Risk Management 80 CapitaLand China Trust • Actively review and maintain an optimal mix of fixed and floating interest rate borrowings by adopting a prudent and balanced interest risk profile. • Adopt a policy that requires the majority of CLCT Group debts’ interest rate to be on fixed basis. This is managed through borrowing at a fixed rate or the use of hedging instruments, such as interest rate swaps, to partially mitigate the risk of interest rate fluctuations. MATERIAL RISKS KEY MITIGATING ACTIONS » Exposure to interest rate volatility on some debts which are on floating basis. Interest Rate • Review hurdle rates and weighted average cost of capital annually based on relevant risk-adjusted input parameters that serve as investment benchmarks, and make necessary adjustments accordingly. • The Board reviews and approves all major investment and divestment decisions. • All investment proposals are subject to a robust investment approval process and undergo comprehensive due diligence by engaging the support of an inter- disciplinary internal team, and/or local independent consultants to advise on legal, tax, building design, quality, environmental, health & safety and security, and compliance with local laws and regulations. • Maintain a framework that proactively identifies the applicable laws, regulations and rules, assesses the regulatory and compliance risks and embeds compliance risk mitigation measures into day-to-day operations. • Leverage in-house specialised teams such as legal, compliance and tax, and external consultants to provide advisory services and updates on changes to laws, regulations and rules. • CLI maintains Group-wide policies and procedures to address the requirements of the applicable laws, regulations and rules such as Personal Data Protection Policy, Anti-Money Laundering Policy and Countering the Financing of Terrorism Policy, Global Sanctions Compliance Policy and Tax Strategy. • Adopt e-learning modules to raise awareness and train employees on ways to avoid or prevent non-compliant behaviour. • Establish and maintain a balanced and sustainable tenant mix by attracting a variety of tenants from different sectors, and reducing reliance on any one industry or tenant in the overall portfolio. • Proactive tenant management strategies to understand and address customers’ changing needs and align with the properties’ overall asset plan. This involves evaluating tenants based on their financial standing, track record, and market adaptability in order to minimise tenant turnover and vacancies, and to appeal to a broader customer base. • Closely monitor tenants’ performance and maintain positive relationships and rapport with them to build loyalty with CLCT Group’s properties, and actively manage lease renewals ahead of time. • Deployment of capital into loss-making or belowtarget return investments due to wrong underwriting assumptions or poor execution. • Inadequate planning to identify suitable divestment opportunities. • Non-compliance with applicable laws, regulations and rules, relating to fund management, tax, data protection and privacy, financial crimes and sanctions in the markets where CLCT Group operates. • Strong competition, poor economic and market conditions are some key factors that could result in key tenants not renewing their leases, adversely affecting the leasing performance of CLCT Group’s properties. Investments and Divestments Regulatory and Compliance Sales and Leasing
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