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Ascott Residence Trust and Ascendas Hospitality Trust enter combination deal to become Asia Pacific's largest hospitality trust with asset value of S$7.6 billion

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Disclaimer

Proposed Combination (“Combination”) of Ascott Residence Trust (“Ascott Reit”) and Ascendas Hospitality Trust (“A-HTRUST”), as announced by Ascott Residence Trust Management Limited (“Ascott Reit Manager”), Ascendas Hospitality Fund Management Pte. Ltd. (“A-HTRUST REIT Manager”) and Ascendas Hospitality Trust Management Pte. Ltd. (“A-HTRUST BT Trustee-Manager”) on 3 July 2019 (“Joint Announcement”)

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THIS SECTION OF THE WEBSITE CONTAINS INFORMATION (“INFORMATION”) PUBLISHED BY ASCOTT REIT AND/OR A-HTRUST RELATING TO THE COMBINATION IN COMPLIANCE WITH THE SINGAPORE CODE ON TAKE-OVERS AND MERGER (“CODE”). THE INFORMATION IS BEING MADE AVAILABLE IN GOOD FAITH AND FOR INFORMATION PURPOSES ONLY AND IS SUBJECT TO THE TERMS AND CONDITIONS SET OUT BELOW.

THE COMBINATION CANNOT BE VALIDLY ACCEPTED BY UNITHOLDERS OF ASCOTT REIT OR A-HTRUST OR ANY OTHER PERSONS BY MEANS OF ACCESSING THIS SECTION OF THE WEBSITE OR (IF APPLICABLE) DOWNLOADING A COPY OF THE ASCOTT REIT COMPOSITE DOCUMENT OR A-HTRUST SCHEME DOCUMENT (EACH AS DEFINED IN THE JOINT ANNOUNCEMENT) FROM THIS WEBSITE.

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Forward-looking statements

The Information may contain forward-looking statements that involve assumptions, risks and uncertainties. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements as a result of a number of risks, uncertainties and assumptions. Representative examples of these factors include (without limitation) general industry and economic conditions, interest rate trends, cost of capital and capital availability, competition from other developments or companies, shifts in expected levels of occupancy rate, property rental income, charge out collections, changes in operating expenses (including employee wages, benefits and training costs), 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 Ascott Reit Manager, the A-HTRUST REIT Manager and/or the A-HTRUST BT Trustee-Manager’s current view on future events.

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1. What is the proposed Combination?

Notes: (1) Calculated based on a total of 1,136.7 million A-HTRUST stapled units. (2) The aggregate Cash Consideration to be paid to each A-HTRUST stapled unitholder shall be rounded to the nearest S$0.01. The number of Consideration Units which each A-HTRUST Stapled Unitholder shall be entitled to pursuant to the Trust Scheme shall be rounded down to the nearest whole number, and fractional entitlements shall be disregarded in the calculation of the aggregate Consideration Units to be issued.

Ascott Residence Trust (“Ascott Reit”) and Ascendas Hospitality Trust (“A-HTRUST”) have announced a proposed combination (“Combination”), which will be effected by way of a trust scheme of arrangement, with Ascott Reit acquiring all the units in A-HTRUST for a consideration of S$1.0868 per A-HTRUST unit, comprising S$0.0543 in cash (5% of the consideration) and 0.7942 units in the new stapled Ascott Reit to be issued at S$1.30 per Ascott Reit stapled unit (95% of the consideration).

By way of illustration, if the trust scheme becomes effective in accordance with its terms, an A-HTRUST stapled unitholder will receive S$54.30 in cash and 794 units for every 1,000 A-HTRUST stapled units held by it as at the relevant books closure date.

The consideration implies a gross exchange ratio of 0.836x, which is based on the respective audited net asset value per unit of Ascott Reit and A-HTRUST. This reflects the underlying fundamental value of both entities.

2. What is the rationale for the proposed Combination?

There are various benefits arising from the proposed Combination.

Proxy Hospitality Trust in Asia Pacific

The proposed Combination will consolidate Ascott Reit’s position as the largest hospitality trust in Asia Pacific with total assets of approximately S$7.6 billion (as at 31 March 2019), making it the proxy hospitality trust in the region.

With an increased EBITDA contribution from developed markets and a ~50% increase in free float, the proposed Combination will facilitate Ascott Reit’s inclusion into the FTSE EPRA Nareit Developed Index, which may potentially result in a positive re-rating of Ascott Reit’s unit price, a wider investor base and higher trading liquidity.

The proposed Combination will also strengthen Ascott Reit’s financial position, giving it greater capacity to drive growth. With greater size, the post-combination Ascott Reit (“Combined Entity”) will have better access to growth opportunities and increased capacity to undertake more development / conversion projects. With a higher development limit and debt headroom of S$1.0 billion, the Combined Entity will have greater financial flexibility to pursue potential investment opportunities.

Enhanced Portfolio

The enlarged portfolio will comprise 88 properties with more than 16,000 units across 39 cities in 15 countries in Asia Pacific, Europe and the USA.

The proposed Combination is slated to enhance portfolio diversification and resilience through:

· Strengthening Ascott Reit’s presence in Asia Pacific where demand for business and leisure travel remains robust

· Adding freehold properties to increase the proportion of freehold assets by 8% to 61% of the total portfolio valuation

· Maintaining a balanced portfolio of stable and growth income

· Reducing earnings concentration risk as each country will have <20% contribution to total gross profit

DPU-accretive to unitholders

On a pro forma basis, the distributable income per unit ("DPU") for Ascott Reit’s unitholders will increase from 7.16 cents to 7.34 cents, translating to a DPU accretion of 2.5%. For A-HTRUST, the pro forma DPU will increase from 6.03 cents to 6.14 cents, representing an accretion of 1.8%.

3. Is the proposed Combination subject to approvals from unitholders and/or other authorities or regulatory bodies?

Yes, approvals will be sought from the unitholders of Ascott Reit and A-HTRUST at their respective extraordinary general meetings (“Meetings”) which will take place around October 2019. The Scheme is also subject to Court approval and approvals from certain other regulatory bodies, including the Monetary Authority of Singapore, the Securities Industry Council, the Singapore Exchange Securities Trading Limited and the Treasurer of the Commonwealth of Australia.

4. What has been done to ensure that the interests of minority unitholders are protected?

With respect to minority unitholders of Ascott Reit: the proposed transaction is subject to the approval by more than 50% of the unitholders of Ascott Reit present and voting at the relevant Ascott Reit Meeting. Interested parties, including CapitaLand entities, are required to abstain from voting on the resolutions in relation to the Combination.

With respect to minority unitholders of A-HTRUST: the proposed transaction is subject to the approval by a majority in number of unitholders of A-HTRUST representing at least 75% in value of the unitholders of A-HTRUST present and voting at the relevant scheme meeting. Concert parties of Ascott Reit, including CapitaLand entities, are required to abstain from voting on the resolutions in relation to the Combination.

Independent Financial Advisors Australia and New Zealand Banking Group Limited and Deloitte & Touche Corporate Finance Pte Ltd have been appointed by Ascott Reit and A-HTRUST respectively to opine on whether the Combination is, in the case of Ascott Reit, on normal commercial terms and not prejudicial to the interests of Ascott Reit and its minority unitholders, and, in the case of A-HTRUST, fair and reasonable.

5. What is the Ascott Reit Stapling Scheme and how does it affect me?

Notes: (1) Held through CapitaLand group of entities, namely The Ascott Limited, Somerset Capital Pte Ltd, the Ascott Reit Manager and Ascendas Land International Pte Ltd. (2) Holdings based on 28 June 2019 and including Consideration Units.

As A-HTRUST has a stapled structure, to effect the Combination, Ascott Reit will have to establish a business trust and adopt a stapled structure via a stapling scheme.

The Ascott Reit Scheme comprises the steps below:

i. Ascott Reit will establish a business trust (“Ascott BT”)

ii. Each unit in Ascott BT will be stapled to one unit in Ascott Reit, to form one Ascott Reit-BT stapled unit

iii. Pursuant to the Combination, the A-HTRUST REIT will become a sub-trust of Ascott Reit, and the A-HTRUST BT will become a sub-trust of Ascott BT

As a unitholder of Ascott Reit, you will be issued one unit in Ascott BT for each unit in Ascott Reit that you own, and the unit in Ascott BT will be stapled with the unit in Ascott Reit. This structure does not affect the value of your investment and there is no effective difference in the manner the stock is traded.

6. Will the issue price of S$1.30 per Ascott Reit unit change? Are there clauses that allow for an adjustment of the issue price should there be a significant price change on the downside?

There will not be any adjustments to the offer price for the units in A-HTRUST or the issue price of the units in Ascott Reit arising from changes in the trading prices.

7. When is the Combination expected to complete?

The Combination is expected to complete by 2019. The timetable is indicative only and is subject to change.

8. What do unitholders need to do in relation to the proposed Combination?

Unitholders will be required to vote on the Combination either in person at the Extraordinary General Meetings (EGM) and Scheme Meetings or by submitting proxy forms.

Ascott Reit’s EGM and Scheme Meeting will be held on 21 October 2019 at 10am and 11am (or as soon thereafter following the conclusion of the EGM to be held, whichever is later) respectively at Raffles City Convention Centre, Padang/Collyer Ballroom, Level 4, 2 Stamford Road, Singapore 178882.

A-HTRUST’s EGM and Scheme Meeting will be held on 21 October 2019 at 2.30pm and 3.30pm (or as soon thereafter following the conclusion of the EGM to be held, whichever is later) respectively at Raffles City Convention Centre, Canning Ballroom, Level 4.

The EGMs and the Scheme Meetings are different meetings to be held on the same day. Each meeting has a separate proxy form, with different instructions and different approval thresholds. If you wish to appoint a proxy for both the EGM and the Scheme Meeting, you are required to submit both proxy forms.

If you are unable to attend the EGM or Scheme Meeting in person, you may appoint someone you know, or the Chairman of the EGM or Chairman of the Scheme Meeting, to vote on your behalf by completing the proxy form (EGM) or proxy form (Scheme Meeting).

For Ascott Reit unitholders, please return the completed and signed proxy form (EGM) and proxy form (Scheme Meeting) to Boardroom Corporate & Advisory Services Pte. Ltd., at its registered office at 50 Raffles Place, #32-01 Singapore Land Tower, Singapore 048623. The proxy form (EGM) and proxy form (Scheme Meeting) should arrive at Boardroom Corporate & Advisory Services no later than Saturday, 19 October 2019 at 10am and 11am respectively.

For A-HTRUST unitholders, please return the completed and signed proxy form (EGM) and proxy form (Scheme Meeting) to Boardroom Corporate & Advisory Services Pte. Ltd., at its registered office at 50 Raffles Place, #32-01 Singapore Land Tower, Singapore 048623. The proxy form (EGM) and proxy form (Scheme Meeting) should arrive at Boardroom Corporate & Advisory Services no later than Saturday, 19 October 2019 at 2.30pm and 3.30pm respectively.

The respective proxy forms are enclosed in the Composite Document of Ascott Reit and Scheme Document of A-HTRUST which have been issued to unitholders. The proxy forms can also be obtained from Boardroom Corporate & Advisory Services.

Questions Specific to A-HTRUST Stapled Unitholders

9. As a stapled unitholder in A-HTRUST, how much cash consideration and consideration units am I entitled to?

You will receive a consideration of S$1.0868 per A-HTRUST unit, comprising S$0.0543 in cash (5% of the consideration) and 0.7942 units in the new stapled Ascott Reit to be issued at S$1.30 per Ascott Reit stapled unit (95% of the consideration).

By way of illustration, if the trust scheme becomes effective in accordance with its terms, you will receive S$54.30 in cash and 794 units for every 1,000 A-HTRUST stapled units held as at the relevant books closure date.

Note: The aggregate Cash Consideration to be paid to each A-HTRUST stapled unitholder shall be rounded to the nearest S$0.01. The number of Consideration Units which each A-HTRUST stapled unitholder shall be entitled to pursuant to the A-HTRUST Scheme, based on the number of the A-HTRUST stapled units held by such A-HTRUST stapled unitholder as at the A-HTRUST Scheme Entitlement Date, shall be rounded down to the nearest whole number, and fractional entitlements shall be disregarded.

10. Between the announcement and completion of the Combination, will I still receive distributions from A-HTRUST? When can I expect the distributions to be paid to me?

Yes. The managers of A-HTRUST are entitled to declare, pay or make distributions for (amongst other things) the period from 1 April 2019 up to (and including) the A-HTRUST Scheme Implementation Date, including any clean-up distributions.

A-HTRUST unitholders can therefore expect to receive the regular half-yearly distribution following the announcement of A-HTRUST’s financial results as at 30 September 2019. The payment date of such distributions will be announced in due course.

According to page 33 of the Scheme Document, the indicative A-HTRUST Scheme Implementation Date is expected to be 31 December 2019. This timetable is indicative only and is subject to change.

Questions Specific to Ascott Reit Unitholders

11. Following the Combination, Ascott Reit will have a stapled structure. What does this mean to me, and how does it affect my investment?

As a unitholder in Ascott Reit, you will be issued one unit in Ascott BT for each unit in Ascott Reit that you own, and the unit in Ascott BT will be stapled with the unit in Ascott Reit. This structure does not affect the value of your investment and there is no effective difference in the manner the stock is traded.

Please refer to question 5 for more details on the stapling scheme.

12. Between the announcement and completion of the proposed Combination, will I still receive distributions from Ascott Reit? When can I expect the distributions to be paid to me?

Yes. The manager of Ascott Reit is entitled to declare, pay or make distributions for (amongst other things) the period from 1 January 2019 up to (and including) the A-HTRUST Scheme Implementation Date, including any clean-up distributions.

The regular half-yearly distribution following the announcement of Ascott Reit’s 1H 2019 financial results as at 30 June 2019 was paid to unitholders on 29 August 2019.

According to page 3 of the Composite Document, the indicative A-HTRUST Scheme Implementation Date is expected to be 31 December 2019. This timetable is indicative only and is subject to change.

Have a question that we have not addressed? Email us at ask-us@ascottreit.com and we will get back to you. Or contact us at Tel: +65 6713 2888, Mondays to Fridays from 9am to 6pm.

Responsibility Statement

The directors of the Ascott Reit Manager (including those who may have delegated detailed supervision of the information set out in this section of the website (“Information”)) have taken all reasonable care to ensure that the facts stated and opinions expressed in the Information which relate to Ascott Reit and/or the Ascott Reit Manager (excluding those relating to A-HTRUST and/or the A-HTRUST REIT Manager and/or the A-HTRUST BT Trustee-Manager) are fair and accurate and that there are no other material facts not contained in the Information the omission of which would make any statement in the Information misleading. The directors of the Ascott Reit Manager jointly and severally accept responsibility accordingly.

Where any information has been extracted or reproduced from published or otherwise publicly available sources or obtained from A-HTRUST and/or the A-HTRUST REIT Manager and/or the A-HTRUST BT Trustee-Manager, the sole responsibility of the directors of the Ascott Reit Manager has been to ensure through reasonable enquiries that such information is accurately extracted from such sources or, as the case may be, reflected or reproduced in the Information. The directors of the Ascott Reit Manager do not accept any responsibility for any information relating to A-HTRUST and/or the A-HTRUST REIT Manager and/or the A-HTRUST BT Trustee-Manager or any opinion expressed by A-HTRUST and/or the A-HTRUST REIT Manager and/or the A-HTRUST BT Trustee-Manager.