences (Honours), University of Singapore Date of first appointment as a director: 31 October 2006 Date of appointment as Chairman: 1 January 2009 Length of service as a director (as at 31 December 2014): 8 years 2 months Board committee served on • Corporate Disclosure Committee (Chairman) Present principal commitments • Accuron Technologies Limited (Director) • Allocated Bullion Solutions Pte. Ltd. (Chairman) • Catalist Advisory Panel (Member) • Singapore Aerospace Manufacturing Private Limited (Director) • Singapore Institute of Management (Vice-Chairman, Governing Council, Chairman, Investment Committee and Member, Audit Committee and Nominating Committee) • Singapore Institute of Management Pte. Ltd. (Director) Background and working experience • Corporate Advisor of Temasek Holdings (Private) Limited (From 2004 to June 2011) • Corporate Advisor of Singapore Technologies Pte Ltd (From February 2002 to 2004) • Executive Vice President, Global Markets and Treasury of Overseas Union Bank Limited (From 1980 to 2002) Award • Public Service Star (2000) Delivering Performance | 17 Board of Directors Lim Ming Yan, 52 Deputy Chairman Non-Executive Non-Independent Director Bachelor of Engineering (Mechanical) and Economics (First Class Honours), University of Birmingham, UK Date of first appointment as a director: 1 January 2013 Date of appointment as Deputy Chairman: 1 January 2013 Length of service as a director (as at 31 December 2014): 2 years Board committees served on • Corporate Disclosure Committee (Member) • Executive Committee (Chairman) Present directorships in other listed companies • Ascott Residence Trust Management Limited (manager of Ascott Residence Trust) (Deputy Chairman) • CapitaCommercial Trust Management Limited (manager of CapitaCommercial Trust) (Deputy Chairman) • CapitaLand Limited • CapitaMall Trust Management Limited (manager of CapitaMall Trust) (Deputy Chairman) Present principal commitments (other than directorships in listed companies) • Building and Construction Authority (Board Member) • Business China (Director) • CapitaLand China Holdings Pte Ltd (Chairman) • CapitaLand Hope Foundation (Director) • CapitaLand Limited (President & Group CEO) • CapitaLand Regional Investments Limited (Chairman) • CapitaLand Singapore Limited (Chairman) • CapitaMalls Asia Limited 1 (Chairman) • CTM Property Trust, Steering Committee (Chairman) • LFIE Holding Limited (Co-Chairman) • Shanghai YiDian Holding (Group) Company (Director) • Singapore-China Foundation Ltd. (Governor) • Singapore Tourism Board (Board Member) • The Ascott Limited (Chairman) Directorship in other listed companies held over the preceding three years • Central China Real Estate Limited Background and working experience • Chief Operating Officer of CapitaLand Limited (From May 2011 to December 2012) • CEO of The Ascott Limited (From July 2009 to February 2012) • CEO of CapitaLand China Holdings Pte Ltd (From July 2000 to June 2009) Awards • Outstanding Chief Executive (Overseas) at the Singapore Business Awards 2006 • Magnolia Award by the Shanghai Municipal Government in 2003 and 2005 1 Delisted on 22 July 2014. 18 | CapitaRetail China Trust Annual Report 2014 Fong Heng Boo, 65 Non-Executive Independent Director Bachelor of Accountancy (Honours), University of Singapore Date of first appointment as a director: 1 January 2013 Length of service as a director (as at 31 December 2014): 2 years Board committee served on • Audit Committee (Chairman) Present directorships in other listed companies • Asian American Medical Group Limited • Colex Holdings Limited • Pteris Global Limited • Sapphire Corporation Limited Present principal commitments (other than directorships in listed companies) • Botanical Services Pty Ltd (Director) • CapitaLand Township Development Fund II Pte. Ltd. (Director) • CapitaLand Township Holdings Pte. Ltd. (Director) • Certis CISCO Security Pte. Ltd. (Director) • Council for Estate Agencies (Member, Licensing & Practice Committee and Member, Audit Committee) • Eastern Health Alliance Pte. Ltd. (Director) • Surbana International Consultants Holdings Pte. Ltd. (Director) Background and working experience • Director, Special Duties of Singapore Totalisator Board (From July 2004 to December 2014) • Senior Vice President, Corporate Services of Singapore Turf Club (From May 2000 to June 2004) • Deputy General Manager, Corporate Services of Singapore Turf Club (From May 1998 to May 2000) • Chief Financial Officer of Easycall International Pte Ltd/Matrix Telecommunications Ltd (From June 1996 to April 1998) • General Manager, Corporate Services of Amcol Holdings Limited (From October 1993 to May 1996) • Assistant Auditor-General of Auditor-General’s Office (From February 1987 to September 1993) • Divisional Director of Auditor-General’s Office (From May 1980 to January 1987) • Auditor of Auditor-General’s Office (From November 1975 to April 1979) Award • Institute of Certified Public Accountants of Singapore Silver Medal (1999) Delivering Performance | 19 Board of Directors Christopher Gee Kok Aun, 46 Non-Executive Independent Director Bachelor of Arts in Law (Honours), University of Nottingham, UK Member, The Institute of Chartered Financial Analysts Date of first appointment as a director: 24 January 2014 Length of service as director (as at 31 December 2014): 11 months Board committee served on • Audit Committee (Member) Present principal commitments • Institute of Policy Studies, Lee Kuan Yew School of Public Policy, National University of Singapore (Research Fellow) • Manas Asian Equities Value Fund (Director) Background and working experience • Head, Singapore Equities Research of J.P. Morgan Securities Singapore Private Limited (From July 2002 to February 2012) • Head, Asia Real Estate Equities Research of J.P. Morgan Securities Singapore Private Limited (From September 2006 to February 2012) • Head, Singapore and Malaysia Equities Research of ING Barings Securities (From June 2000 to June 2002) • Head, Malaysia Equities Research and Investment Analyst of ING Barings Securities Malaysia Sdn. Bhd. (From June 1994 to June 2000) • Audit and Corporate Recovery of Price Waterhouse, London (From September 1990 to March 1994) 20 | CapitaRetail China Trust Annual Report 2014 Professor Tan Kong Yam, 59 Non-Executive Independent Director Bachelor in Economics, Princeton University PhD in Economics, Stanford University Date of first appointment as a director: 31 October 2014 Length of service as a director (as at 31 December 2014): 2 months Board committee served on • Audit Committee (Member) Present principal commitments • APS Asset Management Pte Ltd (Director) • Changi Airport Group (Singapore) Pte. Ltd. (Director) • Nanyang Technological University of Singapore (Professor of Economics) • Surbana International Consultants Holdings Pte. Ltd. (Director) Background and working experience • Senior Economist, Beijing Office of World Bank (From July 2002 to July 2005) • Member, Expert Group on the 11th Five Year Plan of World Bank (2004) • Chief Economist of The Ministry of Trade and Industry (From July 1999 to June 2002) • Head, Department of Business Policy at NUS Business School of National University of Singapore (From 1988 to 1999) Delivering Performance | 21 Board of Directors Ng Kok Siong, 43 Non-Executive Non-Independent Director Bachelor of Accountancy (Honours), Nanyang Technological University of Singapore Date of first appointment as a director: 21 July 2009 Length of service as a director (as at 31 December 2014): 5 years 5 months Board committees served on • Audit Committee (Member) • Corporate Disclosure Committee (Member) • Executive Committee (Member) Present directorship in other listed companies • CapitaMalls Malaysia REIT Management Sdn. Bhd. (manager of CapitaMalls Malaysia Trust) Present principal commitment (other than directorships in listed companies) • CapitaLand Limited (Chief Corporate Development Officer) Background and working experience • Chief Financial Officer of CapitaMalls Asia Limited (From November 2009 to August 2014) • Senior Vice President, Strategic Finance of CapitaLand Limited (From October 2008 to September 2009) • Senior Vice President, CapitaLand Eurasia of CapitaLand Limited (From January 2007 to October 2008) • Vice President, Office of the President of CapitaLand Limited (From September 2005 to January 2007) • Strategy and Portfolio Manager of Shell Oil Products East (From August 2003 to September 2005) • Planning and Appraisal Advisor of Shell Oil Products East (From July 2001 to August 2003) • Regional Advisor of Exxon Mobil Asia Pacific Pte Ltd (From May 2000 to July 2001) • Global Analyst of Esso Coordination Centre N.V. (From January 1999 to May 2000) • Senior Planning Analyst of Esso Singapore Private Limited (From July 1998 to January 1999) 22 | CapitaRetail China Trust Annual Report 2014 Tony Tan Tee Hieong, 48 Chief Executive Officer Executive Non-Independent Director Bachelor of Accountancy, National University of Singapore Master of Business Administration, University of Manchester Date of first appointment as a director: 1 July 2010 Length of service as a director (as at 31 December 2014): 4 years 6 months Board committee served on • Executive Committee (Member) Background and working experience • Deputy CEO of CapitaRetail China Trust Management Limited (From April 2010 to June 2010) • Head, Finance of CapitaRetail China Trust Management Limited (From September 2007 to June 2010) • Asia Pacific Treasurer of IKEA (From August 1998 to September 2007) • Treasury Accountant of Wearnes International (From May 1995 to August 1998) • Money Market Dealer of Credito Italiano Bank (From April 1994 to May 1995) • Money Market Broker of Harlow Ueda Sassoon (From November 1992 to April 1994) • Auditor of Ernst & Young (From June 1991 to October 1992) Delivering Performance | 23 Year in Brief 2014 Month Events January Distributable income of S$70.1 million for the financial year ended 2013 was 4.9% higher than the previous year. Distribution per unit (DPU) for financial year ended 2013 was 9.02 cents. March Paid a DPU of 4.33 cents to Unitholders for the period 1 July to 31 December 2013. April With strong contribution from the newly acquired CapitaMall Grand Canyon, net property income (NPI) increased robustly by 25.0% and distributable income grew 13.2% year-on-year for 1Q 2014. Held its annual general meeting with all the resolutions duly passed. May CapitaMall Minzhongleyuan reopened after going through a major asset enhancement initiative. July NPI increased 29.5% and distributable income grew 18.7% year-on-year for 2Q 2014. Clinched the Bronze award for the Best Annual Report (REITs and Business Trusts category) at the Singapore Corporate Awards 2014. September Paid a DPU of 4.99 cents to Unitholders for the period 1 January to 30 June 2014, an increase of 6.4% compared to the same period in the previous year. October NPI increased 29.2% and distributable income grew 14.1% year-on-year for 3Q 2014. Participated in the “5th Singapore Corporate Governance Week – Statement of Support” organised by Securities Investors Association (Singapore) in demostration of CRCT’s commitment to good corporate governance. 24 | CapitaRetail China Trust Annual Report 2014 Trust Management Team (CRCTML) Tony Tan Tee Hieong Chief Executive Officer & Executive Director Refer to the description under the section on Board of Directors. INVESTMENT AND ASSET MANAGEMENT TEAM The Investment and Asset Management Team is responsible for identifying and evaluating potential acquisitions and investments, as well as formulating business and enhancement plans for CRCT’s assets. They work closely with the property managers as well as the shopping malls’ centre management to ensure that the plans are diligently implemented. Tan Tze Wooi Vice President, Investment and Asset Management Tze Wooi has over 17 years of financial experience in real estate, corporate banking, credit and auditing in Singapore and China. He was an Investment and Asset Manager for CapitaMalls Asia before joining CRCTML. He is a Chartered Financial Analyst and holds a Bachelor of Accountancy (Honours) from Nanyang Technological University, Singapore. Toh Yee-Shui Vice President, Investment and Asset Management Yee-Shui has over 13 years of experience in the real estate and banking industry in Singapore and China. He was an Investment and Asset Manager in China for CapitaMalls Asia before joining CRCTML. He is a Chartered Financial Analyst and holds a Master of Science in Financial Engineering from the National University of Singapore. FINANCE TEAM The Finance Team is responsible for all finance-related functions, including the preparation of statutory accounts, budgeting, sourcing and management of funds, management of treasury and tax affairs, compliance, liaison with external audit, and all other finance-related matters. Joanne Tan Siew Bee Head, Finance Joanne has over 14 years of finance and accounting experience. She holds a professional degree with the Association of Chartered Certified Accountants (ACCA) and is a Chartered Accountant of Singapore. Delivering Performance | 25 Trust Management Team (CRCTML) FUND ANALYST The Fund Analyst is responsible for developing and maintaining financial and asset models to analyse the performance of CRCT at the property level, as well as preparing asset reports on the assets. Samantha Huang Yin Executive, Investment and Asset Management Samantha graduated with a Bachelor of Science in Real Estate from the National University of Singapore in 2013. Prior to joining CRCTML, she gained internship and traineeship exposure in various real estate firms. INVESTOR RELATIONS MANAGER The Investor Relations Manager is responsible for maintaining transparent communications with Unitholders, potential investors and analysts through communication channels such as the annual reports, press releases, presentations, roadshows and CRCT’s website. Leng Tong Yan Manager, Investor Relations Tong Yan has over eight years of experience in auditing and investor relations. She was an Internal Audit Manager with CapitaMalls Asia before joining CRCTML in May 2013. She holds a Bachelor of Accountancy from Nanyang Technological University, Singapore and is a Chartered Accountant of Singapore. 26 | CapitaRetail China Trust Annual Report 2014 Corporate Governance OUR ROLE Our primary role as the manager of CRCT (Manager) is to set the strategic direction of CRCT and make recommendations to HSBC Institutional Trust Services (Singapore) Limited, in its capacity as trustee of CRCT (Trustee), on acquisition, divestment and enhancement of the assets of CRCT in accordance with its stated investment strategy. The research, evaluation and analysis required for this purpose are coordinated and carried out by us as the Manager. As the Manager, we have general powers of management over the assets of CRCT. Our primary responsibility is to manage the assets and liabilities of CRCT for the benefit of the unitholders of CRCT (Unitholders). We do this with a focus on generating rental income and enhancing asset value over time so as to maximise the returns from the investments, and ultimately the distributions and total returns to Unitholders. Our other functions and responsibilities as the Manager include: (a) using our best endeavours to conduct CRCT’s business in a proper and efficient manner and to conduct all transactions with, or on behalf of CRCT, at arm’s length; (b) preparing annual business plans for review by the directors of the Manager (Directors), including forecasts on revenue, net income and capital expenditure, explanations on major variances to previous years’ plans, written commentaries on key issues and underlying assumptions on rental rates, operating expenses and any other relevant assumptions; (c) ensuring compliance with relevant laws and regulations, including the Listing Manual of Singapore Exchange Securities Trading Limited (SGX-ST) (Listing Manual), the Code on Collective Investment Schemes (CIS Code) issued by the Monetary Authority of Singapore (MAS) (including Appendix 6 of CIS Code (Property Funds Appendix)) and the tax rulings issued by the Inland Revenue Authority of Singapore on the taxation of CRCT and Unitholders; (d) attending to all regular communications with Unitholders; and (e) supervising CapitaLand Retail (Shanghai) Management & Consulting Co., Ltd. (Property Manager), the property manager which performs the day-to-day property management functions (including leasing, marketing, promotion, coordination and property management) for CRCT’s malls. CRCT, constituted as a trust, is externally managed by the Manager and therefore has no personnel of its own. The Manager appoints experienced and well qualified management to run its day-to-day operations. All Directors and employees of the Manager are remunerated by the Manager and not CRCT. The Manager was appointed in accordance with the terms of the trust deed constituting CRCT and dated 23 October 2006 (as amended, varied or supplemented from time to time) (Trust Deed). The Trust Deed also outlines certain circumstances under which the Manager can be removed, including by notice in writing given by the Trustee upon the occurrence of certain events, or by a resolution passed by a simple majority of Unitholders present and voting at a meeting of Unitholders duly convened and held in accordance with the provisions of the Trust Deed. The Manager is a subsidiary of CapitaLand Limited (CL) which holds a significant unitholding interest in CRCT. CL is a long-term real estate developer and investor and has strong inherent interests in the performance of CRCT. CL’s retention of a significant unitholding interest in CRCT ensures its commitment to CRCT and aligns its interests with other Unitholders. The Manager’s association with CL provides the following benefits, amongst other things, to CRCT: (a) stable pipeline of property assets through CL’s development activities; Delivering Performance | 27 Corporate Governance (b) wider and better access to banking and capital markets on favourable terms; (c) fund raising and treasury support; and (d) access to a bench of experienced management talent. OUR CORPORATE GOVERNANCE CULTURE The Manager aspires to the highest standards of corporate conduct as guided by the Principles of the Code of Corporate Governance 2012 (Code). The Manager believes in developing and maintaining sound and transparent policies and practices to meet the specific business needs of CRCT and to provide a firm foundation for a trusted and respected business enterprise. The Manager remains focused on complying with the substance and spirit of the Principles of the Code while achieving operational excellence and delivering CRCT’s long-term strategic objectives. The Manager has received accolades from the investment community for excellence in corporate governance. More details can be found in the Investor & Media Relations section on pages 59 to 60 of the Annual Report. This report sets out the corporate governance practices for financial year (FY) 2014 with reference to the Code. Where there are deviations from the principles and guidelines of the Code, an explanation has been provided within this report. (A) BOARD MATTERS The Board’s Conduct of Affairs Principle 1: Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the long-term success of the company. The Board works with Management to achieve this objective and Management remains accountable to the Board. The Manager is led by a board of Directors (Board) comprising a majority of non-executive independent Directors. Each Director brings to the Board skills, experience, insights and sound judgement, which together with his strategic networking relationships, serve to further the interests of CRCT. At all times, the Directors are collectively and individually obliged to act honestly and with diligence, and consider the best interests of Unitholders. The Board oversees the affairs of the Manager, in furtherance of the Manager’s primary responsibility to manage the assets and liabilities of CRCT for the benefit of Unitholders. The Board appoints the Chief Executive Officer (CEO), who, assisted by the management team of the Manager (Management), is responsible for the day-to-day management and overall operations of CRCT’s business. The Board provides leadership to the Management, sets strategic directions and oversees the management of CRCT. The Board establishes goals for Management and monitors the achievement of these goals. It ensures that proper and effective controls are in place to assess and manage business risks and compliance with requirements under the Listing Manual, the Property Funds Appendix, as well as any other applicable guidelines prescribed by the SGX-ST, the MAS or other relevant authorities, and applicable laws. It also sets the disclosure and transparency standards for CRCT and ensures that obligations to Unitholders and other stakeholders are understood and met. The Board has reserved authority to approve certain matters and these include: (a) material acquisitions, investments, disposals and divestments; (b) issue of new units; (c) income distributions and other returns to Unitholders; and 28 | CapitaRetail China Trust Annual Report 2014 (d) matters which involve a conflict of interest for a controlling unitholder or a Director. Various Board Committees, namely the Audit Committee (AC), Corporate Disclosure Committee (CDC) and Executive Committee (EC) have been constituted with clear written terms of reference to assist the Board in the discharge of its functions. The composition of the various Board Committees is set out on page 43 of the Annual Report. Each of these Board Committees operates under delegated authority from the Board. The Board may form other Board Committees as dictated by business imperatives. Membership of the various Board Committees is managed to ensure an equitable distribution of responsibilities among Board members, to maximise the effectiveness of the Board and to foster active participation and contribution from Board members. Diversity of experience and appropriate skills are considered in the composition of the respective Board Committees. The Board has adopted a set of internal controls which establishes approval limits for, amongst other things, capital expenditure, investments, divestments and debts. Apart from matters that specifically require the Board’s approvals, the Board delegates authority for transactions below those limits to Board Committees and Management. Approval sub-limits are also provided at management level to optimise operational efficiency. The Board meets at least once every quarter, and as required by business imperatives. Where exigencies prevent a Director from attending a Board meeting in person, the Articles of Association of the Manager permit the Director to participate via teleconferencing or video conferencing. The Board and Board Committees may also make decisions by way of resolutions in writing. A total of four Board meetings were held in FY 2014. A table showing the attendance record of Directors at meetings of the Board and AC during FY 2014 is set out on page 43 of the Annual Report. The Manager believes in the manifest contribution of its Directors beyond attendance at formal Board and Board Committees meetings. To judge a director’s contributions based on his attendance at formal meetings alone would not do justice to his overall contributions, which include being accessible by Management for guidance or exchange of views outside the formal environment of Board and Board Committees meetings. The Manager provides suitable training for Directors. Upon appointment, each Director is provided with a formal letter of appointment and is also given a copy of the Directors’ Manual (which includes information on a broad range of matters relating to the role of a director). All Directors on appointment are required to undertake an induction programme to familiarise themselves with matters relating to the business activities of CRCT, its strategic directions and policies, the regulatory environment in which CRCT operates and the Manager’s corporate governance practices. The Manager also provides appropriate training for first-time directors including industry-specific knowledge. Following their appointment, Directors are provided with opportunities for continuing education in areas such as directors’ duties and responsibilities, changes to regulations and accounting standards and industry-related matters, so as to be updated on matters that affect or may enhance their performance as Directors or Board Committee members. Delivering Performance | 29 Corporate Governance Board Composition and Guidance Principle 2: There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management and 10% shareholders. No individual or small group of individuals should be allowed to dominate the Board’s decision making. The Board comprises individuals who are business leaders and professionals with financial, banking, fund management, real estate, legal, investment and accounting backgrounds. The varied backgrounds of the Directors enable Management to benefit from their external, diverse and objective perspectives on issues brought before the Board. The size and composition of the Board are reviewed regularly to ensure that the Board is of appropriate size and has an optimal mix of expertise and experience, and comprises persons who, as a group, provide the necessary core competencies, taking into consideration the nature and scope of CRCT’s operations. The Board presently comprises seven Directors, of whom four are non-executive independent Directors. The profiles of the Directors are set out on pages 17 to 23 of the Annual Report. The independence of each Director is reviewed by the Board upon appointment, and thereafter annually and as and when circumstances require. An independent director is one who has no relationship with the Manager, its related corporations, its shareholders who hold 10% or more of the voting shares in the Manager, or Unitholders who hold 10% or more of the units in issue of CRCT or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the Directors’ independent business judgement in the best interests of CRCT. The Board has determined that Mr Liew Cheng San Victor, Mr Fong Heng Boo, Mr Christopher Gee Kok Aun and Professor Tan Kong Yam are independent Directors under the Code. Chairman and Chief Executive Officer Principle 3: There should be a clear division of responsibilities between the leadership of the Board and the executives responsible for managing the company’s business. No one individual should represent a considerable concentration of power. To maintain an appropriate balance of power, increased accountability and greater capacity of the Board for independent decision making, the roles and responsibilities of the Chairman and the CEO are held by separate individuals. The non-executive independent Chairman is responsible for leading the Board and ensuring that the Board is effective on all aspects of its role. The CEO has full executive responsibilities over the business directions and operational decisions of CRCT and is responsible for implementing CRCT’s strategies and policies and for conducting CRCT’s business. The Chairman and the CEO are not immediate family members. The separation of the roles of the Chairman and the CEO and the resulting clarity of roles provide a healthy professional relationship between the Board and Management and facilitate robust deliberations on the business activities of CRCT and the exchange of ideas and views to help shape the strategic process. The Chairman is responsible for leadership of the Board and for creating the conditions for overall Board, Board Committee and individual Director effectiveness. This includes setting the agenda of the Board in consultation with the CEO and promoting constructive engagement among the Directors as well as between the Board and the CEO on strategic issues. The Chairman plays a significant leadership role by providing clear oversight, advice and guidance to the CEO and Management on strategies and business operations. 30 | CapitaRetail China Trust Annual Report 2014 Board Membership Principle 4: There should be a formal and transparent process for the appointment and re-appointment of directors to the Board. The Manager does not have a nominating committee. In view that the Manager is a dedicated manager to only CRCT, and taking into account the activities and scale of business of CRCT, the limited number of independent director appointment and the fact that independent directors constitute more than half of the Board of the Manager, the Board considers that the objectives of a nominating committee may be achieved by the full Board (of which comprises a majority of independent Directors) undertaking the responsibilities of a nominating committee. Therefore, the Board performs the functions that such a committee would otherwise perform, namely, it administers nominations to the Board, reviews the structure, size and composition of the Board, and reviews the independence of Board members. Directors of the Manager are not subject to periodic retirement by rotation. Under the Code, the composition of the Board, including the selection of candidates for new appointments to the Board as part of the Board’s renewal process, is determined using the following principles: (a) the Board should comprise Directors with a broad range of commercial experience, including expertise in fund management, the property industry, banking and legal fields; and (b) at least one-third of the Board should comprise independent Directors. Where, amongst other things, the Chairman of the Board is not an independent Director, at least half of the Board should comprise independent Directors. Renewal or replacement of Board members do not necessarily reflect their contributions to date, but may be driven by the need to position and shape the Board in line with the evolving needs of CRCT and its business. The selection of candidates is evaluated taking into account various factors including the current and mid-term needs and goals of CRCT, as well as the relevant expertise of the candidates and their potential contributions. Candidates may be put forward or sought through contacts and recommendations. Guideline 4.4 of the Code recommends that the Board determine the maximum number of listed company board representations which any director may hold and disclose this in the annual report. The Board is of the view that, the limit on the number of listed company directorships that an individual may hold should be considered on a case-by-case basis, as a person’s available time and attention may be affected by many different factors such as whether they are in full-time employment and their other responsibilities. A Director with multiple directorships is expected to ensure that sufficient attention is given to the affairs of the Manager in managing the assets and liabilities of CRCT for the benefit of Unitholders. The Board believes that each individual Director is best placed to determine and ensure that he is able to devote sufficient time and attention to discharge his duties and responsibilities as a Director of the Manager, bearing in mind his other commitments. In considering the nomination of Directors for appointment, the Board will take into account, amongst other things, the competing time commitments faced by Directors with multiple Board memberships. All Directors had confirmed that notwithstanding the number of their individual listed company board representations and other principal commitments, which the Directors held, they were able to devote sufficient time and attention to the affairs of the Manager in managing the assets and liabilities of CRCT for the benefit of Unitholders. The Board is of the view that the current commitments of each of its Directors are reasonable and each of the Directors is able to and has been adequately carrying out his duties. Delivering Performance | 31 Corporate Governance Board Performance Principle 5: There should be a formal annual assessment of the effectiveness of the Board as a whole and its board committees and the contribution by each director to the effectiveness of the Board. The Manager believes that Board performance is ultimately reflected in the long-term performance of CRCT. The Board strives to ensure that there is an optimal blend in the Board of background, experience and knowledge in business, finance and management skills critical to CRCT’s business and that each Director could bring to the Board an independent and objective perspective to enable balanced and well-considered decisions to be made in the interests of CRCT. Contributions by an individual Board member can also take other forms, including providing objective perspectives on issues, facilitating business opportunities and strategic relationships, and accessibility by Management outside of a formal environment of Board and/or Board Committees meetings. Reviews of Board performance are carried out on an informal basis. The Manager believes that collective Board performance and that of individual Board members are better reflected in, and evidenced by, its and their proper guidance, diligent oversight and able leadership, and the support that it lends to Management in steering CRCT in the appropriate direction, and the long-term performance of CRCT whether under favourable or challenging market conditions. The Board was also able to assess the Board Committees through their regular reports to the Board on their activities. Access to Information Principle 6: In order to fulfil their responsibilities, directors should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis so as to enable them to make informed decisions to discharge their duties and responsibilities. The Manager recognises the importance of providing the Board with timely, adequate and relevant information prior to Board meetings, and as and when the need arises. As a general rule, Board papers are sent to Board members at least five working days prior to the Board meeting to allow the members to prepare for the Board meetings and to enable the discussions to focus on questions that the members may have. However, sensitive matters may be tabled at the meeting itself or discussed without any papers being distributed. In line with the Manager’s commitment to limit paper wastage and reduce its carbon footprint, the Manager no longer provides printed copy of Board papers and Directors are instead provided with tablet devices to enable them to access and read Board and Board Committee papers prior to and at meetings. This initiative also enhances information security as the papers are downloaded to tablet devices through an encrypted channel. In addition to providing timely, adequate and relevant information to the Board on Board affairs and issues requiring the Board’s decision, Management also provides on-going reports relating to the operational and financial performance of the Manager, such as monthly management reports. Where appropriate, informal meetings are also held for Management to brief Directors on prospective deals and potential developments in the early stages before formal Board approval is sought. The Board has separate and independent access to Management including the company secretary of the Manager (Company Secretary) at all times. The Company Secretary attends to corporate secretarial administration matters and is the corporate governance advisor on corporate matters to the Board and Management. The Company Secretary attends Board meetings. The Board, whether as individual Directors or as a group, is also entitled to have access to independent professional advice where required, at the Manager’s expense. 32 | CapitaRetail China Trust Annual Report 2014 The AC also meets the internal auditors and external auditors separately at least once a year, without the presence of the CEO and Management and has unfettered access to any information that it may require. (B) REMUNERATION MATTERS Procedures for Developing Remuneration Policies Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration. Level and Mix of Remuneration Principle 8: The level and structure of remuneration should be aligned with the long-term interest and risk policies of the company, and should be appropriate to attract, retain and motivate (a) the directors to provide good stewardship of the company, and (b) key management personnel to successfully manage the company. However, companies should avoid paying more than is necessary for this purpose. Disclosure on Remuneration Principle 9: Every company should provide clear disclosure of its remuneration policies, level and mix of remuneration, and the procedure for setting remuneration, in the company’s Annual Report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key management personnel, and performance. The Manager believes that a framework of remuneration for the Board and key executives should not be taken in isolation. It should be linked to the building of management bench strength and the development of key executives. This is to ensure continual development of talent and renewal of strong and sound leadership for a sustainable business and a lasting company in the best interests of CRCT. The remuneration of the Directors and employees of the Manager is paid by the Manager, and not by CRCT. As the Manager is a subsidiary of CL, it adheres to the remuneration policies and practices of CL. The Manager therefore does not have a remuneration committee. The Manager’s tapping on the compensation framework of CL puts the Manager in a better position to attract better qualified management talent, who may otherwise not be attracted to a standalone REIT manager. The Manager being a subsidiary of CL also provides an intangible benefit of allowing its employees to be associated with a wider corporate group identity which can offer them the depth and breadth of experience and career horizon and this enables the Manager to attract and retain qualified individuals. The Board has carefully considered the remuneration policies and practices of CL and is satisfied that such policies and practices will provide the Manager with a suitable remuneration policy. The Directors’ fees for FY 2014 are shown in the table on page 34 of the Annual Report. The CEO does not receive any fees in his capacity as a Director. Directors’ fees generally comprise a basic retainer fee as a Director, an additional fee for serving on any of the Board Committees and an attendance fee for participation in meetings of the Board and any of the Board Committees, project meetings and verification meetings. Delivering Performance | 33 Corporate Governance Non-executive Directors (save for Directors who are employees of CL or CapitaMalls Asia Limited (CMA)) receive Directors’ fees which are payable by way of cash and units in CRCT (Units). The Manager believes that the payment of a portion of the Directors’ fees in Units will serve to align the interests of such Directors with that of Unitholders and CRCT’s long-term growth and value. Director’s Fees 1,2 Board Members Liew Cheng San Victor Lim Ming Yan FY 2013 S$129,000 S$129,000 4 S$117,000 3 S$11,143 S$91,000 6 S$76,000 S$68,291 N.A. S$10,161 N.A. 4 S$94,000 3 N.A. N.A. N.A. Chew Gek Khim 5 Fong Heng Boo S$89,572 Christopher Gee Kok Aun Professor Tan Kong Yam FY 2014 7 8 Ng Kok Siong Tony Tan Tee Hieong N.A. N.A.: Not Applicable. 1 2 3 4 5 6 7 8 Inclusive of attendance fees of (a) S$2,000 per meeting attendance in person, (b) S$1,700 per meeting attendance via teleconferencing or video conferencing, and (c) S$1,000 per meeting attendance at project and verification meetings subject to a maximum of S$10,000 per Director per annum. Directors’ fees are subject to the approval of the Manager’s sole shareholder. Each non-executive Director (save for non-executive Directors who are employees of CL or CMA) shall receive up to 20% of his Directors’ fees in the form of Units (subject to rounding adjustments). The remainder of the Directors’ fees shall be paid in cash. No new Units will be issued for this purpose as these Units will be paid by the Manager from the Units it holds. In respect of non-executive Directors who are employees of CL or CMA, their Directors’ fees in respect of FY 2013 were paid to CL and CMA respectively in cash. With effect from FY 2014, non-executive Directors who are employees of CL or CMA do not receive Directors’ fees. Chew Gek Khim resigned as a non-executive independent Director and ceased to be the Chairperson of the AC with effect from 5 February 2014. All Directors’ fees paid and payable to Chew Gek Khim were paid/will be paid in cash. Fong Heng Boo was appointed as Chairman of the AC with effect from 5 February 2014. Christopher Gee Kok Aun was appointed as a non-executive independent Director and a member of the AC with effect from 24 January 2014. Professor Tan Kong Yam was appointed as a non-executive independent Director and a member of the AC with effect from 31 October 2014. (C) ACCOUNTABILITY AND AUDIT Accountability Principle 10: The Board should present a balanced and understandable assessment of the company’s performance, position and prospects. The Manager provides Unitholders with quarterly and annual financial statements. In presenting the annual and quarterly financial statements to Unitholders, the Board aims to provide Unitholders with a balanced, clear and understandable assessment of CRCT’s performance, position and prospects. In order to achieve this, Management provides the Board with management accounts on a monthly basis and such explanation and information as any Director may require, to enable the Directors to keep abreast, and make a balanced and informed assessment, of CRCT’s financial performance, position and prospects. The Manager believes in conducting itself in ways that seek to deliver maximum sustainable value to Unitholders. Best practices are promoted as a means to build an excellent business for Unitholders and the Manager is accountable to Unitholders for CRCT’s performance. Prompt fulfilment of statutory reporting requirements is but one way to maintaining Unitholders’ confidence and trust in the capability and integrity of the Manager. 34 | CapitaRetail China Trust Annual Report 2014 Risk Management and Internal Controls Principle 11: The Board is responsible for the governance of risk. The Board should ensure that Management maintains a sound system of risk management and internal controls to safeguard shareholders’ interests and the company’s assets, and should determine the nature and extent of the significant risks which the Board is willing to take in achieving its strategic objectives. The Manager has in place an adequate and effective system of internal controls addressing material financial, operational, compliance and information technology risks to safeguard Unitholders’ interests and CRCT’s assets. The Board has overall responsibility for the governance of risk and exercises oversight of the risk management strategy and framework. The AC assists the Board in strengthening the Manager’s risk management capabilities for CRCT and its subsidiaries (CRCT Group). In carrying out this responsibility, in particular, the AC: (a) makes recommendations to the Board on risk appetite including associated risk parameters for CRCT Group; (b) oversees Management in the formulation, updating and maintenance of an adequate and effective risk management framework, policies and strategies for managing risks that are consistent with the approved risk appetite and parameters for CRCT Group and report to the Board on its decisions on any material matters concerning the aforementioned; (c) makes the necessary recommendations to the Board such that an opinion and comment regarding the adequacy and effectiveness of the risk management and internal control systems can be made by the Board in the annual report of CRCT in accordance with the Listing Manual and the Code; and (d) reports to the Board on any material breaches of risk limits and the adequacy of any proposed action. The Manager adopts an Enterprise Risk Management (ERM) Framework which sets out the required environmental and organisational components for managing risk in an integrated, systematic and consistent manner. The ERM Framework and related policies are reviewed annually. The Manager consistently seeks to improve and strengthen its ERM Framework. As part of the ERM Framework, Management, amongst other things, undertakes and performs a Risk and Control Self-Assessment (RCSA) process. As a result of the RCSA process, the Manager produces and maintains a risk register which identifies the material risks CRCT Group faces and the corresponding internal controls it has in place to manage or mitigate those risks. The material risks are reviewed annually by the AC and the Board. The AC also reviews the approach of identifying and assessing risks and internal controls in the risk register. The system of risk management and internal controls is reviewed and, where appropriate, refined, regularly by Management, the AC and the Board. The Manager has established an approach towards how risk appetite is defined, monitored and reviewed for CRCT Group. Approved by the Board, the Risk Appetite Statement (RAS), addresses the management of material risks faced by CRCT Group. Alignment of CRCT Group’s risk profile to the RAS is achieved through various communication and monitoring mechanisms (including key performance indicators set for Management) put in place across the various functions within the Manager. More information on CRCT’s ERM Framework can be found in the Enterprise Risk Management section on pages 44 to 46 of the Annual Report. Internal auditors and external auditors conduct audits that involve testing the effectiveness of the material internal controls for CRCT Group addressing financial, operational, compliance and information technology risks. This includes testing, where practical, material internal controls in areas Delivering Performance | 35 Corporate Governance managed by external service providers. Any material non-compliance or lapses in internal controls together with corrective measures recommended by the internal auditors and external auditors are reported to and reviewed by the AC. The adequacy and effectiveness of the measures taken by the Manager in response to the recommendations made by the internal auditors and external auditors are also reviewed by the AC. The Board has received assurance from the CEO and the Head, Finance of the Manager that: (a) the financial records for CRCT Group have been properly maintained and the financial statements for the year ended 31 December 2014 give a true and fair view of CRCT Group’s operations and finances; and (b) the system of risk management and internal controls in place for CRCT Group is adequate and effective in addressing the material risks faced by CRCT Group in its current business environment including material financial, operational, compliance and information technology risks. The CEO and the Head, Finance of the Manager have obtained similar assurance from the respective risk and control owners. In addition, in FY 2014, the Board has received quarterly certification by Management on the integrity of financial reporting and the Board has provided a negative assurance confirmation to Unitholders as required by the Listing Manual. Based on the ERM Framework established and the reviews conducted by Management and both the internal auditors and external auditors, as well as the assurance from the CEO and the Head, Finance of the Manager, the Board concurs with the recommendation of the AC and is of the opinion, that the system of risk management and internal controls addressing material financial, operational, compliance and information technology risks established by the Manager is adequate and effective to meet the needs of CRCT Group in its current business environment as at 31 December 2014. The Board notes that the system of risk management and internal controls established by the Manager provides reasonable assurance that CRCT Group, as it strives to achieve its business objectives, will not be significantly affected by any event that can be reasonably foreseen or anticipated. However, the Board also notes that no system of risk management and internal controls can provide absolute assurance in this regard, or absolute assurance against poor judgement in decision making, human error, losses, fraud or other irregularities. Audit Committee Principle 12: The Board should establish an Audit Committee with written terms of reference which clearly set out its authority and duties. The AC comprises four non-executive Directors, the majority of whom (including the Chairman of the AC) are independent. The members bring with them invaluable recent and relevant managerial and professional expertise in accounting and related financial management domains. The AC has explicit authority to investigate any matter within its terms of reference. Management is required to provide the fullest co-operation in providing information and resources, and in implementing or carrying out all requests made by the AC. The AC has direct access to the internal auditors and external auditors and full discretion to invite any Director or executive officer to attend its meetings. Similarly, both the internal auditors and external auditors are given unrestricted access to the AC. The AC is guided by its terms of reference, in particular, the AC: (a) monitors and evaluates the effectiveness of the Manager’s system of risk management and internal controls (including financial, operational, compliance and information technology 36 | CapitaRetail China Trust Annual Report 2014 controls and risk management policies and systems) through reviewing written reports from the internal auditors and external auditors to ensure that where deficiencies in internal controls have been identified, appropriate and prompt remedial action is taken by Management; (b) reviews the significant financial reporting issues and judgements so as to ensure the integrity of the financial statements of CRCT Group and any announcements relating to CRCT Group’s financial performance; (c) reviews the effectiveness of the internal audit function; (d) reviews the scope and results of the external audit and also assesses the cost effectiveness, the independence and objectivity of the external auditors; (e) makes recommendations to the Board on the proposals to Unitholders on the appointment, re-appointment and removal of the external auditors, and approving the remuneration of the external auditors; (f) reviews and approves processes to regulate transactions involving an Interested Person (as defined in Chapter 9 of the Listing Manual) and/or Interested Party (as defined in the Property Funds Appendix) (each, an Interested Person) and CRCT and/or its subsidiaries (Interested Person Transactions), in particular, ensuring compliance with the provisions of the Listing Manual and the Property Funds Appendix relating to Interested Person Transactions; and (g) reviews the policy and arrangements by which employees of the Manager and any other persons may, in confidence, report suspected fraud or irregularity or suspected infringement of any laws or regulations or rules or, raise concerns about possible improprieties in matters of financial reporting or other matters with a view to ensuring that arrangements are in place for such concerns to be raised and independently investigated, and for appropriate follow-up action to be taken. The AC has reviewed the nature and extent of non-audit services provided by the external auditors during FY 2014 and the fees paid for such services. The AC is satisfied that the independence of the external auditors has not been impaired by the provision of those services. The external auditors have also provided confirmation of their independence to the AC. The aggregate amount of fees paid and payable to the external auditors for FY 2014 was S$437,002 of which audit fees amounted to S$429,002 and non-audit fees amounted to S$8,000. In FY 2014, the AC also met with the internal auditors and external auditors, without Management’s presence, to discuss the reasonableness of the financial reporting process, the system of internal controls, and the significant comments and recommendations by the auditors. Where relevant, the AC makes reference to the best practices and guidance in the Guidebook for Audit Committees in Singapore and the practice directions issued from time to time in relation to Financial Reporting Surveillance Programme administered by the Accounting and Corporate Regulatory Authority of Singapore. The Manager confirms, on behalf of CRCT, that CRCT complies with Rule 712 and Rule 715 of the Listing Manual. Internal Audit Principle 13: The company should establish an effective internal audit function that is adequately resourced and independent of the activities it audits. The Manager has in place an internal audit function supported by CL’s Internal Audit Department (CL IA) which reports directly to the AC and administratively to the CEO. CL IA plans its internal audit schedules in consultation with, but independently of, Management and its plan is submitted to the AC Delivering Performance | 37 Corporate Governance for approval prior to the beginning of each year. The AC also meets with CL IA at least once a year without the presence of Management. CL IA has unfettered access to the Manager’s documents, records, properties and employees, including access to the AC. CL IA is a corporate member of the Singapore branch of the Institute of Internal Auditors Inc. (IIA), which has its headquarters in the USA. CL IA subscribes to, and is guided by, the International Standards for the Professional Practice of Internal Auditing (Standards) developed by the IIA and has incorporated these Standards into its audit practices. To ensure that internal audits are performed by competent professionals, CL IA recruits and employs suitably qualified professional staff with the requisite skill set and experience. CL IA identifies and provides training and development opportunities for its staff to ensure their technical knowledge and skill set remain current and relevant. (D) SHAREHOLDER RIGHTS AND RESPONSIBILITIES Shareholder Rights Principle 14: Companies should treat all shareholders fairly and equitably, and should recognise, protect and facilitate the exercise of shareholders’ rights, and continually review and update such governance arrangements. The Manager is committed to treating all Unitholders fairly and equitably and keeping all Unitholders, other stakeholders and analysts informed of the performance and changes in CRCT or its business which would be likely to materially affect the price or value of Units, on a timely and consistent basis, so as to assist Unitholders and investors in their investment decisions. The Manager provides accurate and timely disclosure of material information on the SGXNet. All Unitholders are entitled to attend general meetings and are accorded the opportunity to participate effectively and vote at general meetings. All Unitholders are also informed of the rules, including voting procedures, governing such meetings. Communication with Shareholders Principle 15: Companies should actively engage their shareholders and put in place an investor relations policy to promote regular, effective and fair communication with shareholders. The Manager has in place the Investor Relations and Corporate Communications team which facilitates effective communication with Unitholders, analysts, fund managers and the media. The Manager actively engages with Unitholders and has put in place a Unitholders’ Communication and Investor Relations Policy (Policy) to promote regular, effective and fair communication with Unitholders. The Policy is uploaded on CRCT’s website at www.capitaretailchina.com. The Board has established the CDC which assists the Board in the discharge of its function to meet the legal and regulatory obligations arising under the laws and regulations of Singapore relating to and to conform to best practices in the corporate disclosure and compliance process. More information on the Manager’s investor and media relations with Unitholders can be found in the Investor & Media Relations section on pages 59 to 60 of the Annual Report and the Policy which is available on CRCT’s website. CRCT’s distribution policy is to distribute at least 90.0% of its distributable income (other than gains from the sale of properties by CRCT which are determined to be trading gains), with the actual level of distribution to be determined at the Manager’s discretion. 38 | CapitaRetail China Trust Annual Report 2014 Conduct of Shareholder Meetings Principle 16: Companies should encourage greater shareholder participation at general meetings of shareholders, and allow shareholders the opportunity to communicate their views on various matters affecting the company. The Manager supports the principle of encouraging Unitholders’ participation and voting at general meetings. Unitholders receive a CD containing the CRCT Annual Report (printed copies are available upon request) and notice of the annual general meeting. As and when an extraordinary general meeting is to be held, Unitholders will receive a copy of the circular which contains details of the matters to be proposed for Unitholders’ consideration and approval. Notices of the general meetings are also advertised in the press and issued via SGXNet. At general meetings, Unitholders are encouraged to communicate their views on and discuss with the Board and the Manager matters affecting CRCT. Representatives of the Trustee, Directors (including the respective Chairpersons of the Board and the AC), the Manager’s senior management and the external auditors, would usually be present at general meetings. To safeguard Unitholders’ interests and rights, a separate resolution is proposed for each substantially separate issue at general meetings. To ensure transparency in the voting process and better reflect Unitholders’ interest, the Manager conducts poll voting for Unitholders/proxies present at the meeting for all the resolutions proposed at the general meetings. The total number of votes cast for or against the resolutions and the respective percentages are announced after the general meetings via SGXNet. Minutes of the general meetings are taken and are available to Unitholders for their inspection upon request. Unitholders also have the opportunity to communicate their views and discuss with the Board and Manager matters affecting CRCT after the general meetings. (E) ADDITIONAL INFORMATION Executive Committee Apart from the AC and CDC, the Board has also established an EC. The EC oversees the day-to-day activities of the Manager and that of CRCT, on behalf of the Board. The EC is guided by its terms of reference, in particular, the EC: (a) reviews, endorses and recommends to the Board strategic directions and management policies of the Manager in respect of CRCT; (b) oversees operational, investment and divestment matters within its approved financial limits; and (c) reviews management reports and operating budgets. The members of the EC meet informally during the course of the year. Dealings with Interested Persons Review Procedures for Interested Person Transactions The Manager has established internal control procedures to ensure that all Interested Person Transactions are undertaken on an arm’s length basis and on normal commercial terms, which are generally no more favourable than those extended to unrelated third parties, and are not prejudicial to the interests of CRCT and Unitholders. In respect of such transactions, the Manager would have to demonstrate to the AC that such transactions are undertaken on normal commercial terms and are not prejudicial to the interests of CRCT and Unitholders which may include obtaining (where practicable) third party quotations or obtaining valuations from independent valuers (in accordance Delivering Performance | 39 Corporate Governance with applicable provisions of the Listing Manual and the Property Funds Appendix). The internal control procedures also ensure compliance with Chapter 9 of the Listing Manual and the Property Funds Appendix. In particular, the following procedures are in place: Interested Person Transactions 1 Approving Authority, Procedures and Disclosure Below S$100,000 per transaction • Trustee S$100,000 and above per transaction (which singly, or when aggregated with other transactions 2 with the same Interested Person in the same financial year is less than 3.0% of CRCT’s latest audited net tangible assets/net asset value) • • Trustee Audit Committee Transaction 2 which: (a) is equal to or exceeds 3.0% of CRCT’s latest audited net tangible assets/net asset value; or (b) when aggregated with other transactions 2 with the same Interested Person in the same financial year is equal to or exceeds 3.0% of CRCT’s latest audited net tangible assets/net asset value • • • Trustee Audit Committee Immediate announcement Transaction 2 which: (a) is equal to or exceeds 5.0% of CRCT’s latest audited net tangible assets/net asset value; or (b) when aggregated with other transactions 2 with the same Interested Person in the same financial year is equal to or exceeds 5.0% of CRCT’s latest audited net tangible assets/net asset value • • • • Trustee Audit Committee Unitholders Immediate announcement 1 Excluding interested person transactions falling under the exceptions set out in Rules 915 and 916 of the Listing Manual. 2 Any transaction of less than S$100,000 in value is disregarded. Role of the Audit Committee for Interested Person Transactions The Manager’s internal control procedures are intended to ensure that Interested Person Transactions are conducted at arm’s length and on normal commercial terms, and are not prejudicial to CRCT and Unitholders’ interests. The Manager maintains a register to record all Interested Person Transactions which are entered into by CRCT (and the basis on which they are entered into, including the quotations obtained to support such basis). All Interested Person Transactions are subject to regular periodic reviews by the AC, which in turn obtains advice from CL IA, to ascertain that the guidelines and procedures established to monitor Interested Person Transactions, including the relevant provisions of the Listing Manual and the Property Funds Appendix, as well as any other guidelines which may from time to time be prescribed by the SGX-ST, the MAS or other relevant authorities, have been complied with. The review includes an examination of the nature of the transaction and its supporting documents or such other information deemed necessary by the AC. If a member of the AC has an interest in a transaction, he is to abstain from participating in the review and approval process in relation to that transaction. In addition, the Trustee also reviews such audit reports to ascertain that the Listing Manual and the Property Funds Appendix have been complied with. Details of all Interested Person Transactions (equal to or exceeding S$100,000 each in value) entered into by CRCT during FY 2014 are disclosed on page 147 of the Annual Report. 40 | CapitaRetail China Trust Annual Report 2014 Dealing with Conflicts of Interest The following principles and procedures have been established to deal with potential conflicts of interest which the Manager (including its Directors, executive officers and employees) may encounter in managing CRCT: (a) the Manager is a dedicated manager to CRCT and will not manage any other REIT or be involved in any other real property business; (b) all resolutions at meetings of the Board in relation to matters concerning CRCT must be decided by a majority vote of the Directors, including at least one non-executive independent Director; (c) in respect of matters in which CL and/or its subsidiaries have an interest, whether direct or indirect, any nominees appointed by CL and/or its subsidiaries to the Board will abstain from voting. In such matters, the quorum must comprise a majority of the non-executive independent Directors and shall exclude such nominee Directors of CL and/or its subsidiaries; (d) in respect of matters in which a Director or his associates have an interest, whether direct or indirect, such interested Director will abstain from voting. In such matters, the quorum must comprise a majority of the Directors and shall exclude such interested Director(s); (e) if the Manager is required to decide whether or not to take any action against any person in relation to any breach of any agreement entered into by the Trustee for and on behalf of CRCT with an affiliate of the Manager, the Manager is obliged to consult with a reputable law firm (acceptable to the Trustee) which shall provide legal advice on the matter. If the said law firm is of the opinion that the Trustee, on behalf of CRCT, has a prima facie case against the party allegedly in breach under such agreement, the Manager is obliged to pursue the appropriate remedies under such agreement; and (f) at least one-third of the Board shall comprise non-executive independent Directors. Additionally, the Trustee has been granted rights of first refusal by CapitaMalls China Income Fund, CapitaMalls China Income Fund II, CapitaMalls China Income Fund III, CapitaMalls China Development Fund III and CMA over any proposed sale or certain proposed acquisitions (as the case may be) of shares or equity interests in properties by CapitaMalls China Income Fund, CapitaMalls China Income Fund II, CapitaMalls China Income Fund III, CapitaMalls China Development Fund III and CMA in China. In respect of voting rights where the Manager would face a conflict between its own interests and that of Unitholders, the Manager shall cause such voting rights to be exercised according to the discretion of the Trustee. Dealings in Securities The Manager has devised and adopted a securities dealing policy for the Manager’s officers and employees which applies the best practices recommendations in the Listing Manual. To this end, the Manager has issued guidelines to its Directors and employees as well as certain relevant executives of the CL group, which sets out prohibitions against dealings in CRCT’s securities (i) while in possession of material unpublished price sensitive information, (ii) during two weeks before the release of CRCT’s results for the first three quarters, and (iii) during one month before the release of CRCT’s full-year results. The Manager will also not deal in CRCT’s securities during the same period. Under these guidelines, all Directors and employees of the Manager as well as certain relevant executives of the CL group are directed to refrain from dealing in CRCT’s securities on short-term considerations. They are also regularly reminded of laws against insider trading. Delivering Performance | 41 Corporate Governance (F) CODE OF BUSINESS CONDUCT The Manager adheres to an ethics and code of business conduct policy which deals with issues such as confidentiality, conduct and work discipline, corporate gifts and concessionary offers. Clear policies and guidelines on how to handle workplace harassment and grievances are also in place. The policies and guidelines are published on CL’s intranet which is accessible by all employees of the Manager. The policies that the Manager has implemented aim to help to detect and prevent occupational fraud in mainly three ways. First, the Manager offers fair compensation packages, based on practices of pay-for-performance and promotion based on merit to its employees. The Manager also provides various healthcare subsidies and financial assistance schemes to alleviate the common financial pressures its employees face. Second, clearly documented policies and work procedures incorporate internal controls which ensure that adequate checks and balances are in place. Periodic audits are also conducted to evaluate the efficacy of these internal controls. Finally, the Manager seeks to build and maintain the right organisational culture through its core values, educating its employees on good business conduct and ethical values. Bribery and Corruption Prevention Policy The Manager adopts a strong stance against bribery and corruption. In addition to clear guidelines and procedures for the giving and receipt of corporate gifts and concessionary offers, all employees of the Manager are required to make a declaration on an annual basis where they pledge to uphold the Manager’s core values and not to engage in any corrupt or unethical practices. This serves as a reminder to all employees to maintain the highest standards of integrity in their work and business dealings. The Manager’s zero tolerance policy towards bribery and corruption extends to its business dealings with third parties. Pursuant to such policy, the Manager requires that certain agreements incorporate anti-bribery and anti-corruption provisions. Whistle-Blowing Policy A whistle-blowing policy and other procedures are put in place to provide employees of the Manager and parties who have dealings with the Manager with well defined, accessible and trusted channels to report suspected fraud, corruption, dishonest practices or other improprieties in the workplace, and for the independent investigation of any reported incidents and appropriate follow up action. The objective of the whistle-blowing policy is to encourage the reporting of such matters – that employees or external parties making any reports in good faith will be able to do so with the confidence that they will be treated fairly, and to the extent possible, be protected from reprisal. Anti-Money Laundering and Countering the Financing of Terrorism Measures As a holder of a Capital Markets Services licence issued by the MAS, the Manager abides by the MAS’ guidelines on the prevention of money laundering and countering the financing of terrorism. Under these guidelines, the main obligations of the Manager are: (a) customer due diligence; (b) suspicious transaction reporting; 42 | CapitaRetail China Trust Annual Report 2014 (c) record keeping; (d) employee screening; and (e) staff training. The Manager has developed and implemented a policy on the prevention of money laundering and terrorist financing and is alert at all times to suspicious transactions. Where there is a suspicion of money laundering or terrorist financing, the Manager performs due diligence checks on its counterparties in order to ensure that it does not enter into business transactions with terrorist suspects or other high risk persons or entities. Suspicious transactions are also reported to the Suspicious Transaction Reporting Office of the Commercial Affairs Department. Under this policy, the Manager must retain all relevant records or documents relating to business relations with its customers or transactions entered into for a period of at least five years following the termination of such business relations or the completion of such transactions. All prospective employees of the Manager are also screened against various lists of terrorist suspects issued by the MAS. Periodic training is provided by the Manager to its Directors and employees to ensure that they are updated and aware of applicable anti-money laundering and terrorist financing regulations, the prevailing techniques and trends in money laundering and terrorist financing and the measures adopted by the Manager to combat money laundering and terrorist financing. Composition and Attendance Record of Meetings of the Board and Board Committees Attendance Record of Meetings in FY 2014 Composition Board Audit Committee Audit Committee Corporate Disclosure Committee Executive Committee Number of Meetings Held: 4 Number of Meetings Held: 4 Liew Cheng San Victor – Chairman – 4 out of 4 N.A Lim Ming Yan – Member Chairman 3 out of 4 N.A. Chairperson – – 1 out of 1 1 out of 1 Fong Heng Boo 2 Chairman – – 4 out of 4 4 out of 4 Christopher Gee Kok Aun 3 Member – – 3 out of 4 3 out of 4 Ng Kok Siong Member Member Member 4 out of 4 4 out of 4 Professor Tan Kong Yam4 Member – – N.A. N.A. – – Member 4 out of 4 N.A. Board Members Chew Gek Khim 1 Tony Tan Tee Hieong N.A.: – Not Applicable. 1 2 3 4 Chew Gek Khim resigned as a non-executive independent Director and ceased to be Chairperson of the Audit Committee with effect from 5 February 2014. Fong Heng Boo was appointed as Chairman of the Audit Committee with effect from 5 February 2014. Christopher Gee Kok Aun was appointed as a non-executive independent Director and a member of the Audit Committee with effect from 24 January 2014. Professor Tan Kong Yam was appointed as a non-executive independent Director and a member of the Audit Committee with effect from 31 October 2014. Delivering Performance | 43 Enterprise Risk Management Risk management is an integral part of CRCT Group’s business at both the strategic and operational level. A proactive approach towards risk management supports the attainment of CRCT Group’s business objective and corporate strategy, thereby creating and preserving value. The Manager of CRCT Group (Manager) recognises that risk management is about opportunities as much as it is about threats. To capitalise on opportunities, the Manager has to take risks. Therefore, risk management is not about pursuing risk minimisation as a goal but rather optimising the risk-reward relationship, within known and agreed risk appetite levels. The Manager therefore takes risks in a prudent manner for justifiable business reasons. The Board of Directors of the Manager (Board) is responsible for the governance of risk across CRCT Group. The responsibilities include determining CRCT Group’s risk appetite, overseeing CRCT Group’s Enterprise Risk Management (ERM) Framework, regularly reviewing CRCT Group’s risk profile, material risks and mitigation strategies, and ensuring the effectiveness of risk management policies and procedures. For these purposes, it is assisted by the Audit Committee (AC) which provides dedicated oversight of risk management at the Board level. The AC comprises four independent board members and meets on a quarterly basis. The meetings are regularly attended by the CEO as well as key management staff. The Board has approved CRCT Group’s risk appetite which determines the nature and extent of material risks which CRCT Group is willing to take to achieve its strategic objectives. CRCT Group’s Risk Appetite (RAS) is expressed via formal high level and overarching statements. Having considered key stakeholders’ interests, the RAS sets out explicit, forward-looking views of the CRCT Group’s desired risk profile and is aligned to CRCT Group’s strategy and business plans. ENTERPRISE RISK MANAGEMENT FRAMEWORK ERM Framework Risk Strategy Risk Identification & Assessment • Risk Appetite • Risk & Control Self-Assessment • Investment Risk Evaluation • Scenario Analysis • Whistle-blowing/ Business Malpractice Risk Monitoring • Key Risk Indicators & Reporting Risk Response • Accept • Avoid • Mitigate • Transfer Independent Review & Audit Internal Control System Board Oversight & Senior Management Involvement Risk-Aware Culture CRCT Group’s ERM Framework sets out the required environmental and organisational components which enable CRCT Group to manage risks in an integrated, systematic and consistent manner. The ERM Framework and related risk management policies are reviewed annually and are periodically validated by external ERM consultants. 44 | CapitaRetail China Trust Annual Report 2014 A robust internal control system and an effective, independent review and audit process are the twin pillars that underpin CRCT Group’s ERM Framework. While the line management is responsible for the design and implementation of effective internal controls using a risk-based approach, the outsourced Internal Audit team reviews such design and implementation to provide reasonable assurance to the AC on the adequacy and effectiveness of the internal control system. Annually, the Manager facilitates and coordinates CRCT’s Group-wide Risk and Control SelfAssessment (RCSA) exercise that requires respective risk and control owners to proactively identify, assess and document material risks as well as the corresponding key controls and mitigating measures needed to address them. Material risks and their associated controls are consolidated and reviewed by the Manager before they are presented to the AC and the Board. Awareness of and preparedness for potential risks affecting CRCT Group’s business continuity helps the Manager to minimise the impact of disruption to its business operations. CRCT Group has in place a business continuity plan. In addition, the outsourced Information Techolology (IT) team has also put in place a disaster recovery strategy, which is reviewed and tested on an annual basis. The Manager believes that having the right risk culture and people with the right attitude, values and knowledge are fundamental to CRCT Group’s success. Therefore, the Manager works closely with CapitaLand’s Risk Assessment Group to proactively enhance risk management knowledge within CRCT Group and promote a culture of risk awareness. MANAGING MATERIAL RISKS The Manager undertakes an iterative and comprehensive approach to identifying, managing, monitoring and reporting of material risks across CRCT Group. Such material risks include: ACTS OF GOD AND PANDEMIC Natural disasters, catastrophes and pandemic events are beyond CRCT Group’s control. Such events may significantly damage our properties or disrupt our operations and reduce shopper traffic. This could lead to loss of income for our tenants and possibly defaults on lease payments, resulting in adverse effect on our business and financial conditions. The Manager manages such risks through established crisis management standard operating procedures at each property. COMPETITION RISK CRCT Group faces keen competition from established players and new market entrants in the property industry. It adopts a relentless approach towards strengthening its competitiveness through high-quality products and services, product differentiation, pricing, asset enhancement initiatives and branding. CRCT Group also promotes shopper loyalty through shopper-centric initiatives and shopper loyalty programmes. ECONOMIC RISK CRCT Group is exposed to economic, financial and property markets developments in major cities in China. These developments may reduce revenue, increase costs and result in downward revaluation of our assets. Market illiquidity during a financial crisis makes asset divestment challenging and this can affect CRCT Group’s investment, financial and strategic objectives. The Manager manages this by adopting a disciplined approach towards financial management and having a balanced portfolio. FOREIGN EXCHANGE RISK CRCT Group is exposed to Chinese Renminbi (RMB) flutuation against Singapore Dollar which is the distribution pay out currency. Where possible, CRCT Group adopts a natural hedging by borrowing in RMB which matches the revenue stream generated from its investments. Non-RMB denominated Delivering Performance | 45 Enterprise Risk Management term loans are hedged via non-deliverable forwards so as to match its underlying assets which are denominated in RMB. In relation to CRCT Group’s overseas investments in foreign subsidiaries whose net assets are exposed to currency translation risk and are held for long term investment purposes, the differences arising from such translation are captured under foreign currency translation reserve which are reviewed and monitored on a regular basis. INFORMATION TECHNOLOGY RISK The outsourced IT team has put in place policies and procedures to manage IT risks. These policies and procedures govern IT security, vendor selection, access controls and data security. Disaster recovery testing is conducted regularly to validate the system continuity plan that is put in place. In addition, network penetration testing is also conducted regularly to check for potential security gaps. INTEREST RATE RISK Some of CRCT Group’s existing debt carry floating interest rates, and consequently, the interest cost to CRCT Group for such loans will be subjected to fluctuations in interest rates. As part of CRCT Group’s active capital management strategy, the Manager enters into hedging transactions to partially mitigate the risk of such interest rate fluctuations through the use of interest rate swaps and/or fixed rate borrowings. The exposure to interest rate risk is further managed through regular reviews with senior management on the optimal mix of fixed and floating rate borrowings. In addition, debt portfolio is reviewed on an on-going basis, taking into account the investment holding period and nature of the assets. LIQUIDITY RISK The Manager actively monitors CRCT Group’s debt maturity profile, operating cash flow and the availability of funding so as to ensure sufficient funds are available to meet its capital, refinancing and operating needs. To manage liquidity risk, CRCT Group seeks to maintain adequate levels of liquid resources to cover its working capital obligations. Moreover, CRCT Group has access to debt capital market through its Medium Term Note (MTN) Programme to raise funds for acquisition, development and/or refinance maturing debt. CRCT Group’s ability to raise funds from both banks and debt capital markets has enabled it to diversify it sources of funding to avoid over-reliance on any single source of funding. POLITICAL AND POLICY RISK CRCT Group’s properties and investments are mainly in China, where it could be exposed to political and policy risks such as political leadership uncertainty, inconsistency in public policies, social unrest, etc. Such risks could result in the deterioration of the economic or social conditions and affect the financial viability of CRCT Group’s investments or even the control of assets. To mitigate these risks, overseas operations are managed by experienced management teams supported by local teams who are familiar with the local conditions and culture. 46 | CapitaRetail China Trust Annual Report 2014 Operations Review Committed Occupancy Rates As at 31 December 2014 1 % As at 31 December 2013 1 % 97.0 99.3 99.7 73.9 2 96.1 100.0 73.9 4 100.0 100.0 100.0 95.9 98.3 99.0 95.9 N.A. 3 97.1 99.9 90.9 100.0 100.0 100.0 98.2 CapitaMall Xizhimen CapitaMall Wangjing CapitaMall Grand Canyon CapitaMall Minzhongleyuan CapitaMall Qibao CapitaMall Saihan CapitaMall Wuhu CapitaMall Anzhen CapitaMall Shuangjing CapitaMall Erqi CRCT Portfolio N.A.: 1 2 3 4 Not Applicable Based on committed leases. Impacted by road closure to facilitate the construction of a new subway line. CapitaMall Minzhongleyuan is excluded as the mall was closed temporarily from 1 July 2013 to 30 April 2014 to carry out asset enhancement initiative. Tenancy adjustment to differentiate market positioning from competing malls. Shopper Traffic 1 CapitaMall Xizhimen CapitaMall Wangjing CapitaMall Grand Canyon CapitaMall Minzhongleyuan CapitaMall Qibao CapitaMall Saihan CapitaMall Wuhu CRCT Portfolio 2014 Million 2013 Million 36.9 10.4 9.5 4.1 3 13.2 8.9 6.8 89.8 34.9 10.6 N.A. 2 N.A. 2 11.5 8.4 7.9 73.3 N.A.: Not Applicable 1 CapitaMall Anzhen, CapitaMall Shuangjing and CapitaMall Erqi do not have traffic counters. 2 CapitaMall Grand Canyon is excluded as its acquisition was completed on 30 December 2013. CapitaMall Minzhongleyuan is excluded as the mall was closed temporarily from 1 July 2013 to 30 April 2014. 3 Shopper traffic for CapitaMall Minzhongleyuan is from 1 May 2014 to 31 December 2014 as the mall reopened on 1 May 2014 after completion of asset enhancement initiative. Portfolio Tenants’ Sales (RMB per square metre) 1 1,846 1,541 1,516 1,327 1Q 1,629 1,403 1,356 2Q 1,403 3Q 2013 1 1,630 1,522 4Q Ful l Year 2014 Based on tenants’ sales (excluding Department Stores and Supermarkets) from CapitaMall Xizhimen, CapitaMall Wangjing, CapitaMall Qibao, CapitaMall Saihan and CapitaMall Wuhu. Prior year’s numbers have been restated for comparative purposes. Delivering Performance | 47 Operations Review Lease Expiry Profile CapitaMall Anzhen, CapitaMall Erqi and the majority of the Gross Rentable Area (GRA) of CapitaMall Shuangjing are let out under master-leases. The master-leases are long-term with a typical tenure of 20 years which help to ensure stable cash flows. For tenants which are not under master-leases, the typical lease term is 15 to 20 years for anchor tenants, five to seven years for mini-anchor tenants and up to three years for specialty tenants. New Leases and Renewals Number of New Leases/Renewals in FY 2014 1 Variance Over Preceding Rental 2,3 % 125 134 96 88 147 60 650 15.6 29.8 43.1 10.9 20.7 1.2 23.1 CapitaMall Xizhimen CapitaMall Wangjing CapitaMall Grand Canyon CapitaMall Qibao CapitaMall Saihan CapitaMall Wuhu CRCT Portfolio 4 1 2 3 4 Excludes new leases at newly created lettable area, short-term renewals (< 1 year), units vacant for >= 1 year and pre-terminated leases. Excludes turnover rent component. Majority of leases have rental escalation clauses. Excludes CapitaMall Minzhongleyuan as the mall was closed temporarily from 1 July 2013 to 30 April 2014 for asset enhancement initiative. Weighted Average Lease Expiry by Mall (As at 31 December 2014) Weighted Expiry (by Total Rental Income) Years Weighted Expiry (By Net Lettable Area (NLA)) Years CapitaMall Xizhimen 5.4 2.8 CapitaMall Wangjing 7.5 3.5 CapitaMall Grand Canyon 8.5 4.6 CapitaMall Minzhongleyuan 1.5 1.4 CapitaMall Qibao 4.5 2.9 CapitaMall Saihan 6.6 3.3 CapitaMall Wuhu 4.2 2.8 CapitaMall Anzhen 10.6 10.6 CapitaMall Erqi 11.9 11.9 CapitaMall Shuangjing 9.0 8.5 CRCT Portfolio 9.0 6.7 48 | CapitaRetail China Trust Annual Report 2014 Lease Expiry Profile for 2015 By Mall (As at 31 December 2014) Total Rental Income/month % of RMB’000 Total 3 NLA CapitaMall CapitaMall CapitaMall CapitaMall CapitaMall CapitaMall CapitaMall 1 2 3 Xizhimen Wangjing Grand Canyon Minzhongleyuan Qibao Saihan Wuhu No. of leases 1 sq m % of Total 2 82 99 112 168 53 112 62 9,778 6,243 6,080 7,891 7,459 8,014 3,209 19.3% 11.5% 13.5% 34.3% 14.6% 26.1% 8.6% 6,180 4,018 3,411 2,794 1,475 2,043 744 28.9% 23.7% 30.0% 60.2% 18.7% 46.2% 38.2% Based on all committed leases as at 31 December 2014. As percentage of each mall’s total NLA as at 31 December 2014. As percentage of each mall’s total rental income for the month of December 2014. Portfolio Lease Expiry Profile (As at 31 December 2014) 66.9 35.4 24.3 19.5 11.8 10.2 7.5 2015 2016 % of Total NLA for the month of December 2014 9.0 5.9 5 4 .8 20 1 7 2 01 8 Beyond 2 0 1 8 % of Total Rental Income for the month of December 2014 Delivering Performance | 49 Operations Review Turnover Rent CRCT’s favourable lease structure helps to provide Unitholders with a stable and growing rental cash flow. Most of the leases for the anchors, mini-anchors and specialty tenants have an annual step-up in the base rent. In addition, most of the leases also contain provisions for rent to be payable at the applicable base rent or at a percentage of sales turnover, whichever is higher. The combination of direct point-of-sales systems, system link-up with tenants’ point-of-sales and central cashier systems at our malls allows us to keep track of tenants’ sales. The long-term master leases at CapitaMall Anzhen, CapitaMall Erqi and CapitaMall Shuangjing contain provisions for upside in rental through step-ups in the base rent. In addition, the master leases at CapitaMall Anzhen and CapitaMall Erqi provide further potential upside through a percentage of tenants’ sales turnover if the turnover exceeds an agreed threshold. Committed Leases with Turnover Rent Provisions by Total Rental Income (%) (As at 31 December 2014) Committed Leases with Turnover Rent Provisions by NLA (%) (As at 31 December 2014) Committed Leases with Turnover Rent Provisions 85.1% Committed Leases with Turnover Rent Provisions 72.0% Committed Leases without Turnover Rent Provisions 14.9% Committed Leases without Turnover Rent Provisions 28.0% Trade Sector Analysis by Total Rental Income (%) (As at 31 December 2014) Fashion & Accessories Food & Beverage Department Store Supermarket Beauty & Healthcare Shoes & Bags Houseware & Furnishings Leisure & Entertainment Education Others Trade Sector Analysis by Committed NLA (%) (As at 31 December 2014) 28.4 21.8 14.6 9.4 7.7 3.4 2.8 2.6 2.4 6.9 50 | CapitaRetail China Trust Annual Report 2014 Fashion & Accessories Food & Beverage Department Store Supermarket Beauty & Healthcare Shoes & Bags Houseware & Furnishings Leisure & Entertainment Education Others 11.9 12.3 29.5 28.0 3.6 1.1 4.3 1.8 4.4 3.1 The portfolio’s biggest tenant is Beijing Hualian Group (BHG) which operates the master-leased Beijing Hualian Department Stores at CapitaMall Anzhen and CapitaMall Erqi. It is also the anchor tenant at CapitaMall Xizhimen, CapitaMall Wangjing and CapitaMall Saihan. TOP 10 TENANTS (Based on percentage of Total Rental Income in the month of December 2014 1) % % Total NLA committed Rental sq m NLA Income 1 Trade Category Lease Expiry 2 Sep/2015 185,182 Dec/2018 Sep/2020 Jul/2025 Nov/2026 Sep/2028 Jun/2029 40.4% 18.4% Tenant Brand Names BHG(北京)百貨有 限公司 Beijing Hualian Department Store Beijing Hualian Supermarket Costa Coffee Department Store 上海聯家超市有限 公司3 北京家樂福商業有 限公司3 Carrefour Supermarket Jan/2024 Mar/2024 Dec/2030 60,077 13.1% 4.4% 綾致時裝(天津)有限 公司3 金林德伯格(天津)有 限公司3 Only Jack & Jones Vero Moda Selected J.Lindeberg Fashion & Accessories May/2015 Sep/2015 Oct/2015 Nov/2015 Dec/2015 Jan/2016 Mar/2016 Apr/2016 Apr/2017 Jun/2017 5,410 1.2% 3.7% 迅銷(中國)商貿有限 公司 優衣庫商貿有限公 司 UNIQLO Fashion & Accessories Apr/2016 Nov/2018 Aug/2020 4,520 1.0% 2.0% 北京百安居裝飾建 材有限公司 B&Q Houseware & Furnishings Apr/2024 17,429 3.8% 1.4% 北京為之味餐飲有 限公司3 北京為之味餐飲有 限公司第三分公 3 司 富迪康(北京)餐飲管 理有限公司3 夾揀成廚麻辣 燙 姑姑宴 川成元麻辣香 鍋 金湯玉線 港仔驛棧 Food & Beverage May/2016 Sep/2016 Nov/2016 Apr/2017 Mar/2018 Sep/2018 Nov/2018 1,894 0.4% 1.3% 北京華聯呼和浩特 金宇綜合超市有 限公司 北京華聯綜合超市 股份有限公司 華聯咖世家(北京)餐 飲管理有限公司 Supermarket Food & Beverage Delivering Performance | 51 Operations Review 1 2 3 Lease Expiry 2 % % Total NLA committed Rental sq m NLA Income 1 Tenant Brand Names Trade Category 北京必勝客比薩餅 有限公司3 北京肯德基有限公 3 司 天津肯德基有限公 3 司 上海肯德基有限公 3 司 銅陵金壇餐飲有限 公司3 KFC Pizza Hut Food & Beverage Jul/2016 Apr/2017 May/2017 Sep/2017 Sep/2018 Dec/2021 Apr/2022 2,795 0.6% 1.0% 北京拉夏樂微服飾 有限公司 拉夏貝爾服飾(太倉) 有限公司 上海拉夏貝爾服飾 股份有限公司 上海樂歐服飾有限 公司 La Chapelle Candie’s Fashion & Accessories Sep/2015 Mar/2016 Dec/2017 Feb/2018 3,001 0.7% 1.0% 北京聯郡餐飲管理 有限公司 北京聯郡餐飲管理 有限公司第三分 公司 南京大牌檔 Food & Beverage Feb/2023 Jun/2024 Oct/2024 3,043 0.7% 0.8% 蓋璞(北京)商業有限 公司 GAP Fashion & Accessories Sep/2018 Apr/2021 2,153 0.5% 0.8% Includes CapitaMall Minzhongleyuan and CapitaMall Grand Canyon. Some of the tenants have signed more than one tenancy agreement and this has resulted in more than one lease expiry date for such tenants. Under the same group of companies respectively. 52 | CapitaRetail China Trust Annual Report 2014 Financial Review In RMB terms, FY 2014 gross revenue for the portfolio was RMB987.6 million, an increase of 24.2% over FY 2013. The was mainly due to the new contribution of RMB138.1 million from CapitaMall Grand Canyon, which was acquired on 30 December 2013. The remaining increase of RMB54.4 million was contributed by other malls due to higher rental growth and higher tenants’ sales, except for CapitaMall Wuhu where tenancy adjustment is currently being carried out. Gross revenue in SGD terms for FY 2014 increased by $43.2 million, 27.0% over FY 2013. Gross Revenue By Property Multi-Tenanted Malls CapitaMall Xizhimen CapitaMall Wangjing CapitaMall Grand Canyon CapitaMall Minzhongleyuan3 CapitaMall Qibao CapitaMall Saihan CapitaMall Wuhu Master-Leased Malls CapitaMall Anzhen CapitaMall Erqi CapitaMall Shuangjing Total FY 2014 1 S$’000 FY 2013 2 S$’000 % Change FY 20141 RMB’000 FY 2013 2 RMB’000 % Change 53,978 41,100 28,430 5,150 19,821 11,456 6,802 166,737 48,596 36,871 – 4,578 17,813 9,962 7,043 124,863 11.1 11.5 N.M. 12.5 11.3 15.0 (3.4) 33.5 262,259 199,691 138,129 25,020 96,301 55,663 33,049 810,112 241,352 183,118 – 22,738 88,468 49,474 34,978 620,128 8.7 9.1 N.M. 10.0 8.9 12.5 (5.5) 30.6 16,794 10,385 9,346 36,525 203,262 16,262 10,084 8,866 35,212 160,075 3.3 3.0 5.4 3.7 27.0 81,596 50,459 45,407 177,462 987,574 80,766 50,082 44,033 174,881 795,009 1.0 0.8 3.1 1.5 24.2 FY 2014 1 (%) FY 2013 2 (%) 26.6 20.2 14.0 2.5 9.8 5.6 3.3 30.4 23.0 – 2.9 11.1 6.2 4.4 8.3 5.1 4.6 10.2 6.3 5.5 Gross Revenue Contribution By Property Multi-Tenanted Malls CapitaMall Xizhimen CapitaMall Wangjing CapitaMall Grand Canyon CapitaMall Minzhongleyuan 3 CapitaMall Qibao CapitaMall Saihan CapitaMall Wuhu Master-Leased Malls CapitaMall Anzhen CapitaMall Erqi CapitaMall Shuangjing 1 2 3 The financial year from 1 January 2014 to 31 December 2014. The financial year from 1 January 2013 to 31 December 2013. CapitaMall Minzhongleyuan’s gross revenue was impacted by the road closure to facilitate the construction of a new subway line. N.M. – Not Meaningful Delivering Performance | 53 Financial Review In RMB terms, NPI for FY 2014 increased by RMB131.4 million, or 25.7% over FY 2013. This was mainly due to the new contribution of RMB86.6 million from CapitaMall Grand Canyon which was acquired on 30 December 2013. FY 2014 recorded higher NPI for all malls except CapitaMall Minzhongleyuan and CapitaMall Wuhu. Multi-tenanted malls that registered strong double digit growth in NPI included CapitaMall Saihan, CapitaMall Qibao, CapitaMall Xizhimen and CapitaMall Wangjing. The master-leased malls – CapitaMall Anzhen, CapitaMall Erqi and CapitaMall Shuangjing – also showed stable year-on-year growth. NPI By Property FY 2014 1 S$’000 FY 2013 2 S$’000 % Change FY 2014 1 RMB’000 FY 2013 2 RMB’000 % Change CapitaMall Xizhimen 37,988 32,649 16.4 184,571 162,153 13.8 CapitaMall Wangjing 29,557 26,007 13.7 143,607 129,164 11.2 17,815 – N.M. 86,555 – N.M. 271 675 (59.9) 1,313 3,353 (60.8) CapitaMall Qibao 8,543 7,270 17.5 41,506 36,102 15.0 CapitaMall Saihan 6,155 5,171 19.0 29,909 25,681 16.5 CapitaMall Wuhu 2,394 2,911 (17.8) 11,630 14,458 (19.6) 102,723 74,683 37.5 499,091 370,911 34.6 13,777 13,319 3.4 66,936 66,149 1.2 CapitaMall Erqi 8,336 7,963 4.7 40,504 39,549 2.4 CapitaMall Shuangjing 7,529 7,073 6.4 36,579 35,126 4.1 29,642 28,355 4.5 144,019 140,824 2.3 132,365 103,038 28.5 643,110 511,735 25.7 FY 2014 1 (%) FY 20132 (%) CapitaMall Xizhimen 28.6 31.7 CapitaMall Wangjing 22.3 25.2 13.5 – Multi-Tenanted Malls CapitaMall Grand Canyon CapitaMall Minzhongleyuan 3 Master-Leased Malls CapitaMall Anzhen Total NPI Contribution By Property Multi-Tenanted Malls CapitaMall Grand Canyon 3 0.2 0.7 CapitaMall Qibao 6.5 7.1 CapitaMall Saihan 4.7 5.0 CapitaMall Wuhu 1.8 2.8 10.4 12.9 CapitaMall Erqi 6.3 7.7 CapitaMall Shuangjing 5.7 6.9 CapitaMall Minzhongleyuan Master-Leased Malls CapitaMall Anzhen 1 2 3 N.M. The financial year from 1 January 2014 to 31 December 2014. The financial year from 1 January 2013 to 31 December 2013. CapitaMall Minzhongleyuan’s NPI was impacted by the road closure to facilitate the construction of a new subway line. – Not Meaningful 54 | CapitaRetail China Trust Annual Report 2014 Portfolio Valuations And Property Yield Valuation 2014 (in per sq m of GRA) Property Yield Valuation Valuation 20141 2014 2013 Valuation 2014 Valuation 2013 RMB million RMB million RMB % CapitaMall Xizhimen 2,777 2,600 33,428 CapitaMall Wangjing 2,050 1,900 CapitaMall Grand Canyon 1,948 CapitaMall Anzhen S$ million S$ million 6.6 588.4 532.2 30,143 7.0 434.4 388.9 1,882 27,842 4.4 412.8 385.2 973 949 22,397 6.9 206.2 194.3 CapitaMall Erqi 606 590 6,562 6.7 128.4 120.8 CapitaMall Minzhongleyuan 564 504 15,051 N.M 119.5 103.2 CapitaMall Shuangjing 558 543 11,281 6.6 118.2 111.2 CapitaMall Qibao 485 472 6,669 8.6 102.8 96.6 CapitaMall Saihan 400 362 9,538 7.5 84.8 74.1 CapitaMall Wuhu 260 251 5,698 4.5 55.1 51.4 – 2 2,250.6 2,057.9 Total 10,621 10,053 6.4 1 2 Property yield is calculated based on NPI for FY 2014 and the valuation as at 31 December 2014. Excludes CapitaMall Minzhongleyuan’s 2014 yield as the mall was impacted by the road closure to facilitate the construction of a new subway line. N.M. – Not Meaningful S$’000 Investment Properties as at 31 December 2014 Surplus on revaluation for FY 2014 1 2,250,783 1 104,829 The carrying amount of the investment properties includes the valuation of the 10 retail malls and the carrying amount of CapitaMall Minzhongleyuan’s three residential units. Delivering Performance | 55 Capital Management As at 31 December 2014, CRCT maintains the following debt facilities: RMB denominated facility • the RMB495.0 million five-year secured term loan facility S$ denominated facilities • the S$151.0 million money market line facilities • the S$88.0 million three-year trust term loan facility • the S$50.0 million three-year trust term loan facility • the S$50.0 million four-year trust term loan facility • the S$50.5 million four-year trust term loan facility • the S$75.0 million four-year trust term loan facility • the S$50.0 million five-year trust term loan facility • the S$75.0 million five-year trust term loan facility • the S$100.0 million five-year trust term loan facility US$ denominated facility • the US$50.0 million money market line facility Multicurrency Medium Term Notes • the S$500.0 million multicurrency Medium Term Notes (MTN) Programme CRCT has sufficient untapped facilities, which include S$500.0 million from the MTN Programme, and money market line facilities of S$121.5 million and US$50.0 million. Current aggregate leverage for CRCT is at 28.7% (below the Monetary Authority of Singapore’s requirement of 35%) with a total outstanding debt of S$672.9 million. CRCT’s effective capital management includes hedging its currency and interest rate risk exposures. Other than the natural hedge where loans are borrowed in RMB, CRCT also hedges its non-RMB denominated loans. This provides a currency match against CRCT’s assets which are predominantly denominated in RMB. However, CRCT does not hedge the equity largely denominated in RMB as CRCT is of the view that such equity investments are long-term. CRCT will hedge the RMB cash flow from operations if it is determined with certainty the exact timing in which they will be remitted back to Singapore for distribution purposes. As at 31 December 2014, CRCT has hedged its non-RMB loans through non-deliverable forwards (NDF) with a notional amount of S$258.0 million which represented 53.9% (including RMB denominated loans) of total outstanding debts. The fair value derivatives for FY 2014, which was included as financial derivatives in total assets and total liabilities, were S$1.5 million and S$8.6 million respectively. This net amount represented a negative 0.5% of the net assets of CRCT as at 31 December 2014. CRCT successfully refinanced the term loans that matured in November 2014, and kept the overall average cost of debt at 3.32%. 56 | CapitaRetail China Trust Annual Report 2014 Debt maturity each year as a percentage of total outstanding debt as at 31 December 2014 is as follows: Debt Maturity Profile (S$ million) (As at 31 December 2014) S$’million 700.0 600.0 27.4% 500.0 400.0 300.0 200.0 72.6% 5.3 29.5 88.0 100.0 5.3 5.3 89.0 100.0 125.5 50.0 75.0 100.0 0.0 Total Debt1 (S$ million) % of Outstanding Debt Total Debt 672.9 100.0% 2015 122.8 18.3% 2016 105.3 15.6% Variable Rate Fixed Rate Trust - Unsecured Offshore Term Loan2 1 2 3 4 2017 130.8 19.4% 2018 139.0 20.7% 2019 75.0 11.1% 2020 100.0 14.9% Trust-Unsecured Money Market Line3 CapitaMall Grand Canyon - Secured Onshore Term Loan4 Total debt excludes interest and upfront fees. Comprises multiple term loans drawn in Singapore at the Trust level, these include fixed and/or floating term loan facilities. Comprises multiple floating rate money market facilities. Secured onshore term loan comprises a RMB term loan of S$104.9 million (RMB495.0 million). The loan is secured by a legal mortgage over CapitaMall Grand Canyon and bears interest referenced against three to five years People’s Bank of China (“PBOC”) base lending rate. This secured RMB term loan is payable on a semi-annual basis starting six months from the first drawdown date. Outstanding loan will be repaid on final maturity. As at 31 December 2014, 18.3% or S$122.8 million of CRCT’s debt will mature in 2015. To date, the Manager has refinanced S$88.0 million which matured in February 2015. Cash Flows and Liquidity CRCT takes a proactive role in monitoring its cash and liquid reserves to ensure adequate funding is available for distributions to Unitholders as well as to meet any short-term liabilities. Operating Activities Operating net cash flow for FY 2014 was S$111.4 million, an increase of S$42.8 million over the operating cash flow of S$68.6 million in the preceding financial year. This was mainly due to the contribution of operating income from CapitaMall Grand Canyon which was acquired on 30 December 2013. Investing Activities CRCT adheres to stringent criteria when evaluating potential acquisitions. This involves a thorough review of risks and returns, and to overall add value to the existing portfolio and future growth expectations. CRCT will constantly look for new acquisition opportunities. Delivering Performance | 57 Capital Management Financing Activities CRCT continues to adopt a prudent and proactive approach to monitor the cash position and level of borrowings to ensure a healthy cash position to finance its operations. During the year, CRCT has fully repaid two of its onshore loans amounting to S$131.5 million resulting in net cash used in financing activities. CRCT can also tap on the capital and debt markets to facilitate any new acquisitions. Cash and Cash Equivalents As at 31 December 2014, the value of the cash and cash equivalents at CRCT stood at S$86.6 million compared with S$105.5 million as at 31 December 2013. S$26.7 million of cash retained from our distributions on 27 March 2014 and 25 September 2014 through Distribution Reinvestment Plan were used for general corporate and working capital purposes. This is in accordance with the stated use and allocation of the proceeds from the announcements. Key Financial Indicators As at 31 December 2014 Unencumbered Assets to Assets as % of Total Assets (%) Aggregate Leverage (%) 28.7 2 5.5 Net Debt/EBITDA (times) Interest Coverage (times) 3 Average Term to Maturity (Years) Average Cost of Debt (%) 4 1 2 3 4 95.6 1 5.6 2.8 3.32 Aggregate leverage is calculated based on total borrowings and deferred payments over total assets. Total assets include the hedging effects on the net assets denominated in RMB. Net Debt comprises gross debt less transaction costs and EBITDA refers to earnings before interest, tax, depreciation and amortisation excluding change in fair value of financial derivatives, investment properties and unrealised foreign exchange gain or loss. Ratio of net income before change in fair value of financial derivative, investment properties and unrealised foreign exchange gain or loss at CRCT Group over interest expense from FY 2014. Ratio of interest expense over weighted average borrowings. 58 | CapitaRetail China Trust Annual Report 2014 Investor & Media Relations We are committed to provide the investment and media communities with timely, effective, unbiased and transparent information. We maintain a high standard of access through our wide variety of communication channels such as meetings, conference calls, roadshows, conferences and mall visits. Our Unitholders’ Communication and Investor Relations Policy states the guiding principles of our approach, and it is available on our corporate website at http://www.capitaretailchina.com/ir_policy.html. During the year, senior management participated, in roadshows in Hong Kong and Singapore. We held our full-year and half-year financial analysts’ and media results briefings in January and July respectively. CRCT’s results, strategies and outlook were communicated during the briefings. The recordings of the results briefings were posted on our website to keep our stakeholders abreast of the latest developments of the Trust. On 16 April 2014, we held our annual general meeting, which gave us an opportunity to have close interaction with our Unitholders. Our communication efforts have been recognised by the investing community. In July 2014, CRCT was conferred the Bronze award for Best Annual Report under the REITs and Business Trusts category at the Singapore Corporate Awards. Individual and group mall visits are arranged for investors and analysts travelling to the cities in which our malls are located. These visits offer them a first-hand experience of our malls’ operations and a greater appreciation of the long-term growth potential of CRCT. All our latest announcements and news are promptly released to SGX-ST and published on CRCT’s website (www.capitaretailchina.com). Unitholders and potential stakeholders have 24-hour access to CRCT’s website for information such as quarterly results, press releases, annual reports and CRCT’s unit price. An email alert service is also provided so that registered participants can receive email alerts on CRCT’s latest announcements and press releases. In addition, the public can pose questions via a dedicated “Ask Us” email address ([email protected]). INVESTOR RELATIONS & MEDIA CALENDAR 2014 Date Event Organiser 29 Jan FY 2013 results briefing to media and analysts, Singapore CRCT 29 Jan FY 2013 post results briefing, Singapore BAML 18 – 19 Feb Non-deal roadshow, Hong Kong J.P. Morgan 5 – 6 Mar ASEAN Stars Conference 2014 BAML 16 Apr Annual General Meeting CRCT 24 Apr 1Q 2014 post results briefing, Singapore UBS 26 – 27 Jun Asia Pacific Property Conference Citibank 24 Jul 2Q 2014 results briefing to media and analysts, Singapore CRCT 24 Jul 2Q 2014 post results briefing, Singapore DBS 11 Aug CapitaLand Debt Investor Day CapitaLand 24 Oct 3Q 2014 post results briefing, Singapore J.P. Morgan 12 – 13 Nov Thirteenth Annual Asia Pacific Summit Morgan Stanley Delivering Performance | 59 Investor & Media Relations FINANCIAL CALENDAR 2015 – 2016 (TENTATIVE) April 2015 2015 First Quarter Results Announcement Annual General Meeting July 2015 2015 Second Quarter Results Announcement September 2015 2015 First Half Distribution to Unitholders October 2015 2015 Third Quarter Results Announcement January 2016 2015 Full Year Results Announcement March 2016 2015 Second Half Distribution to Unitholders ANALYST COVERAGE (AS AT 26 FEBRUARY 2015) China International Capital Corporation Daiwa Capital Markets DBS Bank J.P. Morgan Securities Macquarie Capital Securities OCBC Investment Research UBS Securities UNITHOLDER & MEDIA ENQUIRIES If you have any enquiries or would like to find out more about CRCT, please contact: The Manager Ms Leng Tong Yan Mr Lim Seng Jin Investor Relations Corporate Communications Tel: (65) 6713 2888 Fax: (65) 6713 2999 Email: [email protected] Website: www.capitaretailchina.com The Unitholder Registrar Boardroom Corporate & Advisory Services Pte. Ltd. 50 Raffles Place #32-01 Singapore Land Tower Singapore 048623 Tel: +65 6536 5355 Fax: +65 6536 1360 Website: www.boardroomlimited.com For depository-related matters such as change of details pertaining to Unitholders’ investment records, please contact: The Central Depository (Pte) Limited 9 North Buona Vista Drive #01-19/20 The Metropolis Singapore 138588 Tel: +65 6535 7511 Fax: +65 6535 0775 Email: [email protected] Website: www.sgx.com/cdp 60 | CapitaRetail China Trust Annual Report 2014 Unit Price Performance CRCT Trading Data in FY 2014 Highest Unit Price (S$) 1.705 Lowest Unit Price (S$) 1.285 Average Closing Unit Price (S$) 1.500 Opening Unit Price on 2 January 2014 (S$) 1.330 Closing Unit Price on 31 December 2014 (S$) 1.615 Turnover (million units) 223.6 CRCT Monthly Trading Performance in FY 2014 1.71 1.32 1.38 1.40 1.48 1.52 1.62 1.48 1.57 1.63 1.60 23.6 23.6 21.6 1.62 22.6 21.5 19.5 17.8 17.6 15.4 14.5 14.8 11.3 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Trading Volume (million units) Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Closing Unit Price as at end of the month (S$) Delivering Performance | 61 Unit Price Performance Comparative Yields (%) (As at 31 December 2014) 6.1 5.6 4.0 3.7 3.3 2.5 2.3 0.3 CRCT Yield1 Singapore 10-year Govt Bond Yield2 China 10-year Govt Bond Yield2 FSSTI Yield3 FSTRE Yield4 FSTREI Yield5 CPF Ordinary Account6 12-month Fixed (S$) Deposit7 Source: Bloomberg, CRCTML, Central Provident Fund (CPF) Board, Monetary Authority of Singapore. 1 2 3 4 5 6 7 Based on distribution per unit of 9.82¢ for FY 2014 and the unit closing price of S$1.615 on 31 December 2014. Singapore Government 10-year and China Government 10-year bond yields as at 31 December 2014. Average 12-month gross dividend yield of Straits Times Index stocks as at 31 December 2014. Average 12-month gross dividend yield of Straits Times Real Estate Index as at 31 December 2014. Average 12-month gross dividend yield of Straits Times REIT Index as at 31 December 2014. Prevailing CPF-Ordinary Account savings rate. Average 12-month S$ fixed deposit savings rate as at December 2014. Change in Unit Price/Index Value (%) 60% 50% 40% 30% 20% 10% 0% -10% Dec 2013 Jan 2014 Feb 2014 Mar 2014 Apr 2014 May 2014 Jun 2014 Jul 2014 Aug 2014 Sep 2014 Oct 2014 Nov 2014 CRCT Shanghai Exchange Composite Index (SHCOMP) FTSE Straits Times REIT Index (FSTREI) FTSE Straits Times Real Estate Index (FSTRE) Straits Times Index (FSSTI) 62 | CapitaRetail China Trust Annual Report 2014 Dec 2014 Corporate Social Responsibility As a committed corporate citizen, we continue to promote charity causes in benefit of the communities served by our shopping malls, and adopt green practices that contribute to sustainable development. SUPPORTING THE COMMUNITY “My Schoolbag”, a key annual CapitaLand corporate social responsibility programme, took place in China for the fifth consecutive year in September 2014, in conjunction with the start of the new academic year. For the second year running, CapitaLand partnered with the China Foundation for Poverty Alleviation (CFPA) to distribute new schoolbags to about 16,000 first grade pupils from over 250 schools, including 22 CapitaLand Hope Schools. The programme also canvassed for public donations for the first time through the collaboration with CFPA. Including pledges from CapitaLand Hope Foundation (CHF), the philanthropic arm of CapitaLand, the amount raised to purchase these schoolbags and stationery totalled RMB1.59 million (S$330,500). The children were also in for a treat with additional bag contents last year – each bag contained over 100 items, including arts and crafts materials and a water bottle, on top of basic stationery. The event involved about 500 volunteers comprising staff, retailers and shoppers. Staff volunteers from CapitaMall Xizhimen, CapitaMall Wangjing and CapitaMall Saihan took part in the programme. Besides My Schoolbag, our malls held community activities in support of various causes throughout the year. CapitaMall Wangjing initiated a winter clothes donation drive for the poor rural regions of West China, a move that drew a warm response from the mall’s surrounding communities. CapitaMall Xizhimen and CapitaMall Grand Canyon organised adoption events for stray cats and dogs, while the latter also held a charity concert to rally shoppers to donate daily necessities to orphans. CapitaMall Wuhu invited 25 underprivileged families to spend Mid-Autumn Festival in the mall. BEING GREEN We remain strongly committed to protecting our environment for future generations, and continue to minimise the environmental footprint of our malls’ operations. A recurring highlight was our participation in the World Wide Fund for Nature’s (WWF) Earth Hour 2014, the global movement to raise awareness of climate change. Our malls showed strong support by turning off façade and non-essential lights throughout the night, beginning at 8.30pm on Saturday, 29 March 2014. Six of our malls – CapitaMall Xizhimen, CapitaMall Wangjing, CapitaMall Grand Canyon, CapitaMall Qibao, CapitaMall Saihan and CapitaMall Wuhu – took part in the event. Beyond Earth Hour, our malls also engaged different stakeholders in activities throughout the year to raise awareness of climate change and the role each of us can play in conserving the environment. CapitaMall Saihan joined hands with the local authorities to increase awareness of environmental protection by involving shoppers in maintaining the cleanliness of the streets and bus stops, while CapitaMall Qibao held a cycling event to promote green transportation. CapitaMall Qibao also houses a rooftop farm that provides children and families with a hands-on approach to learning green values, thus reinforcing the importance of environmentally friendly practices to the future generation. Delivering Performance | 63 People & Talent Management We recognise that our people are our greatest asset and are integral to the success of the organisation. We adopt an integrated human capital strategy to continually develop and grow our people to reach their fullest potential. TALENT MANAGEMENT We actively seek outstanding talents to support our business growth in China. To strengthen the management bench and talent pipeline for leadership succession planning, we recruit talents at different points in their careers, from fresh graduates to young, mid-career professionals and industry veterans. Through our network with various distinguished China and overseas universities, we attract young talents to join our Management Associate Programme and Graduate Development Programme. Our scale allows us to provide a platform for cross-fertilisation of skills and capabilities, where our employees have the opportunity to rotate to different malls, functions, cities or countries within CapitaLand’s portfolio as part of their career development and growth. COMPETITIVE REMUNERATION PACKAGE We provide a comprehensive and competitive remuneration package which includes short-term cash bonuses and long-term equity-based reward plans such as Restricted Share Plan and Performance Share Plan. Such reward plans aim to tie incentive with performance, as well as to retain talent. We conduct regular benchmarking exercises against different markets and are innovative in our compensation strategies to ensure that we remain competitive and continue to attract and retain talent. DEVELOPING OUR PEOPLE We strongly believe that continual learning is a fundamental building block of growth, and ample training opportunities are provided to expand our people’s capabilities and realise their potential. We collaborate with CapitaLand to offer our employees a suite of training and development programmes that will help them gain the relevant knowledge and skills required to achieve business excellence. Apart from classroom training, our employees are encouraged to proactively learn at their own time and pace through our online learning platform iCampus, which contains a library of more than 400 courses in English and Chinese. For new employees, we have in place structured programmes such as the new hire orientation modules on iCampus, where staff can learn company information and policies and processes. This helps to seamlessly integrate and ease new employees into our culture and system. During their first three months of service, they are invited to attend a four-day immersion programme where they can gain deeper insights into our management philosophy, core values, business strategy and operations. The immersion programme also provides an opportunity for new employees to network and interact with colleagues from other malls and functions. To sharpen the leadership, management and business skills of the senior management team, we partner with CapitaLand Institute of Management and Business (CLIMB) to organise and run leadership and management programmes. ENGAGING OUR PEOPLE We believe it is important to engage our employees through regular communication. Staff communication sessions with senior management are held on a regular basis to keep our employees abreast of CRCT’s financial results and strategic business thrusts. In addition, regular recreational, team-building and networking events are organised to foster engagement and cohesiveness. CARING FOR OUR PEOPLE We value and care for our people. We believe our success is shaped by our people and we will continue to develop our human capital to achieve optimal performance. 64 | CapitaRetail China Trust Annual Report 2014 This page has been intentionally left blank. Portfolio Summary CapitaMall Xizhimen 凱德MALL•西直門 CapitaMall Wangjing 凱德MALL•望京 CapitaMall Grand Canyon 凱德MALL•大峽谷 CapitaMall Minzhongleyuan 凱德新民眾樂園 Address No. 1 Xizhimenwai Avenue, Xicheng District, Beijing No. 33 Guangshun North Street, Chaoyang District, Beijing No. 16 South Third Ring West Road, Fengtai District, Beijing GFA (sq m) (As at 31 December 2014) 83,075 83,768 GRA (sq m) (As at 31 December 2014) 83,075 NLA (sq m) (As at 31 December 2014) CapitaMall Shuangjing 凱德MALL•雙井 CapitaMall Qibao 凱德七寶購物廣場 CapitaMall Saihan 凱德MALL•賽罕 CapitaMall Wuhu 凱德廣場•蕪湖 CapitaMall Anzhen CapitaMall Erqi 凱德MALL•安貞 凱德廣場•二七 No. 704 Zhongshan Avenue, Jianghan District, Hankou Wuhan, Hubei Province No. 3655, Qixin Road, Minhang District, Shanghai No. 26 Ordos Street, Saihan District, Huhhot, Inner Mongolia Autonomous Region No. 37 Zhongshan North Road, Jinghu District, Wuhu, Anhui Province Building 4, Zone 5, Anzhenxili, Chaoyang District, Beijing No. 3 Minzhu Road, Erqi District, Zhengzhou, Henan Province No. 31 Guangqu Road, Chaoyang District, Beijing 92,918 41,717 83,986 41,938 59,624 43,443 92,356 49,463 68,010 69,967 37,472 72,729 41,938 45,634 43,443 92,356 49,463 50,592 54,109 44,915 23,003 50,979 30,714 37,354 43,443 92,356 51,2446 Number of Leases (As at 31 December 2014) 237 226 204 213 166 186 101 2 2 10 Land Use Right Expiry 23 August 2044 23 August 2054 15 May 2043 15 May 2053 29 August 2044 29 August 2054 30 June 2044 15 Sep 2045 10 March 20434 11 March 2041 20 March 2041 29 May 2044 7 October 2034 5 March 2042 3 June 2042 31 May 2042 10 July 2042 Market Valuation1 (RMB million) (As at 31 December 2014) 2,777.0 2,050.0 1,948.0 564.0 485.0 400.0 260.0 973.0 606.0 558.0 Purchase Price (RMB million) 1,863.5 1,102.0 1,760.0 395.0 264.0 315.0 130.0 772.0 454.0 414.0 1 December 2006 Phase 1: 5 February 2008 Phase 2: 29 September 2008 30 December 2013 30 June 2011 8 November 2006 1 December 2006 8 November 2006 8 November 2006 1 December 2006 1 December 2006 Committed Occupancy Rate (As at 31 December 2014) 97.0% 99.3% 99.7% 73.9% 96.1% 100.0% 73.9% 100.0% 100.0% 100.0% Shopper Traffic for 20143 (Million) 36.9 10.4 9.5 4.15 13.2 8.9 6.8 – – – Major Tenants Beijing Hualian Supermarket/Costa Coffee Vero Moda/Only/ Selected/ Jack & Jones UNIQLO 為之味(夾揀成廚麻辣 燙/金湯玉線/川成元 麻辣香鍋/姑姑宴/ 港仔驛棧) KFC La Chapelle GAP 南京大牌檔 綠茶 Beijing Hualian Group (Department Store & Supermarket) UNIQLO Vero Moda/Only/ Selected/ Jack & Jones/ J.Lindeberg 為之味(夾揀成廚麻辣 燙/金湯玉線/川成元 麻辣香鍋/姑姑宴) I.T ZARA 南京大牌檔 Carrefour Poly Cinema H&M GAP 富貴時代美食廣場 La Chapelle/ Candie’s Vero Moda/Only/ Selected/ Jack & Jones 南京大牌檔 UA Cinemas innisfree Starbucks adidas Originals Swatch 七寶大光明影城 (Cinema) Carrefour UNIQLO Bao Da Xiang Shopping For Kids H3 Club (Gym) Haoledi (KTV) Beijing Hualian Supermarket Jinyi Cinema Nike Vero Moda/Only/ Selected/ Jack & Jones KFC/Pizza Hut BreadTalk La Chapelle :Chocoolate Walmart 阿香婆麻辣涮火鍋 McDonald’s KFC Beijing Hualian Department Store Beijing Hualian Supermarket Beijing Hualian Department Store Beijing Hualian Supermarket Carrefour B&Q Apple SASA Subway Gross Revenue for 2014 (RMB million) 262.3 199.7 138.1 25.0 96.3 55.7 33.0 81.6 50.5 45.4 NPI for 2014 (RMB million) 184.6 143.6 86.6 1.3 41.5 29.9 11.6 66.9 40.5 36.6 Name Acquisition Date 1. 2. 2 Independent valuation of CapitaMall Grand Canyon was conducted by CBRE Pte. Ltd. Independent valuations of CapitaMall Anzhen, CapitaMall Shuangjing and CapitaMall Saihan were conducted by DTZ Debenham Tie Leung International Property Advisers (Shanghai) CO., Ltd. Independent valuations of CapitaMall Qibao, CapitaMall Wuhu, CapitaMall Wangjing and CapitaMall Erqi were conducted by Knight Frank Petty Limited. Independent valuations of CapitaMall Xizhimen and CapitaMall Minzhongleyuan were conducted by Colliers International (Hong Kong) Limited. Refers to the completion of the acquisition of the special purpose vehicles which own the properties. 66 | CapitaRetail China Trust Annual Report 2014 3. 4. 5. 6. CapitaMall Shuangjing, CapitaMall Anzhen, and CapitaMall Erqi do not have traffic counters. CapitaMall Qibao is indirectly held by CRCT under a master lease with Shanghai Jin Qiu (Group) Co., Ltd, the legal owner. The master-lease expires in January 2024, with the right to renew for a further term of 19 years and two months. Accordingly, the land-use right is owned by the legal owner. Shopper traffic for CapitaMall Minzhongleyuan is from 1 May 2014 to 31 December 2014 as the mall reopened on 1 May 2014 after completion of asset enhancement initiative. Includes the area zoned for civil defense but certified for commercial use. Delivering Performance | 67 Portfolio Summary CapitaMall Xizhimen 凱德MALL•西直門 CapitaMall Wangjing 凱德MALL•望京 CapitaMall Grand Canyon 凱德MALL•大峽谷 CapitaMall Minzhongleyuan 凱德新民眾樂園 Address No. 1 Xizhimenwai Avenue, Xicheng District, Beijing No. 33 Guangshun North Street, Chaoyang District, Beijing No. 16 South Third Ring West Road, Fengtai District, Beijing GFA (sq m) (As at 31 December 2014) 83,075 83,768 GRA (sq m) (As at 31 December 2014) 83,075 NLA (sq m) (As at 31 December 2014) CapitaMall Shuangjing 凱德MALL•雙井 CapitaMall Qibao 凱德七寶購物廣場 CapitaMall Saihan 凱德MALL•賽罕 CapitaMall Wuhu 凱德廣場•蕪湖 CapitaMall Anzhen CapitaMall Erqi 凱德MALL•安貞 凱德廣場•二七 No. 704 Zhongshan Avenue, Jianghan District, Hankou Wuhan, Hubei Province No. 3655, Qixin Road, Minhang District, Shanghai No. 26 Ordos Street, Saihan District, Huhhot, Inner Mongolia Autonomous Region No. 37 Zhongshan North Road, Jinghu District, Wuhu, Anhui Province Building 4, Zone 5, Anzhenxili, Chaoyang District, Beijing No. 3 Minzhu Road, Erqi District, Zhengzhou, Henan Province No. 31 Guangqu Road, Chaoyang District, Beijing 92,918 41,717 83,986 41,938 59,624 43,443 92,356 49,463 68,010 69,967 37,472 72,729 41,938 45,634 43,443 92,356 49,463 50,592 54,109 44,915 23,003 50,979 30,714 37,354 43,443 92,356 51,2446 Number of Leases (As at 31 December 2014) 237 226 204 213 166 186 101 2 2 10 Land Use Right Expiry 23 August 2044 23 August 2054 15 May 2043 15 May 2053 29 August 2044 29 August 2054 30 June 2044 15 Sep 2045 10 March 20434 11 March 2041 20 March 2041 29 May 2044 7 October 2034 5 March 2042 3 June 2042 31 May 2042 10 July 2042 Market Valuation1 (RMB million) (As at 31 December 2014) 2,777.0 2,050.0 1,948.0 564.0 485.0 400.0 260.0 973.0 606.0 558.0 Purchase Price (RMB million) 1,863.5 1,102.0 1,760.0 395.0 264.0 315.0 130.0 772.0 454.0 414.0 1 December 2006 Phase 1: 5 February 2008 Phase 2: 29 September 2008 30 December 2013 30 June 2011 8 November 2006 1 December 2006 8 November 2006 8 November 2006 1 December 2006 1 December 2006 Committed Occupancy Rate (As at 31 December 2014) 97.0% 99.3% 99.7% 73.9% 96.1% 100.0% 73.9% 100.0% 100.0% 100.0% Shopper Traffic for 20143 (Million) 36.9 10.4 9.5 4.15 13.2 8.9 6.8 – – – Major Tenants Beijing Hualian Supermarket/Costa Coffee Vero Moda/Only/ Selected/ Jack & Jones UNIQLO 為之味(夾揀成廚麻辣 燙/金湯玉線/川成元 麻辣香鍋/姑姑宴/ 港仔驛棧) KFC La Chapelle GAP 南京大牌檔 綠茶 Beijing Hualian Group (Department Store & Supermarket) UNIQLO Vero Moda/Only/ Selected/ Jack & Jones/ J.Lindeberg 為之味(夾揀成廚麻辣 燙/金湯玉線/川成元 麻辣香鍋/姑姑宴) I.T ZARA 南京大牌檔 Carrefour Poly Cinema H&M GAP 富貴時代美食廣場 La Chapelle/ Candie’s Vero Moda/Only/ Selected/ Jack & Jones 南京大牌檔 UA Cinemas innisfree Starbucks adidas Originals Swatch 七寶大光明影城 (Cinema) Carrefour UNIQLO Bao Da Xiang Shopping For Kids H3 Club (Gym) Haoledi (KTV) Beijing Hualian Supermarket Jinyi Cinema Nike Vero Moda/Only/ Selected/ Jack & Jones KFC/Pizza Hut BreadTalk La Chapelle :Chocoolate Walmart 阿香婆麻辣涮火鍋 McDonald’s KFC Beijing Hualian Department Store Beijing Hualian Supermarket Beijing Hualian Department Store Beijing Hualian Supermarket Carrefour B&Q Apple SASA Subway Gross Revenue for 2014 (RMB million) 262.3 199.7 138.1 25.0 96.3 55.7 33.0 81.6 50.5 45.4 NPI for 2014 (RMB million) 184.6 143.6 86.6 1.3 41.5 29.9 11.6 66.9 40.5 36.6 Name Acquisition Date 1. 2. 2 Independent valuation of CapitaMall Grand Canyon was conducted by CBRE Pte. Ltd. Independent valuations of CapitaMall Anzhen, CapitaMall Shuangjing and CapitaMall Saihan were conducted by DTZ Debenham Tie Leung International Property Advisers (Shanghai) CO., Ltd. Independent valuations of CapitaMall Qibao, CapitaMall Wuhu, CapitaMall Wangjing and CapitaMall Erqi were conducted by Knight Frank Petty Limited. Independent valuations of CapitaMall Xizhimen and CapitaMall Minzhongleyuan were conducted by Colliers International (Hong Kong) Limited. Refers to the completion of the acquisition of the special purpose vehicles which own the properties. 66 | CapitaRetail China Trust Annual Report 2014 3. 4. 5. 6. CapitaMall Shuangjing, CapitaMall Anzhen, and CapitaMall Erqi do not have traffic counters. CapitaMall Qibao is indirectly held by CRCT under a master lease with Shanghai Jin Qiu (Group) Co., Ltd, the legal owner. The master-lease expires in January 2024, with the right to renew for a further term of 19 years and two months. Accordingly, the land-use right is owned by the legal owner. Shopper traffic for CapitaMall Minzhongleyuan is from 1 May 2014 to 31 December 2014 as the mall reopened on 1 May 2014 after completion of asset enhancement initiative. Includes the area zoned for civil defense but certified for commercial use. Delivering Performance | 67 Portfolio Details CAPITAMALL XIZHIMEN • • • • Strategically located at Xizhimen transport hub, well-served by Beijing’s subway Line 2, Line 4 and Line 13, as well as the national rail and bus interchange. Retail podium of an integrated development. Well-supported by large shopper catchment from daily commuters passing through the busy transportation hub and middle-income residents from the vicinity. Attracts working professionals and students from the nearby Beijing’s Financial Street, universities and technological zones of Zhongguancun District. Lease Expiry Profile (As at 31 December 2014) 37.0 28.9 24.5 19.3 19.1 15.3 14.8 13.7 12.7 10.4 2015 2016 % of Total Net Lettable Area 2017 2018 Beyond 2018 % of Total Rental Income Trade Sector Analysis (%) (As at 31 December 2014) Trade Categories Food & Beverage Fashion & Accessories Supermarket Beauty & Healthcare Education Shoes & Bags Sundry & Services Houseware & Furnishings Sporting Goods & Apparel Information & Technology Office Gifts & Souvenirs Jewellery/Watches/Pens Toys & Hobbies Warehouse 68 | CapitaRetail China Trust Annual Report 2014 By Committed NLA (%) By Total Rental Income (%) 29.4 28.5 21.0 8.0 5.6 2.5 1.5 1.5 0.5 0.3 0.3 0.3 0.3 0.2 0.1 29.2 39.3 3.7 12.0 3.6 5.3 2.4 1.7 0.6 0.7 0.0 0.6 0.6 0.3 0.0 CAPITAMALL WANGJING • • • • Leading comprehensive shopping mall in the densely populated residential suburb of Wangjing. Convenient access by key highways, well-served by numerous bus routes and in close proximity to the Wangjingxi subway station. A popular one-stop shopping, dining and entertainment destination in Wangjing. International tenants include ZARA, UNIQLO and Calvin Klein. Lease Expiry Profile (As at 31 December 2014) 63.8 31.5 26.3 23.7 11.5 14.1 10.8 3.9 2015 2016 2017 % of Total Net Lettable Area 5.7 7.7 2018 Beyond 2018 % of Total Rental Income Trade Sector Analysis (%) (As at 31 December 2014) Trade Categories Department Store Food & Beverage Supermarket Fashion & Accessories Beauty & Healthcare Education Warehouse Toys & Hobbies Sundry & Services Houseware & Furnishings Leisure & Entertainment Shoes & Bags Information & Technology Jewellery/Watches/Pens Sporting Goods & Apparel Gifts & Souvenirs By Committed NLA (%) By Total Rental Income (%) 35.4 19.8 16.5 13.4 6.9 2.0 1.1 1.0 0.9 0.8 0.8 0.5 0.3 0.3 0.2 0.1 11.4 27.4 3.0 32.8 10.5 3.6 0.0 1.5 2.4 1.6 0.9 1.7 1.2 1.3 0.4 0.3 Delivering Performance | 69 Portfolio Details CAPITAMALL GRAND CANYON • • • • Strategically located in the up-and-coming Fengtai District of South Beijing with strong economic fundamentals. One of the pioneer shopping malls in South Beijing. Facing the busy South Third Ring West road, the shopping mall is easily accessible from the Majiapu subway station, Beijing South Railway Station and numerous bus stops. Well-established among the local community with its comprehensive offerings. Popular tenants include Carrefour, H&M, Sephora, Nanjing Impressions and Poly Cinema. Lease Expiry Profile (As at 31 December 2014) 56.5 30.0 29.1 13.5 16.3 12.1 12.0 10.5 12.6 6.9 2015 2016 2017 % of Total Net Lettable Area 2018 Beyond 2018 % of Total Rental Income Trade Sector Analysis (%) (As at 31 December 2014) Trade Categories Supermarket Fashion & Accessories Food & Beverage Leisure & Entertainment Education Beauty & Healthcare Sundry & Services Sporting Goods & Apparel Shoes & Bags Houseware & furnishings Warehouse Jewellery/Watches/Pens Music & Videos Toys & Hobbies Information & Technology Electricals & Electronics Gifts & Souvenirs Books & Stationery 70 | CapitaRetail China Trust Annual Report 2014 By Committed NLA (%) By Total Rental Income (%) 31.5 19.6 18.6 12.6 4.9 3.4 2.4 2.1 1.5 0.7 0.7 0.6 0.4 0.4 0.3 0.2 0.1 0.0 9.0 30.0 22.8 8.1 4.7 6.5 3.3 3.9 3.6 1.5 0.0 3.0 0.8 1.3 0.9 0.2 0.3 0.1 CAPITAMALL MINZHONGLEYUAN • • • • • Strategically located along Zhongshan Avenue, an established shopping and entertainment belt that enjoys strong retail activities and pedestrian flow. Easily accessible via public bus routes and subway Line 1 and Line 2. Strong and diverse tenant base that comprises quality and well-known tenants such as innisfree, Starbucks, adidas Originals and Studio City (Wuhan) – the operator of IMAX Screen, as well as local fashion tenants offering young and trendy brands not commonly available in department stores. A natural focal point among youths and young adults. Zhongshan Avenue along where CapitaMall Minzhongleyuan is located has been closed since 20 August 2014. The road closure is to facilitate the construction of the new subway Line 6 which will last for two years. Lease Expiry Profile (As at 31 December 2014) 60.2 34.3 26.7 15.8 17.0 8.3 3.7 0.7 2015 2016 % of Total Net Lettable Area 2017 2018 3.9 3.3 Beyond 2018 % of Total Rental Income Trade Sector Analysis (%) (As at 31 December 2014) Trade Categories Leisure & Entertainment Fashion & Accessories Food & Beverage Beauty & Healthcare Sundry & Services Shoes & Bags Jewellery/Watches/Pens Houseware & Furnishings Information & Technology Sporting Goods & Apparel Toys & Hobbies Music & Videos Warehouse Gifts & Souvenirs Art Gallery By Committed NLA (%) By Total Rental Income (%) 35.2 34.6 13.4 5.7 3.3 3.0 1.6 0.6 0.6 0.6 0.5 0.4 0.2 0.2 0.1 6.7 55.1 13.7 9.0 2.2 5.5 3.3 0.5 1.4 1.5 0.2 0.2 0.1 0.4 0.2 Delivering Performance | 71 Portfolio Details CAPITAMALL QIBAO • • • • • One of the largest shopping malls in Shanghai Minhang District, near Hongqiao transport hub. Located in a growing mid-to high-end residential locality to the west of Shanghai’s Central Business District. One-stop family shopping destination providing shopping, dining and entertainment for residents. Brought in the first modern cinema to Qibao vicinity. Houses popular fashion retailer UNIQLO’s first duplex store in Minhang District. Lease Expiry Profile (As at 31 December 2014) 41.0 25.3 18.7 14.6 20.5 15.8 2015 2016 16.6 13.5 2017 % of Total Net Lettable Area 18.9 11.2 2018 Beyond 2018 % of Total Rental Income Trade Sector Analysis (%) (As at 31 December 2014) Trade Categories Supermarket Food & Beverage Fashion & Accessories Leisure & Entertainment Beauty & Healthcare Education Sundry & Services Houseware & Furnishings Shoes & Bags Warehouse Information & Technology Toys & Hobbies Jewellery/Watches/Pens Gifts & Souvenirs Art Gallery 72 | CapitaRetail China Trust Annual Report 2014 By Committed NLA (%) By Total Rental Income (%) 29.8 24.0 17.9 10.3 9.8 4.8 1.1 0.7 0.6 0.3 0.3 0.2 0.1 0.1 0.0 6.2 37.1 30.0 6.4 7.9 3.4 3.2 1.7 2.1 0.0 0.8 0.3 0.4 0.4 0.1 CAPITAMALL SAIHAN • • • • One of the most popular one-stop shopping destinations in Huhhot. Near the heart of Huhhot’s main retail cluster. Well-served by public transportation. The range of retail offerings has widened with the opening of Jinyi Cinema, and new food and beverage outlets after the completion of asset enhancement initiative. Lease Expiry Profile (As at 31 December 2014) 50.7 46.2 26.1 20.6 16.8 9.4 8.2 5.4 2015 2016 2017 % of Total Net Lettable Area 8.2 5.6 2018 Beyond 2018 % of Total Rental Income Trade Sector Analysis (%) (As at 31 December 2014) Trade Categories Supermarket Fashion & Accessories Food & Beverage Leisure & Entertainment Sporting Goods & Apparel Shoes & Bags Beauty & Healthcare Warehouse Sundry & Services Houseware & Furnishings Toys & Hobbies Information & Technology Jewellery/Watches/Pens Books & Stationery Gifts & Souvenirs By Committed NLA (%) By Total Rental Income (%) 36.1 19.4 14.5 10.3 6.4 5.4 2.4 2.1 1.0 0.9 0.6 0.5 0.3 0.1 0.0 12.5 33.6 17.5 3.7 10.1 12.0 4.8 0.0 1.1 1.7 0.8 0.9 1.0 0.2 0.1 Delivering Performance | 73 Portfolio Details CAPITAMALL WUHU • • • • Located approximately 1 km north of Wuhu’s Central Business District. Near the popular Fenghuang Food Street and close to several commercial projects. One of the first one-stop shopping, dining and entertainment destinations in the locality. Positioned as a destination for young working adults and middle-income families which fits well with the targeted population catchment’s demographic profile. Lease Expiry Profile (As at 31 December 2014) 53.2 38.2 32.6 14.0 11.7 8.6 4.1 2015 3.3 2016 2017 % of Total Net Lettable Area 1.4 3.5 2018 Beyond 2018 % of Total Rental Income Trade Sector Analysis (%) (As at 31 December 2014) Trade Categories Supermarket Food & Beverage Fashion & Accessories Beauty & Healthcare Shoes & Bags Sundry & Services Gifts & Souvenirs Jewellery/Watches/Pens Toys & Hobbies Houseware & Furnishings Sporting Goods & Apparel 74 | CapitaRetail China Trust Annual Report 2014 By Committed NLA (%) By Total Rental Income (%) 69.7 15.6 6.7 1.8 1.8 1.6 1.3 0.5 0.4 0.3 0.3 24.5 29.9 21.0 4.2 7.0 4.7 3.7 2.4 1.1 1.3 0.2 CAPITAMALL SHUANGJING • • • Located in the Chaoyang District, in close proximity to Beijing’s Central Business District. Well-served by bus routes and close to Dawanglu and Guomao subway stations. Strong supermarket anchor, drawing significant shopper traffic from the nearby Central Business District and neighbouring residential areas. Lease Expiry Profile (As at 31 December 2014) 95.4 9.2 0.0 0.0 1.4 2015 2016 3.2 2.3 2017 % of Total Net Lettable Area 0.0 88.5 0.0 2018 Beyond 2018 % of Total Rental Income Trade Sector Analysis (%) (As at 31 December 2014) Trade Categories Supermarket Houseware & Furnishings Fashion & Accessories Sundry & Services Food & Beverage Information & Technology Beauty & Healthcare By Committed NLA (%) By Total Rental Income (%) 61.0 34.0 3.2 1.0 0.5 0.2 0.1 56.3 31.2 2.3 4.9 1.8 1.8 1.7 CAPITAMALL ANZHEN • • • • Located in a densely populated area to the south of Beijing’s Olympic Village. Adjacent to the North Third Ring Road and a major bus terminal. One of the most popular and well-established shopping destinations in the area. Master-leased to BHG. CAPITAMALL ERQI • • • Located in Zhengzhou’s Central Business District, at the heart of Erqi District, Zhengzhou’s premier shopping district. Attracts repeat shoppers who are mainly residents and office workers in the vicinity, as well as visitors to the province. Master-leased to BHG. Delivering Performance | 75 Financial Statements Report of the Trustee 77 Statement by the Manager 78 Independent Auditors’ Report 79 Statements of Financial Position 80 Statements of Total Return 81 Distribution Statements 82 Statements of Movements in Unitholders’ Funds 84 Portfolio Statement 85 Consolidated Statement of Cash Flows 87 Notes to the Financial Statements 89 76 | CapitaRetail China Trust Annual Report 2014 Report of the Trustee Year ended 31 December 2014 HSBC Institutional Trust Services (Singapore) Limited (the “Trustee”) is under a duty to take into custody and hold the assets of CapitaRetail China Trust (the “Trust”) in trust for the Unitholders. In accordance with the Securities and Futures Act (Cap. 289), its subsidiary legislation and the Code on Collective Investment Schemes, the Trustee shall monitor the activities of CapitaRetail China Trust Management Limited (the “Manager”) for compliance with the limitations imposed on the investment and borrowing powers as set out in the Trust Deed dated 23 October 2006 (as amended by a first supplemental deed dated 8 November 2006, a second supplemental deed dated 15 April 2010, a third supplemental deed dated 5 April 2012 and a fourth supplemental deed dated 14 February 2014) (collectively the “Trust Deed”) between the Manager and the Trustee in each annual accounting period and report thereon to Unitholders in an annual report. To the best knowledge of the Trustee, the Manager has, in all material respects, managed the Trust during the year covered by these financial statements, set out on pages 80 to 146, in accordance with the limitations imposed on the investment and borrowing powers set out in the Trust Deed. For and on behalf of the Trustee, HSBC Institutional Trust Services (Singapore) Limited Antony Wade Lewis Director Singapore 26 February 2015 Delivering Performance | 77 Statement by the Manager Year ended 31 December 2014 In the opinion of the directors of CapitaRetail China Trust Management Limited (the “Manager”), the accompanying financial statements set out on pages 80 to 146 comprising the statements of financial position, statements of total return, distribution statements and statements of movements in Unitholders’ funds of the CapitaRetail China Trust (the “Trust”) and its subsidiaries (the “Group”) and of the Trust, the portfolio statement and statement of cash flows of the Group and a summary of significant accounting policies and other explanatory information, are drawn up so as to present fairly, in all material respects, the financial position of the Group and of the Trust and the portfolio of the Group as at 31 December 2014, the total return, distributable income and movements in Unitholders’ funds of the Group and of the Trust and cash flows of the Group for the year ended on that date in accordance with the recommendations of Statement of Recommended Accounting Practice 7 “Reporting Framework for Unit Trusts” issued by the Institute of Singapore Chartered Accountants and the provisions of the Trust Deed. At the date of this statement, there are reasonable grounds to believe that the Group will be able to meet its financial obligations as and when they materialise. For and on behalf of the Manager, CapitaRetail China Trust Management Limited Tan Tee Hieong Director Singapore 26 February 2015 78 | CapitaRetail China Trust Annual Report 2014 Independent Auditors’ Report Unitholders of CapitaRetail China Trust (Constituted in the Republic of Singapore pursuant to a trust deed dated 23 October 2006 (as amended)) We have audited the accompanying financial statements of CapitaRetail China Trust (the “Trust”) and its subsidiaries (the “Group”), which comprise the statements of financial position of the Trust and the Group and the portfolio statement of the Group as at 31 December 2014, the statements of total return, distribution statements and statements of movements in Unitholders’ funds of the Trust and of the Group and the statement of cash flows of the Group for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 80 to 146. MANAGER’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS The Manager of the Trust is responsible for the preparation and fair presentation of these financial statements in accordance with the recommendations of Statement of Recommended Accounting Practice 7 “Reporting Framework for Unit Trusts” issued by the Institute of Singapore Chartered Accountants, and for such internal control as the Manager of the Trust determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. AUDITORS’ RESPONSIBILITY Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Manager of the Trust, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. OPINION In our opinion, the consolidated financial statements of the Group and the statement of financial position, statement of total return, distribution statement and statement of movements in Unitholders’ funds of the Trust present fairly, in all material respects, the financial position of the Group and the Trust as at 31 December 2014 and the total return, distributable income, and movements in Unitholders’ funds of the Group and of the Trust and the cash flows of the Group for the year then ended in accordance with the recommendations of Statement of Recommended Accounting Practice 7 “Reporting Framework for Unit Trusts” issued by the Institute of Singapore Chartered Accountants. KPMG LLP Public Accountants and Chartered Accountants Singapore 26 February 2015 Delivering Performance | 79 Statements of Financial Position As at 31 December 2014 Group Trust Note 2014 $’000 2013 $’000 2014 $’000 2013 $’000 Investment properties 4 2,250,783 2,058,094 – – Plant and equipment 5 7,759 7,325 – – Interests in subsidiaries 6 – – 1,093,523 1,028,567 Trade and other receivables 7 11,347 11,371 201 224 11 1,547 2,044 1,547 2,044 8 86,626 105,457 238 249 2,358,062 2,184,291 1,095,509 1,031,084 51,140 57,719 5,386 9,060 41,158 34,980 – – Assets Financial derivatives Cash and cash equivalents Less: Liabilities Trade and other payables 9 Security deposits Interest-bearing borrowings 10 671,713 712,338 566,823 474,383 Financial derivatives 11 8,605 5,208 8,605 5,208 Deferred tax liabilities 12 204,923 159,620 – – 2,707 561 15 20 980,246 970,426 580,829 488,671 1,377,816 1,213,865 514,680 542,413 Provision for taxation Net assets Represented by: Unitholders’ funds 13 1,349,738 1,186,951 514,680 542,413 Non-controlling interest 14 28,078 26,914 – – 1,377,816 1,213,865 514,680 542,413 828,118 803,027 828,118 803,027 1.63 1.48 0.62 0.68 Units in issue (’000) Net asset value per unit attributable to Unitholders ($) 15 The accompanying notes form an integral part of these financial statements. 80 | CapitaRetail China Trust Annual Report 2014 Statements of Total Return Year ended 31 December 2014 Group Trust 2014 $’000 2013 $’000 2014 $’000 2013 $’000 Gross rental income Other income 189,088 14,174 149,083 10,992 – – – – Gross revenue 203,262 160,075 – – Land rental Property related tax Business tax Property management fees & reimbursables Other property operating expenses (5,620) (10,943) (11,272) (5,238) (8,938) (9,009) – – – – – – (10,078) (32,984) (8,028) (25,824) – – – – Total property operating expenses (70,897) (57,037) – – Net property income 132,365 103,038 – – Note Manager’s management fees – Base fee – Performance fee Manager’s acquisition fee Trustee’s fees Audit fees Valuation fees Other trust operating (expenses)/income Dividend income Foreign exchange gain – realised Finance income Finance costs Net finance (costs)/income Total return before change in fair value of financial derivatives, investment properties and unrealised foreign exchange (loss)/gain Change in fair value of financial derivatives Change in fair value of investment properties Foreign exchange (loss)/gain – unrealised 17 18 18 19 20 4 (5,527) (5,295) – (368) (479) (188) (2,151) – 1,371 (4,283) (4,122) – (302) (407) (278) (426) – 746 (5,527) (5,295) – (368) (164) – (537) – 675 (4,283) (4,122) (3,562) (302) (155) – 265 17,396 620 874 (21,926) (21,052) 1,133 (11,329) (10,196) 24,405 (12,470) 11,935 24,210 (9,784) 14,426 98,676 83,770 – 1,423 (6,977) (20,148) 104,829 (41) 99,159 101 – 16,406 – 13,922 184,453 (48,505) 10,148 (8) 14,057 (20) 719 20,283 Total return for the year before taxation Taxation 21 203,464 (57,109) Total return for the year after taxation Non-controlling interest 14 146,355 (1,757) 135,948 (3,030) 10,140 – 14,037 – 144,598 132,918 10,140 14,037 17.69 17.52 17.69 17.52 Total return for the year attributable to Unitholders Earnings per unit (cents) – Basic – Diluted 22 The accompanying notes form an integral part of these financial statements. Delivering Performance | 81 Distribution Statements Year ended 31 December 2014 Group Trust 2014 $’000 2013 $’000 2014 $’000 2013 $’000 Amount available for distribution to Unitholders at beginning of the year 34,902 11,256 34,902 11,256 Total return for the year attributable to Unitholders 144,598 132,918 10,140 14,037 Note Distribution adjustments A (63,716) (62,858) 70,742 56,023 Income for the year available for distribution to Unitholders B 80,882 70,060 80,882 70,060 115,784 81,316 115,784 81,316 Amount available for distribution to Unitholders Distribution to Unitholders during the year: – Distribution of 4.33 cents per unit for the period from 1 July 2013 to 31 December 2013 (34,771) – (34,771) – – Distribution of 4.99 cents per unit for the period from 1 January 2014 to 30 June 2014 (40,863) – (40,863) – – Distribution of 1.50 cents per unit for the period from 2 November 2012 to 31 December 2012 – (11,234) – (11,234) – Distribution of 4.69 cents per unit for the period from 1 January 2013 to 30 June 2013 – (35,180) – (35,180) Amount available for distribution to Unitholders at end of the year Number of Units entitled to distribution (’000) Distribution per Unit (cents) * * (75,634) (46,414) (75,634) (46,414) 40,150 34,902 40,150 34,902 828,118 803,027 9.82 9.02 The Distribution per Unit relates to the distribution in respect of the relevant financial year. The distribution relating to 1 July 2014 to 31 December 2014 will be paid within 90 days of the end of the distribution period, in accordance with the provisions of the Trust Deed. The accompanying notes form an integral part of these financial statements. 82 | CapitaRetail China Trust Annual Report 2014 Note A – Distribution adjustments Group Note Trust 2014 $’000 2013 $’000 2014 $’000 2013 $’000 5,295 4,122 5,295 4,122 (1,423) 6,977 20,148 (103,960) (96,944) – – 36,364 32,306 – – (4,244) (3,164) – – (6) (19) Distribution adjustment items: – Manager’s management fees (performance component paid/payable in Units) – Change in fair value of financial derivatives – – Change in fair value of investment properties1 – Deferred taxation 1 – Transfer to general reserve – Unrealised foreign exchange gain 1 – Other adjustments – Net overseas income not distributed to the Trust Net effect of distribution adjustments (16,406) (13,922) 2,835 2,264 – – – – 74,876 45,675 70,742 56,023 (63,716) (62,858) Note B – Income for the year available for distribution to Unitholders Comprises: – from operations – from Unitholders’ contribution Total Unitholders’ distribution 1 16 6,006 24,385 6,006 24,385 74,876 45,675 74,876 45,675 80,882 70,060 80,882 70,060 Excludes non-controlling interest’s share. The accompanying notes form an integral part of these financial statements. Delivering Performance | 83 Statements of Movements in Unitholders’ Funds Year ended 31 December 2014 Group Trust 2014 $’000 2013 $’000 2014 $’000 2013 $’000 1,186,951 978,742 542,413 504,541 144,598 132,918 10,140 14,037 – – Operations Unitholders’ funds as at beginning of the year Change in Unitholders’ funds resulting from operations Transfer to general reserve Net increase in net assets resulting from operations (4,244) (3,164) 140,354 129,754 10,140 14,037 2,251 157 2,251 157 Translation differences from financial statements of foreign operations 46,749 52,209 – – Exchange differences on monetary items forming part of net investment in foreign operations 16,290 20,819 – – Exchange differences on hedges of net investment in foreign operations (6,977) (21,572) – – Net gain recognised directly in Unitholders’ funds 58,313 51,613 2,251 157 4,244 3,164 – – – 59,038 – 59,038 – Units issued and to be issued as satisfaction of the portion of Manager’s management fees payable in Units 5,295 4,122 5,295 4,122 – Units issued in respect of acquisition fee for CapitaMall Grand Canyon 3,562 – 3,562 – 26,653 8,732 26,653 8,732 (75,634) (46,414) (75,634) (46,414) Movements in hedging reserve Effective portion of changes in fair value of cash flow hedges Movements in foreign currency translation reserve Movement in general reserve Unitholders’ transactions New Units issued Creation of Units paid/payable to Manager Units issued in respect of the distribution reinvestment plan Distributions to Unitholders Equity issue expenses Net (decrease)/increase in net assets resulting from Unitholders’ transactions Unitholders’ funds as at end of year – (40,124) 1,349,738 The accompanying notes form an integral part of these financial statements. 84 | CapitaRetail China Trust Annual Report 2014 (1,800) 23,678 1,186,951 – (1,800) (40,124) 23,678 514,680 542,413 Portfolio Statement As at 31 December 2014 Group Description of leasehold property Location Term of lease (years) Lease expiry Valuation Percentage of Unitholders’ funds Valuation 2014 2013 2014 2013 2014 2013 RMB’000 RMB’000 $’000 $’000 % % CapitaMall Xizhimen No. 1 Xizhimenwai Avenue, Xicheng District, Beijing 40 – 50 August 2044/2054 2,777,000 2,600,000 588,446 532,246 43.6 44.8 CapitaMall Wangjing No. 33 Guangshun North Street, Blk 213 & 215, Chaoyang District, Beijing 38 – 48 May 2043/2053 2,050,000 1,900,000 434,395 388,949 32.2 32.8 CapitaMall Grand Canyon No. 16 Nansanhuan Xi Road, Fengtai District, Beijing 40 – 50 August 2044/2054 1,948,000 1,881,793 412,781 385,222 30.5 32.5 CapitaMall Anzhen Section 5 No. 4 of Anzhen Xi Li, Chaoyang District, Beijing 29 – 37 October 2034/ March and June 2042 973,000 949,000 206,179 194,270 15.3 16.4 CapitaMall Erqi No. 3 Minzhu Road, Erqi District, Zhengzhou, Henan Province 38 May 2042 606,000 590,000 128,411 120,779 9.5 10.2 CapitaMall Minzhongleyuan1 No. 704 Zhongshan Avenue, Jianghan District, Hankou, Wuhan, Hubei Province 40 June 2044/ September 2045 564,911 504,911 119,705 103,360 8.9 8.7 CapitaMall Shuangjing No. 31 Guangqu Road, Chaoyang District, Beijing 40 July 2042 558,000 543,000 118,240 111,158 8.8 9.4 CapitaMall Qibao2 No. 3655 Qi Xin Road, Minhang District, Shanghai 39 March 2043 485,000 472,000 102,772 96,623 7.6 8.1 CapitaMall Saihan No. 26 Ordos Street, Saihan District, Huhhot, Inner Mongolia Autonomous Region 35 March 2041 400,000 362,000 84,760 74,105 6.3 6.2 10,361,911 9,802,074 2,195,689 2,006,712 162.7 169.1 Balance carried forward The accompanying notes form an integral part of these financial statements. Delivering Performance | 85 Portfolio Statement As at 31 December 2014 Description of leasehold property Location Term of lease (years) Lease expiry Balance brought forward CapitaMall Wuhu No. 37 Zhongshan North Road, Jinghu District, Wuhu, Anhui Province 40 Investment properties, at valuation May 2044 Valuation Percentage of Unitholders’ funds Valuation 2014 2013 2014 2013 2014 2013 RMB’000 RMB’000 $’000 $’000 % % 10,361,911 9,802,074 2,195.689 2,006,712 162.7 169.1 260,000 251,000 55,094 51,382 4.1 4.3 10,621,911 10,053,074 2,250,783 2,058,094 166.8 173.4 (64.7) (71.1) 102.1 102.3 Other assets and liabilities (net) (872,967) 1,377,816 Net assets attributable to noncontrolling interests Net assets attributable to Unitholders (28,078) 1,349,738 (844,229) 1,213,865 (26,914) 1,186,951 (2.1) 100.0 (2.3) 100.0 Notes: 1 The carrying amount of CapitaMall Minzhongleyuan includes the valuation of the retail mall and carrying amount of the three residential units. 2 CapitaMall Qibao is held under a master lease by CapitaRetail Dragon Mall (Shanghai) Co., Ltd, a subsidiary of CapitaRetail China Investments (B) Alpha Pte. Ltd. The master lease was entered with Shanghai Jin Qiu (Group) Co., Ltd (“Jin Qiu”), the legal owner of CapitaMall Qibao and expires in January 2024, with the right to renew for a further term of 19 years and two months from January 2024 at the option of the Group. Accordingly, the land use rights is held by Jin Qiu. The accompanying notes form an integral part of these financial statements. 86 | CapitaRetail China Trust Annual Report 2014 Consolidated Statement of Cash Flows Year ended 31 December 2014 Group 2014 $’000 2013 $’000 146,355 135,948 (874) 21,926 2,754 28 57,109 5,295 81 (104,829) – (1,133) 11,329 2,088 (58) 48,505 4,122 176 (99,159) (1,423) Operating income before working capital changes Changes in working capital: Trade and other receivables Trade and other payables 127,845 100,395 (60) 2,083 (766) (10,582) Cash generated from operating activities Income tax paid 129,868 (18,452) 89,047 (20,422) Net cash from operating activities 111,416 68,625 Investing activities Interest received Net cash outflow on purchase of investment property Capital expenditure on investment properties Proceeds from disposal of plant and equipment Purchase of plant and equipment 874 – (14,597) 13 (2,960) 1,133 (134,610) (7,906) 5 (1,937) (16,670) (143,315) Financing activities Proceeds from issuance of new Units Distribution to Unitholders Payment of equity issue expenses Payment of financing expenses Proceeds from draw down of interest-bearing borrowings Repayment of interest-bearing borrowings Settlement of derivative contracts Interest paid – (48,981) (460) (774) 250,900 (294,797) (832) (22,317) 59,038 (37,682) (915) (977) 309,148 (279,752) (2,824) (11,309) Net cash (used in)/from financing activities (117,261) 34,727 (22,515) 105,457 3,684 (39,963) 140,476 4,944 86,626 105,457 Note Operating activities Total return for the year after taxation Adjustments for: Finance income Finance costs Depreciation and amortisation Impairment losses/(write-back) on trade receivables, net Taxation Manager’s management fees paid/payable in Units Plant and equipment written off Change in fair value of investment properties Change in fair value of financial derivative A(i) B A(ii)(iii) Net cash used in investing activities Decrease in cash and cash equivalents Cash and cash equivalents at 1 January Effect of foreign exchange rate changes on cash balances Cash and cash equivalents at 31 December 8 The accompanying notes form an integral part of these financial statements. Delivering Performance | 87 Consolidated Statement of Cash Flows Year ended 31 December 2014 Notes: (A) Significant non-cash and other transactions (i) $4.0 million (2013: $3.1 million) of the $5.3 million (2013: $4.1 million) of the performance component of the Manager’s management fee was paid during the year through the issue of 2,682,096 Units (2013: 2,074,331 Units). The remaining $1.3 million (2013: $1.0 million) will be paid through the issue of 844,273 new Units (2013: 786,472 new Units) subsequent to the year end. (ii) The Group incurred $36.1 million to purchase investment property in 2008, of which $nil and $43,000 were paid in 2014 and 2013 respectively. (iii) The Group enhanced its investment properties during the year, of which $3.4 million (2013: $6.6 million) was paid. During the year, the Group paid $11.2 million (2013: $1.3 million) of the prior years unpaid balance. (B) Significant non-cash and other transactions Net cash outflows on acquisition of subsidiaries are provided below: Group 2014 $’000 2013 $’000 Investment property – 380,459 Cash Other assets Other liabilities – – – 8,293 2,861 (248,710) Net identifiable assets and liabilities acquired – 142,903 Cash consideration paid Cash acquired – – (142,903) 8,293 Net cash outflow – (134,610) The accompanying notes form an integral part of these financial statements. 88 | CapitaRetail China Trust Annual Report 2014 Notes to the Financial Statements These notes form an integral part of the financial statements. The financial statements were authorised for issue by the Manager and the Trustee on 26 February 2015. 1. GENERAL CapitaRetail China Trust (the “Trust”) is a Singapore-domiciled unit trust constituted pursuant to the trust deed dated 23 October 2006 (as amended by the first supplemental deed dated 8 November 2006, a second supplemental deed dated 15 April 2010, a third supplemental deed dated 5 April 2012 and a fourth supplemental deed dated 14 February 2014) (collectively the “Trust Deed”) between CapitaRetail China Trust Management Limited (the “Manager”) and HSBC Institutional Trust Services (Singapore) Limited (the “Trustee”). The Trust Deed is governed by the laws of the Republic of Singapore. The Trustee is under a duty to take into custody and hold the assets of the Trust held by it or through its subsidiaries (the “Group”) in trust for the holders (“Unitholders”) of Units in the Trust (the “Units”). The Trust was formally admitted to the Official List of the Singapore Exchange Securities Trading Limited (the “SGX-ST”) on 8 December 2006 (the “Listing Date”) and was included under the Central Provident Fund (“CPF”) Investment Scheme on 8 December 2006. The principal activities of the Trust are those relating to investment in a diversified portfolio of income-producing properties located primarily in the People’s Republic of China (“China”), Hong Kong and Macau and used primarily for retail purposes. The principal activities of the subsidiaries are those of investment holding of properties located in China and used for retail purposes. The Group has entered into several service agreements in relation to the management of the Trust and its property operations. The fee structures for these services are as follows: (a) Trustee’s fees Pursuant to the Trust Deed, the Trustee’s fee shall not exceed 0.03% per annum of the value of all the assets of the Group (“Deposited Property”), subject to a minimum of $15,000 per month, excluding out of pocket expenses and Goods and Service Tax. (b) Manager’s management fees The Manager is entitled under the Trust Deed to the following management fees: • a base fee of 0.25% per annum of the value of the Deposited Property; • a performance fee of 4.0% per annum of the net property income in the relevant financial year (calculated before accounting for the performance fee in that financial year); and • an authorised investment management fee of 0.5% per annum of the value of authorised investments which are not real estate. Where such authorised investment is an interest in a property fund (either a real estate investment trust or private property fund) wholly managed by a wholly-owned subsidiary of CapitaLand Limited, no authorised investment management fee shall be payable in relation to such authorised investment. Delivering Performance | 89 Notes to the Financial Statements 1. GENERAL (continued) (b) Manager’s management fees (continued) The Manager may elect to receive the management fees in cash or Units or a combination of cash and/or Units (as it may in its sole discretion determine). (c) Property management fees Under the property management agreements in respect of each property, the property managers will provide lease management services, property tax services and marketing co-ordination services in relation to that property. The property managers are entitled to the following fees: • 2.0% per annum of the gross revenue; • 2.0% per annum of the net property income; and • 0.5% per annum of the net property income in lieu of leasing commissions otherwise payable to the property managers and/or third party agents. (d) Acquisition fee For any authorised investment acquired from time to time by the Trustee on behalf of the Trust, the acquisition fee payable to the Manager shall be: • up to 1.5% of the purchase price in the case of any authorised investment (as defined in the Trust Deed) acquired by the Trust for less than $200 million; and • 1.0% of the purchase price in the case of any authorised investment acquired by the Trust for $200 million or more. The acquisition fee payable in respect of any authorised investment acquired from time to time by the Trustee on behalf of the Trust from CapitaMalls China Income Fund, CapitaMalls China Income Fund II, CapitaMalls China Income Fund III, CapitaMalls China Development Fund III, or CapitaMalls Asia Limited shall be 1.0% of the purchase price paid by the Trust. No acquisition fee was payable for the acquisition of the initial property portfolio of the Trust. The acquisition fee is payable to the Manager in the form of cash and/or Units (as the Manager may elect) at the prevailing market price provided that in respect of any acquisition of real estate assets from interested parties, such a fee should, if required by the applicable laws, rules and/or regulations, be in the form of Units issued by the Trust at prevailing market price(s) and subject to such transfer restrictions as may be imposed. Any payment to third party agents or brokers in connection with the acquisition of any authorised investments for the Trust shall be paid by the Manager to such persons out of the Deposited Property of the Trust or the assets of the relevant special purpose vehicle, and not out of the acquisition fee received or to be received by the Manager. 90 | CapitaRetail China Trust Annual Report 2014 1. GENERAL (continued) (e) Divestment fee The Manager is entitled to receive a divestment fee of 0.5% of the sale price of any authorised investment disposed directly or indirectly by the Trust, prorated if applicable to the proportion of the Trust’s interest. The divestment fee is payable to the Manager in the form of cash and/or Units (as the Manager may elect) at the prevailing market price provided that in respect of any divestment of real estate assets to interested parties, such a fee should, if required by the applicable laws, rules and/or regulations, be in the form of Units issued by the Trust at prevailing market price(s) and subject to such transfer restrictions as may be imposed. Any payment to third party agents or brokers in connection with the divestment of any authorised investments for the Trust shall be paid by the Manager to such persons out of the Deposited Property of the Trust or the assets of the relevant special purpose vehicle, and not out of the divestment fee received or to be received by the Manager. 2. BASIS OF PREPARATION (a) Statement of compliance The financial statements have been prepared in accordance with the recommendations of Statement of Recommended Accounting Practice (“RAP”) 7 “Reporting Framework for Unit Trusts” issued by the Institute of Singapore Chartered Accountants, the applicable requirements of the Code on Collective Investment Schemes (the “CIS Code”) issued by the Monetary Authority of Singapore (“MAS”) and the provisions of the Trust Deed. RAP 7 requires that accounting policies adopted should generally comply with the principles relating to recognition and measurement of the Singapore Financial Reporting Standards (“FRS”). (b) Basis of measurement The financial statements have been prepared on the historical cost basis except for the following material items on the statement of financial position: (c) • derivative financial instruments are measured at fair value • investment properties are measured at fair value. Functional and presentation currency Items included in the financial statements of each entity in the Group are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to that entity (the “functional currency”). The consolidated financial statements of the Group are presented in Singapore dollars, which is the functional currency of the Trust. All financial information presented in Singapore dollars has been rounded to the nearest thousand, unless otherwise stated. Delivering Performance | 91 Notes to the Financial Statements 2. BASIS OF PREPARATION (continued) (d) Use of estimates and judgements The preparation of financial statements in conformity with RAP 7 requires the Manager to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying amounts of assets and liabilities that are not readily apparent from other sources. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and any future periods affected. Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes: • • (e) Note 4 Note 27 – – Valuation of investment properties Valuation of financial instruments. Changes in accounting policies (i) Subsidiaries FRS 110 Consolidated Financial Statements introduces a new control model that focuses on whether the Group has power over an investee, exposure or rights to variable returns from its involvement with the investee and ability to use its power to affect those returns. In accordance with the transitional provisions of FRS 110, the Group reassessed its involvement with investees under the new control model. The adoption of the new standard did not result in a change in the control conclusion in respect of its investment in its investees. (ii) Disclosure of interests in other entities From 1 January 2014, as a result of FRS 112 Disclosure of Interests in Other Entities, the Group has expanded its disclosures about its interests in subsidiaries (see Note 6 and Note 14). (iii) Offsetting of financial assets and financial liabilities Under the Amendments to FRS 32 Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities, to qualify for offsetting, the right to set off a financial asset and a financial liability must not be contingent on a future event and must be enforceable both in the normal course of business and in the event of default, insolvency or bankruptcy of the entity and all counterparties. The adoption of amendments to FRS 32 does not have any significant impact on the financial position or performance of the Group and the Trust. 92 | CapitaRetail China Trust Annual Report 2014 2. BASIS OF PREPARATION (continued) (e) Changes in accounting policies (continued) (iv) Disclosures of recoverable amount for non-financial assets From 1 January 2014, the Group has adopted Amendments to FRS 36: Impairment of Assets Recoverable Amount Disclosures for Non-Financial Assets. The adoption of Amendments to FRS 36 has no impact on the financial position or performance of the Group and the Trust. (v) 3. Levies The Group has adopted INT FRS 121 Levies with a date of initial application of 1 January 2014. The adoption of INT FRS 121 does not have any significant impact on the financial position or performance of the Group and the Trust. SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have been applied consistently by Group entities, except as explained in Note 2(e), which addresses changes in accounting policies. (a) Basis of consolidation (i) Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect these returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The Group’s acquisition of subsidiaries are primarily accounted for as acquisitions of assets as the subsidiaries are special purpose vehicles established for the sole purpose of holding assets. (ii) Loss of control Upon the loss of control, the Trust derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in the statement of total return. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained. (iii) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income or expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Delivering Performance | 93 Notes to the Financial Statements 3. SIGNIFICANT ACCOUNTING POLICIES (continued) (a) Basis of consolidation (continued) (iv) Accounting for subsidiaries by the Trust Investments in subsidiaries are stated in the Trust’s statement of financial position at cost less accumulated impairment losses. (b) Foreign currency (i) Foreign currency transactions Transactions in foreign currencies are translated at the foreign exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated at the foreign exchange rates ruling at that date. Non-monetary assets and liabilities measured at cost in a foreign currency are translated using foreign exchange rates at the date of the transaction. Nonmonetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated at the foreign exchange rates ruling at the date on which the fair value was determined. Foreign currency differences arising on retranslation are recognised in the statement of total return, except for differences arising on the retranslation of monetary items that in substance form part of the Group’s net investment in a foreign operation (see below) and financial derivatives designated as hedges of the net investment in a foreign operation (see Note 3(c)(iii)). (ii) Foreign operations The assets and liabilities of foreign operations are translated to Singapore dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Singapore dollars at exchange rates at the dates of the transactions. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the exchange rate at the reporting date. Foreign currency differences are recognised in the foreign currency translation reserve. When a foreign operation is disposed of, in part or in full, the relevant amount is transferred to the statement of total return. (iii) Net investment in a foreign operation Exchange differences arising from monetary items that in substance form part of the Trust’s net investment in a foreign operation are recognised in the Trust’s statement of total return. Such exchange differences are reclassified to foreign currency translation reserve in the consolidated financial statements. When the hedged net investment is disposed of, the cumulative amount in the foreign currency translation reserve is transferred to the statement of total return as an adjustment to the gain or loss arising on disposal. 94 | CapitaRetail China Trust Annual Report 2014 3. SIGNIFICANT ACCOUNTING POLICIES (continued) (c) Financial instruments (i) Non-derivative financial assets The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. The Group has loans and receivables as its non-derivative financial assets. Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Loans and receivables comprise non-trade amounts due from subsidiaries, trade and other receivables excluding prepayments and cash and cash equivalents. Cash and cash equivalents comprise cash balances and bank deposits. (ii) Non-derivative financial liabilities Financial liabilities are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expired. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. Delivering Performance | 95 Notes to the Financial Statements 3. SIGNIFICANT ACCOUNTING POLICIES (continued) (c) Financial instruments (continued) (ii) Non-derivative financial liabilities (continued) The Group has the following non-derivative financial liabilities: trade and other payables, security deposits and interest-bearing borrowings. Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method. (iii) Derivative financial instruments, including hedge accounting The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through the statement of total return. On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction and the hedged risk, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, of whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items attributable to the hedged risk, and whether the actual results of each hedge are within a range of 80%-125%. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect the statement of total return. Derivatives are recognised initially at fair value; attributable transaction costs are recognised in the statement of total return when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below. Cash flow hedges When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect total return, the effective portion of changes in the fair value of the derivative is recognised and presented in the hedging reserve in Unitholders’ fund. The amount recognised in the hedging reserve is removed and included in the statement of total return in the same period as the hedged cash flows affect the statement of total return under the same line item in the statement of total return as the hedged item. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in the statement of total return. 96 | CapitaRetail China Trust Annual Report 2014 3. SIGNIFICANT ACCOUNTING POLICIES (continued) (c) Financial instruments (continued) (iii) Derivative financial instruments, including hedge accounting (continued) Cash flow hedges (continued) If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised and presented in the hedging reserve in Unitholders’ fund remains there until the forecast transaction occurs. When the hedged item is a non-financial asset, the amount recognised in the hedging reserve is transferred to the carrying amount of the asset when it is recognised. If the forecast transaction is no longer expected to occur, then the balance in the hedging reserve is recognised immediately in the statement of total return. In other cases, the amount recognised in the hedging reserve is transferred to the statement of total return in the same period that the hedged item affects the statement of total return. Hedge of net investment in foreign operation Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign operation are recognised in the Trust’s statement of total return. On consolidation, such differences are recognised directly, as part of foreign currency translation reserve, to the extent that the hedge is effective. To the extent that the hedge is ineffective, such differences are recognised in the statement of total return. When the hedged net investment is disposed of, the cumulative amount in the foreign currency translation reserve attributable to that investment is transferred to the statement of total return as an adjustment to the gain or loss on disposal. (d) Investment properties Investment properties are properties held either to earn rental income or capital appreciation or both. Investment properties are accounted for as non-current assets and are stated at initial cost on acquisition and at fair value thereafter. The cost of a purchased property comprises its purchase price and any directly attributable expenditure. Transaction costs are included in the initial measurement. Fair value is determined in accordance with the Trust Deed, which requires the investment properties to be valued by independent registered valuers at least once a year in accordance with the CIS Code issued by the MAS. Any increase or decrease on revaluation is credited or charged to the statement of total return as a net change in fair value of the investment properties. Subsequent expenditure relating to investment properties that have already been recognised is added to the carrying amount when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset will flow to the Group. All other subsequent expenditure is recognised as an expense in the period in which it is incurred. Delivering Performance | 97 Notes to the Financial Statements 3. SIGNIFICANT ACCOUNTING POLICIES (continued) (d) Investment properties (continued) When an investment property is disposed of, the resulting gain or loss recognised in the statement of total return is the difference between the net disposal proceeds and the carrying amount of the property. Investment properties are not depreciated. The properties are subject to continued maintenance and regularly revalued on the basis set out above. (e) Plant and equipment (i) Recognition and measurement Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. When parts of an item of plant and equipment have different useful lives, they are accounted for as separate items (major components) of plant and equipment. Gains or losses arising from the retirement or disposal of plant and equipment are determined as the difference between the estimated net disposal proceeds and the carrying amount of the asset and are recognised in the statement of total return on the date of retirement or disposal. (ii) Subsequent costs The cost of replacing part of an item of plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The cost of the day-to-day servicing of plant and equipment are recognised in the statement of total return as incurred. (iii) Depreciation Depreciation is provided on a straight-line basis so as to write off items of plant and equipment, and major components that are accounted for separately, over their estimated useful lives as follows: Improvement to premises – 5 years Plant and machinery – 3 to 5 years Motor vehicles – 5 years Furniture, fittings and equipment – 2 to 5 years Depreciation methods, useful lives and residual values are reviewed, and adjusted as appropriate, at each reporting date. 98 | CapitaRetail China Trust Annual Report 2014 3. SIGNIFICANT ACCOUNTING POLICIES (continued) (f) Impairment (i) Financial assets (including receivables) A financial asset not carried at fair value through the statement of total return is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. Objective evidence that financial assets are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor will enter bankruptcy. The Group considers evidence of impairment for receivables at both a specific asset and collective level. All individually significant receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Receivables that are not individually significant are collectively assessed for impairment by grouping together receivables with similar risk characteristics. In assessing collective impairment, the Group uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in the statement of total return and reflected in an allowance account against receivables. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When the Group considers that there are no realistic prospects of recovery of the asset, the relevant amounts are written off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, then the previously recognised impairment loss is reversed through the statement of total return. (ii) Non-financial assets The carrying amounts of the Group’s non-financial assets, other than investment properties, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Delivering Performance | 99 Notes to the Financial Statements 3. SIGNIFICANT ACCOUNTING POLICIES (continued) (f) Impairment (continued) (ii) Non-financial assets (continued) The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”, or “CGU”). An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in the statement of total return. Impairment losses recognised in respect of the CGU are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (g) Unitholders’ funds Unitholders’ funds represent the residual interests in the Group’s net assets upon termination and are classified as equity. Expenses incurred in connection with the issuance of Units in the Trust are deducted directly against the Unitholders’ funds. (h) Employee benefits (i) Defined contribution plans Obligations for contributions to defined contribution pension plans are recognised as an expense in the statement of total return as incurred. (ii) Short-term benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A provision is recognised for the amount expected to be paid under short-term cash bonus if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. 100 | CapitaRetail China Trust Annual Report 2014 3. SIGNIFICANT ACCOUNTING POLICIES (continued) (i) Distribution policy The Trust’s distribution policy is to distribute at least 90.0% of its distributable income in each financial year to Unitholders, other than from the sale of properties that are determined by Inland Revenue Authority of Singapore to be trading gains. (j) Revenue recognition (i) Rental income Rental income receivable under operating leases is recognised on a straight-line basis over the term of the lease, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased assets. Lease incentives granted are recognised as an integral part of the total rental to be received. Contingent rentals, which include gross turnover rental, are recognised as income in the accounting period on an earned basis. No contingent rental is recognised if there are uncertainties due to the possible return of the amounts received. (ii) Dividend income Dividend income is recognised when the right to receive payment is established. (k) Lease payments Payment made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed. (l) Expenses (i) Property expenses Property expenses are recognised on an accrual basis. (ii) Manager’s management fees, property management fees and Trustee’s fees These are recognised on an accrual basis based on the applicable formula stipulated in Note 1. (m) Finance income and finance costs Finance income comprises interest income recognised in the statement of total return as it accrues, using the effective interest method. Finance costs which comprise interest expense on borrowings and expense incurred in connection with borrowings are recognised in the statement of total return, using the effective interest method over the period of the borrowings. Delivering Performance | 101 Notes to the Financial Statements 3. SIGNIFICANT ACCOUNTING POLICIES (continued) (n) Taxation Taxation on the returns for the year comprises current and deferred tax. Taxation is recognised in the statement of total return except to the extent that it relates to items recognised directly in Unitholders’ fund. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years. Deferred tax is in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for: • temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit; and • temporary differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the unused tax losses and credits can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefits will be realised. Except for the tax exemption as described below, income earned by the Trust will be subject to Singapore income tax at the trustee level at the prevailing corporate tax rate. The Trust is exempted from Singapore income tax under Section 13(12) of the Singapore Income Tax Act on the following income: (i) dividends; and (ii) interest on shareholders’ loans, payable by its subsidiaries in Barbados and Singapore out of underlying rental income derived from the investment properties in China. 102 | CapitaRetail China Trust Annual Report 2014 3. SIGNIFICANT ACCOUNTING POLICIES (continued) (n) Taxation (continued) This exemption is granted subject to certain conditions, including the condition that the Trustee is a tax resident of Singapore. The tax exemption also applies to dividends payable by these subsidiaries out of gains, if any, derived from the disposal of their shares in the subsidiaries in China. (o) Earnings per unit The Group presents basic and diluted earnings per unit (“EPU”) data for its Units. Basic EPU is calculated by dividing the total return attributable to Unitholders of the Group by the weighted average number of ordinary Units outstanding during the period. Diluted EPU is determined by adjusting the total return attributable to Unitholders and the weighted average number of Units outstanding for the effects of all dilutive potential Units. (p) Segment reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision-Makers (“CODMs”). The CODMs has been identified as the Chief Executive Officer (“CEO”) and Head of Finance. Segment results that are reported to the Group CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly financial derivative assets and liabilities, other receivables, cash and cash equivalents, trade and other payables, and interest-bearing borrowings. Segment capital expenditure is the total cost incurred during the year to acquire plant and equipment and capital expenditure on investment properties. (q) New standards, interpretations and revised recommended accounting practice not yet adopted The Group has not applied the following accounting standards (including their consequential amendments) and interpretations that have been issued as of the reporting date but are not yet effective: • FRS 16 Property, plant and equipment • FRS 19 Defined benefit plans: Employee Contributions • FRS 24 Related party disclosures • FRS 40 Investment property • FRS 108 Operating segments • FRS 113 Fair value measurement The initial application of these new standards and amendments to standards is not expected to have a significant effect on the financial statements of the Group. Delivering Performance | 103 Notes to the Financial Statements 4. INVESTMENT PROPERTIES Group 2014 2013 $’000 $’000 2,058,094 1,476,988 – 380,459 12,478 17,973 2,070,572 1,875,420 Changes in fair value 104,829 99,159 Translation differences 75,382 83,515 2,250,783 2,058,094 At beginning of year Acquisition of investment property Expenditure capitalised At the end of year Investment properties are stated at fair value based on valuation performed by independent professional valuers having appropriate recognised professional qualifications and recent experience in the location and category of property being valued. In determining the fair value, the valuers have used valuation methods which involve certain estimates. The Manager reviews the key valuation parameters and underlying data including market-corroborated capitalisation rates, term and reversion rates and discount rates adopted by the valuers and is of the view that the valuation methods and estimates are reflective of the current market conditions. The fair values are based on open market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction wherein the parties had each acted knowledgeably and without compulsion. The valuers have considered valuation techniques including the capitalisation, discounted cash flows and/or term and reversion approaches in arriving at the open market value as at the reporting date. The capitalisation approach capitalises an income stream into a present value using revenue multipliers or single-year capitalisation rates. The discounted cash flow method involves the estimation and projection of an income stream over a period and discounting the income stream with an internal rate of return to arrive at the market value. The term and reversion approach capitalises net rental income on a fully leased basis with regards to the current passing rental income from existing tenancies and potential future reversionary income at the market level. Fair value of the investment properties were based on independent professional full valuations carried out by the following valuers on the dates stated below: Valuers Valuation Date Valuation Date DTZ Debenham Tie Leung International Property Advisers (Shanghai) Co., Ltd. 31 December 2014 – Knight Frank Petty Limited 31 December 2014 – CBRE Pte. Ltd. 31 December 2014 31 December 2013 Colliers International (Hong Kong) Limited 31 December 2014 31 December 2013 104 | CapitaRetail China Trust Annual Report 2014 4. INVESTMENT PROPERTIES (continued) Investment properties comprise retail properties that are held mainly for use by tenants under operating leases. Most leases contain an initial non-cancellable period of within 1 to 3 years (2013: within 1 to 3 years). Contingent rents, representing income based on certain sales achieved by tenants, recognised in the statement of total return during the year amounted to $11.9 million (2013: $7.6 million). 5. PLANT AND EQUIPMENT Improvement to premises $’000 Group Cost At 1 January 2013 Assets acquired Additions Disposal/written off Translation difference on consolidation Plant and machinery $’000 Motor vehicles $’000 371 – – (56) 376 20 8,094 2,387 (46) 335 – (36) 283 10 4 203 500 10,718 309 137 6,452 17,616 2,921 12 1,405 (639) 211 – 48 (51) 145 111 1 (106) 3,469 677 578 (1,353) 6,746 800 2,032 (2,149) 175 12 At 31 December 2013 Charge for the year Disposal/written off Translation difference on consolidation 3,874 1,586 (35) 220 45 (33) 181 8 At 31 December 2014 5,606 Carrying amounts At 1 January 2013 At 31 December 2014 Less: Accumulated depreciation At 1 January 2013 Assets acquired Charge for the year Disposal/written off Translation difference on consolidation 7 201 – (68) 6 5,063 1,989 694 (1,504) Total $’000 6,982 44 1,344 (652) At 31 December 2013 Additions Disposal/written off Translation difference on consolidation 157 155 – (118) Furniture, fittings and equipment $’000 254 6,496 663 (910) 12,573 2,188 2,038 (2,330) 657 15,126 3,050 (1,060) 179 372 3,550 1,050 (843) 7,801 2,697 (966) 4 132 325 240 122 3,889 9,857 4,061 160 12 1,594 5,827 At 31 December 2013 4,220 115 44 2,946 7,325 At 1 January 2014 4,220 115 44 2,946 7,325 At 31 December 2014 5,112 69 15 2,563 7,759 157 16 (55) Delivering Performance | 105 Notes to the Financial Statements 6. INTERESTS IN SUBSIDIARIES Trust 2014 $’000 (a) Unquoted equity, at cost (b) Loans to subsidiaries Non-trade amounts due from subsidiaries (a) 2013 $’000 385,035 385,035 326,428 315,480 382,060 328,052 708,488 643,532 1,093,523 1,028,567 Details of the subsidiaries are as follows: Name of subsidiaries Principal activities Place of incorporation/ business Effective equity held by the Group 2014 2013 % % (i) Direct subsidiaries * CapitaRetail China Investments (B) Pte. Ltd. Investment holding Barbados 100 100 * CapitaRetail China Investments (B) Alpha Pte. Ltd. Investment holding Barbados 100 100 * CapitaRetail China Investments (B) Beta Pte. Ltd. Investment holding Barbados 100 100 * CapitaRetail China Investments (B) Gamma Pte. Ltd. Investment holding Barbados 100 100 ** CapitaRetail China Investments (BVI) Alpha Limited Investment holding British Virgin Islands 100 100 *** Somerset (Wuhan) Investments Pte Ltd Investment holding Singapore 100 100 *** CapitaLand Retail Investments (SY) Pte Ltd Investment holding Singapore 100 100 106 | CapitaRetail China Trust Annual Report 2014 6. INTERESTS IN SUBSIDIARIES (continued) Name of subsidiaries (ii) Principal activities Place of incorporation/ business Property investment China 100 100 Effective equity held by the Group 2014 2013 % % Indirect subsidiaries Subsidiary of CapitaRetail China Investments (B) Pte. Ltd. * CapitaRetail Beijing Wangjing Real Estate Co., Ltd. Subsidiaries of CapitaRetail China Investments (B) Alpha Pte. Ltd. * CapitaRetail Beijing Anzhen Real Estate Co., Ltd. Property investment China 100 100 * CapitaRetail Dragon Mall (Shanghai) Co., Ltd. Property investment China 100 100 * CapitaRetail Beijing Shuangjing Real Estate Co., Ltd. Property investment China 100 100 * CapitaRetail Henan Zhongzhou Real Estate Co., Ltd. Property investment China 100 100 * Huaxin Saihan Huhhot Real Estate Co., Ltd. Property investment China 100 100 Property investment China 100 100 Subsidiary of CapitaRetail China Investments (B) Beta Pte. Ltd. * CapitaRetail Beijing Xizhimen Real Estate Co., Ltd. Delivering Performance | 107 Notes to the Financial Statements 6. INTERESTS IN SUBSIDIARIES (continued) Name of subsidiaries (ii) Principal activities Place of incorporation/ business Property investment China 51 51 Property investment China 100 100 Property investment China 100 100 Effective equity held by the Group 2014 2013 % % Indirect subsidiaries (continued) Subsidiary of CapitaRetail China Investments (B) Gamma Pte. Ltd. * CapitaMalls Wuhu Commercial Property Co., Ltd. Subsidiary of Somerset (Wuhan) Investments Pte Ltd * Wuhan New Minzhong Leyuan Co., Ltd. Subsidiary of CapitaLand Retail Investments (SY) Pte Ltd * Beijing Huakun Real Estate Management Co., Ltd. * ** *** Audited by other member firms of KPMG International. This subsidiary is not required to be audited by the laws of the country of incorporation. Audited by KPMG LLP Singapore. (b) The loans to subsidiaries, amounting to $326.4 million (2013: $315.5 million) and the non-trade amounts due from subsidiaries amounting to $363.4 million (2013: $310.1 million) are unsecured and settlement is neither planned nor likely to occur in the foreseeable future. As these amounts are, in substance, a part of the Trust’s net investments in the subsidiaries, they are stated at cost, less accumulated impairment. The remaining $18.7 million (2013: $18.0 million) of the non-trade amounts due from subsidiaries are unsecured, interest-free and repayable on demand. The loans to subsidiaries bear interest fixed at 7.5% (2013: 7.5%). 108 | CapitaRetail China Trust Annual Report 2014 7. TRADE AND OTHER RECEIVABLES Trade receivables Impairment losses Group 2014 $’000 2013 $’000 Trust 2014 $’000 2,302 2,653 – – – – (141) (351) 2013 $’000 2,161 2,302 – – Other receivables 2,549 2,840 201 219 Deposits 1,150 1,104 – – Loans and receivables 5,860 6,246 201 219 Prepayments 5,487 5,125 – 5 11,347 11,371 201 224 Concentration of credit risk relating to loans and receivables is limited due to the Group’s many varied tenants located in several cities in China and the credit policy of obtaining security deposits from tenants for leasing the Group’s investment properties. These tenants comprise retailers engaged in a wide variety of consumer trades. The maximum exposure to credit risk for loans and receivables at the reporting date (by geographical area in China) is: Group 2014 2013 $’000 $’000 31 32 Beijing 3,626 4,483 Shanghai 1,277 1,212 725 300 5,659 6,027 Inner Mongolia Others Delivering Performance | 109 Notes to the Financial Statements 7. TRADE AND OTHER RECEIVABLES (continued) Impairment losses The ageing of loans and receivables at the reporting date is: Gross 2014 $’000 2013 $’000 Impairment 2014 2013 $’000 $’000 4,460 4,278 – – Past due 1 – 30 days 369 1,074 – – Past due 31 – 60 days 297 410 – 3 Past due 61 – 90 days 225 132 – – More than 90 days past due 650 703 141 348 6,001 6,597 141 351 Group Not past due Gross 2014 $’000 2013 $’000 Impairment 2014 2013 $’000 $’000 Trust Not past due 201 219 – – The movement in the allowance for impairment in respect of trade receivables during the year is as follows: Note At 1 January Impairment losses/(write-back) on trade receivables, net Provision acquired Allowance utilised Translation difference At 31 December 17 Group 2014 $’000 2013 $’000 351 163 28 (58) – (244) 332 (94) 6 8 141 351 The majority of the trade receivables are mainly from tenants that have good credit records with the Group. The allowance account in respect of trade receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible; at that point the amounts are considered irrecoverable and are written off against the financial asset directly. During the year ended 31 December 2014, the Group collected $0.1 million (2013: $0.1 million) of its impaired trade receivables. 110 | CapitaRetail China Trust Annual Report 2014 7. TRADE AND OTHER RECEIVABLES (continued) Impairment losses (continued) The Group’s historical experience in the collection of loans and receivables falls within the recorded allowances. The Manager believes that no additional credit risk beyond the amounts provided for collection losses is inherent in the Group’s loans and receivables, based on historical payment behaviours and the security deposits held (if applicable). 8. CASH AND CASH EQUIVALENTS Group 2014 $’000 9. 2013 $’000 Trust 2014 $’000 2013 $’000 Cash at banks and in hand 58,992 71,311 238 249 Fixed deposits with financial institutions 27,634 34,146 – – 86,626 105,457 238 249 TRADE AND OTHER PAYABLES Group 2014 $’000 Trade payable 2013 $’000 Trust 2014 $’000 2013 $’000 650 802 – 63 11,187 12,463 2,582 3,047 Accrued development expenditure 7,528 9,893 – – Amounts due to related parties (trade) 2,344 5,214 1,467 4,677 – – – 17 24,069 23,502 – – Interest payable 1,564 1,745 1,337 1,256 Other payables 3,798 4,100 – – 51,140 57,719 5,386 9,060 Accrued operating expenses Amount due to subsidiary (trade) Other deposits and advances Included in amounts due to related parties (trade) are amounts due to the Manager, Property and Project Managers of $1.5 million (2013: $4.7 million), $0.7 million (2013: $0.5 million) and $nil (2013: $14,000) respectively. Delivering Performance | 111 Notes to the Financial Statements 10. INTEREST-BEARING BORROWINGS Note Group 2014 $’000 2013 $’000 Trust 2014 $’000 2013 $’000 Unsecured term loans (a) 538,503 456,465 538,503 435,503 Secured loans (b) 104,890 216,993 – – Money market facilities 29,500 40,000 29,500 40,000 Less: Unamortised transactions costs (1,180) (1,120) (1,180) (1,120) 671,713 (a) 712,338 566,823 474,383 As at 31 December 2014, unsecured term loans comprise $100.0 million, $88.0 million, $50.5 million, three $50.0 million, two $75.0 million fixed/floating rate trust term loans (collectively known as “Trust Term Loan Facilities”). These facilities have negative pledge covenants which require the Trust, amongst others: (i) not to, without the prior written consent of the lender, create or have outstanding any security on or over the Group’s interest in any of the investment properties; (ii) in the event of a sale of any of the investment properties, to repay an amount equal to the proportion of the market value of the investment properties sold to the total market value of the investment properties as determined by the lender based on the latest annual valuation reports of the investment properties; and (iii) not to provide any guarantee for any other entities except for secured borrowings for new investment properties acquired with existing mortgages. The Trust Term Loan Facilities are repayable in full at maturity, although the Trust has the option to make early prepayments. In respect of the unsecured RMB term loan, 20% of the original RMB term loan principal of RMB128.0 million was repayable on a semi-annual basis in equal instalments starting in 2012 and the remaining was fully repaid on full maturity of the term loan on 30 June 2014. (b) At the reporting date, secured loans comprise of a RMB term loan of $104.9 million (RMB495.0 million) (2013: $106.5 million (RMB520.0 million)) and a RMB bridge loan of $nil (2013: $110.5 million (RMB540.0 million)). Interest rates for the term loan bear interest referenced against the 3 to 5 years People’s Bank of China (“PBOC”) base lending rate and 1 year PBOC base lending rate for the bridge loan. As security for the loans, the Trust has granted in favour of the lender the following: (i) a mortgage over CapitaMall Grand Canyon; (ii) an assignment of the rental revenue of CapitaMall Grand Canyon; and (iii) an assignment of the insurance policies relating to CapitaMall Grand Canyon. 112 | CapitaRetail China Trust Annual Report 2014 10. INTEREST-BEARING BORROWINGS (continued) In respect of the secured RMB term loan, RMB12.5 million is payable on a semi-annual basis from June 2014. The outstanding loan balance of RMB407.5 million is payable in full upon maturity on 19 December 2018. The RMB bridge loan of RMB540.0 million was fully repaid in 2014. Terms and debt repayment schedule Terms and conditions of the outstanding interest-bearing borrowings are as follows: Nominal interest rate per annum % Year of maturity Face value $’000 Carrying amount $’000 1.54 2015 29,500 29,500 S$ unsecured floating rate loan 1.85 – 1.91 2015 88,000 87,996 S$ unsecured fixed rate loan 2.35 – 2.45 2016 50,000 49,946 S$ unsecured floating rate loan 1.37 – 1.84 2016 50,000 49,929 S$ unsecured floating rate loan 1.52 – 2.00 2017 50,503 50,381 S$ unsecured floating rate loan 1.31 – 1.59 2017 75,000 74,775 2.75 2018 50,000 49,829 RMB secured floating rate term loan 6.00 – 6.40 2018 104,890 104,890 S$ unsecured floating rate loan 1.46 – 1.71 2019 75,000 74,713 S$ unsecured floating rate loan 1.65 2020 100,000 99,754 672,893 671,713 2014 Group S$ unsecured floating rate money market facility S$ unsecured fixed rate loan Delivering Performance | 113 Notes to the Financial Statements 10. INTEREST-BEARING BORROWINGS (continued) Terms and debt repayment schedule (continued) Nominal interest rate per annum % Year of maturity Face value $’000 Carrying amount $’000 1.54 2015 29,500 29,500 S$ unsecured floating rate loan 1.85 – 1.91 2015 88,000 87,996 S$ unsecured fixed rate loan 2.35 – 2.45 2016 50,000 49,946 S$ unsecured floating rate loan 1.37 – 1.84 2016 50,000 49,929 S$ unsecured floating rate loan 1.52 – 2.00 2017 50,503 50,381 S$ unsecured floating rate loan 1.31 – 1.59 2017 75,000 74,775 2.75 2018 50,000 49,829 S$ unsecured floating rate loan 1.46 – 1.71 2019 75,000 74,713 S$ unsecured floating rate loan 1.65 2020 100,000 99,754 568,003 566,823 Trust S$ unsecured floating rate money market facility S$ unsecured fixed rate loan 2013 Group S$ unsecured floating rate money market facility 1.04 – 1.25 2014 40,000 40,000 S$ unsecured floating/fixed rate loan 1.41 – 2.66 2014 100,000 99,908 RMB unsecured floating rate term loan 6.77 2014 20,962 20,962 RMB secured floating rate bridge loan 6.00 2014 110,544 110,544 S$ unsecured floating rate loan 1.85 – 1.98 2015 88,000 87,952 S$ unsecured fixed rate loan 2.35 – 2.45 2016 50,000 49,896 S$ unsecured floating rate loan 1.36 – 1.40 2016 50,000 49,879 S$ unsecured floating rate loan 1.51 – 1.55 2017 50,503 50,331 S$ unsecured fixed rate loan 2.75 2018 50,000 49,779 S$ unsecured floating rate loan 1.51 2018 47,000 46,638 RMB secured floating rate term loan 6.40 2018 106,449 106,449 713,458 712,338 114 | CapitaRetail China Trust Annual Report 2014 10. INTEREST-BEARING BORROWINGS (continued) Terms and debt repayment schedule (continued) Nominal interest rate per annum % Year of maturity Face value $’000 Carrying amount $’000 Trust S$ unsecured floating rate money market facility 1.04 – 1.25 2014 40,000 40,000 S$ unsecured floating/fixed rate loan 1.41 – 2.66 2014 100,000 99,908 S$ unsecured floating rate loan 1.85 – 1.98 2015 88,000 87,952 S$ unsecured fixed rate loan 2.35 – 2.45 2016 50,000 49,896 S$ unsecured floating rate loan 1.36 – 1.40 2016 50,000 49,879 S$ unsecured floating rate loan 1.51 – 1.55 2017 50,503 50,331 S$ unsecured fixed rate loan 2.75 2018 50,000 49,779 S$ unsecured floating rate loan 1.51 2018 47,000 46,638 475,503 474,383 The following are the contractual maturities of non-derivative financial liabilities, including estimated interest payments and excluding the impact of netting agreements: Carrying amount Contractual cash flow Within 1 year Within 2 to 5 years After 5 years $’000 $’000 $’000 $’000 $’000 S$ unsecured floating rate money market facility 29,500 (29,541) (29,541) – – S$ unsecured floating rate loan 87,996 (88,410) (88,410) – – S$ unsecured fixed rate loan 49,946 (51,721) (1,182) (50,539) – S$ unsecured floating rate loan 49,929 (51,474) (945) (50,529) – S$ unsecured floating rate loan 50,381 (53,622) (1,030) (52,592) – 2014 Group S$ unsecured floating rate loan 74,775 (80,500) (1,378) (79,122) – S$ unsecured fixed rate loan 49,829 (54,640) (1,375) (53,265) – RMB secured floating rate term loan 104,890 (128,173) (11,597) (116,576) – S$ unsecured floating rate loan 74,713 (84,147) (1,484) (82,663) S$ unsecured floating rate loan 99,754 (116,347) (1,924) (13,978) Trade and other payables (Note 9) 51,140 (51,140) (51,140) Security deposits 41,158 (41,158) (15,309) (21,643) (4,206) 764,011 (830,873) (205,315) (520,907) (104,651) – – (100,445) – Delivering Performance | 115 Notes to the Financial Statements 10. INTEREST-BEARING BORROWINGS (continued) Terms and debt repayment schedule (continued) Carrying amount Contractual cash flow Within 1 year Within 2 to 5 years After 5 years $’000 $’000 $’000 $’000 $’000 29,500 (29,541) (29,541) – – Trust S$ unsecured floating rate money market facility S$ unsecured floating rate loan 87,996 (88,410) (88,410) S$ unsecured fixed rate loan 49,946 (51,721) (1,182) (50,539) – S$ unsecured floating rate loan 49,929 (51,474) (945) (50,529) – S$ unsecured floating rate loan 50,381 (53,622) (1,030) (52,592) – S$ unsecured floating rate loan 74,775 (80,500) (1,378) (79,122) – S$ unsecured fixed rate loan 49,829 (54,640) (1,375) (53,265) – S$ unsecured floating rate loan 74,713 (84,147) (1,484) (82,663) S$ unsecured floating rate loan 99,754 (116,347) (1,924) (13,978) 5,386 (5,386) (5,386) 572,209 (615,788) (132,655) S$ unsecured floating rate money market facility 40,000 (40,073) (40,073) – – S$ unsecured floating/fixed rate loan 99,908 (101,564) (101,564) – – RMB unsecured floating rate term loan 20,962 (21,663) (21,663) – – RMB secured floating rate bridge loan 110,544 (117,158) (117,158) – – S$ unsecured floating rate loans 234,800 (251,106) (3,913) (247,193) – 99,675 (106,067) (2,550) (103,517) – 106,449 (136,760) (11,830) (124,930) – Trade and other payables (Note 9) 57,719 (57,719) (57,719) Security deposits 34,980 (34,980) (13,034) (20,121) (1,825) 805,037 (867,090) (369,504) (495,761) (1,825) Trade and other payables (Note 9) – – (382,688) – – (100,445) – (100,445) 2013 Group S$ unsecured fixed rate loans RMB secured floating rate term loan 116 | CapitaRetail China Trust Annual Report 2014 – – 10. INTEREST-BEARING BORROWINGS (continued) Terms and debt repayment schedule (continued) Carrying amount Contractual cash flow Within 1 year Within 2 to 5 years After 5 years $’000 $’000 $’000 $’000 $’000 S$ unsecured floating rate money market facility 40,000 (40,073) (40,073) – – S$ unsecured floating/fixed rate loan 99,908 (101,564) (101,564) – – S$ unsecured floating rate loans 234,800 (251,106) (3,913) (247,193) – 99,675 (106,067) (2,550) (103,517) – 9,060 (9,060) (9,060) 483,443 (507,870) (157,160) Trust S$ unsecured fixed rate loans Trade and other payables (Note 9) – (350,710) – – It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts. 11. FINANCIAL DERIVATIVES Group and Trust 2014 2013 $’000 $’000 Financial derivative assets Financial derivative liabilities 1,547 2,044 (8,605) (5,208) The following are the contractual maturities of financial derivative assets and liabilities, including estimated interest payments: Carrying amount $’000 Contractual cash flow $’000 1,481 1,793 66 66 1,547 1,859 Within 1 year $’000 Within 2 to 5 years $’000 Group and Trust Financial derivative assets 2014 Interest rate swaps Non-deliverable forward (1,111) – (1,111) 2,904 66 2,970 Delivering Performance | 117 Notes to the Financial Statements 11. FINANCIAL DERIVATIVES (continued) Carrying amount $’000 Contractual cash flow $’000 Within 1 year $’000 Within 2 to 5 years $’000 302 322 1,742 1,742 1,742 – 2,044 2,064 1,172 892 2013 Interest rate swaps Non-deliverable forward (570) 892 Financial derivative liabilities 2014 Interest rate swaps (19) (48) (48) (8,586) (8,586) (5,669) (2,917) (8,605) (8,634) (5,717) (2,917) Interest rate swaps (1,090) (1,261) (1,388) Non-deliverable forward (4,118) (4,118) (1,286) (2,832) (5,208) (5,379) (2,674) (2,705) Non-deliverable forward – 2013 127 It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts. The table also indicates the periods in which the cash flows associated with derivatives that are expected to occur and impact the statement of total return and Unitholders’ funds. 118 | CapitaRetail China Trust Annual Report 2014 12. DEFERRED TAX LIABILITIES Movements in deferred tax liabilities during the financial year are as follows: At 1 January $’000 Statement of total return (Note 21) $’000 Acquired on acquisition of investment property $’000 Translation difference $’000 At 31 December $’000 154,876 34,364 – 8,722 197,962 4,744 2,217 – – 6,961 159,620 36,581 – 8,722 204,923 114,258 28,116 4,123 8,379 154,876 – 4,744 – – 4,744 114,258 32,860 4,123 8,379 159,620 Group 2014 Investment properties Tax on unrepatriated profits 2013 Investment properties Tax on unrepatriated profits Deferred tax assets have not been recognised in respect of the following item because it is not probable that future taxable profit will be available against which the Group can utilise the benefits therefrom: Group 2014 $’000 Tax losses 48,500 2013 $’000 51,106 The tax losses are subject to agreement by the tax authorities and compliance with tax regulations in the country in which the subsidiaries operate. These tax losses can be carried forward up to five consecutive years and will expire on the fifth year from which the tax losses arise. Delivering Performance | 119 Notes to the Financial Statements 13. UNITHOLDERS’ FUNDS Note Net assets resulting from operations Group 2014 $’000 768,262 2013 $’000 627,908 14,662 4,522 (a) 1,459 Foreign currency translation reserve (b) 66,043 9,981 – – 498,559 538,683 498,559 538,683 15,415 11,171 – – 1,349,738 1,186,951 514,680 542,413 General reserve (a) (c) 1,459 2013 $’000 Hedging reserve Unitholders’ transactions (792) Trust 2014 $’000 (792) The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments relating to forecast hedged transactions. (b) The foreign currency translation reserve comprises: (i) foreign exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from the functional currency of the Trust; (ii) the gains or losses on financial instruments used to hedge the Group’s net investment in foreign operations that are determined to be effective hedges; and (iii) the foreign exchange differences on monetary items which form part of the Group’s net investment in foreign operations, provided certain conditions are met. (c) General reserve The subsidiaries incorporated in China are required to transfer 10% of their profits after taxation, as determined under the accounting principles and relevant financial regulations of China to the general reserve until the reserve balance reaches 50% of registered capital. The transfer to this reserve must be made before distribution of dividends to its shareholders. General reserve can be used to make good previous years’ losses, if any, and may be converted to registered capital in proportion to the existing interests of the shareholders, provided that the balance after such conversion is not less than 25% of the registered capital. 120 | CapitaRetail China Trust Annual Report 2014 14. NON-CONTROLLING INTEREST The following summarises the financial information of the Group’s significant subsidiary with material non-controlling interest. At the reporting date, the Group only had one subsidiary with significant non-controlling interest of 49% (2013: 49%), CapitaMalls Wuhu Commercial Property Co., Ltd.. Group 2014 $’000 2013 $’000 58,980 55,225 5,790 6,727 Non-current liabilities (20,576) (25,311) Current liabilities (23,882) (19,128) 20,312 17,513 9,952 8,581 Add non-controlling interest loans in respect of the Group’s investment in a subsidiary in China: 18,126 18,333 Net assets attributable to non-controlling interest 28,078 26,914 Revenue 6,802 7,043 Total return after taxation 2,007 4,553 Total return after taxation 983 2,231 Add interest relating to non-controlling interest loans in respect of the Group’s investment in a subsidiary in China: 774 799 Total return allocated to non-controlling interest 1,757 3,030 Cash flows from operating activities 1,211 2,479 2014 Non-current assets Current assets Net assets Net assets based on percentage shareholdings Attributable to non-controlling interest: Cash flows used in investing activities (136) (199) Cash flows used in financing activities (2,376) (2,163) Net (decrease)/increase in cash and cash equivalents (1,301) 117 There are no dividends paid to non-controlling interest in 2014 and 2013. Delivering Performance | 121 Notes to the Financial Statements 15. UNITS IN ISSUE 2014 Number of Units 2013 Number of Units 803,026,588 748,909,649 – as payment of Manager’s management fees 3,468,568 2,669,258 – as payment of acquisition fee of CapitaMall Grand Canyon 2,735,125 – – 45,413,704 18,887,423 6,033,977 828,117,704 803,026,588 844,273 786,472 828,961,977 803,813,060 Balance as at beginning of year New Units issued: – in connection with preferential offering exercise completed on 20 November 2013 – as payment of distribution under distribution reinvestment plan Total issued Units as at end of year New Units to be issued: – as payment of Manager’s management fees Total issued and issuable Units as at end of year Units issued during the year ended 31 December 2014 are as follows: (a) On 10 February 2014, the Trust issued 2,735,125 new Units at an issue price of $1.3023 per Unit as payment of the related acquisition fees of CapitaMall Grand Canyon; (b) On 27 March 2014, the Trust issued 11,408,589 new Units at an issue price of $1.276 per Unit as payment of distribution under distribution reinvestment plan for the period from 1 July 2013 to 31 December 2013; (c) On 31 March 2014, the Trust issued 786,472 new Units at an issue price of $1.311 per Unit as payment of the performance component of the management fee for the period from 1 October 2013 to 31 December 2013; (d) On 5 June 2014, the Trust issued 933,248 new Units at an issue price of $1.3861 per Unit as payment of the performance component of the management fee for the period from 1 January 2014 to 31 March 2014; (e) On 25 September 2014, the Trust issued 7,478,834 new Units at an issue price of $1.617 per Unit as payment of distribution under distribution reinvestment plan for the period from 1 January 2014 to 30 June 2014; (f) On 29 September 2014, the Trust issued 930,416 new Units at an issue price of $1.4709 per Unit as payment of the performance component of the management fee for the period from 1 April 2014 to 30 June 2014; (g) On 25 November 2014, the Trust issued 818,432 new Units at an issue price of $1.5769 per Unit as payment of the performance component of the management fee for the period from 1 July 2014 to 30 September 2014. 122 | CapitaRetail China Trust Annual Report 2014 15. UNITS IN ISSUE (continued) Units issued during the year ended 31 December 2013 are as follows: (a) On 28 March 2013, the Trust issued 594,927 new Units at an issue price of $1.6251 per Unit as payment of the performance component of the management fee for the period from 1 October 2012 to 31 December 2012; (b) On 6 June 2013, the Trust issued 601,471 new Units at an issue price of $1.7203 per Unit as payment of the performance component of the management fee for the period from 1 January 2013 to 31 March 2013; (c) On 25 September 2013, the Trust issued 6,033,977 new Units at an issue price of $1.447 per Unit as payment of distribution under distribution reinvestment plan for the period from 1 January 2013 to 30 June 2013; (d) On 30 September 2013, the Trust issued 755,049 new Units at an issue price of $1.3993 per Unit as payment of the performance component of the management fee for the period from 1 April 2013 to 30 June 2013; (e) On 20 November 2013, the Trust issued 45,413,704 new Units at an issue price of $1.30 per Unit in connection with the preferential offering exercise to finance the acquisition of CapitaMall Grand Canyon; and (f) On 29 November 2013, the Trust issued 717,811 new Units at an issue price of $1.392 per Unit as payment of the performance component of the management fee for the period from 1 July 2013 to 30 September 2013. The issue prices were determined based on the volume weighted average traded price for all trades done on the SGX-ST in the ordinary course of trading for the last 10 business days of the relevant periods in which the management fees accrue. Each Unit in the Trust represents an undivided interest in the Trust. The rights and interests of Unitholders are contained in the Trust Deed and include the right to: • one vote per Unit; • receive income and other distributions attributable to the Units held; • participate in the termination of the Trust by receiving a share of all net cash proceeds derived from the realisation of the assets of the Trust less any liabilities, in accordance with their proportionate interests in the Trust. However, a Unitholder has no equitable or proprietary interest in the underlying assets of the Trust and is not entitled to the transfer to it of any assets (or part thereof) or any estate or interest in any asset (or part thereof) of the Trust; and • attend all Unitholders’ meetings. The Trustee or the Manager may (and the Manager shall at the request in writing of not less than 50 Unitholders or one-tenth in number of Unitholders, whichever is lesser) at any time convene a meeting of Unitholders in accordance with the provisions of the Trust Deed. Delivering Performance | 123 Notes to the Financial Statements 15. UNITS IN ISSUE (continued) The restrictions of a Unitholder include the following: • a Unitholder’s right is limited to the right to require due administration of the Trust in accordance with the provisions of the Trust Deed; and • a Unitholder has no right to request the Manager to redeem his Units while the Units are listed on the SGX-ST. A Unitholder’s liability is limited to the amount paid or payable for any unit in the Trust. The provisions of the Trust Deed provide that no Unitholder will be personally liable to indemnify the Trustee or any creditor of the Trustee in the event that the liabilities of the Trust exceed its assets. 16. TOTAL UNITHOLDERS’ DISTRIBUTION Unitholders’ distribution for the year is accounted for as distribution from operations and distribution from Unitholders’ contributions: (a) Distribution from operations This refers to distribution made by the Trust that is represented by income received or receivable during the financial year, as the case may be, net of expenses. Such income comprises mainly the following: • dividend from subsidiaries in Barbados and Singapore paid out of dividend declared by the subsidiaries in China; • dividend from subsidiaries in Barbados and Singapore paid out of net interest income earned by subsidiaries in Barbados and Singapore on shareholders’ loans extended to subsidiaries in China; and • interest income earned by the Trust on shareholders’ loans extended to subsidiaries in Barbados and Singapore. The above income originates from profits and income derived by the subsidiaries in China in respect of the current financial year. (b) Distribution from Unitholders’ contributions This refers to the amount of distribution made by the Trust for the financial year where the underlying cash is not, or may not be, received or receivable as income by the Trust during that period. Such distribution comprises mainly the following: • profits from operations arising from the investment properties which are declared as dividend income after the financial year, as the case may be, and accordingly also received as dividends by the Trust after that year; • profits from operations arising from the investment properties which cannot be declared as dividends; • adjustment for depreciation expenses of the investment properties; and 124 | CapitaRetail China Trust Annual Report 2014 16. TOTAL UNITHOLDERS’ DISTRIBUTION (continued) (b) Distribution from Unitholders’ contributions (continued) • adjustments for trust expenses that are paid in Units, foreign currency differences attributable to net investment hedges undertaken by the Trust and certain unrealised expenses. Income available for distribution to Unitholders at end of the year Distributions are made on a semi-annual basis, with the amount calculated as at 30 June and 31 December each year for the six-month period ending on each of the said dates. In accordance with the provisions of the Trust Deed, the Manager is required to pay distributions within 90 days of the end of each distribution period. Distributions, when paid, will be in Singapore dollars. Distributions for the period from 1 January 2014 to 30 June 2014 had been paid on 25 September 2014. Distributions for the period from 1 July 2014 to 31 December 2014 will be paid within 90 days of the end of the distribution period, in accordance with the provisions of the Trust Deed. 17. OTHER PROPERTY OPERATING EXPENSES Group 2014 $’000 2013 $’000 Utilities 7,223 5,304 Advertising and promotion 3,989 3,447 Maintenance 7,925 6,088 Staff costs 9,060 7,311 2,032 Note Depreciation of plant and equipment 5 2,697 Impairment losses/(write-back) on trade receivables, net 7 28 (58) Amortisation of deferred expenditure included in other receivables 57 56 Plant and equipment written off 81 176 1,924 1,468 32,984 25,824 Others Included in staff costs is contribution to defined contribution plans of $1.7 million (2013: $1.4 million). Delivering Performance | 125 Notes to the Financial Statements 18. MANAGER’S MANAGEMENT FEES Manager’s management fees comprise base fee of $5.5 million (2013: $4.3 million) and performance fee of $5.3 million (2013: $4.1 million). The Manager has elected to receive all the performance fee in the form of Units. $4.0 million (2013: $3.1 million) of the $5.3 million (2013: $4.1 million) of performance component of the Manager’s management fee was paid during the year through the issue of 2,682,096 Units (2013: 2,074,331 Units). The remaining $1.3 million (2013: $1.0 million) will be paid through the issue of 844,273 new Units (2013: 786,472 new Units) subsequent to the year end. 19. OTHER TRUST OPERATING EXPENSES/(INCOME) Group 2014 $’000 2013 $’000 Trust 2014 $’000 2013 $’000 Professional fees 191 321 28 136 Acquisition related expenses 888 – – – Non-deal roadshow expenses 10 – 10 – 1,062 105 499 (401) 2,151 426 537 (265) Others 20. FINANCE INCOME AND FINANCE COSTS Group 2014 $’000 2013 $’000 Trust 2014 $’000 2013 $’000 Interest income: – financial institutions 874 1,133 29 119 – – 24,376 24,091 874 1,133 24,405 24,210 (21,212) (10,987) (11,980) (9,442) (714) (342) (490) (342) Finance costs (21,926) (11,329) (12,470) (9,784) Net finance (costs)/income recognised in statement of total return (21,052) (10,196) 11,935 14,426 – subsidiaries Finance income Interest expenses Other finance costs 126 | CapitaRetail China Trust Annual Report 2014 21. TAXATION Note Group 2014 $’000 2013 $’000 Trust 2014 $’000 16,607 – 15 8 5 2013 $’000 Current taxation Current year 19,487 Under/(over) provision in prior years 1,041 (962) 20,528 15,645 8 20 36,581 32,860 – – 57,109 48,505 8 20 2013 $’000 Trust 2014 $’000 Deferred taxation Origination of temporary differences 12 Income tax expense Reconciliation of effective tax rate Group 2014 $’000 Total return for the year before taxation Tax calculated using Singapore tax rate of 17% 2013 $’000 203,464 184,453 10,148 14,057 34,589 31,357 1,725 2,390 10,157 8,310 – – Adjustments: Effect of different tax rates in foreign jurisdictions Income not subject to tax Expenses not deductible for tax purposes Deferred tax assets not recognised Utilisation of previously unrecognised tax losses (27) (401) (6,959) (9,917) – – 1,186 4,273 562 – – – – – – (3,196) Tax losses not allowed to be carried forward 4,049 3,270 4,048 3,269 Foreign tax suffered 6,738 10,127 – – Under/(over) provision in prior years 1,041 8 5 8 20 57,109 (962) 48,505 Delivering Performance | 127 Notes to the Financial Statements 22. EARNINGS PER UNIT The calculation of basic earnings per unit is based on weighted average number of Units during the year and total return for the year after taxation and non-controlling interest before distribution. Group 2014 Total return for the year after taxation and non-controlling interest before distribution 2013 $’000 $’000 144,598 132,918 Trust Number Number of Units of Units 2014 2013 ’000 ’000 Issued Units at beginning of year Effect of creation of new Units: – Manager’s management fees paid/payable in Units – As payment of acquisition fee of CapitaMall Grand Canyon – Units issued in connection with preferential offering exercise completed on 20 November 2013 – As payment of distribution under distribution reinvestment plan Weighted average number of issued and issuable Units at end of year 803,027 748,910 13,876 337 6,362 – – 372 3,332 79 817,612 758,683 Diluted earnings per unit is the same as the basic earnings per unit as there are no dilutive instruments in issue during the year. Group 2014 $’000 Amount available for distribution to Unitholders at end of the year 80,882 2013 $’000 70,060 23. RELATED PARTY TRANSACTIONS For the purposes of these financial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common significant influence. Related parties may be individuals or other entities. The Manager, being CapitaRetail China Trust Management Limited is an indirect wholly-owned subsidiary of a substantial Unitholder of the Trust. The Property and Project Managers, being CapitaLand Retail (Shanghai) Management & Consulting Co., Ltd. and CapitaLand Retail (Beijing) Facilities & Projects Consulting Co., Ltd. are indirect wholly-owned subsidiaries of a substantial Unitholder of the Trust. 128 | CapitaRetail China Trust Annual Report 2014 23. RELATED PARTY TRANSACTIONS (continued) In the normal course of the operations of the Trust, the Manager’s management fees and the Trustee’s fees have been paid or are payable to the Manager and Trustee respectively. The property management fees, reimbursables and project management fees have been paid or are payable to the Property and Project Managers respectively. 24. FINANCIAL RATIOS Ratio of expenses to average net asset value 1 – including performance component of Manager’s management fees – excluding performance component of Manager’s management fees Portfolio turnover rate 2 Group 2014 % 2013 % 1.03 0.89 0.61 – 0.52 – Notes: 1 The annualised ratio is computed in accordance with the guidelines of the Investment Management Association of Singapore. The expenses used in the computation relate to expenses at the Group level, excluding property related expenses and borrowing costs. 2 The annualised ratio is computed based on the lesser of purchases or sales of underlying investment properties of the Group expressed as a percentage of weighted average net asset value. 25. OPERATING SEGMENTS The Group has ten reportable segments, as described below, which are the Group’s investment properties. The investment properties are managed separately because they require different operating and marketing strategies. For each of the investment properties, the CODMs review internal management reports on a monthly basis. All of the Group’s reportable segments are investment properties located in China used primarily for retail purposes. The reporting segments are as follows: • • • • • • • • • • CapitaMall CapitaMall CapitaMall CapitaMall CapitaMall CapitaMall CapitaMall CapitaMall CapitaMall CapitaMall Xizhimen Wangjing Grand Canyon Anzhen Erqi Minzhongleyuan Shuangjing Qibao Saihan Wuhu Segment revenue comprises mainly income generated from its tenants. Segment net property income represents the income earned by each segment after allocating property operating expenses. This is the measure reported to the CODMs for the purpose of assessment of segment performance. In addition, the CODMs monitor the non-financial assets as well as financial assets attributable to each segment when assessing segment performance. Delivering Performance | 129 Notes to the Financial Statements 25. OPERATING SEGMENTS (continued) Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly the Trust’s financial assets and liabilities and its expenses. Segment capital expenditure is the total cost incurred during the year to acquire segment assets that are expected to be used for more than one year. Information regarding the Group’s reportable segments is presented in the tables in the following pages. For the purpose of monitoring segment performance, the Group’s CODMs monitor the non-financial assets as well as financial assets attributable to each segment. 130 | CapitaRetail China Trust Annual Report 2014 Delivering Performance | 131 Capital expenditure (925) 36,162 – Write-back/(impairment losses) on trade receivables, net Net change in fair value of investment properties (796) 81,993 609,155 74,322 – Depreciation and amortisation Other segment items: Segment liabilities Segment assets Reportable segment total return before taxation Finance costs 203 37,988 Segment net property income Finance income 53,978 3,723 50,255 – Gross revenue – Others – Gross rental income External revenues: (1,741) 29,647 19 (784) 66,678 548,622 62,573 – 220 32,649 48,596 3,155 45,441 $’000 $’000 (1,508) 29,872 – (613) 80,052 449,088 60,038 – 146 29,557 41,100 3,158 37,942 2013 (719) 42,251 – (562) 66,071 423,837 68,547 – 255 26,007 36,871 3,677 33,194 $’000 2014 2013 2014 $’000 CapitaMall Wangjing CapitaMall Xizhimen Information about reportable segments 25. OPERATING SEGMENTS (continued) (1,348) 13,098 110 (606) 131,578 422,550 20,248 (9,709) 58 17,815 28,430 3,384 25,046 $’000 2014 – – – – 235,185 396,192 – – – – – – – $’000 2013 CapitaMall Grand Canyon – 4,940 – (44) 28,097 214,877 18,114 (717) 97 13,777 16,794 6 16,788 $’000 2014 2013 (98) 1,716 – (45) 46,303 207,476 13,613 (1,545) 173 13,319 16,262 1 16,261 $’000 CapitaMall Anzhen (322) 3,004 – (89) 16,632 146,577 11,331 – 43 8,336 10,385 – 10,385 $’000 2014 (71) 1,370 – (80) 14,011 129,896 9,271 – 58 7,963 10,084 25 10,059 $’000 2013 CapitaMall Erqi (4,103) 87,076 110 (2,148) 338,352 1,842,247 184,053 (10,426) 547 107,473 150,687 10,271 140,416 $’000 $’000 2013 (2,629) 74,984 19 (1,471) 428,248 1,706,023 154,004 (1,545) 706 79,938 111,813 6,858 104,955 Sub Total 2014 132 | CapitaRetail China Trust Annual Report 2014 (98) (26) 3,259 (9,710) (Impairment losses)/writeback on trade receivables, net Net change in fair value of investment properties Capital expenditure 11,520 121,898 Depreciation and amortisation Other segment items Segment liabilities Segment assets 3,522 – Finance costs Reportable segment total return before taxation 40 271 5,150 240 4,910 (10,985) 273 (8) (99) 12,105 107,106 903 – 19 675 4,578 292 4,286 $’000 $’000 Finance income Segment net property income – Gross revenue – Others – Gross rental income External revenues: 2013 2014 CapitaMall Minzhongleyuan (149) 2,942 – (10) 16,110 123,405 10,402 – 48 7,529 9,346 15 9,331 $’000 2014 (73) 1,953 – (11) 14,327 117,053 8,896 – 77 7,073 8,866 331 8,535 $’000 2013 CapitaMall Shuangjing 25. OPERATING SEGMENTS (continued) Information about reportable segments (continued) Notes to the Financial Statements (626) 2,101 – (106) 18,840 115,867 11,008 – 125 8,543 19,821 2,173 17,648 $’000 2014 (1,107) 9,451 10 (109) 16,812 110,344 16,764 – 103 7,270 17,813 2,190 15,623 $’000 2013 CapitaMall Qibao (765) 7,679 – (211) 9,747 91,091 14,025 – 49 6,155 11,456 925 10,531 $’000 2014 (209) 7,977 – (228) 4,673 81,952 13,090 – 73 5,171 9,962 839 9,123 $’000 2013 CapitaMall Saihan (175) 1,772 (112) (181) 4,770 61,335 4,247 – 36 2,394 6,802 550 6,252 $’000 2014 (244) 4,521 37 (170) 5,143 58,647 7,704 – 32 2,911 7,043 482 6,561 $’000 2013 CapitaMall Wuhu (11,425) 17,753 (138) (606) 60,987 513,596 43,204 – 298 24,892 52,575 3,903 48,672 $’000 2013 227,257 (10,426) 845 132,365 203,262 14,174 189,088 $’000 2014 201,361 (1,545) 1,010 103,038 160,075 10,992 149,083 $’000 2013 Grand Total (12,618) 24,175 39 (617) 53,060 (15,528) 104,829 (28) (2,754) 399,339 (15,247) 99,159 58 (2,088) 481,308 475,102 2,355,843 2,181,125 47,357 – 304 23,100 48,262 4,134 44,128 $’000 Sub Total 2014 25. OPERATING SEGMENTS (continued) Reconciliations of reportable segment revenues, total return, assets and liabilities and other material items 2014 $’000 2013 $’000 203,262 160,075 227,257 201,361 – Other corporate expenses (23,793) (16,908) Total return before taxation 203,464 184,453 2,355,843 2,181,125 2,219 3,166 2,358,062 2,184,291 Total liabilities for reportable segments 399,339 481,308 Other unallocated amounts 580,907 489,118 Consolidated liabilities 980,246 970,426 Reportable segment totals $’000 Unallocated amounts $’000 Consolidated totals $’000 845 29 874 Revenue Total revenue for reporting segments Total return Total return for reportable segments before taxation Unallocated amounts: Assets Total assets for reportable segments Other unallocated amounts Consolidated assets Liabilities Other material items 2014 Finance income Finance costs (10,426) (11,500) (21,926) Other material items 2013 Finance income Finance costs 1,010 (1,545) 123 (9,784) 1,133 (11,329) Geographical segments All of the Group’s investment properties are used for retail purposes and are primarily located in China. Major tenant Revenue from one tenant of the Group represents approximately $36.6 million (2013: $35.5 million) of the Group’s total revenue. Delivering Performance | 133 Notes to the Financial Statements 26. COMMITMENTS (a) Capital commitments Group 2014 $’000 2013 $’000 3,636 4,023 Payable: – contracted but not provided for (b) The Group leases out its investment properties. Operating lease rentals are receivable as follows: Group 2014 $’000 2013 $’000 Receivable: (c) – within 1 year 175,125 158,326 – after 1 year but within 5 years 414,530 364,307 – after 5 years 372,730 412,612 962,385 935,245 The Group has non-cancellable leases with rentals payable as follows: Group 2014 $’000 2013 $’000 4,782 5,819 – after 1 year but within 5 years 25,386 23,992 – after 5 years 27,795 32,854 57,963 62,665 Payable: – within 1 year 134 | CapitaRetail China Trust Annual Report 2014 27. CAPITAL AND FINANCIAL RISK MANAGEMENT Capital management The Group’s objectives when managing capital are to optimise Unitholders’ value through the mix of available capital sources which include debt and equity instruments whilst complying with statutory and constitutional capital and distribution requirements, maintaining aggregate leverage and interest service coverage ratios within approved limits. As a key part of the Group’s overall strategy, the Board of the Manager reviews the Group and the Trust’s debt and capital management cum financing policy regularly so as to optimise the Group and the Trust’s funding structure. The Board also monitors the Group and the Trust’s exposure to various risk elements by closely adhering to clearly established management policies and procedures. The Group is subject to the aggregate leverage limit as defined in Appendix 6 of the CIS Code (“Property Fund Appendix”). The Property Fund Appendix stipulates that the total borrowings and deferred payments (together, the “Aggregate Leverage”) of a property fund should not exceed 35.0% of its Deposited Property except that the Aggregate Leverage of a property fund may exceed 35.0% of its Deposited Property (up to a maximum of 60.0%) if a credit rating of the property fund from Fitch Inc., Moody’s or Standard and Poor’s is obtained and disclosed to the public. The Group’s aggregate leverage limit did not exceed 35.0% during the year, and was 28.7% (2013: 32.6%) as at 31 December 2014. In computing the aggregate leverage, the Trust has considered the effect of hedging the net assets denominated in RMB. There were no changes in the Group’s approach to capital management during the financial year. Financial risk management Overview The Group’s returns are primarily from net operating income and capital appreciation of its assets. However, these returns are exposed to financial risks including credit, liquidity, interest rate and foreign currency risks. Financial risk management is integral to the whole business of the Group. The Group adopts an integrated approach to manage the financial risks arising in the normal course of the Group’s business. The Group has written risk management policies and guidelines, and established processes to monitor and manage significant exposures. Risk management policies and processes are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group adheres to standardised accounting and financial policies and exercises effective controls over the financial affairs of its subsidiaries. This is achieved by ensuring group-wide adherence to a comprehensive set of guidelines covering contracts, policies and procedures and other requirements. Adequate measures are in place to ensure that the reliability and integrity of financial information compiled from subsidiaries are kept intact. Credit risk While it is necessary to assume a certain level of tenant credit risks to remain competitive in China, the Group has established credit limits for tenants and monitors their balances on an ongoing basis. Risks associated with credit limits are reflected in the level of security deposits and bank guarantees placed as collateral in respect of the leases. Appropriate risk mitigating actions are in place to manage trade receivables. Delivering Performance | 135 Notes to the Financial Statements 27. CAPITAL AND FINANCIAL RISK MANAGEMENT (continued) Financial risk management (continued) Credit risk (continued) The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets. The allowance account in respect of trade and other receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible. At that point, the financial asset is considered irrecoverable and the amount charged to the allowance account is written off against the carrying amount of the impaired financial asset. Cash and fixed deposits are placed with banks and financial institutions which are regulated. Liquidity risk The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows. Typically the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a reasonable period, including the servicing of financial obligations. In addition, the Group maintains the following debt facilities and programme as at 31 December 2014. RMB denominated facility: • the RMB495.0 million five-year secured term loan facility S$ denominated facilities: • the S$151.0 million money market line facilities • the S$88.0 million three-year trust term loan facility • the S$50.0 million three-year trust term loan facility • the S$50.0 million four-year trust term loan facility • the S$50.5 million four-year trust term loan facility • the S$75.0 million four-year trust term loan facility • the S$50.0 million five-year trust term loan facility • the S$75.0 million five-year trust term loan facility • the S$100.0 million five-year trust term loan facility 136 | CapitaRetail China Trust Annual Report 2014 27. CAPITAL AND FINANCIAL RISK MANAGEMENT (continued) Financial risk management (continued) Liquidity risk (continued) US$ denominated facility: • the US$50.0 million money market line facility Multicurrency Medium Term Notes: • the $500.0 million multicurrency Medium Term Note (“MTN”) Programme As at 31 December 2014, the Group has drawn down $538.5 million of its trust term loan facilities and $29.5 million of the money market facility. The Group has also drawn down RMB495.0 million of the five-year secured term loan facility. The Group also monitors and observes the Property Fund Appendix issued by MAS concerning limits on total borrowings. Interest rate risk The Manager adopts a proactive interest rate management policy to manage the risk associated with changes in interest rates on the Group’s loan facilities while also seeking to ensure that the ongoing cost of debt remains competitive. As at 31 December 2014, the Group has interest rate swaps (“IRS”) with notional contract amount of $388.5 million (2013: $315.5 million). The Group pays a fixed rate interest and receives a variable rate equal to the Swap Offer Rate (“SOR”) on the notional contract amount. The Group classifies the IRS as cash flow hedges to hedge the exposure to changes in the variability of interest rate fluctuations on certain of its term loans. The term loans and the underlying IRS have the same terms and conditions. The Manager proactively seeks to minimise the level of interest rate risk by locking the majority of the Group’s borrowings at fixed rates. As at 31 December 2014, the Group has locked in approximately 72.6% (2013: 61.0%) of its borrowings at fixed rates. Fair value sensitivity analysis for fixed rate instruments The Group does not account for any fixed rate financial liabilities at fair value through profit or loss and the Group does not designate interest rate derivatives as hedging instruments under a fair value hedge accounting model. Therefore a change in interest rates at the reporting date would not affect the statement of total return. Cash flow sensitivity analysis for variable rate instruments The net change in fair value of the interest component of IRS as at 31 December 2014 of $2.3 million (2013: $0.2 million), representing the effective portion of the cash flow hedge, has been recognised directly in hedging reserves. Delivering Performance | 137 Notes to the Financial Statements 27. CAPITAL AND FINANCIAL RISK MANAGEMENT (continued) Financial risk management (continued) Interest rate risk (continued) Cash flow sensitivity analysis for variable rate instruments (continued) Effects of a 100 basis point (“bp”)* movement in interest rate at the reporting date would increase/(decrease) statement of total return and Unitholders’ funds by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2013. * 100 basis point is equivalent to 1 percentage point Statement of total return 100 bp 100 bp increase decrease $’million $’million Unitholders’ funds 100 bp 100 bp increase decrease $’million $’million Group and Trust 2014 Interest rate swaps Variable rate instruments – (1.8) – 1.8 (3.1) – 3.1 – Cash flow sensitivity (net) (1.8) 1.8 (3.1) 3.1 2013 Interest rate swaps Variable rate instruments – (0.5) – 0.5 (1.9) – 1.9 – Cash flow sensitivity (net) (0.5) 0.5 (1.9) 1.9 Foreign currency risk The Group is exposed to foreign currency risk on cash holdings and operating expenses that are denominated in a currency other than the respective functional currencies of the Group entities. The currencies giving rise to this risk are primarily the United States dollar (“US dollar”) and Chinese Renminbi (“RMB”). As the Trust intends to be a long term investor in China, the Manager has taken a view not to hedge the RMB equity exposure arising from its investments in China unless certain risks are specifically identified. The Manager’s strategy is to achieve a natural hedge through local RMB financing and any non-RMB denominated loan will be hedged into RMB where possible, to protect the going concern of the Trust in the event of large currency fluctuation. However, the Manager will hedge the RMB cash flow from operations if it is determined with certainty that they are to be remitted back to Singapore for distribution purposes. 138 | CapitaRetail China Trust Annual Report 2014 27. CAPITAL AND FINANCIAL RISK MANAGEMENT (continued) Financial risk management (continued) Foreign currency risk (continued) The Group’s and Trust’s exposures to foreign currency are as follows: US Dollars RMB Total S$’000 S$’000 S$’000 193 94 287 167 86 253 US Dollars RMB Total S$’000 S$’000 S$’000 Loans to subsidiaries 326,428 – 326,428 Non-trade amounts due from subsidiaries 165,060 – 165,060 31 79 110 491,519 79 491,598 Loans to subsidiaries 315,480 – 315,480 Non-trade amounts due from subsidiaries 159,677 – 159,677 11 71 82 475,168 71 475,239 Group 2014 Cash and cash equivalents 2013 Cash and cash equivalents Trust 2014 Cash and cash equivalents 2013 Cash and cash equivalents Sensitivity analysis A 10% strengthening of Singapore dollar against the US dollar and RMB at the reporting date would increase/(decrease) total return after tax by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2013. Statements of total return Group Trust $’000 $’000 2014 US dollars RMB (19) (49,152) (9) (8) Delivering Performance | 139 Notes to the Financial Statements 27. CAPITAL AND FINANCIAL RISK MANAGEMENT (continued) Financial risk management (continued) Foreign currency risk (continued) Sensitivity analysis (continued) Statements of total return Group Trust $’000 $’000 2013 US dollars RMB (17) (47,517) (9) (7) A 10% weakening of Singapore dollar against the US dollar and RMB would have had the equal but opposite effect on the US dollar and RMB to the amounts shown above, on the basis that all other variables remain constant. Hedge of net investment in foreign operation The non-deliverable forwards (“NDF”) of $258.0 million (2013: $288.0 million) are designated as hedges of the Group’s net investment in certain subsidiaries in China. The net change in fair value of the net investment hedge comprised the effective portion of $7.0 million (2013: $21.6 million) which was recognised in the foreign currency translation reserve. Sensitivity analysis For NDF (accounted for as net investment hedges), a change of 10% in foreign exchange rate at the reporting date would increase/(decrease) Unitholders’ funds as at 31 December 2014 by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2013. Unitholders’ funds 10% increase 10% decrease $’million $’million Group 2014 Non-deliverable forwards 20.1 (24.6) 21.9 (26.8) 2013 Non-deliverable forwards 140 | CapitaRetail China Trust Annual Report 2014 27. CAPITAL AND FINANCIAL RISK MANAGEMENT (continued) Accounting classifications and fair values Fair values versus carrying amounts Note Loans and receivables Fair value – hedging instruments Other financial liabilities within scope of FRS 39 Total carrying amount Fair value $’000 $’000 $’000 $’000 $’000 Group 2014 Trade and other receivables 7 5,860 – – 5,860 5,860 Cash and cash equivalents 8 86,626 – – 86,626 86,626 Financial derivative assets 11 – 1,547 – 1,547 1,547 92,486 1,547 – 94,033 94,033 – – 51,140 51,140 51,140 – – 41,158 41,158 39,782 Trade and other payables 9 Security deposits Interest-bearing borrowings 10 – – 671,713 671,713 672,943 Financial derivative liabilities 11 – 8,605 – 8,605 8,605 – 8,605 764,011 772,616 772,470 2013 Trade and other receivables 7 6,246 – – 6,246 6,246 Cash and cash equivalents 8 105,457 – – 105,457 105,457 Financial derivative assets 11 – 2,044 – 2,044 2,044 111,703 2,044 – 113,747 113,747 – – 57,719 57,719 57,719 – – 34,980 34,980 33,803 Trade and other payables 9 Security deposits Interest-bearing borrowings 10 – – 712,338 712,338 715,504 Financial derivative liabilities 11 – 5,208 – 5,208 5,208 – 5,208 805,037 810,245 812,234 Delivering Performance | 141 Notes to the Financial Statements 27. CAPITAL AND FINANCIAL RISK MANAGEMENT (continued) Accounting classifications and fair values (continued) Fair values versus carrying amounts (continued) Note Loans and receivables Fair value – hedging instruments Other financial liabilities within scope of FRS 39 Total carrying amount Fair value $’000 $’000 $’000 $’000 $’000 Trust 2014 Non-trade amounts due from subsidiaries 6 18,693 – – 18,693 18,693 Trade and other receivables 7 201 – – 201 201 Cash and cash equivalents 8 238 – – 238 238 Financial derivative assets 11 – 1,547 – 1,547 1,547 19,132 1,547 – 20,679 20,679 9 – – 5,386 5,386 5,386 Interest-bearing borrowings 10 – – 566,823 566,823 568,053 Financial derivative liabilities 11 – 8,605 – 8,605 8,605 – 8,605 572,209 580,814 582,044 Trade and other payables 2013 Non-trade amounts due from subsidiaries 6 17,954 – – 17,954 17,954 Trade and other receivables 7 219 – – 219 219 Cash and cash equivalents 8 249 – – 249 249 Financial derivative assets 11 – 2,044 – 2,044 2,044 18,422 2,044 – 20,466 20,466 9 – – 9,060 9,060 9,060 Interest-bearing borrowings 10 – – 474,383 474,383 477,549 Financial derivative liabilities 11 – 5,208 – 5,208 5,208 – 5,208 483,443 488,651 491,817 Trade and other payables 142 | CapitaRetail China Trust Annual Report 2014 27. CAPITAL AND FINANCIAL RISK MANAGEMENT (continued) Accounting classifications and fair values (continued) Estimation of fair value The following summarises the significant methods and assumptions used in estimating the fair values of financial instruments of the Group and Trust. Investment Properties Refer to Note 4 on the valuation methods used to arrive at the fair value of investment properties. Financial derivatives The fair value of non-deliverable forwards is based on banks’ quotes. These quotes are tested for reasonableness by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds). The fair value of interest rate swaps is based on banks’ quotes. These quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date. Interest-bearing borrowings Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. Other financial assets and liabilities The carrying amounts of financial assets and liabilities with a maturity of less than one year (including trade and other receivables, cash and cash equivalents, trade and other payables and current security deposits) are assumed to approximate their fair values because of the short period to maturity. All other financial assets and liabilities (non-current security deposits) are discounted to determine their fair values. Interest rates used in determining fair values The interest rates used to discount estimated cash flows, where applicable, are based on the forward yield curve as at 31 December 2014 plus an adequate constant credit spread, and are as follows: Interest-bearing borrowings Security deposits 2014 % p.a. 2013 % p.a. 1.31-6.40 1.04-6.77 1.84 1.85 Delivering Performance | 143 Notes to the Financial Statements 27. CAPITAL AND FINANCIAL RISK MANAGEMENT (continued) Fair value hierarchy The table below analyses financial and non-financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; • Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and • Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). Level 1 $’000 Level 2 $’000 Level 3 $’000 Total $’000 Group and Trust 2014 Financial instruments Non-deliverable forwards – (8,520) – (8,520) Interest rate swaps – 1,462 – 1,462 – (7,058) – (7,058) Non-financial instruments Investment properties – – 2,250,783 2,250,783 2,243,725 – (7,058) 2,250,783 Non-deliverable forwards – (2,376) – (2,376) Interest rate swaps – (788) – (788) – (3,164) – (3,164) 2013 Financial instruments Non-financial instruments Investment properties – – – (3,164) 2,058,094 2,058,094 2,058,094 2,054,930 Financial assets and financial liabilities not carried at fair value but for which fair values are disclosed Non-current security deposits and fixed rates interest-bearing borrowings which are level 2 financial instruments has fair value of $24.5 million and $100.0 million (2013: $20.8 million and $102.0 million) respectively. 144 | CapitaRetail China Trust Annual Report 2014 27. CAPITAL AND FINANCIAL RISK MANAGEMENT (continued) Fair value hierarchy (continued) Level 3 fair values The reconciliation from the beginning balances to the ending balances for Level 3 fair value measurements of investment properties is disclosed in Note 4. The following table shows the key unobservable inputs used in the valuation models: Inter-relationship between key unobservable inputs and fair value measurement Valuation methods Key unobservable inputs Capitalisation approach • Capitalisation rate (5.75%) (2013: from 5.00% to 6.75%) The fair value increases as capitalisation rates decreases. Discounted cash flows approach • Discount rates (from 7.00% to 11.00%) (2013: from 8.75% to 11.00%) The fair value increases as discount rates and terminal rates decreases. • Terminal rates (from 4.00% to 6.50%) (2013: from 5.50% to 6.75%) • Term and reversion rates (from 4.25% to 10.50%) (2013: from 5.50% to 7.00%) Term and reversion approach The fair value increases as term and reversion rates decreases. Key unobservable inputs Key unobservable inputs correspond to: • Investment property yields derived from specialised publications from the related markets and comparable transactions. • Discount rate, based on the risk-free rate for 10-year bonds issued by the government in the relevant market. Offsetting financial assets and financial liabilities The disclosures set out in the tables below include financial assets and financial liabilities that: • are offset in the Trust’s statements of financial position; or • are subject to an enforceable master netting arrangement, irrespective of whether they are offset in the statement of financial position Financial instruments such as loans and receivables and financial liabilities are not disclosed in the tables below unless they are offset in the statements of financial position. The Trust’s derivative transactions that are not transacted on an exchange are entered into under International Swaps and Derivatives Association (“ISDA”) Master Agreements. In certain circumstances, for example when a termination event such as a default occurs, all outstanding transactions under the agreement are terminated, the termination value is assessed and only a single net amount is due or payable in settlement of all transactions. Delivering Performance | 145 Notes to the Financial Statements 27. CAPITAL AND FINANCIAL RISK MANAGEMENT (continued) Fair value hierarchy (continued) Offsetting financial assets and financial liabilities (continued) Under the agreements signed, the Trust and its counterparties neither have a legal obligation nor intend to settle on a net basis or to realise the assets and settle the liabilities simultaneously. In addition, the right of set-off of recognised amounts is enforceable only following the occurrence of a termination event as set out in the agreements. Accordingly, the ISDA agreements do not meet the criteria for offsetting and the derivatives financial instruments presented below are not offset in the Statement of Financial Position. Financial assets and liabilities subject to offsetting and enforceable master netting arrangement under termination events 31 December 2014 Financial assets Interest rate swaps Non-deliverable forward Financial liabilities Interest rate swaps Non-deliverable forward 31 December 2013 Financial assets Interest rate swaps Non-deliverable forward Financial liabilities Interest rate swaps Non-deliverable forward Gross amounts of recognised financial instruments $’000 Gross amount of recognised financial instruments offset in the statement of financial position $’000 Net amounts of financial instruments presented in the statement of financial position $’000 1,481 66 – – 1,481 66 (13) (66) 1,468 – 1,547 – 1,547 (79) 1,468 19 8,586 – – 19 8,586 (13) (66) 6 8,520 8,605 – 8,605 (79) 8,526 302 1,742 – – 302 1,742 (139) (1,240) 163 502 2,044 – 2,044 (1,379) 665 1,090 4,118 – – 1,090 4,118 (139) (1,240) 951 2,878 5,208 – 5,208 (1,379) 3,829 Related amounts not offset in the statement of financial position $’000 Net amounts $’000 28. SUBSEQUENT EVENTS On 29 January 2015, the Manager declared a distribution of 4.83 cents per Unit to Unitholders in respect of the period from 1 July 2014 to 31 December 2014. 146 | CapitaRetail China Trust Annual Report 2014 Interested Person Transactions The transactions entered into with interested persons during the financial year, which fall under the Listing Manual and the Property Funds Appendix of the CIS Code (excluding transactions of less than $100,000 each), are as follows: Name of Interested Persons Aggregate value of all interested person transactions during the financial year under review (excluding transactions of less than S$100,000 and transactions conducted under shareholder’s mandate pursuant to Rule 920) S$’000 Aggregate value of all interested person transactions during the financial year under review under shareholder’s mandate pursuant to Rule 920 (excluding transactions less than S$100,000) S$’000 CapitaLand Limited and its subsidiaries or associates – Management fees 1 10,822 – – Property management fees (including reimbursables) 10,302 – HSBC Institutional Trust Services (Singapore) Limited Trustee’s fees 1 362 – For the purposes of Rule 907 of the Listing Manual of the SGX-ST, in arriving at this figure, the market price of the units (being the closing price of the units traded on the SGX-ST on the relevant date of issue of the units) issued to the Manager for its management fees, was used to determine the amount of the aggregate asset management fees paid to the Manager for the period from 1 January 2014 to 31 December 2014. Saved as disclosed above, there were no additional Interested Person Transactions (excluding transactions of less than S$100,000 each) entered into during the financial period under review. The fees and charges payable by CRCT to the Manager under the Trust Deed, and to the Property Managers under the Property Management Agreements (collectively, the “Exempted Agreements”), each of which constitutes a Interested Person Transaction, are deemed to have been specifically approved by the Unitholder upon purchase of the Units and are therefore not subject to Rules 905 and 906 of the Listing Manual to the extent that there is no subsequent change to the rates and/or bases of the fees charged thereunder which will affect CRCT. However, the renewal of such agreements will be subject to Rules 905 and 906 of the Listing Manual. Please also see Related Party Transactions on note 23 in the financial statements. SUBSCRIPTION OF CRCT UNITS An aggregate of 3,468,568 Units were issued in relation to the performance component of the Manager’s management fee paid during the year. As at 31 December 2014, 828,961,977 Units were in issue and outstanding. In the first quarter of 2015, 844,273 Units will be issued to the Manager as part payment of the performance component of its management fee for the fourth quarter of 2014. Delivering Performance | 147 Unitholders’ Statistics As at 23 February 2015 ISSUED AND FULLY PAID UNITS 828,117,704 Units (voting rights: 1 vote per Unit) Market Capitalisation: S$1,378,815,977.16 (based on closing Unit price of S$1.665 on 23 February 2015) DISTRIBUTION OF UNITHOLDINGS No. of Unitholders % No. of Units % 32 1,717 4,249 1,755 21 0.41 22.09 54.66 22.57 0.27 1,458 1,673,084 18,220,651 72,882,069 735,340,442 0.00 0.20 2.20 8.80 88.80 7,774 100.00 828,117,704 100.00 No. of Unitholders % No. of Units % 7,581 110 83 97.52 1.41 1.07 823,378,259 2,577,879 2,161,566 99.43 0.31 0.26 7,774 100.00 828,117,704 100.00 S/No. Name No. of Units % 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 175,990,578 157,033,221 138,939,292 111,723,549 41,004,283 31,843,543 18,089,178 15,844,747 14,455,106 5,936,373 4,134,458 4,100,083 3,084,629 2,862,499 1,879,412 1,647,290 1,614,469 1,504,035 1,249,740 1,240,957 21.25 18.96 16.78 13.49 4.95 3.85 2.18 1.91 1.75 0.72 0.50 0.50 0.37 0.35 0.23 0.20 0.19 0.18 0.15 0.15 734,177,442 88.66 Size of Holdings 1 – 99 100 – 1,000 1,001 – 10,000 10,001 – 1,000,000 1,000,001 and above LOCATION OF UNITHOLDERS Country Singapore Malaysia Others TWENTY LARGEST UNITHOLDERS HSBC (Singapore) Nominees Pte Ltd Retail Crown Pte. Ltd. DBS Nominees (Private) Limited Citibank Nominees Singapore Pte Ltd DBSN Services Pte. Ltd. CapitaRetail China Trust Management Limited DB Nominees (Singapore) Pte Ltd Raffles Nominees (Pte) Limited United Overseas Bank Nominees (Private) Limited BNP Paribas Securities Services Singapore Branch DBS Vickers Securities (Singapore) Pte Ltd Koo Boon Hooi (Qiu Wenhui) Bank Of Singapore Nominees Pte. Ltd. Morgan Stanley Asia (Singapore) Securities Pte Ltd Phillip Securities Pte Ltd OCBC Securities Private Limited ABN AMRO Nominees Singapore Pte Ltd OCBC Nominees Singapore Private Limited Siong Lim Private Limited Societe Generale, Singapore Branch 148 | CapitaRetail China Trust Annual Report 2014 DIRECTORS’ INTERESTS IN UNITS AND CONVERTIBLE SECURITIES AS AT 21 JANUARY 2015 Based on the Register of Directors’ Unitholdings, save for those disclosed below, none of the Directors holds any interest in Units and convertible securities issued by CRCT. Name of Director No. of Units Direct Interest Deemed Interest Liew Cheng San Victor Lim Ming Yan Fong Heng Boo Ng Kok Siong Tony Tan Tee Hieong 121,319 181,154 10,340 251,000 34,989 – – – – – SUBSTANTIAL UNITHOLDERS’ UNITHOLDINGS AS AT 23 FEBRUARY 2015 Based on the information available to the Manager as at 23 February 2015, the unitholdings of Substantial Unitholders of CRCT are as follows: Name of Substantial Unitholder Temasek Holdings (Private) Limited (THPL) CapitaLand Limited (CL) CapitaMalls Asia Limited (CMA) CapitaLand Retail China Pte. Ltd. (CLRC) Direct Interest No. of Units % – – – Deemed Interest No. of Units % – 314,985,916 1 38.04 – 311,581,764 2 37.63 311,581,764 3 37.63 4 18.96 – – – 157,033,221 Retail Crown Pte. Ltd. 157,033,221 18.96 – – HSBC Institutional Trust Services (Singapore) Limited, as trustee of CapitaMall Trust 122,705,000 14.82 – – Matthews International Capital Management, LLC (MICM) – – 60,253,000 5 7.28 – 48,680,000 6 5.88 44,302,000 7 5.35 8 5.34 Matthews International Funds (MIF) AIA Group Limited (AIAGL) – – – AIA Company Limited (AIACL) 50,000 0.01 44,252,000 AIA Singapore Private Limited 44,252,000 5.34 – – 1 THPL is deemed to have an interest in the unitholdings in which its associated companies have or are deemed to have an interest pursuant to Section 4 of the Securities and Futures Act, Chapter 289 of Singapore. THPL is wholly-owned by the Minister for Finance. 2 CL is deemed to have an interest in the unitholdings of HSBC Institutional Trust Services (Singapore) Limited, as trustee of CapitaMall Trust and its indirect wholly-owned subsidiaries namely, Retail Crown Pte. Ltd. and the Manager. CMA is deemed to have an interest in the unitholdings of HSBC Institutional Trust Services (Singapore) Limited, as trustee of CapitaMall Trust and its indirect wholly-owned subsidiaries namely, Retail Crown Pte. Ltd. and the Manager. 3 4 5 6 7 8 CLRC is deemed to have an interest in the unitholdings of its direct wholly-owned subsidiary namely, Retail Crown Pte. Ltd.. MICM is a U.S. registered investment advisor who has a discretionary authority over its clients’ investment. MIF is deemed to have an interest in the unitholdings of Brown Brothers Harriman & Co, the custodian for Units owned by MIF. AIAGL is deemed to have an interest in the unitholdings of its direct wholly-owned subsidiary namely, AIACL and its indirect wholly-owned subsidiary namely, AIA Singapore Private Limited. AIACL is deemed to have an interest in the unitholdings of its direct wholly-owned subsidiary namely, AIA Singapore Private Limited. FREEFLOAT Based on the information made available to the Manager, approximately 49.27% of the Units in CRCT were held in the hands of the public as at 23 February 2015. Accordingly, Rule 723 of the Listing Manual of the SGX-ST has been complied with. Delivering Performance | 149 Malls Directory Name of Mall Address Tel (General) Fax (General) CapitaMall Xizhimen 凱德MALL•西直門 No. 1 Xizhimenwai Street, Xicheng District, Beijing 北京市西城區西直門外大街1號 (86) 10 5830 1111 (86) 10 5830 1599 CapitaMall Wangjing 凱德MALL•望京 No. 33 Guangshun North Street, Chaoyang District, Beijing 北京市朝陽區廣順北大街33號 (86) 10 8472 9898 (86) 10 8472 9800 CapitaMall Grand Canyon 凱德MALL•大峽谷 No.16 South Third Ring West Road, Fengtai District, Beijing 北京市豐台區南三環西路16號 (86) 10 8756 2780 (86) 10 8526 7556 CapitaMall Minzhongleyuan 凱德新民眾樂園 No. 704 Zhongshan Avenue, Jianghan District, Hankou, Wuhan, Hubei Province 湖北省武漢市漢口江漢區中山大道 704號 (86) 27 8553 0108 (86) 27 8537 9137 CapitaMall Qibao 凱德七寶購物廣場 No. 3655 Qixin Road, Minhang District, Shanghai 上海市閔行區七莘路3655號 (86) 21 6479 3030 (86) 21 6479 0808 CapitaMall Saihan 凱德MALL•賽罕 No. 26 Ordos Street, (86) 47 1596 1222 Saihan District, Huhhot, Inner Mongolia Autonomous Region 內蒙古自治區呼和浩特市賽罕區鄂 爾多斯大街26號 (86) 47 1597 1671 CapitaMall Wuhu 凱德廣場•蕪湖 No. 37 Zhongshan North Road, Jinghu District, Wuhu, Anhui Province 安徽省蕪湖市鏡湖區中山北路37號 (86) 55 3599 1888 (86) 55 3599 1886 CapitaMall Anzhen Building 4, Zone 5, Anzhenxili, 凱德MALL•安貞 Chaoyang District, Beijing 北京市朝陽區安貞西里5區4號樓 (86) 10 5879 9001 (86) 10 5879 9009 CapitaMall Erqi 凱德廣場•二七 No. 3 Minzhu Road, Erqi District, Zhengzhou, Henan Province 河南省鄭州市二七區民主路3號 (86) 27 8359 1800 (86) 27 8359 1818 CapitaMall Shuangjing 凱德MALL•雙井 No. 31 Guangqu Road, Chaoyang District, Beijing 北京市朝陽區廣渠路31號 (86) 10 5879 9001 (86) 10 5879 9009 . 150 | CapitaRetail China Trust Annual Report 2014 Corporate Information CAPITARETAIL CHINA TRUST THE MANAGER REGISTERED ADDRESS HSBC Institutional Trust Services (Singapore) Limited 21 Collyer Quay #10-02 HSBC Building Singapore 049320 www.capitaretailchina.com Email: [email protected] REGISTERED ADDRESS CapitaRetail China Trust Management Limited 168 Robinson Road #30-01 Capital Tower Singapore 068912 Tel: +65 6713 2888 Fax:+65 6713 2999 Stock Code: AU8U Counter Name:CapitaR China TR BOARD OF DIRECTORS Liew Cheng San Victor Chairman & Non-Executive Independent Director TRUSTEE HSBC Institutional Trust Services (Singapore) Limited 21 Collyer Quay #03-01 HSBC Building Singapore 049320 Tel: +65 6658 6906 Fax:+65 6534 5526 AUDITOR KPMG LLP Public Accountants and Chartered Accountants 16 Raffles Quay #22-00 Hong Leong Building Singapore 048581 Tel: +65 6213 3388 Fax:+65 6225 0984 Partner-In-Charge: Ronald Tay Appointed: With effect from financial year ended 31 December 2012 UNIT REGISTRAR Boardroom Corporate & Advisory Services Pte. Ltd. 50 Raffles Place #32-01 Singapore Land Tower Singapore 048623 Tel: +65 6536 5355 Fax:+65 6536 1360 Lim Ming Yan Deputy Chairman & Non-Executive Non-Independent Director Fong Heng Boo Non-Executive Independent Director Christopher Gee Kok Aun Non-Executive Independent Director AUDIT COMMITTEE Fong Heng Boo Chairman Christopher Gee Kok Aun Ng Kok Siong Professor Tan Kong Yam CORPORATE DISCLOSURE COMMITTEE Liew Cheng San Victor Chairman Lim Ming Yan Ng Kok Siong EXECUTIVE COMMITTEE Lim Ming Yan Chairman Ng Kok Siong Tony Tan Tee Hieong COMPANY SECRETARY Goh Mei Lan Ng Kok Siong Non-Executive Non-Independent Director Professor Tan Kong Yam Non-Executive Independent Director Tony Tan Tee Hieong Chief Executive Officer & Executive Non-Independent Director This Annual Report to Unitholders may contain forward-looking statements. Forward-looking statement is subject to inherent uncertainties and is based on numerous assumptions. Actual performance, outcomes and results may differ materially from those expressed in forward-looking statements. Representative examples of factors which may cause the actual performance, outcomes and results to differ materially from those in the forward-looking statements include (without limitation) changes in general industry and economic conditions, interest rate trends, cost of capital and capital availability, availability of real estate investment opportunities, competition from other companies, shifts in customers’ demands, changes in operating conditions, including employee wages, benefits and training, governmental and public policy changes and the continued availability of financing in the amounts and the terms necessary to support future business. You are cautioned not to place undue reliance on these forward-looking statements, which are based on the current views of management on future events. All rights are reserved. CapitaRetail China Trust Management Limited As Manager of CapitaRetail China Trust Company Registration No. 200611176D 168 Robinson Road #30-01 Capital Tower Singapore 068912 Tel: +65 6713 2888 Fax: +65 6713 2999 Email: [email protected] www.capitaretailchina.com This annual report is printed on environmentally-friendly paper.
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