INTRODUCTION | INGENIOUS VALUE CREATION & GROWTH STRATEGIES | IN CONVERSATION | INSIGHTS INTO GROWTH | INSPIRING LEADERSHIP

INTEGRATING PEOPLE & SOCIETY | INVESTOR RELATIONS | IN REVIEW | INCREASING DOMINANCE | IN DETAILS

INTRODUCTION

LETTER TO UNIHOLDERS (ENGLISH)

LETTER TO UNITHOLDERS (CHINESE)

FINANCIAL HIGHLIGHTS

MILESTONES

On behalf of the Board of CapitaMall Trust Management Limited (CMTML), the Manager of CapitaMall Trust (CMT), we present the report of CMT for the year ended 31 December 2005.

2005 has been a remarkable year of achievement for CapitaMall Trust (CMT). With four new acquisitions at a total purchase price of S$770.6¹ million, the largest quantum of assets purchased in a year since CMT was listed in July 2002, we have grown CMT’s asset size to S$3.4 billion and market capitalisation to S$3.1² billion, further strengthening our position as the largest Real Estate Investment Trust (REIT) by asset size and market capitalisation in Singapore. In addition, we have gained market dominance with an enlarged portfolio of nine malls across Singapore, bringing us a step closer to achieve our target asset size of S$4 billion to S$5 billion locally by 2007.

Financial Performance
Singapore’s economy, building from 2004’s solid base and benefiting from the favourable external environment and the government’s restructuring and upgrading efforts, continued to perform strongly particularly in the second half of the year. Gross Domestic Product (GDP) in 2005 grew 6.4³ percent over 2004. Besides the good economic performance, we saw a record high 8.9 million in tourist arrivals, increased retail and catering sales figures, positive business sentiments among retailers and high demand for space from local and international retailers.

High Occupancy and Strong Rental Renewal Rates
The overall positive economic sentiments, together with the higher domestic consumer confidence, continued to sustain the close to 100 percent occupancy rates and strong rental renewal rates at our malls, which were 12.6⁴ percent and 6.8⁵ percent better than preceding and forecast rental rates, respectively.

Stable Distributions and Attractive Total Returns
In line with our vision to deliver stable distributions and sustainable total returns to Unitholders, CMT has continued to outperform our forecasts to deliver a total Distribution per Unit (DPU) of 10.23 cents for the financial period ended 31 December 2005. This was 8 percent above the total DPU payout of 9.48 cents for the financial period ended 31 December 2004. For Unitholders who have held CMT units since 1 January 2005, they would have enjoyed a total return of 33.1⁶ percent as at 31 December 2005. For Unitholders who have invested in CMT since our Initial Public Offering (IPO) in July 2002, they would have enjoyed a total return of 165.8⁷ percent as at 31 December 2005.

The sterling performance in 2005 was mainly due to the addition of the four new properties to CMT’s portfolio, the receipt of interest income from CMT’s investment in Class E bonds issued by CapitaRetail Singapore Limited and a full-year contribution from Junction 8’s new extension which was completed in December 2004. Higher rental income on new and renewed leases from other malls and rental income from newly created retail spaces at Tampines Mall and Funan DigitaLife Mall also contributed to an increase in gross revenue.

Key Developments
CMT’s DPU has grown 62.5⁸ percent since IPO and yield-accretive acquisitions, innovative asset enhancements and active leasing have each contributed 49.0 percent, 20.5 percent and 19.2 percent, respectively, to the DPU growth. These three key components continued to play a prominent role in driving DPU growth in 2005.

Yield-Accretive Acquisitions & Proactive Management
CMT acquired Sembawang Shopping Centre for S$78.0 million on 10 June 2005. This was shortly followed by the acquisition of 96.7 percent of the strata area of Hougang Plaza, which was progressively purchased for a total of S$43.8 million on 20 June 2005 (13.6 percent), 30 June 2005 (78.8 percent) and 16 August 2005 (4.3 percent). Bugis Junction and Jurong Entertainment Centre were acquired for S$580.8 million and S$68.0 million, respectively on 31 October 2005. The four yield-accretive acquisitions, totalling S$770.6 million, offered further geographic diversification benefits by allowing CMT to cater to tenancy demands in different parts of Singapore. They also provided CMT with an opportunity to increase our free float and trading liquidity. In addition, CMT reduced our total net property income derived from any one property to no more than 23.3 percent, down from 30.0 percent for the same period last year (from 31 October 2005 to 31 December 2005). More importantly, the new assets provided CMT with a continuous pipeline of value-adding opportunities within the portfolio which will drive DPU growth for Unitholders in the next few years.

A strong testament to our ability to proactively manage our assets to deliver enhanced returns was when we successfully unlocked the value of Seiyu’s master lease at Bugis Junction, even prior to the completion of the acquisition. The surrender of part of the space under the master lease by Seiyu generated an additional net property income of S$3.16⁹ million. As a result, the property yield of Bugis Junction increased from 5.0¹⁰percent to 5.3¹¹ percent in 2005, and from 5.3¹² percent to 5.6¹³ percent in 2006. Concurrently, CMT’s forecast DPU also increased from 10.64¹⁴cents to 10.81¹⁵ cents in 2005, and from 10.88¹⁶ cents to 11.04¹⁷ cents in 2006.

Another clear endorsement of our proactive management skillset was when Urban Redevelopment Authority (URA) granted CMT Outline Permission to convert 45,267 sq ft of residential Gross Floor Area (GFA) to commercial GFA at Sembawang Shopping Centre, a 999-year leasehold commercial cum residential development. We had assumed nil contribution from the residential component when Sembawang Shopping Centre was purchased.

Increased Market Capitalisation, Free Float and Trading Liquidity
To part-finance the acquisitions, 173.4 million new units were issued in October 2005. CMT’s free float was also increased from 61.0¹⁸ percent to 66.0¹⁹ percent. As a result, CMT’s Unitholder base was enlarged with the addition of many new institutional investors, including a substantial number of quality investors from Switzerland and Australia. As at 31 December 2005, CMT’s market capitalisation has increased by 47.6²⁰ percent to approximately S$3.1 billion. With CMT’s inclusion in the Straits Times Index in March 2005, along with our earlier inclusion in other key indices such as the Morgan Stanley Capital International, Inc (MSCI) Index, the FTSE European Public Real Estate Association (EPRA) / National Association of Real Estate Investment Trust (NAREIT) Global Real Estate Index, the Global Property Research (GPR) General Property Shares Index, the GPR 250 Global Property Shares Index and the GPR 250 Global REIT Index, CMT’s trading liquidity for the full year 2005 improved significantly to approximately 354 million units. This was an increase of 15 percent over the approximately 308 million units traded for the full year 2004.

Completed Asset Enhancement Initiatives
We are constantly reviewing the concepts, tenant mix and layout of our malls. 2005 was a busy year with one major rebranding exercise and with many asset enhancement initiatives successfully executed on schedule.

In May 2005, Funan The IT Mall was rebranded as Funan DigitaLife Mall to better reflect the tenant mix and the positioning of the mall. The rebranding exercise was also tied in with the launch of “Inbox5”, a thematic zone on Level 5 with a focus on digital and electronic devices, in June 2005. Over at Tampines Mall, the food kiosk area was reconfigured which increased the total number of food kiosks from 13 to 18. The reconfiguration initiative, which was completed in October 2005, incurred a capital expenditure of S$2.9 million, but created additional net property income of S$0.4 million per annum and achieved a return on investment of 12.2 percent. With the launch of “Inbox5” at Funan DigitaLife Mall and reconfiguration of the food kiosk area at Tampines Mall, coupled with the other asset enhancement initiatives at IMM Building, Plaza Singapura and Jurong Entertainment Centre, a total of S$2.2 million of rental revenue per annum was created in 2005. In addition, all projects undertaken met our minimum return of investment criteria of 10.0 percent.

As Junction 8’s new retail extension was completed only in December 2004, the full impact of the revenue contribution was felt in 2005. Revenue year-on-year at Junction 8 was up from S$33.5 million to S$40.4 million, representing a 20.6 percent increase, and ‚ŽNet Property Income (NPI) also rose from $21.3 million to S$26.5 million, representing an increase of 24.4 percent.

Other than major asset enhancement works, we are also constantly exploring different avenues to enhance the value of our assets. Through initiatives such as the extension of lease lines at Tampines Mall and the relocation of Air Handling Units (AHUs) at Junction 8 to create more retail space, we were able to increase Net Lettable Area by 4,855 sq ft which translated to a rental increase per annum of S$1.1 million. A reduction in operational expenses, through the bulk purchase of utilities, also contributed to an increase in NPI per annum of S$1.2 million. In 2006, the recovery of 12,000 sq ft of space, through the relocation of AHUs at Plaza Singapura, is expected to provide a rental increase per annum of S$0.9 million.

Increased Value of Property Portfolio
With the four acquisitions, CMT’s asset size increased 47.8 percent, from S$2.3 billion (as at 31 December 2004) to S$3.4 billion (as at 31 December 2005). Part of this increase was attributable to the value creation at the malls which had their valuation increased by 14.4²¹ percent from S$2,235.0 million (as at 1 December 2004) to S$2,556.5 million (as at 1 December 2005).

Planned Asset Enhancement Initiatives
CMT’s key growth drivers for the next three years will be from asset enhancements undertaken at IMM and Sembawang Shopping Centre.

IMM Building
Asset enhancement works at IMM will commence in first quarter 2006. The asset enhancement plan involves the decantation of 64,800 sq ft of NLA from the secondary corridor spaces at the mall and its transfer to a two-storey retail extension block which will be constructed on the existing open-air car park space. The commencement of the work follows the provisional permission obtained from the URA to increase the allowable commercial GFA from 26.8 percent to 40.0 percent, subject to the payment of a differential premium. The 13.2 percent increase granted by URA effectively translates to approximately 188,000 sq ft of additional commercial GFA at the mall. With the increase in commercial GFA, we were able to optimise the asset enhancement plan and the project is expected to increase net property income by S$9.3 million per annum. The estimated capital expenditure is S$92.5 million and the target return of investment is 10.1 percent. The asset enhancement work is expected to be completed by first quarter 2008.

Sembawang Shopping Centre
We have developed the asset enhancement plan which incorporates an additional 45,267 sq ft of GFA from the decantation of the residential block. The decanted space from the residential block and part of the retail space on Level 4 will be transferred to create more prime retail space on three levels of an extension which will be built on a plot of land adjoining the mall. The decanted space on Level 4 will be converted to an Open Landscape Plaza which will feature a children’s playground and an event space. The project is expected to incur a capital expenditure of S$38.9 million, and is expected to increase net property income by S$3.7 million per annum and achieve a return on investment of 9.5 percent. Construction of the extension block is expected to commence in end 2006 and is expected to be completed by end 2008.

Funan DigitaLife Mall
Asset enhancement work has started on the development of a two-storey annex which will add close to 8,000 sq ft of NLA to Funan DigitaLife Mall. The adjoining annex, which will be constructed at a capital expenditure of S$5.0 million, is expected to increase net property income by S$0.5 million per annum and provide a return on investment of 10.1 percent. The project is expected to be completed by second quarter 2006. Funan DigitaLife Mall still has approximately 300,000 sq ft of unutilised GFA, and we will actively explore its utilisation when the opportunity arises.

Investor Relations & Corporate Governance
CMT was honoured to win the ‘Most Transparent Company’ Award at the Securities Investors Association (Singapore) (SIAS) Investors’ Choice Awards held in October 2005 for the second year running. The prestigious award, for which we were nominated by analysts, fund managers and media, recognises the timeliness, clarity and comprehensiveness of the information we disclose and our strong commitment to good investor relations. We will seek to uphold the highest level of corporate governance and transparency standards for CMT.

Corporate Social Responsibility
Whilst we considered ways to add value to our Unitholders, we also thought of how we could turn our malls into centre of activities to embrace and benefit the community. A key milestone was achieved when we handed over 55,000 sq ft of rent-free lettable space at Junction 8’s office tower to the National Council of Social Service for their Voluntary Welfare Organisations. Earlier, 70,000 sq ft of gross floor area was transferred from the office tower to the retail portion of Junction 8. The office tower would have had to be demolished to maintain Junction 8’s original total gross floor area.

In addition, we have created open landscaped plazas on the rooftops of Tampines Mall and Junction 8 which are excellent locations for events and activities, and we have made them available to charitable organisations to further our corporate social responsibility goals.

Looking Forward
Strategic Initiative
As at 31 December 2005, we have 60.6²² percent and 77.6²² percent of our tenants on step-up rental and Gross Turnover Rent (GTO) respectively. As we gradually move towards a new rental structure of either a base rent plus a percentage of GTO or a percentage of GTO, whichever is higher, we will be progressively rolling out the Point of Sales (POS) system to all malls across the portfolio so as to capture tenants’ sales more efficiently and effectively. We have started to pilot the POS system at Junction 8 and achieved over 90 percent subscription rate. Deployment of the POS system will also enable us to capture the revenue upside from GTO rent.

Well-Positioned to Capitalise on Guidelines and Budget Changes
In October 2005, the Monetary Authority of Singapore refined its Property Funds Guidelines to, among other things, strengthen the corporate governance of REITs and incorporate higher flexibilities in the investment activities by REITs. The key changes to the guidelines include providing clear provisions and stipulations to facilitate the acquisition of foreign property assets and the partial ownership of property assets by REITs. More importantly, the leverage limit was increased from 35.0 percent to 60.0 percent, subject to the REIT obtaining and disclosing a credit rating by a major rating agency.

Clearly, to enhance the competitive advantage of Singapore REITs and to further grow Singapore as the REIT financial centre, the government announced in its Budget 2006 on 17 February 2006 that tax exemptions granted to Singapore REITs will be extended to include foreign-sourced interest and distributions by foreign trusts paid out of income or gains related to ownership of foreign properties. In addition, Singapore REITs will be able to recover Goods and Services Tax (GST) on expenses incurred to structure and set up various tiers of Special Purpose Companies (SPCs) to hold overseas non-residential properties. GST incurred on acquiring overseas non-residential properties and operating the SPCs is also recoverable.

CMT, with its competitive cost of capital structure, conservative debt structure and low gearing ratio of 31.7 percent as at 31 December 2005, is well poised to benefit from the increased gearing limit. Through leveraging on our six established value creation cum growth strategies, termed as the Six “i”s, we will continue to pursue yield accretive acquisitions in Singapore to grow CMT’s asset size to a higher target of S$5.0 billion to S$6.0 billion by 2008. We have now grown to a significant size where we can capitalise on our scale to take on investment and development projects. This option is further facilitated by the government’s latest guideline change which allows REITs to take on development projects up to no more than 10 percent of their deposited assets. Over the medium-term, we will also explore how CMT Unitholders can benefit from having an exposure in overseas assets so to provide them with a new wing of growth.

2006 Objectives
This year, we will be focused on executing the various planned asset enhancement initiatives with minimal impact to existing revenue streams and will continue to explore value creation opportunities at our malls. In addition, we will further strengthen the tenancy mix and enhance the retail experience for our shoppers. We will also continue to optimise CMT’s capital structure, actively pursue yield-accretive acquisitions and improve operational efficiencies at the malls. Barring any unforeseen circumstances, we are confident of delivering the 2006 forecast DPU of 11.04²³ cents per unit.

Acknowledgements
In July 2005, Mr Lui Chong Chee stepped down from the Board after serving for more than 3 years. We would like to thank him for his invaluable contributions. We also welcome our new Director, Mr Olivier Lim, from whose expertise we are confident we will benefit.

We would like to thank our Board of Directors, Unitholders, business partners, customers, tenants, shoppers and staff for their contributions to our performance. With the continued support of all stakeholders, CMT aims to continue to create value through proactively managing our assets so as to maximise returns to Unitholders, and at the same time, endeavour to provide shoppers with one of the best retail experiences at our malls.

Hsuan Owyang
Chairman

Pua Seck Guan
Chief Executive Officer

11 March 2006