Page 26 - TreasuryChinaTrust

Treasury China Trust Annual Report 2010 71

NOTES TO THE FINANCIAL STATEMENTS

Period from 19 May 2010 (date of constitution) to 31 December 2010

14 Unitholders’ funds (Continued)

Capital management

The Trustee-Manager reviews the Group’s and the Trust’s capital structure regularly, which the group defines as total Unitholders’ funds and the level of distribution to Unitholders. The Group uses a combination of debt and equity to fund acquisition, property development and asset enhancement projects. The Trustee-Manager seeks to maintain an optimal combination of debt and equity in order to minimise the cost of capital and maximise returns to Unitholders.

The objectives of the Trustee-Manager are to:

(a) maintain a strong balance sheet by adopting and maintaining a target gearing range;

(b) secure diversified funding sources from financial institutions and/or capital markets;

(c) adopt a proactive interest rate management strategy to manage risks related to interest rate fluctuations; and

(d) manage the foreign currency exposure through hedging, where appropriate.

During the period, the Group has complied with all the externally imposed capital requirements.

15 Units in issue

Trust 2010 Number of units

At 19 May 2010 (date of constitution) – Issue of units:

– Acquisition of subsidiaries 240,180,020 – Private placement 16,095,047 At 31 December 2010 256,275,067

On 21 June 2010, the Trustee-Manager in its capacity as Trustee-Manager of the Trust issued an aggregate of 240,180,020 units representing undivided interests in the Trust to the shareholders of CREO for the acquisition of the entire issued and paid-up share capital of CREO, comprising 48,036,004 shares in CREO. CREO was previously listed on Alternative Investment Market of the London Stock Exchange (AIM). The Trust was constituted in Singapore on 19 May 2010. Subsequently, the above mentioned acquisition of CREO by the Trust in connection with the listing of the Trust on the mainboard of the SGX-ST was completed on 21 June 2010 by way of an introduction.

In view that the shareholders of CREO prior to the delisting of CREO on AIM became the Unitholders of the Trust following the listing of the Trust on SGX-ST, the acquisition of CREO was accounted for in a manner similar to the pooling-of-interests method. Accordingly, the assets and liabilities of CREO and its subsidiaries have been included in the consolidated financial statements of the Trust at their historical carrying amounts. The cost of investment in subsidiaries recorded in the Trust’s balance sheet is based on the acquired net asset value of CREO and its subsidiaries at the date of the acquisition on 21 June 2010.

Legal and professional fees totalling approximately $2.6 million were incurred for the listing of the Trust. These expenses were incurred by CREO on behalf of the then CREO’s shareholders for the purpose of the constitution and listing of the Trust. As no repayment of such fees would be made to CREO by the shareholders, these fees were regarded as capital distribution to the then shareholders of CREO. As a result, such listing expenses were recognised by CREO prior to the acquisition and therefore were included in the amount of units in issue of the Trust following the acquisition.