Xizhimen Mall

CIRCULAR DATED 14 NOVEMBER 2007 (Constituted in the Republic of Singapore THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. pursuant to a trust deed dated 23 October 2006 (as amended))

Anzhen Mall, Beijing Jinyu Mall, Huhehaote Xizhimen Mall, Beijing CAPITARETAIL CHINA TRUST Circular dated 14 November (Xizhimen Mall) 2007 OVERVIEW This overview section is qualiﬁ ed in its entirety by, and should be read in conjunction with, the full text of this Circular. Meanings of capitalised terms Xizhimen Mall may be found in the Glossary of this Circular. PROPOSED ACQUISITION OF XIZHIMEN MALL

Jiulong Mall, Beijing Qibao Mall, Shanghai Wangjing Mall, Beijing CRCT is proposing to acquire Xizhimen Mall located at Xizhimen in Xicheng District, Beijing, PRC (the “Proposed Acquisition”). On 18 October 2007, HSBC Institutional Trust Services (Singapore) Limited, as trustee of CRCT, entered into a conditional share purchase agreement to purchase the mall at an agreed property price of S$336.0 million. Two independent property valuers, Colliers International (Hong Kong) Limited and Knight Frank Petty Limited, have valued the property at S$338.4 million and S$340.0 million respectively, as at 30 September 2007. Separate from the Proposed Acquisition, there is also an agreement to purchase (subject to certain conditions being fulﬁ lled) from Beijing Finance Street Construction Development Co., Ltd. (a third party vendor), the planned extension of the current basement 1 of the mall (“Phase 2”) currently estimated Xinwu Mall, Wuhu Zhengzhou Mall, to have a Gross Rentable Area (“GRA”) of approximately 11,539 square metres Zhengzhou when completed. The extension would increase the GRA of Xizhimen Mall by 15.6%. The total acquisition cost, comprising the purchase consideration, the acquisition fee payable to the Manager, as well as the professional and other fees and expenses in connection with the Proposed Acquisition, is estimated to be approximately S$344.0 million (the “Total Acquisition Cost”) Unitholders should note that the Proposed Acquisition is subject to and conditional upon the passing of the resolution for the Equity Fund Raising (see Resolution 2).

Singapore Exchange Securities Trading Limited (the “SGX-ST”) takes no responsibility If you have sold or transferred all your units in CRCT (“Units”), you should immediately for the correctness of any statements made, opinions expressed, or reports contained, forward this Circular, together with the Notice of Extraordinary General Meeting and in this Circular. If you are in any doubt as to the action you should take, you should the accompanying Proxy Form in this Circular, to the purchaser or transferee or to the consult your stockbroker, bank manager, solicitor, accountant or other professional bank, stockbroker or other agent through whom the sale or transfer was effected for adviser immediately. onward transmission to the purchaser or transferee. PROPOSED METHOD OF ANZHEN MALL Approval in-principle has been obtained from the SGX-ST for the listing and quotation This Circular is not for distribution, directly or indirectly, in or into the United States. of the new units (the “New Units”) in CapitaRetail China Trust (“CRCT”) to be issued It is not an offer of securities for sale into the United States. The Units may not JIULONG MALL for the purpose of the Equity Fund Raising (as defi ned herein) on the Main Board of be offered or sold in the United States or to, or for the account or benefi t of, U.S. FINANCING MAP OF CHINA Inner the SGX-ST. The SGX-ST’s in-principle approval is not to be taken as an indication of persons (as such term is defi ned in Regulation S under the Securities Act of 1933, as Mongolia WANGJING MALL the merits of CRCT, the New Units, the Equity Fund Raising, the Waivers (as defi ned amended) unless they are registered or exempt from registration. There will be no herein) or the Proposed Acquisition (as defi ned herein). public offer of securities in the United States. The Manager intends to issue New Units so as to raise gross proceeds JINYU MALL Existing Portfolio XIZHIMEN MALL of up to approximately S$280.0 million in order to partly fi nance the Proposed Acquisition - Xizhimen Mall Beijing CIRCULAR TO UNITHOLDERS IN RELATION TO: Proposed Acquisition, with the balance of the proceeds to be utilised for CRCT’s working capital and capital expenditure purposes (the (1) THE PROPOSED ACQUISITION OF XIZHIMEN MALL; “Equity Fund Raising”). (2) THE PROPOSED ISSUE OF NEW UNITS UNDER THE EQUITY FUND RAISING; ZHENGZHOU MALL Henan (3) THE PROPOSED PLACEMENT OF NEW UNITS TO CAPITALAND LIMITED AND ITS SUBSIDIARIES; The remainder of the Total Acquisition Cost will be fi nanced through (4) THE PROPOSED PLACEMENT OF NEW UNITS TO CAPITAMALL TRUST; bank borrowings of approximately S$88.0 million. The bank borrowings Shanghai (5) THE PROPOSED PLACEMENT OF NEW UNITS TO THE DIRECTORS; are expected to be entered into at the CRCT level in the form of a two- QIBAO MALL Anhui (6) THE PROPOSED GENERAL MANDATE FOR THE ISSUE OF NEW UNITS AND CONVERTIBLE SECURITIES; AND year unsecured term loan facility. (7) THE PROPOSED RETENTION OF WANGJING MALL IN THE EXISTING PORTFOLIO. XINWU MALL Unitholders should also note that the Equity Fund Raising is subject

Managed By IMPORTANT DATES AND TIMES FOR UNITHOLDERS to and conditional upon the passing of the resolution for the Proposed Acquisition (see Resolution 1). Event Date Time CAPITARETAIL CHINA TRUST MANAGEMENT LIMITED (the “MANAGER”) Last date and time for 2 December 2007 10.00 a.m. A member of lodgement of Proxy Forms Date and time of Extraordinary General 4 December 2007 10.00 a.m. Meeting (“EGM”)

Joint Lead Managers, Bookrunners and Underwriters for the Equity Fund Raising Place of EGM 168 Robinson Road Capital Tower Level 9 STI Auditorium Singapore 068912

CCRCT_gatefold_pg1.inddRCT_gatefold_pg1.indd 1 111/14/071/14/07 12:44:3412:44:34 AMAM FOR INFORMATION ONLY

CIRCULAR DATED 14 NOVEMBER 2007 (Constituted in the Republic of Singapore THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. pursuant to a trust deed dated 23 October 2006 (as amended)

Anzhen Mall, Beijing Jinyu Mall, Huhehaote Xizhimen Mall, Beijing CAPITARETAIL CHINA TRUST Circular dated 14 November 2007 (Xizhimen Mall) OVERVIEW This overview section is qualiﬁ ed in its entirety by, and should be read in conjunction with, the full text of this Circular. Meanings of capitalised terms Xizhimen Mall may be found in the Glossary of this Circular. PROPOSED ACQUISITION OF XIZHIMEN MALL

Managed By IMPORTANT DATES AND TIMES FOR UNITHOLDERS to and conditional upon the passing of the resolution for the Proposed Acquisition (see Resolution 1). Event Date Time CAPITARETAIL CHINA TRUST MANAGEMENT LIMITED (the “MANAGER”) Last date and time for 2 December 2007 10 a.m. A member of lodgement of Proxy Forms Date and time of Extraordinary General 4 December 2007 10 a.m. Meeting (“EGM”)

Joint Lead Managers, Bookrunners and Underwriters for the Equity Fund Raising Place of EGM 168 Robinson Road Capital Tower Level 9 STI Auditorium Singapore 068912 BENEFITS TO UNITHOLDERS

1. Attractive DPU accretion 3. Competitive strengths of Xizhimen Mall: 4. Greater income and tenant mix diversiﬁ cation

Based on the assumptions as set out in Appendix B, the improvement in (i) Iconic retail development in a landmark location, with ease of Xizhimen Mall’s diverse tenant base is largely weighted CRCT’s FY2008 DPU, as a result of the Proposed Acquisition combined connectivity towards specialty type tenants with its anchor tenant, with the proposed debt and equity fi nancing plan, is shown below. Beijing Hualian Supermarket, occupying only 10.9% Xizhimen Mall is part of Xihuan Plaza, a contemporary, iconic of total GRA. The Proposed Acquisition is expected to development located just outside the boundary of Beijing’s west FY2008 DPU (S$) improve income diversifi cation, reducing tenant and asset second ring road and situated at one of only two inter-modal, multi- concentration risks in CRCT’s Enlarged Portfolio. level public transportation hubs in Beijing with a confl uence of MRT and LRT lines, national railway line and major bus routes. 10.3% The effect of the Proposed Acquisition on CRCT’s portfolio trade mix and NPI contribution is shown below: (ii) Strong shopper catchment 7.20 cents Xizhimen Mall is strategically located in Xicheng district, which has a 6.53 cents large, well-established and growing population catchment comprising Portfolio Trade Sector Analysis middle class residents, workers from Beijing Finance Street (the city’s (By Gross Rental Income) (As at 31 August 2007) fi nancial district), as well as universities and high-technology zones of Zhongguancun district. It is estimated that the daily commuter traffi c Existing Portfolio Enlarged Portfolio Existing Portfolio Enlarged Portfolio fl owing through the Xizhimen transportation hub is approximately 300,000 persons on weekdays and 600,000 persons on weekends. 2. Proposed Acquisition is consistent with the Manager’s It is also estimated that the current retail spending of the catchment investment and acquisition growth strategy population is approximately 15.0% to 20.0% above the Beijing average. The acquisition of Xizhimen Mall is in line with the Manager’s principal investment strategy and will grow CRCT’s Deposited Property value by (iii) Diverse, stable and quality tenant base approximately 47.1% to nearly S$1.2 billion, augmenting the Manager’s Xizhimen Mall benefi ts from well-established brand names of its Trade sub-sector Contribution % Contribution % vision to achieve a Deposited Property value of S$3.0 billion by 2009. diverse tenant base comprising 165 leases (as at 31 August 2007) Fashion 16.2 23.3 Department Store 46.4 34.3 with tenants such as KFC, Pizza Hut, Esprit, McDonald’s, Watsons, Food & Beverage/ 10.2 13.7 CRCT’s total assets1 growth Beijing Hualian Supermarket, Sport 100, Colour Jeans etc. The large Foodcourt diverse tenant base and wide product offering position Xizhimen Mall Services 5.4 8.7 Sports & Fitness 4.1 4.5 favourably relative to other comparable malls in the vicinity. Supermarket/ 9.8 8.1 47.1% Hypermarket Leisure & 1.4 1.1 (iv) Favourable lease structure with strong upside potential Entertainment S$1,185.4 million Xizhimen Mall’s lease structure provides Unitholders with stable and Toys 1.2 1.0 growing rental income. Most leases provide for annual step-up in Home Furnishings 4.3 3.7 S$805.7 million Gifts and Specialty 0.0 0.1 base rent and for rent to be payable on the basis of the higher of Electronic/IT 0.4 0.6 either base rent or a percentage of tenants’ gross sales turnover, Education/ 0.4 0.7 providing stability and potential upside in revenues. School Books & 0.0 0.0 Existing Portfolio Enlarged Portfolio Stationery (v) Value creation opportunity from Phase 2 Hobbies 0.1 0.1 Others 0.1 0.1 Phase 2 is a planned extension of the current basement 1 of Xizhimen Mall, which would provide direct pedestrian connectivity to the adjacent MRT station and future railway station, hence increasing Portfolio FY2008 NPI Analysis overall shopper traffi c and enabling better shopper fl ow. The completion of Phase 2 offers on opportunity to increase Xizhimen Mall’s overall rentals and further enhance its position as the area’s Existing Portfolio Enlarged Portfolio landmark one-stop shopping dining and entertainment destination.

Property Name Contribution % Contribution % Wangjing Mall 33.7 24.4 Jiulong Mall 12.6 9.1 Anzhen Mall 25.0 18.1 Qibao Mall 6.3 4.6 Zhengzhou Mall 15.1 10.9 Jinyu Mall 5.9 4.3 Xinwu Mall 1.4 1.1 Xizhimen Mall 27.5

1 Refers to the Deposited Property BENEFITS TO UNITHOLDERS

1. Attractive DPU accretion 3. Competitive strengths of Xizhimen Mall: 4. Greater income and tenant mix diversiﬁ cation

1 Refers to the Deposited Property 5. Strengthened foothold in Beijing’s retail sector XIZHIMEN MALL, BEIJING CRCT currently owns three quality retail assets in Beijing: Wangjing Mall, Jiulong Mall and Anzhen Mall which are strategically located in high-growth Xizhimen Mall is a one-stop shopping, dining and entertainment destination comprising seven storeys of multi- areas with large population catchments and in close proximity to transportation tenanted retail outlets, with a basement level and six storeys above ground level. The mall is part of an iconic nodes. The addition of Xizhimen Mall to CRCT’s existing portfolio will extend integrated mixed-use development which includes three offi ce towers and a commercial block. The mall is CRCT’s market presence to the western part of Beijing which forms part of situated at one of Beijing’s two key inter-modal transportation hubs with a confl uence of subway and rail lines Beijing’s core city area. Such addition will allow CRCT to benefi t from a larger such as the existing MRT Line 2, LRT Line 13, as well as the upcoming MRT Line 4 and national railway. Major pool of shoppers and tenancy demand in Beijing’s core city area. The Manager bus routes also converge at a future bus interchange across the mall. believes the enlarged portfolio will propel CRCT’s ability to capture the strong growth opportunity in Beijing’s retail sector that has grown on average by Xizhimen Mall is thus well-supported by a large shopper catchment encompassing the strong fl ow of daily approximately 12.0% per annum in the last decade. commuters passing through the transportation hub (estimated to be 300,000 persons on weekdays and 600,000 persons on weekends), neighbouring middle-class residents, as well as students and working population 6. Greater trading liquidity in the nearby Beijing Finance Street (the city’s fi nancial district), universities and high-technology zones of Zhongguancun District. The outstanding connectivity of public transport provides an opportunity to capitalise on The New Units, when issued, are expected to increase CRCT’s free fl oat of Top Tenants at Xizhimen Mall large traffi c volumes, providing the mall with a sustainable competitive advantage in the long-term. Units on the SGX-ST, which in turn may result in improved trading liquidity thus potentially benefi ting Unitholders. Tenants 1 Trade Category % of Monthly Gross Rental Income (excluding 7. Exposure to the rapidly growing retail market trend in the turnover rent) PRC Sport 100 Sports and Fitness 7.8% Colour Jeans Fashion Against the backdrop of favourable macro-economic landscape (e.g. GDP Only, Jack & Jones, Fashion 6.7% Vero Moda forecast to grow by 10% in 2007 and at an average rate of 9.3% for the next KFC Food and 3.8% fi ve years), the retail sector in the PRC is witnessing rapid retail sales growth Pizza Hut Beverages/Foodcourt (forecast to grow by 10.9% CAGR over the next fi ve years), concurrently being Bejing Supermarket 3.1% driven by the shifting trends in retail spending. In addition, the emergence of Hualian Supermarket shopping malls as the dominant form of retailing with widespread acceptance Da Shi Dai (ࡍအࡔ) Food & 2.8% by PRC residents due to its convenience and quality, variety of goods and BreadTalk Beverage/Foodcourt services bodes well for the sector. Sephora Fashion 2.4% In-Base Fashion 2.1% The overall outlook for the retail property sector in the PRC is expected to Weider-Tera Sports & Fitness 2.0% be sound with continued strong growth in retail sales accompanied by a Esprit Fashion 1.9% desire by international retailers to establish and strengthen their presence Red Earth in the PRC. Considering the robust conditions of the PRC economy and its McDonald’s Food & 1.4% Beverage/Foodcourt retail market, the Manager believes that there is potential for future upside in

rentals for CRCT’s portfolio. 1 Tenants that belong to the same parent company are placed together. Beijing Subway 8. Competitive Capital Management Plan 2008 The Proposed Acquisition will reduce CRCT’s gearing from the existing level of approximately 31.0% to approximately 28.7%. This will provide CRCT with funding ﬂ exibility to undertake future acquisitions, including that of Phase 2, and any asset enhancement initiatives.

The table below sets out a summary of selected information on Xizhimen Mall:

Gross Rentable Area as at 31 August 2007 (sq m) 73,857 Xizhimen Number of Leases as at 31 August 2007 165 Committed Occupancy as at 31 August 2007 82.1%1 Car Parks 365 2 Years of Completion 2005, with refurbishments in 2006 and 2007 Land Use Right Terms Land use right terms expiring 23 August 2054 for overall integrated use and underground car park use and 23 August 2044 for underground commercial / retail use Valuation by Colliers as at 30 September 2007 S$338,400,000 (RMB1,692,000,000)3 Valuation by Knight Frank as at 30 September 2007 S$340,000,000 (RMB1,700,000,000)3

Notes: 1 Committed occupancy rate as 11 October 2007 is 87.1%. 2 Represents the number of car parks available for use. These are a part of Xihuan Plaza and not owned by the Vendor. 3 The independent valuers have adopted an exchange rate of S$1.00 is to RMB 5.00. 5. Strengthened foothold in Beijing’s retail sector XIZHIMEN MALL, BEIJING CRCT currently owns three quality retail assets in Beijing: Wangjing Mall, Jiulong Mall and Anzhen Mall which are strategically located in high-growth Xizhimen Mall is a one-stop shopping, dining and entertainment destination comprising seven storeys of multi- areas with large population catchments and in close proximity to transportation tenanted retail outlets, with a basement level and six storeys above ground level. The mall is part of an iconic nodes. The addition of Xizhimen Mall to CRCT’s existing portfolio will extend integrated mixed-use development which includes three offi ce towers and a commercial block. The mall is CRCT’s market presence to the western part of Beijing which forms part of situated at one of Beijing’s two key inter-modal transportation hubs with a confl uence of subway and rail lines Beijing’s core city area. Such addition will allow CRCT to benefi t from a larger such as the existing MRT Line 2, LRT Line 13, as well as the upcoming MRT Line 4 and national railway. Major pool of shoppers and tenancy demand in Beijing’s core city area. The Manager bus routes also converge at a future bus interchange across the mall. believes the enlarged portfolio will propel CRCT’s ability to capture the strong growth opportunity in Beijing’s retail sector that has grown on average by Xizhimen Mall is thus well-supported by a large shopper catchment encompassing the strong fl ow of daily approximately 12.0% per annum in the last decade. commuters passing through the transportation hub (estimated to be 300,000 persons on weekdays and 600,000 persons on weekends), neighbouring middle-class residents, as well as students and working population 6. Greater trading liquidity in the nearby Beijing Finance Street (the city’s fi nancial district), universities and high-technology zones of Zhongguancun District. The outstanding connectivity of public transport provides an opportunity to capitalise on The New Units, when issued, are expected to increase CRCT’s free fl oat of Top Tenants at Xizhimen Mall large traffi c volumes, providing the mall with a sustainable competitive advantage in the long-term. Units on the SGX-ST, which in turn may result in improved trading liquidity thus potentially benefi ting Unitholders. Tenants 1 Trade Category % of Monthly Gross Rental Income (excluding 7. Exposure to the rapidly growing retail market trend in the turnover rent) PRC Sport 100 Sports and Fitness 7.8% Colour Jeans Fashion Against the backdrop of favourable macro-economic landscape (e.g. GDP Only, Jack & Jones, Fashion 6.7% Vero Moda forecast to grow by 10% in 2007 and at an average rate of 9.3% for the next KFC Food and 3.8% fi ve years), the retail sector in the PRC is witnessing rapid retail sales growth Pizza Hut Beverages/Foodcourt (forecast to grow by 10.9% CAGR over the next fi ve years), concurrently being Bejing Supermarket 3.1% driven by the shifting trends in retail spending. In addition, the emergence of Hualian Supermarket shopping malls as the dominant form of retailing with widespread acceptance Da Shi Dai (ࡍအࡔ) Food & 2.8% by PRC residents due to its convenience and quality, variety of goods and BreadTalk Beverage/Foodcourt services bodes well for the sector. Sephora Fashion 2.4% In-Base Fashion 2.1% The overall outlook for the retail property sector in the PRC is expected to Weider-Tera Sports & Fitness 2.0% be sound with continued strong growth in retail sales accompanied by a Esprit Fashion 1.9% desire by international retailers to establish and strengthen their presence Red Earth in the PRC. Considering the robust conditions of the PRC economy and its McDonald’s Food & 1.4% Beverage/Foodcourt retail market, the Manager believes that there is potential for future upside in

The table below sets out a summary of selected information on Xizhimen Mall:

Notes: 1 Committed occupancy rate as 11 October 2007 is 87.1%. 2 Represents the number of car parks available for use. These are a part of Xihuan Plaza and not owned by the Vendor. 3 The independent valuers have adopted an exchange rate of S$1.00 is to RMB 5.00. THE FIRST PURE-PLAY CHINA RETAIL REAL CAPITARETAIL CHINA TRUST ESTATE INVESTMENT TRUST IN SINGAPORE

Listed on the Singapore Exchange Securities Trading Limited on 8 December 2006, CRCT is the ﬁ rst pure-play China retail REIT in Singapore. As at 31 October 2007, CRCT’s market capitalization was approximately S$1.3 billion, with a Deposited Property value of approximately S$805.7 million.

CRCT is established with the objective of investing on a long-term basis in a diversiﬁ ed portfolio of income-producing real estate used primarily for retail purposes and located primarily in China, Hong Kong and Macau. The current portfolio of seven retail mall properties is located in key cities of China.

CRCT is provided with long-term growth potential via three private funds established by the sponsor, CapitaLand Limited. The three funds, CapitaRetail China Development Fund I and II, and CapitaRetail China Incubator Fund, have granted rights of ﬁ rst refusal to CRCT over the properties that they will propose to sell. This secured and proprietary acquisition pipeline will potentially more than triple CRCT’s initial portfolio and increase CRCT’s presence to over 28 cities in China.

CRCT is managed by an external manager, CapitaRetail China Trust Management Ltd, which is an indirect wholly-owned subsidiary of CapitaLand Limited, one of the largest listed real estate companies in Asia. Existing Portfolio The table below sets out selected information on the Existing Portfolio as at 31 August 2007 (unless otherwise dated):

Gross Floor Gross Rentable Number Land Use Valuation (as at Percentage of Committed Forecast Year Area (sq m) Area (sq m) of Leases Right Expiry 30 Sep 2007) aggregate value Occupancy (%) 2008 NPI (RMB’000) of Existing (RMB’000) Portfolio (%) Wangjing Mall 82,634 67,500 155 15 May 2043 1,193,000 32.7 99.1 85,631 15 May 2053 Jiulong Mall 49,526 49,526 6 10 July 2042 432,000 11.8 100.0 32,003 Anzhen Mall 43,442 43,442 1 5 March 2042 791,000 21.7 100.0 63,504 3 June 2042 7 October 2034 Qibao Mall 83,986 72,729 126 10 March 2043 320,000 8.8 79.4 16,160 Zhengzhou Mall 92,356 92,356 1 31 May 2042 466,000 12.8 100.0 38,307 Jiuyu Mall 41,938 41,938 1 11 March 2041 316,000 8.6 100.0 15,056 20 March 2041 Xinwu Mall1 59,624 45,375 96 29 May 2044 130,000 3.6 95.5 3,624

1 Based on CRCT’s 51.0% ownership in Xinwu Mall

CRCT is Enlarged Portfolio (comprising Xizhimen Mall and the Existing Portfolio) proposing to acquire The table below sets out selected information on the Enlarged Portfolio. Xizhimen Mall located at Xizhimen Proposed Acquisition Existing Portfolio Enlarged Portfolio Gross Floor Area1 73,857 453,506 527,363 in Xicheng District, (sq m) Beijing, PRC. Gross Rentable 73,857 412,866 486,723 Area1 (sq m) Number of 165 386 551 Leases1 Valuation as at 30 1,692,0002 3,648,0004 5,340,000 September 2007 (RMB’000) Committed 82.1%3 95.8%5 93.6%5 Occupancy1

1 As at 31 August 2007. 2 Valuation by Colliers. 3 Committed occupancy as at 11 October 2007 is 87.1%. 4 Valuation by CBRE. 3 Based on CRCT’s 51.0% ownership in Xinwu Mall. THE FIRST PURE-PLAY CHINA RETAIL REAL CAPITARETAIL CHINA TRUST ESTATE INVESTMENT TRUST IN SINGAPORE

1 Based on CRCT’s 51.0% ownership in Xinwu Mall

1 As at 31 August 2007. 2 Valuation by Colliers. 3 Committed occupancy as at 11 October 2007 is 87.1%. 4 Valuation by CBRE. 3 Based on CRCT’s 51.0% ownership in Xinwu Mall. IMPORTANT NOTICE

The value of Units and the income derived from them may fall as well as rise. Units are not obligations of, deposits in, or guaranteed by, the Manager or any of its affiliates. An investment in Units is subject to investment risks, including the possible loss of the principal amount invested. The past performance of CRCT is not necessarily indicative of the future performance of CRCT.

Investors have no right to request the Manager to redeem their Units while the Units are listed. It is intended that Unitholders may only deal in their Units through trading on the SGX-ST. Listing of the Units on the SGX-ST does not guarantee a liquid market for the Units.

This Circular may contain forward-looking statements that involve 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 similar developments, shifts in expected levels of property rental income, changes in operating expenses (including employee wages, benefits and training costs), property expenses and 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 Manager’s current view of future events. All forecasts are based on a specified range of issue prices per Unit and on the Manager’s assumptions as explained in Appendix B of this Circular. Yields will vary accordingly for investors who purchase Units in the secondary market at a market price higher or lower than the issue price range specified in this Circular. The major assumptions are certain expected levels of property rental income and property expenses over the relevant periods, which are considered by the Manager to be appropriate and reasonable as at the date of the Circular. The forecast financial performance of CRCT is not guaranteed and there is no certainty that it can be achieved. Investors should read the whole of this Circular for details of the forecasts and consider the assumptions used and make their own assessment of the future performance of CRCT.

If you have sold or transferred all your Units, you should immediately forward this Circular, together with the Notice of Extraordinary General Meeting and the accompanying Proxy Form, to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for onward transmission to the purchaser or transferee.

This Circular is not for distribution, directly or indirectly, in or into the United States. It is not an offer of securities for sale into the United States. The Units may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons (as defined in Regulation S under the United States Securities Act of 1933 (as amended) and the rules and regulations of the United States Securities and Exchange Commission) unless they are registered or exempt from registration. There will be no public offer of securities in the United States.

i TABLE OF CONTENTS

Page

CORPORATE INFORMATION ...... 1

SUMMARY ...... 3

INDICATIVE TIMETABLE ...... 17

LETTER TO UNITHOLDERS 1. Summary of Approvals Sought ...... 18 2. The Proposed Acquisition...... 22 3. The Rationale of the Proposed Acquisition ...... 23 4. Details of the Proposed Acquisition ...... 29 5. Proposed Method of Financing...... 33 6. Details of the Proposed Equity Fund Raising ...... 35 7. The Proposed Placement to CapitaLand Limited and its Subsidiaries ...... 37 8. The Proposed Placement to CapitaMall Trust ...... 38 9. The Proposed Placement to the Directors ...... 39 10. The Proposed General Mandate to Issue Units and Convertible Securities ...... 40 11. The Proposed Retention of Wangjing Mall in the Existing Portfolio ...... 41 12. Recommendations ...... 43 13. Extraordinary General Meeting...... 45 14. Abstentions from Voting ...... 45 15. Action to be Taken by Unitholders ...... 46 16. Directors’ Responsibility Statement...... 47 17. Joint Lead Managers, Bookrunners and Underwriters’ Responsibility Statement ...... 47 18. Consents...... 47 19. Documents on Display ...... 47 GLOSSARY ...... 49 APPENDICES Appendix A The Mall and the Existing Portfolio ...... A-1 Appendix B Profit Forecast ...... B-1

Appendix C Independent Accountants’ Report on the Profit Forecast ...... C-1 Appendix D Significant Accounting Policies ...... D-1 Appendix E Tax Considerations ...... E-1 Appendix F Summary Valuation Reports...... F-1 Appendix G Existing Interested Persons Transactions ...... G-1 Appendix H PRC Retail Market Review by the Independent Property Consultant ...... H-1 NOTICE OF EXTRAORDINARY GENERAL MEETING PROXY FORM

ii CORPORATE INFORMATION

Directors of CapitaRetail : Mr Hsuan Owyang (Chairman and Independent Director) China Trust Management Mr Liew Mun Leong (Deputy Chairman and Non-Executive Limited (the manager of Director) CRCT (the “Manager”)) Mr Victor Liew Cheng San (Independent Director) Ms Chew Gek Khim (Independent Director) Mr Dilhan Pillay Sandrasegara (Independent Director) Mr Kee Teck Koon (Non-Executive Director) Mr Olivier Lim Tse Ghow (Non-Executive Director) Mr Pua Seck Guan (Non-Executive Director) Mr Lim Beng Chee (Executive Director and Chief Executive Officer)

Registered Office of : 39 Robinson Road CapitaRetail China Trust #18-01 Robinson Point Management Limited Singapore 068911

Trustee of CRCT (the : HSBC Institutional Trust Services (Singapore) Limited “Trustee”) 21 Collyer Quay #14-01 HSBC Building Singapore 049320

Joint Lead Managers, : Citigroup Global Markets Singapore Pte. Ltd. Bookrunners and 3 Temasek Avenue Underwriters for the Equity #12-00 Centennial Tower Fund Raising Singapore 039190

DBS Bank Ltd 6 Shenton Way DBS Building Tower One Singapore 068809

J.P. Morgan (S.E.A.) Limited 168 Robinson Road 17th Floor, Capital Tower Singapore 068912

Legal Adviser for the Equity : Allen & Gledhill LLP Fund Raising, the Proposed One Marina Boulevard #28-00 Acquisition and to the Singapore 018989 Manager as to Singapore Law

Legal Adviser to the : Paul, Hastings, Janofsky & Walker Manager for the Proposed 21-22/F Acquisition Bank of China Tower 1 Garden Road Hong Kong

Legal Adviser for the : Commerce & Finance Law Offices Proposed Acquisition and 6F NCI Tower to the Manager as to PRC A12 Jianguomenwai Avenue Law Beijing 100022 China

1 Legal Adviser to the Joint : WongPartnership Lead Managers, One George Street #20-01 Bookrunners and Singapore 049145 Underwriters for the Equity Fund Raising as to Singapore Law

Legal Adviser to the : Shook Lin & Bok LLP Trustee 1 Robinson Road #18-00 AIA Tower Singapore 048542

Unit Registrar and Unit : Boardroom Corporate & Advisory Services Pte. Ltd. Transfer Office 3 Church Street #08-01 Samsung Hub Singapore 049483

Independent Accountants : KPMG Certified Public Accountants 16 Raffles Quay #22-00 Hong Leong Building Singapore 048581

Independent Tax Adviser : Ernst & Young One Raffles Quay North Tower, Level 18 Singapore 048583

Independent Valuers : Colliers International (Hong Kong) Limited 5701 Central Plaza 18 Harbour Road Wanchai, Hong Kong

Knight Frank Petty Limited 4/F Shui On Centre 6-8 Harbour Road Wanchai, Hong Kong

Independent Property : Urbis JHD Pty Ltd Consultant for the PRC Level 12 Retail Market Review (the 120 Collins Street “Independent Property Melbourne Victoria 3000 Consultant”) Australia

2 SUMMARY

The following summary is qualified in its entirety by, and should be read in conjunction with, the full text of this Circular. Meanings of defined terms may be found in the Glossary on pages 49 to 55 of this Circular.

Any discrepancies in the tables included herein between the listed amounts and totals thereof are due to rounding.

SUMMARY OF APPROVALS SOUGHT The Manager seeks approvals from the unitholders of CRCT (“Unitholders”) for the resolutions stated below.

1. The Proposed Acquisition of Xizhimen Mall (the “Proposed Acquisition”) (Ordinary Resolution)

Xizhimen Mall (the “Mall”)1 is a one-stop shopping, dining and entertainment destination comprising seven storeys of multi-tenanted retail outlets, with a basement level and six storeys above ground, which in aggregate represent a Gross Rentable Area (“GRA”) of 73,857 sq m (“Phase 1”). Located at Xizhimen, in Xicheng district, just outside the boundary of Beijing’s west second ring road, the Mall is part of Xihuan Plaza, an iconic integrated mixed-use development which includes three office towers and a commercial block.

1 Unless expressly stated otherwise, references to the Mall in this Circular are to Phase 1 of Xizhimen Mall.

3 The Mall is situated at one of Beijing’s two key inter-modal multi-level public transportation hubs (the other being Dongzhimen), with a confluence of mass rapid transit (“MRT”) and light rail transit (“LRT”) lines, national railway(s) and major bus routes. Xizhimen transportation hub is served by the existing MRT Line 2, LRT Line 13, the Beijing North National Railway Station and the upcoming MRT Line 4. A new bus interchange will also be built across from the Mall.

The Mall is thus well-supported by a large shopper catchment encompassing the high flow of daily commuters passing through the Xizhimen transportation hub, residents, students and working population from the nearby Beijing Finance Street (the city’s financial district) as well as universities and high-technology zones of Zhongguancun District. The Independent Property Consultant estimates that the daily commuter traffic flowing through Xizhimen transportation hub is approximately 300,000 persons on weekdays and 600,000 persons on weekends. The Independent Property Consultant also estimates that the current retail spending of the catchment population is approximately 15.0% to 20.0% above the Beijing average.

The Mall is held directly by CapitaRetail Beijing Xizhimen Real Estate Co. Ltd (“CapitaRetail Xizhimen SPV”), a special purpose company incorporated in the PRC solely for the purpose of holding the Mall. CapitaRetail Xizhimen SPV in turn is wholly owned by CapitaRetail China Investments (B) Beta Pte Ltd (“CRCI Beta Barbados” or the “Holding Company”), an investment holding company incorporated in Barbados. The Holding Company is wholly owned by CapitaLand Retail Trustee Pte. Ltd. as trustee of CapitaRetail China Incubator Fund (the “Incubator Fund” and the trustee of the Incubator Fund, the “Vendor”).

The agreed property purchase price of the Mall is S$336.0 million (the “Agreed Property Price”). Pursuant to the right of first refusal agreement entered into on 8 November 2006 between (i) the Manager; (ii) the Trustee; (iii) CapitaRetail China Fund Management Pte. Ltd., as manager of the Incubator Fund and (iv) the Vendor, CRCT proposes to acquire the Mall from the Vendor through the acquisition of the entire issued share capital of the Holding Company (the “ Sale Share”) and the outstanding shareholder’s loan extended by the Vendor to the Holding Company (the “ Shareholder’s Loan”) at an aggregate consideration equal to the sum of (i) the consolidated net asset value (“NAV”) of the Holding Company and CapitaRetail Xizhimen SPV as at completion of the acquisition calculated based on the Agreed Property Price and (ii) the principal amount of the Shareholder’s Loan (the “Purchase Consideration”).

Two independent property valuers, Colliers International (Hong Kong) Limited (“Colliers”) and Knight Frank Petty Limited (“Knight Frank” and together with Colliers, the “Independent Valuers”), were appointed by the Manager and the Trustee, respectively, to value the Mall. In their respective reports, Colliers and Knight Frank have stated the open market value of the Mall as at 30 September 2007 to be S$338.4 million (RMB1,692.0 million)2 and S$340.0 million (RMB1,700.0 million)2, respectively.

On 18 October 2007, the Trustee entered into a conditional share purchase agreement (the “S&P Agreement”) with the Vendor for the acquisition of the Mall. The total acquisition cost of the Mall, comprising the Purchase Consideration, the acquisition fee (the “Acquisition Fee”) payable to the Manager pursuant to the trust deed dated 23 October 2006 constituting CRCT (as amended) (the “Trust Deed”) as well as the professional and other fees and expenses in connection with the Proposed Acquisition, is estimated to be approximately S$344.0 million (the “Total Acquisition Cost”).

2 The Independent Valuers have adopted an exchange rate of S$1.00 is to RMB5.00.

4 (2) The Proposed Issue of New Units under the Equity Fund Raising (Ordinary Resolution) The proposed issue of such number of New Units so as to raise gross proceeds of up to approximately S$280.0 million (the “Equity Fund Raising”). The proceeds to be raised from the Equity Fund Raising will be used to partly finance the Proposed Acquisition as well as towards working capital and capital expenditure purposes. The Manager intends to partly finance the remainder of the Total Acquisition Cost through bank borrowings of approximately S$88.0 million.

The bank borrowings are expected to be taken at the CRCT level in the form of a two-year unsecured term loan facility.

(3) The Proposed Placement of New Units to CapitaLand Limited and its Subsidiaries (Ordinary Resolution) The proposed placement of New Units to CapitaLand Limited (“CapitaLand”) and its subsidiaries (including the Manager) (the “CapitaLand Group”) as part of the Equity Fund Raising, provided that such number of New Units is no more than what would be required for the CapitaLand Group to maintain its proportionate unitholding, in percentage terms, at its pre-placement level (the “CapitaLand Group Placement”).

(4) The Proposed Placement of New Units to the CapitaMall Trust (Ordinary Resolution) The proposed placement of New Units to CapitaMall Trust as part of the Equity Fund Raising, provided that such number of New Units is no more than what would be required for CapitaMall Trust to maintain its proportionate unitholding, in percentage terms, at its pre-placement level (the “CapitaMall Trust Placement”).

(5) The Proposed Placement of New Units to the Directors (Ordinary Resolution) The proposed placement of New Units to each of the directors of the Manager (the “Directors”) and his/her immediate family members, provided that such number of New Units are no more than what would be required for each of them to maintain his/her proportionate unitholding, in percentage terms, at his/her pre-placement level (the “Directors Placement”).

(6) The Proposed General Mandate for the Issue of new Units and Convertible Securities (Ordinary Resolution) The proposed general mandate to be given to the Manager for the issue of new Units and convertible securities (the “Convertible Securities”) in the financial year ending 31 December 2008, provided that the aggregate number of new Units and Convertible Securities does not exceed 50.0% of the number of Units in issue as at 31 December 2007 (taking into account the New Units to be issued under the Equity Fund Raising and the new Units to be issued as payment of the Acquisition Fee to the Manager), of which the aggregate number of new Units and Convertible Securities to be issued other than on a pro-rata basis to existing Unitholders shall not be more than 20.0% of the number of Units in issue as at 31 December 2007 (taking into account the New Units to be issued under the Equity Fund Raising and the new Units to be issued as payment of the Acquisition Fee to the Manager) (the “General Mandate”).

5 (7) The Proposed Retention of Wangjing Mall in The Existing Portfolio (Ordinary Resolution) As at the date of the CRCT prospectus dated 29 November 2006 (the “CRCT Prospectus”), CapitaRetail Beijing Wangjing Real Estate Co., Ltd (“CapitaRetail Wangjing”) did not have the legal title to Wangjing Mall and only has contractual rights in respect of Wangjing Mall. CapitaLand Retail Limited (“CRTL”) and the Trustee had entered into a put option agreement (the “Wangjing Put Option Agreement”) which provided that, if the legal title to Wangjing Mall is not issued on the expiry of 12 months from the listing date of CRCT, a meeting of the Unitholders will be convened by the Trustee pursuant to which the Unitholders will agree, by way of an Ordinary Resolution, whether to retain Wangjing Mall in the Existing Portfolio (as defined herein) of CRCT.

Under the terms of the Wangjing Put Option Agreement, if (i) an Ordinary Resolution is not passed in favour of retaining Wangjing Mall in the Existing Portfolio of CRCT or (ii) an Ordinary Resolution is passed in favour of retaining Wangjing Mall in the Existing Portfolio of CRCT and the legal title is still not issued on the expiry of six months from the date of the Ordinary Resolution, the Trustee will have the right (the “Wangjing Put Option”) to require CRTL to purchase the entire issued and paid-up capital of CapitaRetail China Investments (B) Pte. Ltd. (an international business company incorporated in Barbados which owns CapitaRetail Wangjing) (“CRCI Barbados”), at the higher of the net asset value of CRCI Barbados (based on the independent valuation of CRCI Barbados (which shall be based on, inter alia, the average of two independent valuations of Wangjing Mall)) at the relevant time and the net asset value of CRCI Barbados (which shall be based on, inter alia, the value attributable to Wangjing Mall) for the purpose of the offering of Units pursuant to the issue of the CRCT Prospectus (the “Wangjing Put Option Price”).

For the avoidance of doubt, this Resolution 7 is proposed only if the legal title to Wangjing Mall in the name of CapitaRetail Wangjing is not obtained before the date of the EGM (as defined herein). In the event that the legal title to Wangjing Mall in the name of CapitaRetail Wangjing is obtained before the date of the EGM, Unitholders may disregard this Resolution 7.

Rationale of the Proposed Retention of Wangjing Mall in the Existing Portfolio The Manager seeks Unitholders’ approval for the Proposed Retention of Wangjing Mall in the Existing Portfolio for the following reasons:

1. Largest contributor to Existing Portfolio’s net property income (“NPI”) Wangjing Mall is one of the anchor assets in CRCT’s Existing Portfolio contributing approximately 33.7% of the Existing Portfolio’s NPI in FY2008 and is expected to contribute approximately 24.4% of the Enlarged Portfolio’s (as defined herein) NPI in FY2008.

2. Largest asset in the Existing Portfolio Wangjing Mall is the largest asset in terms of value contributing approximately 32.7% of the Existing Portfolio as of 30 September 2007.

3. Substantial distribution per Unit (“DPU”) impact Being the largest asset in the Existing Portfolio in terms of both NPI and asset value, the removal of Wangjing Mall from the Existing Portfolio will have a substantial negative impact on the DPU of CRCT.

4. Strategic location with large catchment population and ease of accessibility Wangjing Mall is prominently located in Wangjing, one of Beijing’s most densely populated residential suburbs. Through Wangjing Mall, CRCT has gained a foothold in Beijing.

6 5. High committed occupancy, with favourable lease terms Wangjing Mall benefits from a high committed occupancy of 99.1% as at 31 August 2007, providing stable cash flows to CRCT. There is an annual step-up provision in a majority of its leases. In addition, most of the leases contain provisions for rent to be payable at the applicable base rent or at a percentage of gross sales turnover, whichever is higher, providing for potential upside.

RESOLUTION 1: THE PROPOSED ACQUISITION OF THE MALL A description of the Mall is on pages 3 and 4 of this Circular.

The Proposed Acquisition comprises the purchase of the Mall.

Certain details of the Mall are set out in the table below.

Phase 1: Key Statistics

Xizhimen Mall

No.1, Xizhimenwai Avenue, Xicheng District, Beijing, PRC Year of completion 2005, with refurbishments in 2006 and 2007 Year of expiry of land use right 2054 (overall integrated use)

2044 (retail use) Committed Occupancy as at 31 August 2007(1) 82.1% GRA as at 31 August 2007 (sq m) 73,857 Number of leases as at 31 August 2007 165 Car parks(2) 365 Prominent tenants Beijing Hualian Supermarket, Esprit, Sport 100, Vero Moda, KFC, Pizza Hut, Only, Watsons, BreadTalk Valuation by Colliers as at 30 September 2007 S$338,400,000 (RMB1,692,000,000)(3) Valuation by Knight Frank as at 30 September 2007 S$340,000,000 (RMB1,700,000,000)(3) Estimated NPI contribution for FY2008 RMB 96,451,000

Notes: (1) Committed Occupancy as at 11 October 2007 is 87.1%. (2) Represents the number of car parks available for use. These are part of Xihuan Plaza and not owned by the Vendor. (3) The Independent Valuers have adopted an exchange rate of S$1.00 is to RMB5.00.

CRCI Beta Barbados has entered into an agreement with Beijing Finance Street Construction Development Co., Ltd. (“Beijing Finance”), a third party vendor, for the purchase (subject to certain conditions being fulfilled) of the planned extension of basement 1 of the Mall (“Phase 2”) (currently estimated to have a GRA of approximately 11,539 sq m) when completed.

7 RATIONALE OF THE PROPOSED ACQUISITION The Manager believes that the Proposed Acquisition will bring the following key benefits to Unitholders:

1. Attractive DPU accretion The acquisition of the Mall will be DPU accretive to the Existing Portfolio by approximately 10.3% in FY2008 under the base case scenario3. The acquisition also provides strong future growth with an estimated 11.4% growth in the Mall’s NPI expected between FY2008 and FY2009 resulting in the NPI yield on Agreed Property Price increasing from approximately 5.7%4 to approximately 6.4%4. The Mall’s Committed Occupancy (as defined herein) is 87.1% as at 11 October 2007.

FY2008 DPU (S$)

7.20 cents

10.3% Accretion

6.53 cents

Existing Portfolio Enlarged Portfolio

3 Proposed Acquisition is funded through S$88.0 million in borrowings and the issuance of New Units under the Equity Fund Raising. 4 Based on average occupancy of 88.7% for FY2008 and 100.0% for FY2009.

8 2. The Proposed Acquisition is consistent with the Manager’s Investment and Acquisition Growth Strategy The Proposed Acquisition of the Mall is in line with the Manager’s principal investment strategy and will increase CRCT’s Deposited Property value as at 30 September 2007 by approximately 47.1% to S$1,185.4 million, augmenting the Manager’s vision for CRCT to achieve a Deposited Property value of S$3.0 billion by 2009. The Proposed Acquisition also further strengthens CRCT’s foothold in Beijing, where half its Enlarged Portfolio resides.

CRCT’s total assets5 growth

S$1,185.4 million

47.1% increase

S$805.7 million

Existing Portfolio Enlarged Portfolio

3. Competitive Strengths of the Mall

(i) Iconic retail development in a landmark location, with ease of connectivity The Mall is part of Xihuan Plaza, a contemporary, iconic development located just outside the boundary of Beijing’s west second ring road and situated at one of only two inter-modal, multi-level public transportation hubs in Beijing with a confluence of MRT and LRT lines, national railway(s) and major bus routes.

(ii) Strong shopper catchment The Mall is strategically located in Xicheng district, which has a large, well-established and growing population catchment comprising middle class residents, workers from Beijing Finance Street (the city’s financial district) as well as universities and high-technology zones of Zhongguancun district. The Independent Property Consultant estimates that the daily commuter traffic flowing through the Xizhimen transportation hub is approximately 300,000 persons on weekdays and 600,000 persons on weekends. The Independent Property Consultant also estimates that the current retail spending of the catchment population is approximately 15.0% to 20.0% above the Beijing average.

(See Appendix H for the PRC Retail Market Review by the Independent Property Consultant.)

5 Refers to the Deposited Property.

9 (iii) Diverse, stable and quality tenant base The Mall benefits from well-established brand names of its diverse tenants base comprising 165 leases6 with tenants such as KFC, Pizza Hut, Esprit, McDonald’s, Watsons, Beijing Hualian Supermarket, Sport 100, Colour Jeans etc. The large diverse tenant base and wide product offering position the Mall favourably relative to other comparable malls in the vicinity.

(iv) Favourable lease structure with strong upside potential The Mall’s lease structure which ranges from one to three years for specialty tenants, five to seven years for mini-anchors and up to twenty years for anchor tenants, provides Unitholders with stable and growing rental income. Most leases provide for annual step-up in 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 turnover7, providing stability and potential upside in revenues.

(v) Value creation opportunity from Phase 2 Phase 2 is a planned extension of the current basement 1 of the Mall, which would provide direct pedestrian connectivity to the adjacent MRT station and future railway station, hence increasing overall shopper traffic and enabling better shopper flow. The completion of Phase 2 offers an opportunity to increase the Mall’s overall rentals and further enhance its position as the area’s landmark one-stop shopping, dining and entertainment destination. CRCI Beta Barbados and Beijing Finance (a third party vendor), have entered into an agreement for the acquisition of Phase 2, subject to certain conditions being fulfilled.

6 As at 31 August 2007. 7 For Beijing Hualian Supermarket, the gross sales turnover percentage will take effect if the turnover exceeds an agreed threshold. For Weider-Tera, a gym operator, only the base rent will be payable.

10 The floor plan of basement 1 of Phase 1 and Phase 2 of the Mall is set out below.

To Xizhimen MRT To Beijing North railway station for Line 2 station and Line 4

Phase 2

Phase 1

4. Greater Income and Tenant Mix Diversification The Mall’s diverse tenant base is largely weighted towards specialty type tenants with its anchor tenant, Beijing Hualian Supermarket, occupying only 10.9% of total GRA.

The Manager estimates the Proposed Acquisition would reduce the maximum contribution to CRCT’s FY2008 NPI from any single property from approximately 33.7% to approximately 27.5%. The Proposed Acquisition would also reduce the maximum contribution to CRCT’s FY2008 Gross Rental Income by a single tenant from approximately 39.7% to approximately 29.3%. The Proposed Acquisition is thus expected to improve income diversification, reducing tenant and asset concentration risks in CRCT’s Enlarged Portfolio.

11 The charts below illustrate a comparison of the Existing Portfolio and the Enlarged Portfolio.

Portfolio Trade sector analysis (By Gross Rental Income) (As at 31 August 2007)

Existing Portfolio Enlarged Portfolio

Trade sub-sector Contribution Contribution Fashion 16.2% 23.3% Department Store 46.4% 34.3% Food & Beverage/Foodcourt 10.2% 13.7% Services 5.4% 8.7% Sports & Fitness 4.1% 4.5% Supermarket/Hypermarket 9.8% 8.1% Leisure & Entertainment 1.4% 1.1% Toys 1.2% 1.0% Home Furnishings 4.3% 3.7% Gifts & Speciality 0.0% 0.1% Electronic/IT 0.4% 0.6% Education/School 0.4% 0.7% Books & Stationery 0.0% 0.0% Hobbies 0.1% 0.1% Others 0.1% 0.1%

Portfolio Forecast Year 2008 NPI analysis

Existing Portfolio Enlarged Portfolio

Property Name Contribution Contribution

Wangjing Mall 33.7% 24.4% Jiulong Mall 12.6% 9.1% Anzhen Mall 25.0% 18.1% Qibao Mall 6.3% 4.6% Zhengzhou Mall 15.1% 10.9% Jinyu Mall 5.9% 4.3% Xinwu Mall 1.4% 1.1% Xizhimen Mall 27.5%

12 5. Strengthened Foothold in Beijing’s Retail Sector CRCT currently owns three quality retail assets in Beijing: Wangjing Mall, Jiulong Mall and Anzhen Mall, which are strategically located in high-growth areas with large population catchments and in close proximity to transportation nodes. The addition of the Mall to the portfolio would extend CRCT’s market presence to the western part of Beijing and will benefit from a larger pool of shoppers and tenancy demand in Beijing’s core city area. The Manager believes the Enlarged Portfolio will propel CRCT’s ability to capture the strong growth opportunity in Beijing’s retail sector that has grown on average by approximately 12.0% per annum in the last decade.

6. Greater Trading Liquidity The New Units, when issued, are expected to increase CRCT’s free float of Units on the SGX-ST which in turn may result in improved trading liquidity thus potentially benefiting Unitholders. Assuming that approximately 112.0 million New Units are issued under the Equity Fund Raising based on an assumed Issue Price of S$2.50, such New Units represent approximately 23.5% of the total number of Units in issue as at 7 November 2007, being the latest practicable date prior to the printing of this Circular (the “Latest Practicable Date”).

7. Exposure to Rapidly Growing Retail Market in the PRC The Independent Property Consultant has been commissioned to prepare the PRC Retail Market Review. The current state of the PRC is characterised by a stable population, increasing urbanisation and robust economic growth fuelling rising real incomes, providing strong fundamentals for growth of the retail sector.

Against the backdrop of flourishing macro-economic landscape (for example, GDP forecast to grow by 10.0% in 2007 and at an average rate of 9.3% for the next five years), the retail sector in the PRC is witnessing rapid sales growth (forecast to grow by 10.9% Compounded Annual Growth Rate (“CAGR”) over the next five years), which is concurrently being driven by the changing trends in retail spending. In addition, the emergence of shopping malls as the dominant form of retailing with widespread acceptance by PRC residents due to its convenience and quality, variety of goods and services bodes well for the sector.

According to the Independent Property Consultant, the overall outlook for the retail property sector in the PRC is sound with continued strong growth in retail sales accompanied by a desire by international retailers to establish and/or strengthen their presence in the PRC. Considering the robust conditions of the PRC economy and its retail market, the Manager believes that there is potential for future upside in rentals for CRCT’s portfolio.

(See Appendix H for the PRC Retail Market Review by the Independent Property Consultant.)

8. Competitive Capital Management The Proposed Acquisition is expected to be funded via a competitive capital structure that will reduce CRCT’s Aggregate Leverage Limit (as defined herein) from approximately 31.0% (as of 30 September 2007) to approximately 28.7% upon the completion of the Equity Fund Raising and the Proposed Acquisition. This will provide CRCT with funding flexibility to undertake future acquisitions including that of Phase 2 and any asset enhancement initiatives. Based on pro forma gearing of 28.7% upon the completion of the Equity Fund Raising and the Proposed Acquisition, CRCT would have a debt capacity of approximately S$74.7 million before it reaches the 35.0% gearing limit for REITs (as defined herein) without credit rating under Appendix 2 to the Code on Collective Investment Schemes (the “Property Funds Guidelines”).

Unitholders should also note that the Proposed Acquisition is subject to and conditional upon the passing of the resolution for the Equity Fund Raising (Resolution 2).

13 Interested Person Transaction and Interested Party Transaction As the Proposed Acquisition will constitute an “interested party transaction” under the Property Funds Guidelines issued by the Monetary Authority of Singapore (the “MAS”), the Acquisition Fee payable to the Manager will be in the form of Units, which shall not be sold within one year from their date of issuance.

As at the Latest Practicable Date, CapitaLand held an aggregate direct and deemed interest in 190,747,309 Units, which is equivalent to approximately 40.06% of the total number of Units then in issue, and is therefore regarded as a “controlling unitholder” of CRCT under the Listing Manual of the SGX-ST (the “Listing Manual”) and the Property Funds Guidelines.

As at the Latest Practicable Date, CapitaLand has an indirect interest of 30.0% in the Incubator Fund. For the purposes of Chapter 9 of the Listing Manual, CapitaLand, being a controlling Unitholder, is an “interested person” of CRCT. For the purposes of the guidelines relating to interested party transactions under the Property Funds Guidelines, CapitaLand (being a controlling Unitholder) is an “interested party” of CRCT and the Incubator Fund is an associate of CapitaLand as a controlling Unitholder.

Therefore, the Proposed Acquisition will constitute an “interested person transaction” under Chapter 9 of the Listing Manual as well as an “interested party transaction” under the Property Funds Guidelines, in respect of which the approval of Unitholders is required (see paragraph 4.4 of the Letter to Unitholders for further details).

RESOLUTION 2: THE PROPOSED ISSUE OF NEW UNITS UNDER THE EQUITY FUND RAISING Equity Fund Raising and Debt Financing

The Manager intends to issue New Units, so as to raise gross proceeds of up to approximately S$280.0 million in order to partly finance the Proposed Acquisition, with the balance of the proceeds to be utilised for CRCT’s working capital and capital expenditure purposes.

The Manager intends to partly finance the remainder of the Total Acquisition Cost through bank borrowings of approximately S$88.0 million.

The bank borrowings are expected to be taken at the CRCT level in the form of a two-year unsecured term loan facility.

Unitholders should also note that the Equity Fund Raising is subject to and conditional upon the passing of the resolution for the Proposed Acquisition (Resolution 1).

Advance Distribution/Cumulative Distribution CRCT’s policy is to distribute its distributable income on a semi-annual basis to Unitholders. In the event that approval for the issue of New Units under the Equity Fund Raising is given, in order to ensure fairness to holders of the Units in issue on the day immediately prior to the date on which the New Units are issued under the Equity Fund Raising (the “Existing Units”), the Manager has elected to make an advance distribution.

The next distribution was originally scheduled to take place in respect of CRCT’s semi-annual distributable income for the period from 1 July 2007 to 31 December 2007 (the “Scheduled Distribution”). The Manager intends to declare, in lieu of the Scheduled Distribution, a distribution of CRCT’s distributable income for the period from 1 July 2007 to the day immediately prior to the date on which the New Units are issued under the Equity Fund Raising (the “Advance Distribution” in the event that the Equity Fund Raising is completed by 31 December 2007, and “Cumulative Distribution” in the event that the Equity Fund Raising is completed in January 2008). The next distribution following

14 the Advance Distribution or Cumulative Distribution, as the case may be, will comprise CRCT’s distributable income for the period from the day the New Units are issued to 30 June 2008. Semi-annual distributions will resume thereafter. By implementing the Advance Distribution or Cumulative Distribution, as the case may be, distributable income accrued by CRCT up to the day immediately preceding the date of issue of the New Units will only be distributed in respect of the Existing Units.

The date on which the Transfer Books and Register of Unitholders of CRCT will be closed to determine the Unitholders entitled to the Advance Distribution or Cumulative Distribution, as the case may be, and further details pertaining to the Advance Distribution or Cumulative Distribution, as the case may be, will be announced in due course.

RESOLUTION 3: THE PROPOSED PLACEMENT OF NEW UNITS TO CAPITALAND LIMITED AND ITS SUBSIDIARIES New Units may be placed to the CapitaLand Group as part of the Equity Fund Raising. To demonstrate its commitment to CRCT and to align its interest with other Unitholders, the CapitaLand Group may subscribe for up to such number of New Units under the Equity Fund Raising so as to maintain its proportionate unitholding, in percentage terms, at its pre-placement level.

Unitholders should also note that the CapitaLand Group Placement is subject to and conditional upon the passing of the resolutions for the Proposed Acquisition (Resolution 1) and the Equity Fund Raising (Resolution 2).

Interested Person Transaction and Interested Party Transaction A placement of New Units to the CapitaLand Group would also constitute an interested person transaction under Chapter 9 of the Listing Manual. As such, if New Units are placed to the CapitaLand Group in such numbers as to maintain its proportionate unitholding, in percentage terms, at its pre-placement level, the value of New Units placed to the CapitaLand Group will exceed 5.0% of the value of CRCT’s latest unaudited net tangible assets (“NTA”). In such circumstances, Rule 906 of the Listing Manual also requires Unitholders’ approval for placement of New Units to the CapitaLand Group (see paragraph 7.1 of the Letter to Unitholders for further details).

RESOLUTION 4: THE PROPOSED PLACEMENT OF NEW UNITS TO CAPITAMALL TRUST New Units may be placed to CapitaMall Trust as part of the Equity Fund Raising. To demonstrate its commitment to CRCT and to align its interest with other Unitholders, CapitaMall Trust may subscribe for up to such number of New Units under the Equity Fund Raising so as to maintain its proportionate unitholding, in percentage terms, at its pre-placement level.

Unitholders should also note that the CapitaMall Trust Placement is subject to and conditional upon the passing of the resolutions for the Proposed Acquisition (Resolution 1) and the Equity Fund Raising (Resolution 2).

Interested Person Transaction and Interested Party Transaction A placement of New Units to CapitaMall Trust would also constitute an interested person transaction under Chapter 9 of the Listing Manual. As such, if New Units are placed to the CapitaMall Trust in such numbers as to maintain its proportionate unitholding, in percentage terms, at its pre-placement level, the value of New Units placed to CapitaMall Trust may exceed 5.0% of the value of CRCT’s latest unaudited NTA. In such circumstances, Rule 906 of the Listing Manual also requires Unitholders’ approval for placement of New Units to CapitaMall Trust (see paragraph 8.1 of the Letter to Unitholders for further details).

15 RESOLUTION 5: THE PROPOSED PLACEMENT OF NEW UNITS TO THE DIRECTORS The Manager may issue New Units to each of the Directors and his/her immediate family members as part of the Equity Fund Raising. The number of New Units proposed to be placed to each of the Directors and his/her immediate family members shall be no more than what would be required for each of them to maintain his/her proportionate unitholding, in percentage terms, at his/her pre-placement level.

Unitholders should also note that the Directors Placement is subject to and conditional upon the passing of the resolutions for the Proposed Acquisition (Resolution 1) and the Equity Fund Raising (Resolution 2).

RESOLUTION 6: THE PROPOSED GENERAL MANDATE FOR THE ISSUE OF NEW UNITS AND CONVERTIBLE SECURITIES The Manager proposes to seek the approval of Unitholders for a general mandate under Rule 887 of the Listing Manual for the issue of new Units and Convertible Securities in the financial year ending 31 December 2008, provided that the aggregate number of new Units and Convertible Securities does not exceed 50.0% of the number of Units in issue as at 31 December 2007 (taking into account the New Units to be issued under the Equity Fund Raising and the new Units to be issued as payment of the Acquisition Fee to the Manager), of which the aggregate number of new Units and Convertible Securities to be issued other than on a pro-rata basis to existing Unitholders shall not be more than 20.0% of the number of Units in issue as at 31 December 2007 (taking into account the New Units to be issued under the Equity Fund Raising and the new Units to be issued as payment of the Acquisition Fee to the Manager).

RESOLUTION 7: THE PROPOSED RETENTION OF WANGJING MALL IN THE EXISTING PORTFOLIO The Manager seeks the approval of Unitholders for the retention of Wangjing Mall by way of an Ordinary Resolution, pursuant to the terms of the Wangjing Put Option Agreement. If an Ordinary Resolution is passed in favour of retaining Wangjing Mall in the Existing Portfolio of CRCT and the legal title is still not issued on the expiry of six months from the date of the Ordinary Resolution, the Trustee may exercise the Wangjing Put Option to require CRTL to purchase CRCI Barbados at the Wangjing Put Option Price.

(See paragraph 11 of the Letter to Unitholders for further details.)

16 INDICATIVE TIMETABLE

Event Date and Time

Last date and time for lodgement of Proxy Forms : 2 December 2007 at 10.00 a.m.

Date and time of the Extraordinary General : 4 December 2007 at 10.00 a.m. Meeting (the “EGM”)

If the approvals sought at the EGM are obtained:

Commencement of the Equity Fund Raising : To be determined (but is expected to be no later than January 2008)

Close of the Equity Fund Raising : To be determined (but is expected to be no later than January 2008)

Last day and time of trading on a “cum” basis in : To be determined (but is expected to be no respect of the Advance Distribution or Cumulative later than January 2008) Distribution, as the case may be

Commencement of trading on an “ex” basis in : To be determined (but is expected to be no respect of the Advance Distribution or Cumulative later than January 2008) Distribution, as the case may be

Date on which the Transfer Books and Register of : To be determined (but is expected to be no Unitholders will be closed to determine later than January 2008) Unitholders’ entitlements to the Advance Distribution or Cumulative Distribution, as the case may be

Issue of the New Units and commencement of : To be determined (but is expected to be no trading of the New Units on the SGX-ST later than January 2008)

Target date for completion of the Proposed : Expected to be no later than January 2008 Acquisition

Date of payment of the Advance Distribution or : To be determined (but is expected to be no Cumulative Distribution, as the case may be later than March 2008)

The timetable for the events which are scheduled to take place after the EGM is indicative only and is subject to change at the Manager’s absolute discretion.

17 CAPITARETAIL CHINA TRUST (Constituted in the Republic of Singapore pursuant to a trust deed dated 23 October 2006 (as amended))

Directors of the Manager Registered Office Mr Hsuan Owyang (Chairman and Independent Director) 39 Robinson Road, Mr Liew Mun Leong (Deputy Chairman and Non-Executive Director) #18-01 Robinson Point, Mr Victor Liew Cheng San (Independent Director) Singapore 068911 Ms Chew Gek Khim (Independent Director) Mr Dilhan Pillay Sandrasegara (Independent Director) Mr Kee Teck Koon (Non-Executive Director) Mr Olivier Lim Tse Ghow (Non-Executive Director) Mr Pua Seck Guan (Non-Executive Director) Mr Lim Beng Chee (Executive Director and Chief Executive Officer) 14 November 2007

To: Unitholders of CapitaRetail China Trust

Dear Sir/Madam

1. SUMMARY OF APPROVALS SOUGHT The following paragraphs set forth a summary of the approvals which the Manager seeks from Unitholders. Approval by way of an Ordinary Resolution is required in respect of the resolutions relating to the Proposed Acquisition (Resolution 1), the Equity Fund Raising (Resolution 2), the CapitaLand Group Placement (Resolution 3), the CapitaMall Trust Placement (Resolution 4), the Directors Placement (Resolution 5), the General Mandate (Resolution 6) and the Retention of Wangjing Mall (Resolution 7).

1.1 Resolution 1: The Proposed Acquisition of the Mall (Ordinary Resolution)

1.1.1 The Proposed Acquisition As at the Latest Practicable Date, CapitaLand held 100.0% of CRTL. As at the Latest Practicable Date, CRTL held 100.0% of Pyramex Investments Pte Ltd (“PIPL”), Premier Healthcare Services International Pte Ltd (“PHSI”) and Albert Complex Pte Ltd (“ACPL”) which collectively owned 31.19% of CapitaMall Trust. CapitaMall Trust in turn held 95,100,000 Units, representing approximately 19.97% of the total number of Units in issue, as at the Latest Practicable Date. Accordingly, CapitaLand indirectly held 95,100,000 Units representing approximately 19.97% of the total number of Units in issue, as at the Latest Practicable Date.

As at the Latest Practicable Date, CRTL also held 100.0% of CapitaLand Retail China Pte. Ltd. (“CRC”) which held 100.0% of Retail Crown Pte. Ltd. (“RCPL”). RCPL in turn held 95,130,513 Units representing approximately 19.98% of the total number of Units in issue, as at the Latest Practicable Date. Accordingly, CapitaLand indirectly held an additional 95,130,513 Units representing approximately 19.98% of the total number of Units in issue, as at the Latest Practicable Date.

Further, through the Manager, CapitaLand has an indirect interest in 516,796 Units, representing approximately 0.11% of the total number of Units in issue, as at the Latest Practicable Date. Therefore, as at the Latest Practicable Date, CapitaLand held an aggregate direct and deemed interest in 190,747,309 Units, which in aggregate represents approximately 40.06% of the total number of Units then in issue, and is therefore regarded as a “controlling Unitholder” of CRCT under the Listing Manual and the Property Funds Guidelines and the Incubator Fund is an associate of CapitaLand as controlling Unitholder.

18 As at the Latest Practicable Date, CapitaLand has an indirect interest of 30.0% in the Incubator Fund. For the purposes of Chapter 9 of the Listing Manual, CapitaLand being a controlling Unitholder, is an “interested person” of CRCT. For the purposes of the guidelines relating to interested party transactions under the Property Funds Guidelines, CapitaLand (being a controlling Unitholder) is an “interested party” of CRCT.

Chapter 9 of the Listing Manual requires, among others, approval of Unitholders for an “interested person transaction” if the value thereof exceeds 5.0% of CRCT’s latest unaudited NTA. Paragraph 5 of the Property Funds Guidelines imposes a similar requirement for an “interested party transaction” whose value exceeds 5.0% of CRCT’s latest unaudited NAV.

Approval of the Unitholders is sought because the Agreed Property Price in connection with the Proposed Acquisition, exceeds both the aforementioned thresholds stated in Chapter 9 of the Listing Manual and paragraph 5 of the Property Funds Guidelines.

In compliance with the requirements of the Listing Manual and the Property Funds Guidelines, the Manager is therefore seeking Unitholders’ approval for the Proposed Acquisition.

(See paragraphs 2, 3, 4 and 5 below for further details about the Proposed Acquisition.)

1.1.2 Abstention from Voting CapitaLand will abstain, and will ensure that CRTL, CRC, RCPL, PIPL, PHSI and ACPL will abstain, from voting at the EGM on the resolution relating to the Proposed Acquisition. Being a wholly owned subsidiary of CapitaLand, the Manager will also abstain from voting at the EGM on the resolution relating to the Proposed Acquisition.

1.1.3 Voting by PGGM Stichting Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke Belangen (“PGGM”) holds approximately 10.0% of the outstanding Units and is also the single largest unitholder (holding approximately 45.0% of the equity interest) of the Incubator Fund. PGGM has voted to sell the Holding Company to the Trustee. PGGM may vote at the EGM on the resolution relating to the Proposed Acquisition.

The Manager believes that there will be no conflicts of interest if PGGM is permitted to vote on the Prosposed Aquisition for the following reasons: (a) PGGM is a passive investor in the Incubator Fund and is not involved in the day-to-day management of the Incubator Fund. (b) While PGGM is one of three members of the Investment Committee of the Incubator Fund and CapitaLand had abstained from voting at the Investment Committee level, the disposal of the Mall by the Incubator Fund will require unanimous approval of the other member of the Investment Committee and PGGM itself will not be able to carry through any such decision.

19 (c) PGGM does not participate in the management of CRCT and is a passive investor in CRCT. As such, PGGM does not exert any influence over the Manager in the day-to-day operation of matters relating to CRCT. (d) Minority Unitholders will be entitled to vote on the Proposed Acquisition and PGGM, which holds approximately 10.0% of the outstanding Units, does not enjoy any advantage or preferential treatment over other minority Unitholders.

1.2 Resolution 2: The Proposed Issue of New Units under the Equity Fund Raising (Ordinary Resolution) The Trust Deed, read together with the Listing Manual, provides that specific prior approval of Unitholders by Ordinary Resolution is required for an issue of New Units if the number of such New Units (together with any other issue of Units, other than by way of a rights issue offered on a pro rata basis to all existing Unitholders, in the same financial year including Units issued to the Manager in payment of its fees) would, immediately after the issue, exceed 20.0% of the outstanding Units as at 31 December 2006.

Depending on the Issue Price (as defined herein), the number of New Units to be issued pursuant to the Equity Fund Raising may, immediately after issue, exceed 20.0% of the outstanding Units. Accordingly, the Manager is seeking the approval of Unitholders for an issue of the New Units for the purpose of the Equity Fund Raising.

Approval in-principle has been obtained from the SGX-ST for the listing and quotation of the New Units on the Main Board of the SGX-ST. The SGX-ST’s in-principle approval is not to be taken as an indication of the merits of the Proposed Acquisition, the Equity Fund Raising, the New Units, the Waivers (as defined herein) or CRCT.

(See paragraph 6 for further details on the Equity Fund Raising.)

1.3 Resolution 3: The Proposed Placement to CapitaLand Limited and its Subsidiaries (Ordinary Resolution) The Manager is also seeking Unitholders’ approval for the placement of New Units under the Equity Fund Raising to the CapitaLand Group, a Substantial Unitholder8. To demonstrate its commitment to CRCT and to align its interest with other Unitholders, the CapitaLand Group may subscribe up to such number of New Units under the Equity Fund Raising so as to maintain its proportionate unitholding, in percentage terms, at its pre-placement level.

Under Rule 812(2) of the Listing Manual, unitholders’ approval for such a placement to the CapitaLand Group, being a Substantial Unitholder, is required. CapitaLand and each of its associates (as defined in the Listing Manual), including the Manager, will not vote on the resolution relating to the CapitaLand Group Placement.

A placement of New Units to the CapitaLand Group would also constitute an interested person transaction under Chapter 9 of the Listing Manual. If New Units are placed to the CapitaLand Group in such numbers as to maintain its proportionate unitholding, in percentage terms, at its pre-placement level, the value of New Units placed to the CapitaLand Group will exceed 5.0% of the value of CRCT’s latest unaudited NTA. In such circumstances, Rule 906 of the Listing Manual also requires Unitholders’ approval for placement of New Units to the CapitaLand Group (see paragraph 7.1 of the Letter to Unitholders for further details).

(See paragraph 7 for further details on the CapitaLand Group Placement.)

8 “Substantial Unitholder” means a person with an interest in one or more Units constituting not less than 5.0% of all Units in issue.

20 1.4 Resolution 4: The Proposed Placement to CapitaMall Trust (Ordinary Resolution) The Manager is also seeking Unitholders’ approval for the placement of New Units under the Equity Fund Raising to CapitaMall Trust, a Substantial Unitholder. To demonstrate its commitment to CRCT and to align its interest with other Unitholders, CapitaMall Trust may subscribe for up to such number of New Units under the Equity Fund Raising so as to maintain its proportionate unitholding, in percentage terms, at its pre-placement level.

Under Rule 812(2) of the Listing Manual, unitholders’ approval for such a placement to CapitaMall Trust, being a Substantial Unitholder, is required. CapitaMall Trust and each of its associates (as defined in the Listing Manual), including the Manager, will not vote on the resolution relating to the CapitaMall Trust Placement.

A placement of New Units to CapitaMall Trust would also constitute an interested person transaction under Chapter 9 of the Listing Manual. If New Units are placed to CapitaMall Trust in such numbers as to maintain its proportionate unitholding, in percentage terms, at its pre-placement level, the value of New Units placed to CapitaMall Trust will exceed 5.0% of the value of CRCT’s latest unaudited NTA. In such circumstances, Rule 906 of the Listing Manual also requires Unitholders’ approval for placement of New Units to CapitaMall Trust (see paragraph 7.1 of the Letter to Unitholders for further details).

(See paragraph 8 for further details on the CapitaMall Trust Placement.)

1.5 Resolution 5: The Proposed Placement of New Units to Directors (Ordinary Resolution) The Manager is seeking Unitholders’ approval for the placement of New Units to each of the Directors and his/her immediate family members who hold Units.

The number of New Units proposed to be placed to each of the Directors and his/her immediate family members shall be no more than what would be required for each of them to maintain his/her proportionate unitholding, in percentage terms, at his/her pre-placement level. (See paragraph 9 below for further details about the Placement to the Directors.)

The Directors who have interests in the Units will abstain from voting on the resolution relating to the Directors Placement.

1.6 Resolution 6: The Proposed General Mandate for the Issue of new Units and Convertible Securities (Ordinary Resolution) The Manager proposes to seek the approval of Unitholders for a general mandate under Rule 887 of the Listing Manual for the issue of new Units and Convertible Securities in the financial year ending 31 December 2008, provided that the aggregate number of new Units and Convertible Securities does not exceed 50.0% of the number of Units in issue as at 31 December 2007 (taking into account the New Units to be issued under the Equity Fund Raising and the new Units to be issued as payment of the Acquisition Fee to the Manager), of which the aggregate number of new Units and Convertible Securities to be issued other than on a pro-rata basis to existing Unitholders shall not be more than 20.0% of the number of Units in issue as at 31 December 2007 (taking into account the New Units to be issued under the Equity Fund Raising and the new Units to be issued as payment of the Acquisition Fee to the Manager).

(See paragraph 10 below for further details about the General Mandate.)

21 1.7 Resolution 7: The Proposed Retention of Wangjing Mall in the Existing Portfolio (Ordinary Resolution) The Manager is seeking Unitholders’ approval for the retention of Wangjing Mall in the Existing Portfolio.

If an Ordinary Resolution is passed in favour of retaining Wangjing Mall in the Existing Portfolio of CRCT and the legal title is still not issued on the expiry of six months from the date of the Ordinary Resolution, the Trustee may exercise the Wangjing Put Option to require CRTL to purchase CRCI Barbados at the Wangjing Put Option Price.

2. THE PROPOSED ACQUISITION OF THE MALL

2.1 The Proposed Acquisition On 18 October 2007, the Trustee entered into the S&P Agreement with the Vendor for the acquisition of the Mall. The Agreed Property Price of the Mall is S$336.0 million which was arrived at on a willing-buyer and willing-seller basis. CRCT proposes to acquire from the Vendor the Sale Share and the Shareholder’s Loan at the Purchase Consideration. The Purchase Consideration will be paid on completion of the Proposed Acquisition (the “Proposed Completion”) under the S&P Agreement, which shall be on a date to be determined in accordance with the S&P Agreement.

Two Independent Valuers, Colliers and Knight Frank have been appointed by the Manager and the Trustee respectively to value the Mall. Colliers and Knight Frank have respectively stated in their valuation reports that the open market value of the Mall as at 30 September 2007 is S$338.4 million (RMB1,692.0 million)9 and S$340.0 million (RMB1,700.0 million)9 by using the Discounted Cash Flow Analysis and Capitalisation Approach, and the Discounted Cash Flow Analysis and Direct Comparison Approach, respectively. (For further details, see “Summary Valuation Reports” in Appendix F of this Circular.)

2.2 Disclosures under the S&P Agreement It was disclosed in the disclosure letter referred to in the S&P Agreement, inter alia, that the Holding Company has entered into a shareholder loan facility to extend up to US$92.0 million (the “Holding Company Loan Facility”) to CapitaRetail Xizhimen SPV. The Holding Company currently holds US$92.0 million of registered capital in CapitaRetail Xizhimen SPV and has advanced approximately US$31.0 million (the “Holding Company Loan”) under the Holding Company Loan Facility to CapitaRetail Xizhimen SPV. These amounts had been approved by the State Administration of Foreign Exchange Regulations of the PRC (“SAFE”) for conversion into RMB for payment to Beijing Finance in relation to the acquisition of the Mall by CapitaRetail Xizhimen SPV.

The Holding Company Loan is currently in the process of being registered by SAFE as CapitaRetail Xizhimen SPV’s foreign debt, and documentary approval is expected to be obtained in due course.

2.3 Conditions Precedent for the Proposed Completion The Proposed Completion is subject to and conditional upon the following conditions precedent:

2.3.1 There shall not have occurred at any time, in the reasonable opinion of the Trustee, any material breach of the warranties or of the covenants contained in the S&P Agreement;

9 The Independent Valuers have adopted an exchange rate of S$1.00 is to RMB5.00.

22 2.3.2 The approval by the Unitholders given at an extraordinary general meeting for the purchase of the Sale Share and the Shareholder’s Loan, as required under the Listing Manual and under the Property Funds Guidelines; and

2.3.3 CRCT securing sufficient financing to undertake the acquisition of the Sale Share and the Shareholder’s Loan and the agreements for such financing have not been terminated and are unconditional in all respects.

2.4 Estimated Acquisition Cost The current estimated Total Acquisition Cost of the Mall is approximately S$344.0 million, comprising:

2.4.1 The Purchase Consideration of S$332.0 million10 being the sum of (i) the consolidated NAV of the Holding Company and CapitaRetail Xizhimen SPV (which takes into account, inter alia, the Agreed Property Price of S$336.0 million) and (ii) the Shareholder’s Loan of the Holding Company;

2.4.2 The Acquisition Fee of S$3.3 million being 1.0% of the Agreed Property Price, payable to the Manager pursuant to Clause 14.2.1 of the Trust Deed; and

2.4.3 The estimated professional and other fees and expenses incurred in connection with the Proposed Acquisition of approximately S$8.7 million.

As the Proposed Acquisition will constitute an “interested party transaction” under the Property Funds Guidelines, the Acquisition Fee payable to the Manager will be in the form of Units which shall not be sold within one year from their date of issuance.

3. THE RATIONALE OF THE PROPOSED ACQUISITION

3.1 Description of the Proposed Acquisition Detailed information on the Mall can be found in Appendix A of this Circular.

3.2 Rationale for the Proposed Acquisition The Manager believes that the Proposed Acquisition will bring the following key benefits to Unitholders:

3.2.1 Attractive DPU accretion The Manager believes that Unitholders will enjoy a higher DPU in FY2008 due to the acquisition of the Mall at an attractive price relative to the cash flows that it is expected to generate via a competitive capital structure.

The acquisition of the Mall will be DPU accretive to the Existing Portfolio by approximately 10.3% in FY2008 under the base case scenario11. The acquisition also provides strong growth going forward with an estimated 11.4% growth in the Mall’s NPI between FY2008 and FY2009, resulting in the implied NPI yield on Agreed Property

10 Based on the pro forma NAV of the consolidated financial statement of the Holding Company and its subsidiary as at 31 December 2007. The S&P Agreement provides for the consolidated NAV of the Holding Company and CapitaRetail Xizhimen SPV to be adjusted to the date of completion of the Proposed Acquisition pursuant to which the Purchase Consideration will be adjusted accordingly. 11 The Proposed Acquisition is funded through S$88.0 million in borrowings and the issuance of New Units under the Equity Fund Raising.

23 Price increasing from approximately 5.7%12 to approximately 6.4%12. The Mall’s Committed Occupancy is 87.1% as at 11 October 2007.

To illustrate the DPU accretion (as defined herein) arising from the Proposed Acquisition assuming the proposed debt and equity financing plan, the table below shows FY2008 DPU in relation to: (i) the Existing Portfolio, which comprises Wangjing Mall, Jiulong Mall, Anzhen Mall, Qibao Mall, Zhengzhou Mall, Jinyu Mall and Xinwu Mall (the “Existing Portfolio”); and (ii) the Existing Portfolio and the Mall (the “Enlarged Portfolio”):

DPU and DPU Accretion sensitivity table for FY2008

FY2008 DPU Assumed Number of Existing Enlarged Issue Price of New Units Portfolio Portfolio DPU accretion New Units Issued (cents) (cents) (%) S$2.30 121,739,130 6.53 7.08 8.4 S$2.35 119,148,936 6.53 7.11 8.9 S$2.40 116,666,667 6.53 7.14 9.3 S$2.45 114,285,714 6.53 7.17 9.8 S$2.50 112,000,000 6.53 7.20 10.3 S$2.55 109,803,922 6.53 7.22 10.6 S$2.60 107,692,308 6.53 7.25 11.0 S$2.65 105,660,377 6.53 7.27 11.3 S$2.70 103,703,704 6.53 7.30 11.8 S$2.75 101,818,182 6.53 7.32 12.1 S$2.80 100,000,000 6.53 7.35 12.6 S$2.85 98,245,614 6.53 7.37 12.9 S$2.90 96,551,724 6.53 7.39 13.2 S$2.95 94,915,254 6.53 7.41 13.5 S$3.00 93,333,333 6.53 7.43 13.8

3.2.2 The Proposed Acquisition is consistent with the Manager’s Investment and Acquisition Growth Strategy The Proposed Acquisition is in line with the Manager’s principal investment strategy to invest in quality income-producing assets and pursue DPU accretive acquisitions so as to deliver stable and growing distributions with attractive total returns to Unitholders.

The Proposed Acquisition is also in line with the Manager’s vision to grow CRCT’s Deposited Property value to S$3.0 billion by 2009 via DPU accretive acquisitions. With the inclusion of the Mall, CRCT’s Deposited Property value will increase from S$805.7 million as at 30 September 2007 to approximately S$1,185.4 million.

12 Based on average occupancy rates of 88.7% in FY2008 and 100.0% in FY2009.

24 3.2.3 Competitive Strengths of the Mall The Manager believes that the competitive strengths of the Mall include:

(i) Iconic retail development in a landmark location, with ease of connectivity The Mall is part of Xihuan Plaza, a contemporary, iconic development located just outside the boundary of Beijing’s west second ring road, bound by two major roads, Xizhimenwai Dajie and Gaoliangqiao Lu. Xizhimen is one of only two inter-modal, multi-level public transportation hubs in Beijing (the other transportation hub being Dongzhimen). The Xizhimen transportation hub is served by the existing MRT Line 2, LRT Line 13, the Beijing North National Railway Station and the upcoming MRT Line 4. A new bus interchange will also be built across from the Mall.

(ii) Strong shopper catchment The Mall is strategically located in the western half of Beijing in the Xicheng district, a large, well-established and growing population catchment area. The location is a well-known middle class residential area and is also in close proximity to Beijing Finance Street, the city’s financial district, as well as universities and high-technology zones of Zhongguancun district. The Independent Property Consultant estimates that the daily commuter traffic using the Xizhimen transportation hub around the Mall is approximately 300,000 persons on weekdays and approximately 600,000 persons on weekends. The Independent Property Consultant has also estimated that the current retail spending of catchment population is approximately 15.0% to 20.0% above the Beijing average.

(See Appendix H for the PRC Retail Market Review by the Independent Property Consultant.)

(iii) Diverse, stable and quality tenant base The Mall will benefit from well-established brand names of its anchor tenants and their market leadership in their respective trade sectors. A significant portion of the Mall’s tenant base comprises prominent international and domestic tenants such as KFC, Pizza Hut, Esprit, McDonald’s, Watsons, Beijing Hualian Supermarket, Sport 100, Colour Jeans, etc. The large diverse tenant base of 165 leases as at 31 August 2007 and wide product offering, position the Mall favourably relative to other comparable malls in the vicinity.

(iv) Favourable lease structure with strong upside potential The Mall’s lease structure provides Unitholders with stable and growing rental income. The typical lease term for specialty tenants is one to three years, five to seven years for mini-anchors and up to 20 years for anchor tenants. Most leases provide for annual step-up in base rent and for the rent to be payable on the basis of the higher of either the base rent or a percentage of tenants’ gross sales turnover13, providing stability and potential upside in revenues.

13 For Beijing Hualian Supermarket, the gross sales turnover percentage will take effect if the turnover exceeds an agreed threshold. For Weider-Tera, a gym operator, only the base rent will be payable.

25 (v) Value creation opportunity from Phase 2 Phase 2 is a planned extension of the current basement 1 of the Mall. The extension will provide direct pedestrian connectivity to the adjacent MRT station for Line 2 and the future Line 4 and the Beijing North National Railway Station. The planned completion of this extension by end 2008 is expected to increase overall shopper traffic and enable better shopper flow within the Mall, offering an opportunity to increase the Mall’s overall rentals. The completion of Phase 2 will also further enhance the Mall’s position as the landmark one-stop shopping, dining and entertainment destination in the locality, serving the needs of the large population catchment and commuter traffic. CRCI Beta Barbados and Beijing Finance (a third party vendor), have also entered into an agreement for the acquisition of Phase 2, subject to certain conditions being fulfilled.

The floor plan of basement 1 of Phase 1 and Phase 2 of the Mall is set out below.

To Xizhimen MRT To Beijing North railway station for Line 2 station and Line 4

Phase 2

Phase 1

(See Appendix A of this Circular for more details about the Existing Portfolio and the Mall.

3.2.4 Greater Income and Tenant Mix Diversification The Mall’s diverse tenant base is largely weighted towards specialty type tenants with its anchor tenant, Beijing Hualian Supermarket, occupying only 10.9% of its total GRA. This is expected to improve income diversification, reduce tenant and asset concentration risks in CRCT’s Enlarged Portfolio.

The Manager estimates that the Proposed Acquisition would reduce the maximum contribution to CRCT’s FY2008 NPI from any single property from approximately 33.7% to approximately 27.5%. The Proposed Acquisition would also reduce the maximum contribution to CRCT’s FY2008 Gross Rental Income by a single tenant from approximately 39.7% to approximately 29.3%.

26 The charts below illustrate a comparison of the trade sector breakdown of Existing Portfolio versus the Enlarged Portfolio as measured by Gross Rental Income and a comparison of the trade NPI analysis of the Existing Portfolio versus the Enlarged Portfolio:

Portfolio Trade sector analysis (By Gross Rental Income) (As at 31 August 2007)

Existing Portfolio Enlarged Portfolio

Portfolio Forecast Year 2008 NPI analysis

Existing Portfolio Enlarged Portfolio

Property Name Contribution Contribution

Wangjing Mall 33.7% 24.4% Jiulong Mall 12.6% 9.1% Anzhen Mall 25.0% 18.1% Qibao Mall 6.3% 4.6% Zhengzhou Mall 15.1% 10.9% Jinyu Mall 5.9% 4.3% Xinwu Mall 1.4% 1.1% Xizhimen Mall 27.5%

27 3.2.5 Strengthened Foothold in Beijing’s Retail Sector CRCT currently owns three quality retail assets in Beijing: Wangjing Mall, Jiulong Mall and Anzhen Mall. These properties are strategically located in high-growth areas with large population catchments and in close proximity to transportation nodes. The addition of the Mall to CRCT’s portfolio would extend CRCT’s market presence to the western part of Beijing which forms part of Beijing’s core city area. Such addition will allow CRCT to benefit from a large pool of shoppers and tenancy demand in that area. The Manager believes the Enlarged Portfolio will propel CRCT’s ability to capture the strong growth opportunity in Beijing’s retail sector which has grown on average by approximately 12.0% per annum in the last decade.

Outlined below is an overview of the three existing assets that CRCT owns in Beijing.

Wangjing Mall is a five-level retail podium with a seven-level tower above the podium. It is prominently located in the densely populated Wangjing residential suburb, a high-rise middle-class residential suburb in the north-eastern part of Beijing, approximately 13 km north-east of the central business district (“CBD”). The mall can be conveniently accessed by key highways such as the Airport Expressway, the Jingcheng Expressway and the major 4th and 5th Ring Roads. It is also well-served by numerous bus routes and is in close proximity to the Wangjingxi train station. Wangjing Mall is the first comprehensive multi-tenanted and professionally-managed mall in the locality, attracting shoppers from all age groups and income levels.

Anzhen Mall is a six-level retail mall, located approximately 11 km northwest of the Beijing CBD in the Chaoyang District, the second most populous precinct in Beijing. It is adjacent to the north Third Ring Road and highly accessible due to its proximity to a major bus terminal. The mall is amongst the most recognised in the region, providing a comprehensive shopping experience with a wide variety of product offerings. Its established positioning attracts recurring shopper traffic from the surrounding catchments. Anzhen Mall is let out under a master lease to Beijing Hualian Group which operates a department store and supermarket that serve the middle-class residents in the northern part of Beijing.

Jiulong Mall is a four-level retail mall in the Chaoyang District of Beijing which is in close proximity to the Beijing CBD. The mall is well served by bus routes and is in close proximity to two subway stations, Guomao and Dawanglu. The mall is the only one-stop shopping destination in the locality, with a strong hypermarket anchor, Carrefour, drawing shopping traffic from the CBD workers and neighbouring middle- class residential area to the south-east of Beijing’s city centre.

(See Appendix H for the PRC Retail Market Review by the Independent Property Consultant.)

3.2.6 Greater Trading Liquidity The New Units, when issued, are expected to increase CRCT’s free float of Units on the SGX-ST which in turn may result in improved trading liquidity thus potentially benefiting Unitholders. Assuming that approximately 112.0 million New Units are issued under the Equity Fund Raising based on an assumed Issue Price of S$2.50, such New Units represent approximately 23.5% of the total number of Units in issue as at the Latest Practicable Date.

28 3.2.7 Exposure to Rapidly Growing Retail Market in the PRC The Independent Property Consultant has been commissioned to prepare the PRC Retail Market Review. The current state of the PRC is characterised by a stable population, increasing urbanisation and robust economic growth fuelling rising real incomes, providing strong fundamentals for growth of the retail sector.

Against the backdrop of flourishing macro-economic landscape (for example, GDP is forecast to grow by 10.0% in 2007 and at an average rate of 8.7% for the next 10 years), the retail sector in the PRC is witnessing rapid sales growth (forecast to grow by 10.9% CAGR over the next five years), which is concurrently being driven by the changing trends in retail spending. In addition, the emergence of shopping malls as the dominant form of retailing with widespread acceptance by PRC residents due to its convenience and quality, variety of goods and services bodes well for the sector.

According to the Independent Property Consultant, the overall outlook for the retail property sector in the PRC is sound with continued strong growth in retail sales accompanied by a desire by international retailers to establish and strengthen their presence in the PRC. Considering the robust conditions of the PRC economy and retail market, the Manager believes that there is potential for future upside in rentals for CRCT’s portfolio.

(See Appendix H for the PRC Retail Market Review by the Independent Property Consultant.)

3.2.8 Competitive Capital Management The Proposed Acquisition is expected to be funded via a competitive capital structure that will reduce CRCT’s Aggregate Leverage Limit from approximately 31.0% (as of 30 September 2007) to approximately 28.7% upon the completion of the Equity Fund Raising and the Proposed Acquisition. The lower Aggregate Leverage Limit will provide CRCT with funding flexibility to undertake future acquisitions including that of Phase 2 and any asset enhancement initiatives. Based on pro forma gearing of 28.7% upon the completion of the Equity Fund Raising and the Proposed Acquisition, CRCT will have a debt capacity of approximately S$74.7 million before it reaches the 35.0% gearing limit for REITs without credit rating under the Property Funds Guidelines. As CRCT intends to be a long term investor in China, the Manager has taken a view not to hedge the currency exposure. The Manager’s strategy is to achieve a natural hedge through local RMB financing and any non-RMB denominated loan will be hedged to protect the ongoing concern of CRCT in the event of large currency fluctuation. However, the Manager will hedge the RMB cash flow from operations if it is determined that they are to be remitted back to Singapore for distribution purposes.

4. DETAILS OF THE PROPOSED ACQUISITION

4.1 Certain Financial Information Relating to the Proposed Acquisition In relation to the Proposed Acquisition, assuming that the Proposed Acquisition is completed on 1 January 2008 and 100.0% of the income from the Proposed Acquisition accrues to CRCT from 1 January 2008, the NPI yield of the Mall will be 5.7%14 in FY2008 and 6.4%14 in FY2009, based on the Agreed Property Price.

The detailed forecast statement of net income in relation to the Mall and the assumptions for the forecast information included in the paragraph above are set out in Appendix B of this Circular.

14 Based on average occupancy of 88.7% for FY2008 and 100.0% for FY2009.

29 4.2 Pro Forma Financial Effects of the Proposed Acquisition The pro forma financial effects of the Proposed Acquisition on the DPU and NAV per Unit presented below are strictly for illustrative purposes and were prepared based on the unaudited financial statements of CRCT and its associates (as defined in the Listing Manual) for the nine-month period ended 30 September 2007 (the “CRCT Unaudited Financial Statements”), taking into account the Total Acquisition Cost of the Mall as well as the estimated costs of the Equity Fund Raising, and assuming that: (i) Approximately 112.0 million New Units are issued at an assumed Issue Price of S$2.50 per New Unit pursuant to the Equity Fund Raising; (ii) Bank borrowings of S$88.0 million are drawn down to partly finance the Proposed Acquisition; (iii) The Manager’s Acquisition Fee is paid in the form of Units; and (iv) The Manager’s performance fee, based on NPI, is paid in the form of Units

4.2.1 Pro Forma DPU The Mall recently commenced operations on 15 September 2007. Prior to commencement of its operations, the Mall incurred pre-operating expenses with no revenue, which resulted in a decrease in net income before tax and distributable income of the Mall.

The pro forma financial effects of the Proposed Acquisition on CRCT’s DPU for the nine-month period ended 30 September 2007, assuming that the Proposed Acquisition was completed on 1 January 2007 and held for the nine-month period ended 30 September 2007, are as follows:

Existing Portfolio Enlarged Portfolio Net income before tax (S$’000) 73,034 69,456 Distributable income (S$’000) 23,702 20,123 Issued Units (’000) 475,971 589,491 DPU (cents) 4.98 3.41

4.2.2 Pro Forma NAV The pro forma financial effects of the Proposed Acquisition on the NAV per Unit as at 30 September 2007, as if the Proposed Acquisition was completed on 1 January 2007 based on the base case, are as follows:

Existing Portfolio Enlarged Portfolio NAV (S$’000) 491,923 763,763 Issued Units (’000) 475,971 589,491 NAV per Unit (S$) 1.03 1.30

30 4.2.3 Pro Forma Capitalisation The following table sets forth the pro forma capitalisation of CRCT and its associates (as defined in the Listing Manual) as at 30 September 2007. The information in this table should be read in conjunction with paragraph 5 below.

As at 30 September 2007 Actual As adjusted (S$ million) (S$ million)

Short-term debt: Secured debt –– Unsecured debt 19.1 19.1

Total short-term debt 19.1 19.1

Long-term debt: Unsecured debt(1) 160.0 248.0 Secured debt 70.6 70.6

Total long-term debt 230.6 318.6

Total debt: Unitholders’ funds 491.9 775.8 Expenses relating to the Equity Fund Raising – (12.0)

Total Unitholders’ funds 491.9 763.8

Total capitalisation 741.6 1,101.5

Note: (1) Net of transaction costs incurred of S$0.2 million.

4.3 Effect on CRCT Deposited Property As set out in the table below, CRCT’s Deposited Property value is approximately S$805.7 million as at 30 September 2007. After the completion of the Proposed Acquisition, CRCT’s Deposited Property value will increase to approximately S$1,185.4 million.

S$ million Adjusted Deposited Property value for the Existing Portfolio (as at 30 September 2007)(1) 805.7 Add: Net Decrease in Deposited Property value of the Existing Portfolio(2) (13.5)

Deposited Property value for the Existing Portfolio before the Proposed Acquisition 792.2 Add: Proposed Acquisition(3) 393.2

Total Deposited Property value for the Enlarged Portfolio 1,185.4

Notes: (1) Adjusted for CRCT’s distributable income for the period from 1 July 2007 to 30 September 2007. (2) The net decrease in Deposited Property value is mainly due to projected movement in working capital before the Proposed Acquisition. (3) Based on Total Acquisition Cost, current assets and fixed assets of the CRCI Beta Barbados Group and the remaining proceeds from Equity Fund Raising being utilised for CRCT’s working capital and capital expenditure purposes.

31 4.4 Interested Person Transaction and Interested Party Transaction Under Chapter 9 of the Listing Manual, where CRCT proposes to enter into a transaction with an interested person and the value of the transaction (either in itself or when aggregated with the value of other transactions, each of a value equal to or greater than S$100,000, with the same interested person during the same financial year) is equal to or exceeds 5.0% of CRCT’s and its associates’ latest unaudited NTA, Unitholders’ approval is required in respect of the transaction. Based on the CRCT Unaudited Financial Statements, the NTA of CRCT and its associates (as defined in the Listing Manual) was S$491.9 million as at 30 September 2007. Accordingly, if the value of a transaction which is proposed to be entered into in the current financial year by CRCT with an interested person is, either in itself or in aggregation with all other earlier transactions (each of a value equal to or greater than S$100,000) entered into with the same interested person during the current financial year, equal to or in excess of S$24.6 million, such a transaction would be subject to Unitholders’ approval. Given that the Purchase Consideration is approximately S$332.0 million, the value of the Proposed Acquisition exceeds the said threshold.

Paragraph 5 of the Property Funds Guidelines also imposes a requirement for Unitholders’ approval for an interested party transaction by CRCT whose value exceeds 5.0% of CRCT’s latest unaudited NAV. Based on the CRCT Unaudited Financial Statements, the NAV of CRCT and its associates (as defined in the Listing Manual) was S$491.9 million as at 30 September 2007. Accordingly, if the value of a transaction which is proposed to be entered into by CRCT with an interested party is equal to or greater than S$24.6 million, such a transaction would be subject to Unitholders’ approval. Given the Purchase Consideration of S$332.0) million, the value of the Proposed Acquisition exceeds the said threshold.

As at the Latest Practicable Date, CapitaLand held an aggregate direct and deemed interest in 190,747,309 Units, representing approximately 40.06% of the total number of Units then in issue, and is therefore regarded as a “controlling unitholder” of CRCT under the Listing Manual and the Property Funds Guidelines.

As at the Latest Practicable Date, CapitaLand has an indirect interest of 30.0% in the Incubator Fund. For the purposes of Chapter 9 of the Listing Manual, CapitaLand being a controlling Unitholder, is an “interested person” of CRCT. For the purposes of the guidelines relating to interested party transactions under the Property Funds Guidelines, CapitaLand (being a controlling Unitholder) is an “interested party” of CRCT.

Prior to the Latest Practicable Date, CRCT had entered into several interested person transactions with the CapitaLand Group (the “Existing Interested Person Transactions”). Details of the Existing Interested Person Transactions may be found in Appendix G of this Circular.

4.5 Interests of Directors and Controlling Unitholders As at the Latest Practicable Date, certain directors of CapitaLand collectively hold an aggregate direct and indirect interest in 640,000 Units and certain of the Directors of the Manager (“Directors”), being, Hsuan Owyang, Liew Mun Leong, Victor Liew Cheng San, Chew Gek Khim, Dilhan Pillay Sandrasegara, Olivier Lim Tse Ghow, Pua Seck Guan and Lim Beng Chee (including those of the aforementioned directors of CapitaLand who are also Directors), collectively hold an aggregate direct and indirect interest in 1,779,000 Units.

32 Mr Hsuan Owyang is the Deputy Chairman of CapitaLand (which owns a 100.0% interest in the Manager), and the Chairman and an Independent Director of CapitaMall Trust Management Limited, the manager of CapitaMall Trust (“CMTML”) and the Manager.

Mr Liew Mun Leong is the President and Chief Executive Officer of CapitaLand, and is the Deputy Chairman of CMTML and the Manager.

Mr Kee Teck Koon is a director of CMTML and the Manager, and also a member of the Investment Committee of the Incubator Fund.

Mr Olivier Lim Tse Ghow is a director of CMTML and the Manager.

Mr Pua Seck Guan is the Chief Executive Officer of CMTML and a director of the Manager and CapitaRetail China Fund Management Pte. Ltd., the manager of the Incubator Fund.

Mr Lim Beng Chee is the Chief Executive Officer of the Manager and a director of CapitaRetail China Fund Management Pte. Ltd., the manager of the Incubator Fund.

The decision to sell the Mall was made by the Investment Committee of the Incubator Fund, in which the only representative from CapitaLand had abstained from participating and voting.

Save as disclosed above and based on information available to the Manager as at the Latest Practicable Date, none of the Directors or the Substantial Unitholders have an interest, direct or indirect, in the Proposed Acquisition.

4.6 Director’s Service Contracts No person is proposed to be appointed as a director of the Manager in connection with the Proposed Acquisition or any other transaction contemplated in relation to the Proposed Acquisition.

5. PROPOSED METHOD OF FINANCING The Manager proposes to finance the Proposed Acquisition through the following: (i) the Equity Fund Raising; and (ii) bank borrowings.

The proposed method of financing will provide CRCT with funding flexibility to undertake future acquisitions including that of Phase 2 and any asset enhancement initiatives. Based on pro forma gearing of 28.7% assuming completion of the Equity Fund Raising and the Proposed Acquisition, CRCT would have a debt capacity of approximately S$74.7 million before it reaches the 35.0% gearing limit for REITs without credit rating under the Property Funds Guidelines.

5.1 The Financing Plan The Manager intends to issue New Units, so as to raise gross proceeds of up to approximately S$280.0 million in order to partly finance the Proposed Acquisition, with the balance of the proceeds to be utilised for CRCT’s working capital and capital expenditure purposes.

5.2 Debt Financing Plan The Manager intends to partly finance the remainder of the Total Acquisition Cost through borrowings of approximately S$88.0 million. In addition, the Manager is exploring the possibility of putting in place a CMBS (as defined herein) structure either in the PRC or offshore in order

33 to optimise CRCT’s capital structure and cost of capital, taking into account the regulatory framework, appropriate securitisation structures and market conditions.

The bank borrowings are expected to be taken at the CRCT level in the form of a two-year unsecured term loan facility.

5.3 CRCT’s Aggregate Leverage Limit As at 30 September 2007 (being the date of the latest unaudited financial statements of CRCT), CRCT has an Aggregate Leverage Limit of approximately 31.0%.

As at 30 September 2006, the aggregate valuation of the Existing Portfolio was approximately RMB 3,451.0 million.

As at 30 September 2007, CB Richard Ellis (Pte) Ltd (“CBRE”) stated that the open market valuation of the Existing Portfolio was RMB 3,648.0 million which is approximately RMB 197.0 million higher than the aggregate valuation of the Existing Portfolio as at 30 September 2006.

Aggregate Valuation Comparison

Valuation Valuation (as at 30 September (as at 30 September 2006) 2007) Percentage Property (RMB’000) (RMB’000) Increase (%) Wangjing Mall 1,102,000 1,193,000 8.3 Jiulong Mall 414,000 432,000 4.3 Anzhen Mall 772,000 791,000 2.5 Qibao Mall(1) 264,000 320,000 21.2 Zhengzhou Mall 454,000 466,000 2.6 Jinyu Mall 315,000 316,000 0.3 Xinwu Mall(2) 130,000 130,000 – Aggregate for the 3,451,000 3,648,000 5.7 Existing Portfolio

Notes: (1) Qibao Mall has undergone asset enhancement. (2) Based on CRCT’s 100.0% ownership interest in Xinwu Mall.

Based on CRCT’s Deposited Property value (following the proposed acquisition of the Mall) of approximately S$1,185.4 million (which also takes into account current assets such as cash), CRCT’s Aggregate Leverage Limit is expected to be reduced from 31.0% (as at 30 September 2007) to 28.7% following the completion of the Equity Fund Raising and the Proposed Acquisition.

5.3.1 Profit Forecast Please refer to Appendix B of this Circular for the Forecast Consolidated Statement of Total Return which is based on the Financing Plan and Debt Financing Plan described in paragraph 5.1 and 5.2 respectively. The Forecast Consolidated Statement of Total Return must be read together with the report of KPMG (the “Independent Accountants”) (who have examined the forecast) in Appendix C of this Circular.

34 6. DETAILS OF THE PROPOSED EQUITY FUND RAISING

6.1 Structure It is intended that the Equity Fund Raising will comprise: (a) a placement to institutional and other investors (the “Private Placement”); and (b) an offering to the public in Singapore through automated teller machines (the “ATM Offering”),

and the Manager may issue such number of New Units (including securities which may be converted into Units) so as to raise gross proceeds of up to approximately S$280.0 million.

The actual number of New Units to be issued under the Equity Fund Raising will depend on the Issue Price. The Issue Price of New Units to be issued under the Equity Fund Raising will be determined between the Manager and the Joint Lead Managers, Bookrunners and Underwriters (as defined herein) after an accelerated book-building process. The issuance of New Units under the Equity Fund Raising is subject to Unitholders’ approval of the Proposed Acquisition.

6.2 Additional Information on the Placement of New Units to Substantial Unitholders The Manager has obtained a waiver from the SGX-ST from the requirement under Rule 812(1) of the Listing Manual for the placement of New Units under the Equity Fund Raising to each of PGGM and The Capital Group of Companies, Inc (“Capital Group”) being Substantial Unitholders, subject to the following conditions: (i) the number of New Units proposed to be placed to each such Substantial Unitholder is no more than what would be required to maintain its proportionate unitholding in percentage terms at its pre-placement level, (ii) the Manager certifies it is independent of each such placee, (iii) the Manager discloses the rationale for such placement, and (iv) the Manager announces any such placement.

The Manager hereby certifies that it is independent of PGGM and the Capital Group and will announce any such placement of New Units to PGGM and the Capital Group through SGXNET accordingly.

Both PGGM and the Capital Group are institutional investors in CRCT, each holding approximately 10.0% of CRCT’s issued Units as at the Latest Practicable Date. The rationale for allowing the placement of New Units to PGGM and the Capital Group is that although PGGM and the Capital Group are Substantial Unitholders, both PGGM and the Capital Group are not related to the Manager and do not exert any influence on the Manager on the day-to-day operation of matters relating to CRCT.

6.3 Placement of New Units to Non-CapitaLand TLCs The Manager has obtained a waiver from the SGX-ST from the requirement under Rule 812(1) of the Listing Manual for the placement of New Units to companies within the Temasek group of companies (being Temasek Holdings (Private) Limited (“Temasek”) and its subsidiaries), including companies in which Temasek has an aggregate interest of at least 10.0%, but excluding Temasek and the CapitaLand Group (the “Non-CapitaLand TLCs”), under the Private Placement, subject to the following conditions: (i) the number of New Units proposed to be placed to each such Substantial Unitholder is no more than what would be required to maintain its proportionate unitholding, in percentage terms, at its pre-placement level, (ii) the Manager certifies it is independent of each such placee, (iii) the Manager discloses the rationale for such placement, and (iv) the Manager announces any such placement.

The Manager hereby certifies that it is independent of the Non-CapitaLand TLCs, and will announce any such placement through SGXNET accordingly.

35 The rationale for allowing the placement of New Units to the Non-CapitaLand TLCs is that while the charter of Temasek states that it will provide strategic directions to the companies in which it has an interest, both Temasek and the Non-CapitaLand TLCs are not involved in the day-to-day operational and commercial decisions of CRCT.

(See paragraphs 7, 8 and 9 of the Letter to Unitholders for further details on the CapitaLand Group Placement, the CapitaMall Trust Placement and the Directors Placement respectively)

6.4 Costs of the Equity Fund Raising If CRCT proceeds with the Equity Fund Raising, the Manager estimates that CRCT will have to bear the following estimated costs and expenses based on an assumed Issue Price of S$2.50: • approximately S$5.6 million, estimated to be the underwriting and selling commissions and related expenses payable to the Joint Lead Managers, Bookrunners and Underwriters in relation to the Equity Fund Raising; and • approximately S$3.1 million, estimated to be professional and other fees and expenses to be incurred by CRCT in connection with the Equity Fund Raising.

6.5 Use of Proceeds The net proceeds of the Equity Fund Raising will be utilised to partly finance the Proposed Acquisition with the balance of the proceeds of the Equity Fund Raising to be utilised for CRCT’s working capital and capital expenditure purposes.

6.6 Underwriting by the Joint Lead Managers, Bookrunners and Underwriters The Equity Fund Raising will be underwritten by the Joint Lead Managers, Bookrunners and Underwriters, subject to the terms of the underwriting agreement to be entered into between the Manager and the Joint Lead Managers, Bookrunners and Underwriters.

6.7 Advance Distribution/Cumulative Distribution CRCT’s policy is to distribute its distributable income on a semi-annual basis to Unitholders. In the event that approval for the issue of New Units under the Equity Fund Raising is given, in order to ensure fairness to holders of the Existing Units under the Equity Fund Raising, the Manager has elected to make an advance distribution.

The next distribution was originally scheduled to take place in respect of CRCT’s semi-annual distributable income for the period from 1 July 2007 to 31 December 2007. The Manager intends to declare, in lieu of the Scheduled Distribution, the Advance Distribution or Cumulative Distribution, as the case may be. The next distribution following the Advance Distribution or Cumulative Distribution, as the case may be, will comprise CRCT’s distributable income for the period from the day the New Units are issued to 30 June 2008. Semi-annual distributions will resume thereafter. By implementing the Advance Distribution or Cumulative Distribution, as the case may be, distributable income accrued by CRCT up to the day immediately preceding the date of issue of the New Units will only be distributed in respect of the Existing Units.

The date on which the Transfer Books and the Register of Unitholders of CRCT will be closed to determine the Unitholders entitled to the Advance Distribution or Cumulative Distribution, as the case may be, and further details pertaining to the Advance Distribution or Cumulative Distribution, as the case may be, will be announced in due course.

36 6.8 Status of the New Units Issued Pursuant to the Equity Fund Raising The New Units will, upon issue, rank pari passu in all respects with the Existing Units, including the right to any distributions which may be paid for the period from the day the New Units are issued to 30 June 2008 as well as all distributions thereafter.

For the avoidance of doubt, the New Units will not be entitled to participate in the Advance Distribution or Cumulative Distribution, as the case may be.

7. THE PROPOSED PLACEMENT TO CAPITALAND LIMITED AND ITS SUBSIDIARIES

7.1 Proposed CapitaLand Group Placement New Units may be placed to the CapitaLand Group as part of the Equity Fund Raising. To demonstrate its commitment to CRCT and to align its interest with other Unitholders, the CapitaLand Group may subscribe up to such number of New Units under the Equity Fund Raising so as to maintain its proportionate unitholding, in percentage terms, at its pre-placement level.

Under Rule 812(2) of the Listing Manual, the approval of Unitholders by way of Ordinary Resolution is required for placement of New Units to the CapitaLand Group. This is because CapitaLand and its subsidiaries are related parties of the Manager, which is a wholly-owned subsidiary of CapitaLand. CapitaLand and each of its associates (as defined in the Listing Manual), including the Manager, are therefore prohibited from voting on the resolution to permit such a placement of New Units.

The Manager has obtained a waiver from the SGX-ST from the requirement under Rule 812(1) of the Listing Manual for the placement of New Units to the CapitaLand Group, subject to the following conditions: (i) approval of Unitholders is obtained for such placement, (ii) the number of New Units proposed to be placed to the CapitaLand Group is no more than what would be required to maintain its proportionate unitholding, in percentage terms, at its pre-placement level, (iii) the Manager discloses the rationale for such placement, and (iv) the Manager announces such placement of New Units through SGXNET accordingly.

As at the Latest Practicable Date, the direct unitholdings of the CapitaLand Group are as follows:

Unitholdings as at the Latest Practicable Date Percentage of total number Name Number of Units of Units in issue (%) Retail Crown Pte Ltd 95,130,513 19.98 The Manager 516,796 0.11

Assuming that approximately 112.0 million New Units are issued under the Equity Fund Raising based on an assumed Issue Price of S$2.50 and the CapitaLand Group subscribes for the maximum number of 22,498,000 New Units that it would be permitted to subscribe for under the Equity Fund Raising so as to maintain its proportionate unitholding, in percentage terms, at its pre-placement level, the CapitaLand Group will hold an aggregate of 118,145,309 Units immediately upon the completion of the Equity Fund Raising.

As CapitaLand is a controlling Unitholder of CRCT, a placement of New Units to the CapitaLand Group would also constitute an interested person transaction under Chapter 9 of the Listing Manual. If New Units are placed to the CapitaLand Group in such numbers as to maintain its proportionate unitholding, in percentage terms, at its pre-placement level, the value of New Units placed to the CapitaLand Group will exceed 5.0% of the value of CRCT’s latest unaudited NTA. In such circumstances, Rule 906 of the Listing Manual also requires Unitholders’ approval for placement of New Units to the CapitaLand Group.

37 7.2 Rationale for Placement to the CapitaLand Group The Manager believes that the size of the unitholding of the CapitaLand Group provides a degree of stability to CRCT as an investment vehicle. Allowing New Units to be placed to the CapitaLand Group would help to maintain such stability, which will ultimately benefit all Unitholders.

Further, the proposed placement of New Units to the CapitaLand Group would align the interest of the CapitaLand Group with the other Unitholders and enhance investors’ confidence in CRCT by providing a higher degree of certainty for the successful completion of the Equity Fund Raising.

8. THE PROPOSED PLACEMENT TO CAPITAMALL TRUST

8.1 Proposed CapitaMall Trust Placement New Units may be placed to CapitaMall Trust as part of the Equity Fund Raising. To demonstrate its commitment to CRCT and to align its interest with other Unitholders, CapitaMall Trust may subscribe up to such number of New Units under the Equity Fund Raising so as to maintain its proportionate unitholding, in percentage terms, at its pre-placement level.

Under Rule 812(2) of the Listing Manual, the approval of Unitholders by way of Ordinary Resolution is required for placement of New Units to CapitaMall Trust. This is because CapitaMall Trust, being an associate (as defined in the Listing Manual) of CapitaLand, is a related party of the Manager, which is a wholly-owned subsidiary of CapitaLand. CapitaMall Trust and each of its associates (as defined in the Listing Manual), including the Manager, are therefore prohibited from voting on the resolution to permit such a placement of New Units.

The Manager has obtained a waiver from the SGX-ST from the requirement under Rule 812(1) of the Listing Manual for the placement of New Units to CapitaMall Trust, subject to the following conditions: (i) approval of Unitholders is obtained for such placement, (ii) the number of New Units proposed to be placed to CapitaMall Trust is no more than what would be required to maintain its proportionate unitholding, in percentage terms, at its pre-placement level, (iii) the Manager discloses the rationale for such placement, and (iv) the Manager announces such placement of New Units through SGXNET accordingly.

A placement of New Units to CapitaMall Trust, which holds 95,100,000 Units representing approximately 19.97% of the total issued units of CRCT as at the Latest Practicable Date and is therefore a controlling Unitholder, would also constitute an interested person transaction under Chapter 9 of the Listing Manual. Assuming that approximately 112.0 million New Units are issued under the Equity Fund Raising based on an assumed Issue Price of S$2.50 and CapitaMall Trust subscribes for the maximum number of 22,369,000 New Units that it would be permitted to subscribe for under the Equity Fund Raising so as to maintain its proportionate unitholding, in percentage terms, at its pre-placement level, CapitaMall Trust will hold an aggregate of 117,469,000 Units immediately upon the completion of the Equity Fund Raising. If New Units are placed to CapitaMall Trust in such numbers as to maintain its proportionate unitholding, in percentage terms, at its pre-placement level, the value of New Units placed to CapitaMall Trust will exceed 5.0% of the value of CRCT’s latest unaudited NTA. In such circumstances, Rule 906 of the Listing Manual also requires Unitholders’ approval for placement of New Units to CapitaMall Trust.

8.2 Rationale for Placement to the CapitaMall Trust The Manager believes that the size of the unitholding of CapitaMall Trust provides a degree of stability to CRCT as an investment vehicle. Allowing New Units to be placed to CapitaMall Trust would help to maintain such stability, which will ultimately benefit all Unitholders.

38 Further, the proposed placement of New Units to CapitaMall Trust will align the interest of CapitaMall Trust with the other Unitholders, enhance investors’ confidence in CRCT and provide a higher degree of certainty for the successful completion of the Equity Fund Raising.

9. THE PROPOSED PLACEMENT TO THE DIRECTORS

9.1 Placement to the Directors The Manager is seeking Unitholders’ approval for the placement of New Units under the Equity Fund Raising to each of the Directors and his/her immediate family members, provided that such number of New Units are no more than what would be required for each of them to maintain his/her proportionate unitholding, in percentage terms, at his/her pre-placement level.

The SGX-ST has granted a waiver from the requirements under Rule 812(1) of the Listing Manual so that each of the Directors and his/her immediate family members can apply for New Units under the Private Placement, subject to the following conditions: (i) approval of unitholders is obtained for such placement, (ii) the number of New Units proposed to be placed to each Director and his/her immediate family members is no more than what would be required to maintain each of their respective proportionate unitholding, in percentage terms, at each of their respective pre-placement level, (iii) the Manager discloses the rationale for such placement, and (iv) the the Manager announces such placement of New Units through SGXNET accordingly.

9.2 Rationale for Placement to the Directors The Manager is of the view that each Director and his/her immediate family members should be given the opportunity to apply for additional New Units under the Private Placement, if any, as this will further align their interest with other Unitholders.

The unitholding of each Director immediately after the completion of the Equity Fund Raising set out in the table below is based on the assumptions that (a) approximately 112.0 million New Units are issued under the Equity Fund Raising based on an assumed Issue Price of S$2.50 and (b) each of the Directors subscribes for the maximum number of New Units that he/she would be permitted to subscribe for under the Equity Fund Raising so as to maintain his/her respective proportionate unitholding, in percentage terms, at its pre-placement level.

Unitholdings as at the Latest Maximum Practicable Date number of New Unitholdings Percentage of Units permitted immediately after total number for subscription completion of the Number of of Units in under the Equity Equity Fund Name Units issue (%) Fund Raising Raising(1) Mr Hsuan Owyang 60,000 0.01 14,000 74,000 Mr Liew Mun Leong 100,000 0.02 23,000 123,000 Mr Victor Liew Cheng San 40,000 0.01 9,000 49,000 Ms Chew Gek Khim 999,000 0.21 234,000 1,233,000 Mr Dilhan Pillay Sandrasegara 60,000 0.01 14,000 74,000 Mr Kee Teck Koon –––– Mr Olivier Lim Tse Ghow 120,000 0.03 28,000 148,000 Mr Pua Seck Guan 250,000 0.05 58,000 308,000 Mr Lim Beng Chee 150,000 0.03 35,000 185,000

Notes: (1) None of these Directors has given any undertaking to subscribe for New Units under the Equity Fund Raising.

39 10. THE PROPOSED GENERAL MANDATE TO ISSUE NEW UNITS AND CONVERTIBLE SECURITIES

10.1 General Mandate Rule 887(2) of the Listing Manual states that for a general mandate, the percentage of the number of units in issue should be based on the number of units at the end of the last financial year. Rule 887(3) of the Listing Manual also states that the general mandate may remain in force until the earlier of the end of the financial year in which the mandate is passed or it is revoked or varied by ordinary resolution of the unitholders in a general meeting.

In this respect, the Manager has obtained a waiver from the SGX-ST from compliance with Rules 887(2) and 887(3) such that: (a) the percentage of the number of Units in issue to be based on the number of the Units in issue as at 31 December 2007 (taking into account the number of New Units to be issued pursuant to the Equity Fund Raising and the number of new Units to be issued as payment of the Acquisition Fee to the Manager); and (b) the General Mandate to be approved by Unitholders before the end of 2007 to be in force until the earlier of the end of financial year 2008 or when the General Mandate is revoked or varied by Ordinary Resolution.

Having obtained the aforesaid waiver from the SGX-ST, the Manager now seeks the approval of Unitholders for a general mandate under Rule 887 of the Listing Manual for the issue of new Units and Convertible Securities in the financial year ending 31 December 2008, provided that the aggregate number of new Units and Convertible Securities does not exceed 50.0% of the number of Units in issue as at 31 December 2007 (taking into account the New Units to be issued under the Equity Fund Raising and the new Units to be issued as payment of the Acquisition Fee to the Manager), of which the aggregate number of new Units and Convertible Securities to be issued other than on a pro-rata basis to existing Unitholders shall not be more than 20.0% of the number of Units in issue as at 31 December 2007 (taking into account the New Units to be issued under the Equity Fund Raising and the new Units to be issued as payment of the Acquisition Fee to the Manager).

10.2 Rationale for the General Mandate Currently, it is contemplated that the Equity Fund Raising will be completed by 31 January 2008. Based on the assumed Issue Price of S$2.50, approximately 112.0 million New Units will be issued pursuant to the Equity Fund Raising, the number of Units in issue is expected to increase by approximately 23.5% from 476,147,309 Units in issue as at the Latest Practicable Date. Assuming a general mandate was obtained from Unitholders at the EGM, the Manager can issue, on a pro rata basis, up to 50.0% or approximately 238.0 million New Units based on the number of Units in issue as at the Latest Practicable Date versus approximately 294.0 million New Units if the percentage is based on the number of units expected to be in issue as at 31 December 2007 (taking into account the number of New Units to be issued pursuant to the Equity Fund Raising and the new Units to be issued as payment of the Acquisition Fee to the Manager). Other than the number of New Units to be issued pursuant to the Equity Fund Raising and the new Units to be issued as payment of the Acquisition Fee to the Manager), no other new Units are expected to be issued pursuant to the General Mandate prior to 1 January 2008.

Furthermore, pursuant to the Wangjing Put Option Agreement, if the legal title to Wangjing Mall is not issued on the expiry of 12 months from CRCT’s listing date, a meeting of Unitholders will be convened by the Trustee pursuant to which the Unitholders will agree, by way of ordinary resolution, whether to retain Wangjing Mall in the Existing Portfolio. Consequently, the Manager intends to convene the EGM on or around 4 December 2007 which is before the first anniversary of CRCT’s listing date on 8 December 2007. The General Mandate is being sought to avoid

40 having to incur additional time, effort and cost in organising another EGM for the sole purpose of approving the General Mandate after the end of the financial year 2007.

The waiver from Rules 887(2) and 887(3) was sought from and granted by the SGX-ST on the following bases: (a) CRCT’s total number of Units in issue will increase by approximately 23.5% following the Equity Fund Raising which is expected to be completed before 31 January 2008. This larger base for the number of Units in issue will provide additional flexibility to the Manager when raising funds for future acquisitions; (b) a specific resolution seeking Unitholders’ approval for the issuance of the New Units under the Equity Fund Raising will be sought during the EGM; (c) separately, specific approval will be sought from Unitholders during the EGM for the general mandate on the basis that the percentage of the number of Units in issue would be based on the total number of Units in issue as at 31 December 2007 (taking into account the New Units to be issued pursuant to the Equity Fund Raising and the new Units to be issued as payment of the Acquisition Fee to the Manager) and that the General Mandate is in respect of the financial year ending 31 December 2008; (d) no new Units are expected to be issued prior to 1 January 2008 in reliance on the General Mandate, other than the New Units to be issued under the Equity Fund Raising and the new Units to be issued as payment of the Acquisition Fee to the Manager; and (e) the proposed date of the EGM is very close to the end of the current financial year ending 31 December 2007 and it will be a costly exercise to convene another EGM in early 2008 for the sole purpose of seeking Unitholders’ approval for the General Mandate.

In addition, the Manager is of the view that the General Mandate will provide CRCT with additional flexibility which will enable further growth through the acquisition of new properties without the time and expense of convening extraordinary general meetings. CRCT faces competition in the market for quality retail properties. The General Mandate will allow CRCT to raise funds more expeditiously and be more responsive in the acquisition of new properties in a competitive environment where timeliness in making bids and making payment for acquisitions is important.

Notwithstanding the General Mandate, CRCT will nonetheless be required to make an announcement and/or convene a meeting of Unitholders should an acquisition result in the relevant thresholds in Chapter 9 of the Listing Manual relating to interested person transactions, the relevant thresholds in Property Funds Guidelines relating to interested party transactions and/or the relevant thresholds in Chapter 10 of the Listing Manual relating to discloseable transactions and major transactions being exceeded.

11. THE PROPOSED RETENTION OF WANGJING MALL IN THE EXISTING PORTFOLIO

11.1 Retention of Wangjing Mall The Manager seeks the approval of Unitholders for the retention of Wangjing Mall by way of an Ordinary Resolution, pursuant to the terms of the Wangjing Put Option Agreement. If an Ordinary Resolution is passed in favour of retaining Wangjing Mall in the Existing Portfolio of CRCT and the legal title is still not issued on the expiry of six months from the date of the Ordinary Resolution, the Trustee may exercise the Wangjing Put Option to require CRTL to purchase CRCI Barbados, at the Wangjing Put Option Price.

41 11.2 Rationale for the Retention of Wangjing Mall The Manager believes that the proposed retention of Wangjing Mall will bring the following benefits to the Unitholders:

11.2.1 Largest contributor to Existing Portfolio’s NPI Wangjing Mall is one of the anchor assets in CRCT’s Existing Portfolio contributing approximately 33.7% of the Existing Portfolio’s NPI in FY2008 and is expected to contribute approximately 24.4% of the Enlarged Portfolio’s NPI in FY2008. It is the largest contributor to the Existing Portfolio’s NPI and has strong growth prospects having established itself as the only one-stop shopping, dining and entertainment destination in the locality. This is illustrated in the chart below.

Portfolio Forecast Year 2008 NPI analysis

Existing Portfolio Enlarged Portfolio

Property Name Contribution Contribution

Wangjing Mall 33.7% 24.4% Jiulong Mall 12.6% 9.1% Anzhen Mall 25.0% 18.1% Qibao Mall 6.3% 4.6% Zhengzhou Mall 15.1% 10.9% Jinyu Mall 5.9% 4.3% Xinwu Mall 1.4% 1.1% Xizhimen Mall 27.5%

11.2.2 Largest asset in the Existing Portfolio Wangjing Mall is the largest asset in terms of value contributing approximately 32.7% of the Existing Portfolio as of 30 September 2007. It would continue to be a substantial asset in the Enlarged Portfolio contributing approximately 22.4% in terms of asset value. In addition, Wangjing Mall enjoys a high FY2008 NPI yield of 7.2% based on the latest valuation as at 30 September 2007.

Portfolio valuation contribution analysis

Existing Portfolio Enlarged Portfolio

Property Name Contribution Contribution

Wangjing Mall 32.7% 22.4% Jiulong Mall 11.8% 8.1% Anzhen Mall 21.7% 14.8% Qibao Mall 8.8% 6.0% Zhengzhou Mall 12.8% 8.7% Jinyu Mall 8.6% 5.9% Xinwu Mall 3.6% 2.4% Xizhimen Mall 31.7%

42 11.2.3 Substantial DPU impact Being the largest asset in the Existing Portfolio in terms of both NPI and asset value, the removal of Wangjing Mall from the Existing Portfolio would have a substantial negative impact on the DPU of CRCT. The table below outlines the impact:

Existing Portfolio Enlarged Portfolio DPU for FY2008 DPU for FY2008 Scenario (cents) (cents) Base Case: Retention of Wangjing 6.53 7.20 Mall Non-retention of Wangjing Mall 3.58 4.81 Percentage reduction in DPU (%) 45.2% 33.2%

11.2.4 Strategic location with large catchment population and ease of accessibility Wangjing Mall is prominently located in Wangjing, one of Beijing’s most densely populated residential suburbs. The locality has witnessed a significant amount of high-rise residential developments recently, which is expected to continue in the near future. The mall can be conveniently accessed by key highways, is well served by numerous bus routes and is in close proximity to the Wangjingxi train station. Being amongst the first comprehensive multi-tenanted and professionally-managed one-stop shopping mall in the locality, Wangjing Mall is a prime asset in the Existing Portfolio.

11.2.5 High committed occupancy, with favourable lease terms Wangjing Mall benefits from a high committed occupancy of 99.1% as at 31 August 2007, providing stable cash flows to CRCT. There is an annual step-up provision in a majority of its leases. In addition, most of the leases contain provisions for rent to be payable at the applicable base rent or at a percentage of gross sales turnover, whichever is higher, providing for potential upside.

12. RECOMMENDATIONS

12.1 On the Proposed Acquisition Based on the considerations set forth in this letter and, in particular, having taken into account: (i) the rationale for the Proposed Acquisition; (ii) the market valuation of the Mall by the Independent Valuers15; (iii) the DPU accretion of the Proposed Acquisition; (iv) the Agreed Property Price, which is lower than the Independent Valuers’ valuation of the Mall; (v) the Total Acquisition Cost; and (vi) the positive financial effects of the Proposed Acquisition,

Mr Hsuan Owyang, Mr Victor Liew Cheng San, Ms Chew Gek Khim and Mr Dilhan Pillay Sandrasegara, being the Independent Directors, are of the opinion that the Proposed Acquisition is based on normal commercial terms and would not be prejudicial to the interests of CRCT and Unitholders.

Accordingly, the Independent Directors recommend that Unitholders vote in favour of the resolution to approve the Proposed Acquisition (Resolution 1).

15 The Independent Valuers, Colliers and Knight Frank, were appointed by the Manager and the Trustee respectively.

43 12.2 On the Proposed Issue of New Units Given the current conditions in the Singapore stock market and the borrowing limits imposed by the MAS on property funds such as CRCT, the Manager considers the Equity Fund Raising to be an efficient method of raising funds to partly finance the Proposed Acquisition.

Assuming that Unitholders’ approval is obtained for the issue of New Units under the Equity Fund Raising and that CRCT issues approximately 112.0 million New Units based on an assumed Issue Price of S$2.50, the number of Units in issue will increase by approximately 23.5% immediately upon the issue of the New Units. This increase in the total number of Units in issue and Unitholder base is expected to improve the level of trading liquidity of the Units.

The Proposed Acquisition is expected to be DPU accretive. The Aggregate Leverage Limit of CRCT is expected to decrease from 31.0% (as of 30 September 2007) to approximately 28.7% upon completion of the Equity Fund Raising and the Proposed Acquisition, which would provide future flexibility in the form of increased debt capacity for the Manager to implement its acquisition growth strategy.

Accordingly, the Manager recommends that Unitholders vote in favour of the resolution relating to the issue of New Units under the Equity Fund Raising (Resolution 2).

12.3 On the Proposed Placement of New Units to CapitaLand Limited and its Subsidiaries Having regard to the rationale for the placement of New Units to the CapitaLand Group set out above, the Independent Directors are of the opinion that such a placement of New Units as part of the Equity Fund Raising to the CapitaLand Group is on normal commercial terms and is not prejudicial to the interests of CRCT or its minority Unitholders.

Accordingly, the Independent Directors recommend that Unitholders vote in favour of the resolution relating to the CapitaLand Group Placement (Resolution 3).

12.4 On the Proposed Placement of New Units to CapitaMall Trust Having regard to the rationale for the placement of New Units to CapitaMall Trust set out above, the Independent Directors are of the opinion that such a placement of New Units as part of the Equity Fund Raising to CapitaMall Trust is on normal commercial terms and is not prejudicial to the interests of CRCT or its minority Unitholders.

Accordingly, the Independent Directors recommend that Unitholders vote in favour of the resolution relating to the CapitaMall Trust Placement (Resolution 4).

12.5 On the Proposed Placement of New Units to the Directors Having regard to the rationale for the placement of New Units to each of the Directors and his/her immediate family members, the Manager believes that such a placement of New Units as part of the Equity Fund Raising to each of the Directors and his/her immediate family members would be on normal commercial terms and would not be prejudicial to the interests of CRCT or its minority Unitholders.

Accordingly, the Manager recommends that Unitholders vote in favour of the resolution to permit the placement of New Units as part of the Equity Fund Raising to each of the Directors and his/her immediate family members (Resolution 5).

44 12.6 On the Proposed General Mandate to Issue Units and Convertible Securities Having regard to the rationale for the General Mandate as set out above, the Manager believes that the General Mandate would be beneficial to, and is in the interests of CRCT.

Accordingly, the Manager recommends that Unitholders vote in favour of the resolution relating to the General Mandate (Resolution 6).

12.7 On the Proposed Retention of Wangjing Mall in the Existing Portfolio Having regard to the rationale for the proposed retention of the Wangjing Mall in the Existing Portfolio as set out above, the Manager believes that the retention of the Wangjing Mall in the Existing Portfolio would be beneficial to, and is in the interests of CRCT.

Accordingly, the Manager recommends that Unitholders vote in favour of the resolution relating to the proposed retention of the Wangjing Mall in the Existing Portfolio (Resolution 7).

13. EXTRAORDINARY GENERAL MEETING The EGM will be held at 10.00 a.m. on 4 December 2007 at 168 Robinson Road, Capital Tower Level 9, STI Auditorium, Singapore 068912, for the purpose of considering and, if thought fit, passing with or without modification, the resolutions set out in the Notice of EGM. The purpose of this Circular is to provide Unitholders with relevant information about each of these resolutions.

A Depositor shall not be regarded as a Unitholder entitled to attend the EGM and to speak and vote thereat unless he is shown to have Units entered against his/her name in the Depository Register, as certified by CDP as at 48 hours before the EGM.

CRCT will not proceed with the Equity Fund Raising in the event that Unitholders’ approval for the Proposed Acquisition is not obtained. As such, the Equity Fund Raising is subject to and conditional upon Unitholders’ approval for the Proposed Acquisition.

14. ABSTENTIONS FROM VOTING

14.1 Relationship between CapitaLand, CapitaMall Trust, CRTL and its subsidiaries and the Manager As at the Latest Practicable Date, CapitaLand held 100.0% of CRTL. As at the Latest Practicable Date, CRTL held 100.0% of PIPL, PHSI and ACPL, which collectively own 31.19% of CapitaMall Trust. CapitaMall Trust in turn held 95,100,000 Units, representing approximately 19.97% of the total number of Units in issue, as at the Latest Practicable Date. Accordingly, CapitaLand indirectly held 95,100,000 Units representing approximately 19.97% of the total number of Units in issue, as at the Latest Practicable Date.

As at the Latest Practicable Date, CRTL also held 100.0% of CRC which in turn held 100.0% of RCPL. RCPL in turn holds 95,130,513 Units representing approximately 19.98% of the total number of Units in issue, as at the Latest Practicable Date. Accordingly, CapitaLand indirectly held an additional 95,130,513 Units representing approximately 19.98% of the total number of Units in issue, as at the Latest Practicable Date. Further, through the Manager, CapitaLand has an indirect interest in 516,796 Units, representing approximately 0.11% of the total number of Units in issue, as at the Latest Practicable Date.

45 14.2 Abstention from Voting by CapitaLand As at the Latest Practicable Date, CapitaLand has an indirect interest of 30.0% in the Incubator Fund. For the purposes of Chapter 9 of the Listing Manual, CapitaLand (being a controlling Unitholder) is an “interested person” of CRCT. For the purposes of the guidelines relating to interested party transactions under the Property Funds Guidelines, CapitaLand (being a controlling Unitholder) is an “interested party” of CRCT. Accordingly, CapitaLand will abstain and will ensure that CRTL, CRC, RCPL, PIPL, PHSI and ACPL will abstain from voting at the EGM on the resolution relating to the Proposed Acquisition. Being a wholly owned subsidiary of CapitaLand, the Manager will abstain from voting at the EGM on the resolution relating to the Proposed Acquisition.

Further, CapitaLand will abstain and will ensure that CRTL, CRC, RCPL, PIPL, PHSI and ACPL will abstain from voting at the EGM on the resolution relating to the CapitaLand Group Placement and the CapitaMall Trust Placement. The Manager will also abstain from voting at the EGM on the resolution relating to CapitaLand Group Placement. In addition, as stated in the CRCT Prospectus, CRTL and its associates (including CapitaLand, which wholly owns CRTL and the Manager) will abstain from voting at the EGM on the resolution relating to the proposed retention of Wangjing Mall in the Existing Portfolio of CRCT.

14.3 Abstention from Voting by CapitaMall Trust As at the Latest Practicable Date, CapitaMall Trust has a direct interest in 95,100,000 Units, representing approximately 19.97% of the total number of Units in issue. For the purposes of Chapter 9 of the Listing Manual, CapitaMall Trust (being a controlling Unitholder) is an “interested person” of CRCT. For the purposes of the guidelines relating to interested party transactions under the Property Funds Guidelines, CapitaMall Trust (being a controlling Unitholder) is an “interested party” of CRCT.

Accordingly, CapitaMall Trust will abstain from voting at the EGM on the resolution relating to the CapitaMall Trust Placement. Further, as CapitaLand has direct and deemed interest of 31.19% in CapitaMall Trust, CapitaMall Trust will also abstain from voting on the Proposed Acquisition and the CapitaLand Group Placement. In addition, as stated in the CRCT Prospectus, CRTL and its associates (including CapitaMall Trust, in which CRTL has indirect interests) will abstain from voting at the EGM on the resolution relating to the proposed retention of Wangjing Mall in the Existing Portfolio of CRCT. The Manager will also abstain from voting at the EGM on the resolution relating to the CapitaMall Trust Placement.

14.4 Abstention from Voting by the Directors The Directors who have interests in the Units will also abstain from voting on the resolution relating to the Directors Placement.

15. ACTION TO BE TAKEN BY UNITHOLDERS Unitholders will find enclosed in this Circular the Notice of EGM and a Proxy Form.

If a Unitholder is unable to attend the EGM and wishes to appoint a proxy to attend and vote on his/her behalf, he/she should complete, sign and return the enclosed Proxy Form in accordance with the instructions printed thereon as soon as possible and, in any event, so as to reach the Manager’s registered office at 39 Robinson Road, #18-01 Robinson Point, Singapore 068911 not later than 10.00 a.m. on 2 December 2007, being 48 hours before the time fixed for the EGM. The completion and return of the Proxy Form by a Unitholder will not prevent him from attending and voting in person at the EGM if he/she so wishes.

46 Persons who have an interest in the approval of one or more of the resolutions must decline to accept appointment as proxies unless the Unitholder concerned has specific instructions in his/her Proxy Form as to the manner in which his/her votes are to be cast in respect of such resolutions.

16. DIRECTORS’ RESPONSIBILITY STATEMENT The Directors collectively and individually accept responsibility for the accuracy of the information given in this Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, the facts stated and opinions expressed in this Circular are fair and accurate in all material respects as at the date of this Circular and there are no material facts, the omission of which would make any statement in this Circular misleading in any material respect. Where information has been extracted or reproduced from published or otherwise publicly available sources, the sole responsibility of the Directors 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 this Circular.

The forecast consolidated financial information set out in Appendix B of this Circular have been stated by the Directors after due and careful enquiry.

17. JOINT LEAD MANAGERS, BOOKRUNNERS AND UNDERWRITERS’ RESPONSIBILITY STATEMENT The Joint Lead Managers, Bookrunners and Underwriters confirm that, having made all reasonable enquiries and to the best of their knowledge and belief, based on information made available by the Manager, the information about the Equity Fund Raising contained in paragraphs 6.1 and 6.6 above constitutes true disclosure of all material facts, about the Equity Fund Raising as at the date of this Circular and that there are no material facts the omission of which would make any statement about the Equity Fund Raising contained in the said paragraphs misleading in any material respect as at the date of this Circular.

18. CONSENTS Each of the Independent Accountants, the Independent Tax Adviser, the Independent Valuers and the Independent Property Consultant has given and has not withdrawn its written consent to the issue of this Circular with the inclusion of its name and, respectively, the Independent Accountants’ Report on the Profit Forecast, the Tax Considerations, the Summary Valuation Reports and the PRC Retail Market Review, and all references thereto, in the form and context in which they are included in this Circular.

19. DOCUMENTS ON DISPLAY Copies of the following documents are available for inspection during normal business hours at the registered office of the Manager16 at 39 Robinson Road, #18-01 Robinson Point, Singapore 068911 from the date of this Circular up to and including the date falling three months after the date of this Circular: • the full valuation report on the Mall issued by Colliers; • the full valuation report on the Mall issued by Knight Frank; • the full report on the retail property market in the PRC prepared by the Independent Property Consultant; • the Independent Accountants’ Report on the Profit Forecast; • the Tax Considerations; and

16 Prior appointment would be appreciated.

47 • the written consents of each of the Independent Accountants, the Independent Tax Adviser, the Independent Property Consultant and the Independent Valuers.

The Trust Deed will also be available for inspection at the registered office of the Manager for so long as CRCT is in existence.

Yours faithfully

CapitaRetail China Trust Management Limited

(as manager of CapitaRetail China Trust)

Company Registration Number: 200611176D

Hsuan Owyang

Chairman

48 GLOSSARY

In this Circular, the following definitions apply throughout unless otherwise stated:

ACPL : Albert Complex Pte Ltd

Advance Distribution : In lieu of the Scheduled Distribution, a distribution of CRCT’s distribution income for the period from 1 July 2007 to the day immediately prior to the date on which the New Units are issued under the Equity Fund Raising, in the event that the Equity Fund Raising is completed by 31 December 2007

Acquisition Fee : The acquisition fee which the Manager will be entitled under Clause 14.2.1 of the Trust Deed to receive from CRCT upon the completion of the Proposed Acquisition

Agreed Property Price : The Property price of the Mall, being S$336.0 million

Aggregate Leverage Limit : The ratio of CRCT’s borrowings to the value of the Deposited Property, adjusted for the distribution of any accrued distributable income

Barbados Companies : CRCI Alpha Barbados, CRCI Barbados, CRCI Beta Barbados, CRCI Gamma Barbados and the Holding Company (and each, a “Barbados Company”)

Beijing Finance : Beijing Finance Street Construction Development Co., Ltd.

CAGR : Compounded Annual Growth Rate

CapitaLand : CapitaLand Limited

CapitaLand Group : The proposed placement of New Units to CapitaLand and its Placement subsidiaries as part of the proposed Equity Fund Raising

CapitaRetail Xizhimen SPV : CapitaRetail Beijing Xizhimen Real Estate Co., Ltd.

CBD : Central Business District

CBRE : CB Richard Ellis (Pte) Ltd

CDP : The Central Depository (Pte) Limited

Citi : Citigroup Global Markets Singapore Pte. Ltd.

CMBS : Commercial mortgage-backed securitisation

CMTML : CapitaMall Trust Management Limited, the manager of CapitaMall Trust

Colliers : Colliers International (Hong Kong) Limited

Committed Leases : All current leases as at 31 August 2007 including letters of offer which are to be followed up with tenancy agreements to be signed by the parties

Committed Occupancy : Occupancy rate based on Committed Leases

Completion : The completion of the Proposed Acquisition

49 Conditions Precedent : The conditions precedent in relation to the Completion

Convertible Securities : As defined in the Listing Manual to be convertible equity securities or convertible debt securities

CPF : Central Provident Fund

CRC : CapitaLand Retail China Pte. Ltd.

CRCI Alpha Barbados : CapitaRetail China Investments (B) Alpha Pte. Ltd.

CRCI Barbados : CapitaRetail China Investments (B) Pte. Ltd.

CRCI Beta Barbados or the : CapitaRetail China Investments (B) Beta Pte. Ltd. Holding Company

CRCI Gamma Barbados : CapitaRetail China Investments (B) Gamma Pte. Ltd.

CRCT : CapitaRetail China Trust

CRCT Unaudited Financial : The unaudited financial statements of CRCT and its Statements associates for the nine months ended 30 September 2007

CRTL : CapitaLand Retail Limited

Cumulative Distribution : In lieu of the Scheduled Distribution, a distribution of CRCT’s distribution income for the period from 1 July 2007 to the day immediately prior to the date on which the New Units are issued under the Equity Fund Raising, in the event that the Equity Fund Raising is completed in January 2008

DBS : DBS Bank Ltd

Deposited Property : All the assets of CRCT (or proportional share if CRCT owns less than 100.0% of a Barbados Company and/or a Project Company), including the Properties and all the authorised investment of CRCT for the time being held or deemed to be held upon the trusts under the Trust Deed

Directors : The directors of the Manager

Directors Placement : The proposed placement of New Units to each of the Directors and his/her immediate family members as part of the Equity Fund Raising

DPU : Distribution per Unit

DPU accretion : Represents the percentage increase between the FY2008 DPU on the Enlarged Portfolio when compared with the Existing Portfolio

EGM : The extraordinary general meeting of Unitholders to be held at 10.00 a.m. on 4 December 2007 to approve the matters set out in the Notice of Extraordinary General Meeting

EJV : A sino-foreign equity joint venture in the PRC

Enlarged Portfolio : Comprises the Existing Portfolio and the Mall

50 Equity Fund Raising : The proposed offer and placement of such number of New Units so as to raise up to approximately S$280.0 million in order to partly finance the Proposed Acquisition with the balance to be utilised for CRCT’s working capital and capital expenditure purposes

Existing Interested Person : The interested person transactions which CRCT had entered Transactions into with the CapitaLand Group in the course of the current financial year

Existing Portfolio : Wangjing Mall, Jiulong Mall, Anzhen Mall, Qibao Mall, Zhengzhou Mall, Jinyu Mall and Xinwu Mall

Existing Units : The 476,147,309 outstanding Units as at the Latest Practicable Date

Financial Adviser : CapitaLand Financial Limited

FY : Financial year

FY2008 and FY2009 : The forecast year ending 31 December 2008 and the projection year ending 31 December 2009, respectively

GFA or Gross Floor Area : In relation to an entire Property, the sum of the areas specified in the building ownership certificate for the Property

GRA or Gross Rentable : Area in a building that is to be leased, including common areas Area such as common corridors, lift shafts, fire escape staircases and toilets and excluding carpark

Gross Rental Income : The total amount payable by all tenants/licensees pursuant to a tenancy or licence, comprising base rents, service charges, turnover rents and where applicable, advertising and promotion levy

Gross Revenue : Consists of (i) Gross Rental Income and (ii) other income

Holding Company Loan : The loan of US$31.0 million from the Holding Company to CapitaRetail Xizhimen SPV under the Holding Company Loan Facility

Holding Company Loan : The shareholder loan facility entered into between the Holding Facility Company, as shareholder, and CapitaRetail Xizhimen SPV to extend up to US$92.0 million to CapitaRetail Xizhimen SPV

Income Tax Act : Income Tax Act, Chapter 134 of Singapore

Incubator Fund : CapitaRetail China Incubator Fund

Independent Accountants : KPMG

Independent Directors : The independent directors of the Manager, being Mr Hsuan Owyang, Mr Victor Liew Cheng San, Ms Chew Gek Khim and Mr Dilhan Pillay Sandrasegara

Independent Property : Urbis JHD Pty Ltd Consultant

Independent Tax Adviser : Ernst & Young

51 Independent Valuers : Colliers International (Hong Kong) Limited and Knight Frank Petty Limited

Issue Price : The issue price per New Unit under the Equity Fund Raising

Joint Lead Managers, : Citi, DBS and JPMorgan Bookrunners and Underwriters

JPMorgan : J.P. Morgan (S.E.A.) Limited

Knight Frank : Knight Frank Petty Limited

Latest Practicable Date : 7 November 2007, being the latest practicable date prior to the printing of this Circular

Listing Manual : The Listing Manual of the SGX-ST

LRT : Light rail transit

Manager : CapitaRetail China Trust Management Limited, as manager of CRCT

Market Day : A day on which the SGX-ST is open for trading in securities

Market Rent : The rent which the Manager believes could be achieved if each lease was renegotiated as at 31 August 2007 and is estimated with reference to the rental payable pursuant to comparable leases for tenancies that have recently been negotiated, the effect of competing shopping centres, assumed tenant retention rates on lease expiry, likely market conditions, inflation levels and tenant demand levels

MAS : Monetary Authority of Singapore

MRT : Mass rapid transit

NAV : Net asset value

New Units : The new units proposed to be issued pursuant to the Equity Fund Raising

NPI or Net Property Income : Comprises Gross Revenue less property operating expenses

NTA : Net tangible assets

Ordinary Resolution : A resolution proposed and passed as such by a majority being greater than 50.0% or more of the total number of votes cast for and against such resolution at a meeting of Unitholders convened in accordance with the provisions of the Trust Deed

PGGM : Stichting Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke Belangen

PHSI : Premier Healthcare Services International Pte Ltd

PIPL : Pyramex Investments Pte Ltd

PRC : The People’s Republic of China, excluding, for purposes of this Circular, Hong Kong and Macau

52 PRC Retail Market Review : The summary of the report on the retail property market in the PRC prepared by Urbis JHD

Private Placement : The proposed placement of New Units to retail and institutional investors under the Equity Fund Raising

Project Company : A special purpose project company established either as a WFOE or an EJV whose primary purpose is to hold or own a retail property in the PRC

Properties : The Existing Portfolio and the Mall, and “Property” means any one of them

Property Funds Guidelines : The Property Funds Guidelines in Appendix 2 of the Code on Collective Investment Schemes issued by the MAS

Property Value : The value of the properties or relevant property held by CRCT, with the initial value of each property being its initial acquisition cost (including any applicable stamp duty, tax and other related acquisition cost) and subsequently its valuation by an independent approved valuer obtained on an annual basis

Proposed Acquisition : The proposed acquisition of the Mall by CRCT

Purchase Consideration : The aggregate consideration payable to the Vendor for the acquisition of the Mall, equal to the sum of (i) the consolidated NAV of the Holding Company and CapitaRetail Xizhimen SPV as at completion of the acquisition calculated based on the Agreed property price and (ii) the principal amount of the Shareholder’s Loan

RCPL : Retail Crown Pte. Ltd.

REITs : Real Estate Investment Trusts

Restricted Placees : (a) The Directors and Substantial Unitholders; (b) The spouse, children, adopted children, step-children, siblings and parents of the Directors and Substantial Unitholders; (c) Substantial shareholders, related companies (as defined in Section 6 of the Companies Act, Chapter 50 of Singapore), associated companies and sister companies of the Substantial Unitholders; (d) Corporations in which the Directors and the Substantial Unitholders have an aggregate interest of at least 10.0%; and (e) Any person who, in the opinion of the SGX-ST, falls within categories (a) to (d)

Sale Share : The entire issued share capital of the Holding Company

SAFE : State Administration of Foreign Exchange Regulations of the PRC

53 Scheduled Distribution : The distribution originally scheduled to take place in respect of CRCT’s semi-annual distributable income for the period from 1 July 2007 to 31 December 2007

SGX-ST : Singapore Exchange Securities Trading Limited

Shareholder’s Loan : The sum of US$178.0 million owing by the Holding Company to the Vendor as at the date of the S&P Agreement.

S&P Agreement : The share purchase agreement dated 18 October 2007 between CapitaLand Retail Trustee Pte. Ltd. (as trustee of CapitaRetail China Incubator Fund) and the Trustee sq m : Square metre(s)

Substantial Unitholder : A person with an interest in one or more Units constituting not less than 5.0% of all Units in issue

Summary Valuation Reports : The Summary Valuation Reports on the Mall attached as Appendix F of this Circular the Mall : Xizhimen Mall located at No.1, Xizhimenwai Avenue, Xicheng District, Beijing, PRC, with Phase 1 of which being the subject of the Proposed Acquisition

Trust Deed : The trust deed dated 23 October 2006 as supplemented by a first supplemental trust deed dated 8 November 2006, entered into between the Trustee and the Manager, as amended, varied, or supplemented from time to time

Trustee : HSBC Institutional Trust Services (Singapore) Limited, as trustee of CRCT

Unit : A unit representing an undivided interest in CRCT

Unitholder : A Depositor whose securities account with CDP is credited with Unit(s)

US$ or US dollars : United States dollars, the lawful currency of the United States of America

Waivers : The waivers granted by the SGX-ST as described in paragraphs 6 to 8 of this circular, permitting among others, (i) the placement of New Units to the CapitaLand Group, (ii) the placement of New Units to CapitaMall Trust and (iii) the placement of New Units to each of the Directors and his/her immediate family members

Wangjing Mall : The property located at No. 33 Guangshun North Street, Blk 213, Chaoyang District, Beijing, PRC, comprising part of the Existing Portfolio

WFOE : A wholly foreign-owned enterprise in the PRC

RMB : Renminbi, the lawful currency of the PRC

S$ and cents : Singapore dollars and cents

% : Per centum or percentage

54 The terms “Depositor” and “Depository Register” shall have the meanings ascribed to them respectively in Section 130A of the Companies Act, Chapter 50 of Singapore.

Words importing the singular shall, where applicable, include the plural and vice versa and words importing the masculine gender shall, where applicable, include the feminine and neuter genders. References to persons shall include corporations.

Any reference in this Circular to any enactment is a reference to that enactment for the time being amended or re-enacted.

Any reference to a time of day in this Circular shall be a reference to Singapore time unless otherwise stated.

The exchange rates used in this Circular are for reference only. No representation is made that any amounts could have been or could be converted into Singapore dollar amounts at any of the exchange rates used in this Circular, at any other rate or at all.

Any discrepancies in the tables, graphs and charts between the listed amounts and totals thereof are due to rounding. Where applicable, figures and percentages are rounded to one decimal place.

55 This page has been intentionally left blank. APPENDIX A THE MALL AND THE EXISTING PORTFOLIO

The following sections set out selected information in respect of the Mall and the Existing Portfolio. Any discrepancies in the tables, charts or diagrams between the listed figures and totals thereof are due to rounding.

A. THE PROPOSED ACQUISITION

1. THE MALL The Mall is a one-stop shopping, dining and entertainment destination comprising seven-storeys of multi-tenanted retail outlets, with a basement level and six storeys above ground. Located at Xizhimen, in Xicheng district, the Mall is part of Xihuan Plaza, an iconic integrated mixed-use development which includes three office towers and a commercial block. The Mall is situated at one of Beijing’s two key inter-modal multi-level public transportation hubs (the other being Dongzhimen), with a confluence of MRT and LRT lines, national railway(s) and major bus routes. Xizhimen transportation hub is served by the existing MRT Line 2, LRT Line 13, the Beijing North National Railway Station and the upcoming MRT Line 4. A new bus interchange will also be built across from the Mall.

The Mall is thus well-supported by a large shopper catchment encompassing the high flow of daily commuters passing through the Xizhimen transportation hub, residents, students and working population from the nearby Beijing Finance Street (the city’s financial district) as well as universities and high-technology zones of Zhongguancun District. The Independent Property Consultant estimates that the daily commuter traffic flowing through Xizhimen transportation hub is approximately 300,000 persons on weekdays and 600,000 persons on weekends. The accessibility of public transport provides an opportunity to capitalise on large traffic volumes, offering the Mall sustainable competitive advantage of strong footfall in the long term.

The table below sets out a summary of selected information on the Mall:

Year of completion 2005, with refurbishments in 2006 and 2007 Land use right terms(1) Land use right terms expiring 23 August 2054 for overall integrated use and underground car park use and 23 August 2044 for underground commercial/retail use Committed Occupancy as at 31 August 82.1% 2007(2) GRA as at 31 August 2007 (sq m) 73,857 Number of leases as at 31 August 2007 165 Car parks(3) 365 Prominent tenants Beijing Hualian Supermarket, Esprit, Sport 100, Vero Moda, KFC, Pizza Hut, Only, Watsons, BreadTalk Valuation by Colliers as at 30 S$338,400,000 (RMB1,692,000,000)(4) September 2007 Valuation by Knight Frank as at 30 S$340,000,000 (RMB1,700,000,000)(4) September 2007 FY2008 Gross Rental Income RMB146,371,000 FY2008 Estimated NPI RMB96,451,000

A-1 Notes: (1) CapitaRetail Xizhimen SPV has obtained the Building Ownership Certificate to the first floor to sixth floor as well as basement 1 of the Mall. In view of this, CapitaRetail Xizhimen SPV shall be entitled to claim title to the portion of land on which the Mall is located, and shall have the right to transfer, sublet, mortgage or otherwise dispose of such property. CapitaRetail Xizhimen SPV currently possesses all relevant documents for the issue of the land use right certificate for the Mall required under relevant PRC laws and regulations. However, due to PRC government policy reasons, the relevant PRC authorities are currently reviewing the procedure for issuance of separate land use right certificate. In any case, no person other than CapitaRetail Xizhimen SPV would be entitled to claim title over the portion of land on which the Mall is located. (2) Committed occupancy as at 11 October 2007 is 87.1%. (3) Represents the number of car parks available for use. These are part of Xihuan Plaza and not owned by the Vendor. (4) The Independent Valuers have adopted an exchange rate of S$1.00 is to RMB5.00.

1.1 Tenant Profile and Trade Sector Analysis for the Mall As at 31 August 2007, the Mall has 165 committed leases comprising a wide variety of consumer trade sub-sectors. The Mall is anchored by Beijing Hualian Group, the eighth largest retailer in the PRC1, occupying approximately 10.9% of the total GRA. The other prominent brand names at the Mall include Sport 100 (one of the PRC’s premier sporting goods and apparel retailer), Esprit, Vero Moda (a local fashion retailer), Watsons, BreadTalk, Pizza Hut and KFC amongst many others.

The lease term of the Mall’s retailers range from one to three years for speciality tenants, five to seven years for mini-anchors and up to 20 years for anchor tenants. Most leases provide for annual step-up in 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 turnover2, providing stability and potential upside in rental revenue.

The chart below provides a breakdown by monthly Gross Rental Income (excluding turnover rent) of the different trade sectors represented in the Mall as at 31 August 2007.

Trade sector analysis for Xizhimen Mall (as at 31 August 2007) — By Gross Rental Income

Trade sub-sector Contribution Fashion 43.4% Department Store 0.0% Food & Beverage/Foodcourt 23.8% Services 18.6% Sports & Fitness 5.7% Supermarket/Hypermarket 3.1% Leisure & Entertainment 0.0% Toys 0.6% Home Furnishings 1.9% Gifts & Speciality 0.3% Electronic/IT 1.2% Education/School 1.4% Books & Stationery 0.0% Hobbies 0.1% Others 0.0%

1 China Chain Store and Franchise Association Analysis Report (2006) 2 For Beijing Hualian Supermarket, the gross sales turnover percentage will take effect if the turnover exceeds an agreed threshold. For Weider-Tera, a gym operator, only the base rent will be payable.

A-2 The table below sets out selected information about the top ten retailers of the Mall by monthly Gross Rental Income (excluding turnover rent) as at 31 August 2007.

% of Monthly Gross Rental Income (excluding turnover Retailers Brand Names Trade Category Expiry Date rent) Sport 100 Sports & Fitness 14 September 2012 7.8% Colour Jeans Fashion 31 October 2012 Only Fashion 14 September 2012 6.7% Jack & Jones Vero Moda KFC Food & 14 September 2017 3.8% (1) Pizza Hut Beverage/ Foodcourt Beijing Hualian Supermarket 30 September 2028 3.1% Supermarket Da Shi Dai Food & 14 September 2011 2.8% Beverage/ 31 December 2012 (1) BreadTalk Foodcourt Sephora Fashion 14 September 2010 2.4%

In-Base Fashion 12 October 2012 2.1%

Weider-Tera Sports & Fitness 6 November 2013 2.0% Esprit Fashion 12 October 2010 1.9% Red Earth 29 August 2011 McDonald’s Food & 14 September 2017 1.4% Beverage/ Foodcourt Top ten retailers by total monthly Gross Rental Income (excluding turnover rent) 34.0% Other retailers 66.0% Total 100.0%

Notes: (1) Under the same group of companies.

A-3 1.2 Lease Expiry Profile for the Mall (as at 31 August 2007) The table below illustrates the committed lease expiry profile of the Mall.

Expiring leases as a % of total monthly Gross Rental Income Total number of (excluding turnover Expiring leases as a Period leases expiring rent) %ofGRA FY2008 35 6.3% 2.2% FY2009 28 9.0% 3.7% FY2010 77 41.9% 21.8% FY2011 9 8.2% 5.5% Beyond FY2011 16 34.6% 48.9% Vacant ––17.9% Total 165 100.0% 100.0%

A-4 B. EXISTING PORTFOLIO The Existing Portfolio comprises Wangjing Mall, Jiulong Mall, Anzhen Mall, Qibao Mall, Zhengzhou Mall, Jinyu Mall and Xinwu Mall.

1. EXISTING PORTFOLIO The table below sets out selected information about the Existing Portfolio as at 31 August 2007 (unless otherwise dated).

Percentage Gross Valuation of aggregate Gross Floor Rentable (as at value of Committed Area Area Number of Land Use Right 30 Sep 2007) Existing Occupancy FY2008 NPI (sq m) (sq m) Leases Expiry (RMB’000) Portfolio (%) (%) (RMB’000) Wangjing Mall 82,634 67,500 155 15 May 2043 1,193,000 32.7 99.1 85,631 15 May 2053 Jiulong Mall 49,526 49,526 6 10 July 2042 432,000 11.8 100.0 32,003 Anzhen Mall 43,442 43,442 1 5 March 2042 791,000 21.7 100.0 63,504 A-5 3 June 2042 7 October 2034 Qibao Mall 83,986 72,729 126 10 March 2043 320,000 8.8 79.4 16,160 Zhengzhou Mall 92,356 92,356 1 31 May 2042 466,000 12.8 100.0 38,307 Jinyu Mall 41,938 41,938 1 11 March 2041 316,000 8.6 100.0 15,056 20 March 2041 Xinwu Mall1 59,624 45,375 96 29 May 2044 130,000 3.6 95.5 3,624

Note: (1) Based on 100.0% of Xinwu Mall. 1.1 Trade Sector Analysis for Existing Portfolio (as at 31 August 2007) As at 31 August 2007, the Existing Portfolio has 386 committed leases. The tenant profile comprises a wide variety of consumer trade sectors. The malls are anchored by a number of prominent international and local retailers such as Wal-Mart, Carrefour, Beijing Hualian Supermarket, B&Q, Sport 100, Sizzler, Pizza Hut, KFC and Watsons.

Anzhen Mall, Zhengzhou Mall and the majority of the GRA of Jiulong Mall are let out under master leases. The master leases over Anzhen Mall, Zhengzhou Mall and Jiulong Mall are long-term with a tenure of 20 years. For the remaining properties under the Existing Portfolio 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 one to three years for specialty tenants. Most leases provide for 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, providing stability and potential upside in rental revenue.

The chart below provides a breakdown by monthly Gross Rental Income (excluding turnover rent)(1) of the different trade sectors represented in the Existing Portfolio.

Portfolio Trade sector analysis: Existing Portfolio (By Gross Rental Income) (As at 31 August 2007)

Trade sub-sector Contribution Fashion 16.2% Department Store 46.4% Food & Beverage/Foodcourt 10.2% Services 5.4% Sports & Fitness 4.1% Supermarket/Hypermarket 9.8% Leisure & Entertainment 1.4% Toys 1.2% Home Furnishings 4.3% Gifts & Speciality 0.0% Electronic/IT 0.4% Education/School 0.4% Books & Stationery 0.0% Hobbies 0.1% Others 0.1%

Note: (1) For leases structured on base rent only or base rent plus a percentage of gross sales turnover whichever is higher. Where the structure is a percentage of gross sales turnover or base rent plus a percentage of gross sales turnover, monthly Gross Rental Income is calculated based on actual rent payable in the month of August 2007.

A-6 The table below sets out selected information about the top ten retailers of the Existing Portfolio by monthly Gross Rental Income (excluding turnover rent)(1).

%of Monthly Gross Rental Income (excluding Trade turnover Retailers Brand Names Category Expiry Date rent) Beijing Hualian Supermarket 31 October 2009 47.9% Supermarket Department 24 July 2025 Beijing Hualian Store 31 October 2026 Department Store 30 November 2026 Carrefour Supermarket 7 January 2024 7.5% (2) 1 March 2024 B&Q Home 9 April 2024 3.6% Furnishings Sport 100 Sports & 24 June 2011 2.4% Fitness 31 August 2011 Ebase Fashion 23 July 2009 1.5% Ebase Garcons Calvin Klein Jeans Baleno Urban Astroboy Kentex Only Fashion 19 April 2008 1.3% Jack & Jones 14 July 2009 Vero Moda Sizzler Food & 14 July 2009 1.2% Lejazz Beverage/ 15 July 2009 Pin Qi Pizza Foodcourt Powerhouse Gym Sports & 1 May 2009 0.9% Fitness 15 January 2013 Party Land Leisure & 8 July 2012 0.9% Entertainment Da Shi Dai Food & 31 August 2008 0.8% BreadTalk Beverage/ 14 July 2009 (2) Foodcourt 19 September 2011 Top ten retailers by total monthly Gross Rental Income (excluding turnover rent) 68.0% Other retailers 32.0% Total 100.0%

Notes: (1) For leases structured on base rent only or base rent plus a percentage of gross sales turnover whichever is higher. Where the structure is a percentage of gross sales turnover or base rent plus a percentage of gross sales turnover, monthly Gross Rental Income is calculated based on actual rent payable in the month of August 2007. (2) Under the same group of companies.

A-7 1.2 Lease Expiry Profile for the Existing Portfolio (as at 31 August 2007) The table below illustrates the committed lease expiry profile of the Existing Portfolio.

Expiring leases as a % of total monthly Gross Rental Income Total number of (excluding turnover Expiring leases as a Period leases expiring rent)(1) %ofGRA FY2007 24 0.4% 0.2% FY2008 139 7.1% 2.2% FY2009 133 24.4% 15.0% FY2010 43 5.4% 2.3% FY2011 15 4.1% 3.7% Beyond FY2011 32 58.6% 72.4% Vacant ––4.2% Total 386 100.0% 100.0%

2. ENLARGED PORTFOLIO (COMPRISING THE MALL AND THE EXISTING PORTFOLIO) The table below sets out selected information about the Enlarged Portfolio.

Proposed Existing Enlarged Acquisition Portfolio Portfolio Gross Floor Area(1) (sq m) 73,857 453,506 527,363 GRA(1) (sq m) 73,857 412,866 486,723 Number of Leases(1) 165 386 551 Valuation as at 30 1,692,000(2) 3,648,000(3) 5,340,000 September 2007 (RMB’000) Committed Occupancy(1) 82.1% 95.8%(4) 93.6%(4) FY2008 NPI (RMB’000) 96,451 254,285 350,736

Notes: (1) As at 31 August 2007. (2) Based on Colliers’ valuation. (3) Based on CBRE’s valuation. (4) Based on CRCT’s 51.0% ownership interest in Xinwu Mall.

A-8 2.1 Trade Sector Analysis for Enlarged Portfolio (as at 31 August 2007) The chart below provides a breakdown by monthly Gross Rental Income (excluding turnover rent)(1) of the different trade sectors represented in the Enlarged Portfolio.

Portfolio Trade sector analysis: Enlarged Portfolio (31 August 2007) (By Gross Rental Income)

Trade sub-sector Contribution Fashion 23.3% Department Store 34.3% Food & Beverage/Foodcourt 13.7% Services 8.7% Sports & Fitness 4.5% Supermarket/Hypermarket 8.1% Leisure & Entertainment 1.1% Toys 1.0% Home Furnishings 3.7% Gifts & Speciality 0.1% Electronic/IT 0.6% Education/School 0.7% Books & Stationery 0.0% Hobbies 0.1% Others 0.1%

2.2 Top Ten Retailers of the Enlarged Portfolio (as at 31 August 2007) The table below sets out selected information about the top ten retailers of the Enlarged Portfolio by monthly Gross Rental Income (excluding turnover rent)(1).

%of Monthly Gross Rental Income (excluding Trade turnover Retailers Brand Names Category Expiry Date rent) Beijing Hualian Supermarket 31 October 2009 36.3% Supermarket Department 24 July 2025 Beijing Hualian Store 31 October 2026 Department Store 30 November 2026 30 September 2028 Carrefour Supermarket 7 January 2024 5.6% (2) 1 March 2024 Sport 100 Sports & 24 June 2011 3.8% Colour Jeans Fitness 31 August 2011 Fashion 14 September 2012 31 October 2012 Only Fashion 19 April 2008 2.7% Jack & Jones 14 July 2009 Vero Moda 14 September 2012

A-9 %of Monthly Gross Rental Income (excluding Trade turnover Retailers Brand Names Category Expiry Date rent) B&Q Home 9 April 2024 2.6% Furnishings Ebase Fashion 23 July 2009 1.6% Ebase Garcons 12 October 2012 Calvin Klein Jeans Baleno Urban Astroboy Kentex In-Base KFC Food & 14 July 2016 1.3% Pizza Hut Beverage/ 30 April 2017 Foodcourt 29 May 2017 (2) 14 September 2017 Da Shi Dai Food & 31 August 2008 1.3% BreadTalk Beverage/ 14 July 2009 (2) Foodcourt 14 September 2011 19 September 2011 31 December 2012 Sizzler Food & 14 July 2009 0.9% Lejazz Beverage/ 15 July 2009 Pin Qi Pizza Foodcourt

Esprit Fashion 9 September 2009 0.8% Red Earth 12 October 2010 29 August 2011 Top ten retailers by total monthly Gross Rental Income (excluding turnover rent) 56.9% Other retailers 43.1% Total 100.0%

A-10 2.3 Lease Expiry Profile for the Enlarged Portfolio (as at 31 August 2007) The table below illustrates the committed lease expiry profile of the Enlarged Portfolio.

Expiring leases as a % of total monthly Gross Rental Income Total number of (excluding turnover Expiring leases as a Period leases expiring rent)(1) %ofGRA FY2007 24 0.3% 0.1% FY2008 174 6.9% 2.2% FY2009 161 20.4% 13.2% FY2010 120 14.9% 5.4% FY2011 24 5.2% 4.0% Beyond FY2011 48 52.3% 68.7% Vacant ––6.4% Total 551 100.0% 100.0%

A-11 This page has been intentionally left blank. APPENDIX B PROFIT FORECAST

Statements contained in this section, which are not historical facts may be forward-looking statements. Such statements are based on the assumptions set forth in this section and are subject to certain risks and uncertainties which could cause actual results to differ materially from those forecast. Under no circumstances should the inclusion of such information herein be regarded as a representation, warranty or prediction with respect to the accuracy of the underlying assumptions by the Manager, the Joint Lead Managers, Bookrunners and Underwriters or the Trustee or any other person nor that these results will be achieved or are likely to be achieved.

None of the Manager, the Joint Lead Managers, Bookrunners and Underwriters or the Trustee guarantees the performance of CRCT, the repayment of capital or the payment of any distributions, or any particular return on the Units. The forecast DPU stated in the following table is calculated based on (i) the assumed Issue Price of S$2.50 and (ii) the assumption that the issue date of the New Units is 31 December 2007. Such forecast DPU may vary accordingly if the issue date of the New Units is after 31 December 2007 and in relation to investors who purchase Units in the secondary market at a market price that differs from the Issue Price.

The following table sets out CRCT’s forecast consolidated statement of total return for FY2008. The forecast has been examined by the Independent Accountants and should be read together with their report contained in Appendix C of this Circular as well as the assumptions and sensitivity analysis set out below.

B-1 Forecast Consolidated Statement of Total Return for the Existing Portfolio and Enlarged Portfolio

FY2008 (S$’000) Existing Enlarged Portfolio The Mall Portfolio Gross Rental Income 80,675 29,235 109,910 Other income 1,306 599 1,905

Gross Revenue 81,981 29,834 111,815 Property Operating Expenses Land rental (4,330) – (4,330) Property related tax (5,642) (2,106) (7,748) Business tax (4,150) (1,492) (5,642) Property management fees (2,984) (1,106) (4,090) Other property operating expenses (14,087) (5,866) (19,953)

Total property operating expenses (31,193) (10,570) (41,763) NPI 50,788 19,264 70,052 Administrative expenses Manager’s management fees (4,017) (5,820)(1) Trustee’s fee (235) (355) Other trust operating expenses (1,479) (2,317)

Total administrative expenses (5,731) (8,492) Finance costs (8,802) (13,465) Net income before taxation 36,255 48,095 Taxation (6,018) (7,284) Total return for the year after income tax 30,237 40,811 Minority interest (355) (355)

Total return for the year attributable to 29,882 40,456 Unitholders before distribution

B-2 Reconciliation from total return attributable to Unitholders to total Unitholders’ distribution:

FY2008 (S$’000) Existing Enlarged Portfolio The Mall Portfolio Total return for the year attributable to 29,882 40,456 Unitholders from consolidated statement of total return before distribution Distribution adjustments(2) 1,264 2,056

Income available to Unitholders(3) 31,146 42,512

Unitholders’ distribution: — from operations(5) 12,363 12,733(4) — from Unitholders’ contributions(5) 18,783 29,779

Income available for distribution to 31,146 42,512 Unitholders

Units in issue (’000)(6) 477,152 590,804 Distribution per Unit (cents) 6.53 7.20 DPU accretion 10.3%

Notes: (1) This includes the expected incremental Manager’s Base and Performance Fees payable of S$1.0 million and S$0.8 million respectively. (2) These include the portion of the Manager’s Performance Fees of S$2.0 million and S$2.8 million which are payable in the form of Units for FY2008 for the Existing Portfolio and Enlarged Portfolio respectively, and deducting the annual transfer to the general reserve fund of S$0.8 million and S$0.7 million in FY2008 for the Existing Portfolio and Enlarged Portfolio respectively. (3) Assuming distribution of 100.0% of Income available to Unitholders. (4) The less than proportionate increase in the Unitholders’ distribution from operations is attributable to an increase in interest expense as a result of additional bank borrowings (see “Assumptions — Trust Level Assumptions — (VIII) Capital Structure”), an increase in Manager’s Base and Performance Fees and Trustee’s fee following the addition of the Mall to the portfolio and net profit after tax of CapitaRetail Xizhimen SPV for the year ending 31 December 2008 not declared and paid as dividend in FY2008 (See “Assumptions — Trust Level Assumptions — (XVII) Unitholders’ Distribution”). This is however partly offset by an increase in interest income from shareholder’s loans. (5) See “Assumptions — Trust Level Assumptions — (XVII) Unitholders’ Distribution” (6) The increase in the number of Units in issue is a result of the New Units issued in respect of the Equity Fund Raising exercise and assumed payment of the Manager’s Performance Fees for the relevant period in the form of Units issued at an assumed issue price per Unit of S$2.50 (see “Assumptions — Trust Level Assumptions — (VI) Manager’s Management Fees”) as well as the issuance of New Units under the Equity Fund Raising.

B-3 Section I: Assumptions — Existing and Enlarged Portfolio The major assumptions made in preparing the forecast consolidated statement of total return for the Existing Portfolio and the Enlarged Portfolio are set out below. The Manager considers these assumptions to be appropriate and reasonable as at the date of this Circular.

Project Company Level Assumptions

(I) Gross Revenue Gross Revenue is the aggregate of Gross Rental Income and other income earned. A summary of the assumptions used in calculating the Gross Revenue is set out as follows:

(a) Gross Rental Income Gross Rental Income refers to the total amount payable by all tenants/licensees pursuant to a tenancy or licence, comprising base rents, service charges, turnover rents and where applicable, advertising and promotion levy. The percentage of forecast Gross Rental Income attributable to Committed Leases (as defined herein) for the Existing Portfolio and the Enlarged Portfolio as at 31 August 2007 are estimated as follows:

FY2008 (1 January 2008 to 31 December 2008) Existing Enlarged Portfolio Portfolio Gross Rental Income attributable to Committed Leases (as 87.3% 86.9% percentage of total Gross Rental Income)

With the exception of Jinyu Mall, the Manager has used rents payable under the Committed Leases in relation to the Existing Portfolio and the Enlarged Portfolio to forecast the Gross Rental Income, which will be S$80,675,000 (RMB403,923,000) and S$109,910,000 (RMB550,294,000) for the Existing Portfolio and the Enlarged Portfolio respectively for FY2008.

Anzhen Mall is fully leased to the Beijing Hualian Group under a 20-year master lease which expires on 24 July 2025. The master lease agreement provides for an annual step-up increase in the base rent of 1.0%, plus a percentage of gross sales turnover if the turnover exceeds an agreed threshold.

Zhengzhou Mall is fully leased to the Beijing Hualian Group under a 20-year master lease which expires on 31 October 2026. Starting from the fourth year, there will be an increase of 2.0% in the base rent, followed by a progressive annual increase of 1.0% from the fifth year onwards. There is an additional potential upside through a percentage of tenants’ gross sales turnover if the turnover exceeds an agreed threshold.

For Jinyu Mall, under a revised arrangement with the master lessee, the Manager managed to bring forward the recovery of space from the master lessee within a shorter period, instead of over a three-year period earlier envisaged. Some of the asset enhancement works are already in progress, while the rest are scheduled to commence in a manner that would allow the supermarket operator to continue trading with minimal disruption. For FY2008, the Manager has taken into account the potential revenue loss during the period when the asset enhancement works are underway, as well as the additional revenue contribution from higher yielding specialty tenants resulting from the completion of the asset enhancement in phases.

B-4 For the remaining Properties (as defined herein) 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 one to three years for specialty tenants. Most of the 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, providing stability and potential upside in revenue. There are also leases with rent payable based on a percentage of gross sales turnover only, or based on base rent plus a percentage of gross sales turnover.

For FY2008, the Manager has only factored in turnover rents for leases with rent payable based on a percentage of gross sales turnover only, or based on base rent plus a percentage of gross sales turnover. The Manager has reviewed the average historical turnover rent for the relevant tenant that pays turnover rent as described above. Where historical turnover rent figures are not available, the Manager has made an estimate of the tenant’s expected turnover, based on information provided by the tenant and other factors such as the outlook for retail sales, as well as comparison with the Manager’s wider tenant base and network.

As at 31 August 20071, approximately 80.1% and 64.2% of all Committed Leases (by number and by GRA1 respectively) of the Existing Portfolio have leases structured with turnover rents, and only 0.8% of the total Gross Rental Income of the Existing Portfolio in FY2008 is attributable to such turnover rents.

As at 31 August 20071, approximately 85.7% and 68.2% of all committed leases (by number and by GRA1 respectively) of the Enlarged Portfolio have leases structured with turnover rents, and only 0.6% of the total Gross Rental Income of the Enlarged Portfolio in FY2008 is attributable to such turnover rents.

The Manager believes that the portfolio is exposed to potential upside from turnover rents, where the current level of consumer spending is expected to grow in tandem with the future growth in retail spending.

Following the expiry of a Committed Lease during FY2008, the Manager has used the following process to project the Gross Rental Income for the periods following such expiry: • the Manager has assessed the market rent for each portion of GRA of each of the Properties as at 31 August 2007. The Market Rent (as defined herein) is the rent which the Manager believes could be achieved if each lease was renegotiated as at 31 August 2007 and is estimated with reference to the rental payable pursuant to comparable leases for tenancies that have recently been negotiated, the effect of competing shopping centres, assumed tenant retention rates on lease expiry, likely market conditions, inflation levels and tenant demand levels. • if a Committed Lease expires in FY2008, the Manager has assumed that the rental rate for a new lease (or a lease renewal) which commences in FY2008 is the Market Rent, increased by the forecast growth rate in accordance with the methodology set out in paragraph (c) below or the actual rent (if the lease agreement or letter of offer has been entered into).

1 Based on CRCT’s 51.0% ownership interest in Xinwu Mall.

B-5 Occupancy The Committed Occupancy of the Enlarged Portfolio as at 31 August 2007 and the average occupancy for FY2008 are set out in the table below.

Average Occupancy Committed FY2008 Occupancy as at (1 January 2008 to Enlarged Portfolio 31 August 2007(1) 31 December 2008) (%) (%) Wangjing Mall 99.1 99.7 Jiulong Mall 100.0 100.0 Anzhen Mall 100.0 100.0 Qibao Mall 79.4 91.4 Zhengzhou Mall 100.0 100.0 Jinyu Mall 100.0 74.0 Xinwu Mall 95.5 99.8 The Mall 82.1 88.7 Weighted Average(2) 93.6 94.4

Notes: (1) Based on Committed Leases for the Properties. (2) Based on CRCT’s 51.0% ownership interest in Xinwu Mall.

(b) Other Income Other income comprises carpark income earned from the operations of the carparks located at the Properties, signage licence fee, casual leasing and other miscellaneous income from the Properties. It is assumed that only Wangjing Mall derives any carpark income. For Xinwu Mall and Qibao Mall, the anchor tenants are hypermarkets and it is typical for such malls with hypermarkets not to charge carpark fees. The Manager will monitor the market conditions and charge parking fees when the demand for carpark increases. For the remaining Properties which are under master leases, carpark income, if any, is received directly by the master lessees.

(c) Market Rent Growth Rate A Market Rent growth rate (excluding turnover rents) of 6.0% per annum compounded on a monthly basis, has been assumed for the Properties which are not under master lease, namely Wangjing Mall, Qibao Mall, Xinwu Mall, Jiulong Mall, Jinyu Mall and the Mall. The growth assumption reflect the Manager’s assessment of the Market Rent growth rate having factored in consumer price inflation, the outlook for the Chinese economy including gross domestic product growth rates and the strong outlook for retail sales in the respective cities in the PRC in which the Properties are located, as well as the demand level for tenancies in the Existing and Enlarged Portfolio.

The Market Rent growth rate has been used to project the Gross Rental Income payable under the assumed new leases (or lease renewals) signed in FY2008.

B-6 (d) Lease renewals and vacancy allowances For leases expiring in FY2008, where the actual vacancy periods are already known pursuant to commitments to lease which are in place as at 31 August 2007, the actual vacancy periods have been used in FY2008.

For the other leases expiring in FY2008, it has been assumed that leases representing 50.0% of the Gross Rental Income derived from such leases expiring in FY2008 will be renewed and will not experience any vacancy period. It has been assumed that leases representing the remaining 50.0% of the Gross Rental Income derived from the other leases expiring in FY2008 will experience a one-month vacancy period before rent becomes payable under a new lease.

(II) Property Operating Expenses

(a) Land rental This is applicable only to Qibao Mall. The property is currently under a master lease with the landlord, Shanghai Jin Qiu (Group) Co., Ltd., for a period of 20 years with the option to renew for a further 19 years up to 2043.

(b) Property and related tax Property tax is computed as 1.2% per annum based on 70.0% to 90.0% of the cost of the Property, or 12.0% of base revenue in the case of Zhengzhou Mall. There is no property tax payable for Qibao Mall as it is under a master lease with the landlord (as explained under “Land rental” above).

Land Use Tax Foreign Enterprises and Foreign Investment Enterprises became subject to land use tax with effect from 1 January 2007. The land use tax rates per square metre per year are as follows:

Bigcities RMB1.5toRMB30.0 Medium cities RMB1.2 to RMB24.0 Small cities RMB0.9 to RMB18.0 County towns, towns or bases operated under an RMB0.6 to RMB12.0 organisational system and industrial and mining districts

The applicable land use tax rate is subject to the detailed implementation rules to be issued by the relevant local governments where the properties are located.

(d) Property Management Fee The Property Management Fee is based on 2.0% per annum of Gross Revenue of the Properties plus 2.0% per annum of NPI of the Properties and 0.5% per annum of NPI of the Properties in lieu of leasing commissions otherwise payable to the Property Manager and/or third party agents.

B-7 (e) Other Property Operating Expenses (staff costs, utilities, repair and maintenance, advertising and promotion, general and administration and insurance) Anzhen Mall, Zhengzhou Mall, and the majority of the GRA of Jiulong Mall are under master leases where the master lessee is responsible for the other property operating expenses such as staff costs, utilities, repair and maintenance, advertising and promotion, general and administration and insurance. Therefore, such expenses are not forecast for these properties.

The other property operating expenses are estimated based on the following assumptions:

Staff costs — based on a typical organisation structure of about 50 personnel per property, comprising centre manager, leasing team, marketing and communications team, operations team, finance, IT and human resource personnel.

Utilities — based on typical consumption levels of comparable operating malls and average electricity, water and gas rates for each category of mechanical and electrical equipment as well as lighting equipment.

Repair and maintenance — based on typical level of routine repair and maintenance expenses of comparable operating malls.

Advertising and promotion — based on approximately 1.5% to 4.0% of Gross Revenue, benchmarked against comparable operating malls. Where the Manager intends to increase its marketing effort at certain of the Properties, consideration has been made for additional expenses in this forecast.

General and administration — based on typical level of miscellaneous administrative expenses of comparable operating malls, and comprises expenses such as statutory fees, printing and stationery, computer equipment, entertainment, provision of doubtful debts and write off of bad debts.

Insurance — based on quotations received from prospective insurers for the Properties.

(III) Depreciation Depreciation expenses at the Project Companies consists of the depreciation of property, plant, equipment, including capitalised acquisition-related expenses. Properties are depreciated on a straight-line basis over the remaining term of the lease, based on 90.0% of the depreciable costs.

(IV) General Reserves Under the regulations of the PRC, there is a requirement for WFOEs to apportion 10.0% of its net profit after tax to the general reserves account until such reserve reaches 50.0% of the company’s registered capital. The Manager has assumed a 10.0% provision for general reserves for all the Project Companies.

Barbados Company Level Assumptions

(V) Operating Expenses at Barbados Company Level The annual operating expenses at the Barbados Company level comprise fees for corporate secretariat services, annual tax returns filing services, accounting and auditing services. The Manager has assumed such expenses to be similar to the annual operating expense incurred in the previous year.

B-8 Trust Level Assumptions

(VI) Manager’s Management Fees The Manager’s Base Fee is 0.25% per annum of the value of the Deposited Property. In addition, there is a Manager’s Performance Fee of 4.0% per annum of the NPI of CRCT. Both components are payable quarterly in accordance with the Trust Deed.

It is assumed that the Base Fee will be paid in cash and the Performance Fee will be paid in the form of Units although the Manager may elect to receive the Performance Fee in cash or Units or a combination of cash and Units (as it may in its sole discretion determine). The issue price of the Units will be determined based on the 10-Day Volume Weighted Average Price. The Manager has assumed the issue price to be S$2.50 for FY2008 for the purpose of computing the number of Units for the Performance Fee.

(VII) Trustee’s Fee The Trustee’s fee is up to 0.03% per annum of the value of the Deposited Property, subject to a minimum amount of S$15,000 per month, and is accrued daily and paid monthly. It is calculated based on the forecast Deposited Property at the end of each month in accordance with the Trust Deed.

(VIII) Capital Structure The capital structure of CRCT comprises a combination of Unitholders’ equity and external borrowings (financing at both the Project Company and trust levels).

CRCT has in place the following debt facilities: • the RMB350.0 million five-year secured Anzhen Term Loan Facility; • the US$105.0 million two-year Trust Term Loan Facility I; • the S$88.0 million two-year Trust Term Loan Facility II; • the S$44.0 million short-term Trust Money Market Facility I; and • the S$17.0 million short-term Trust Money Market Facility II.

The Anzhen Term Loan Facility and the Trust Term Loan Facility I are fully drawn and together with S$19.1 million drawn down from the Trust Money Market Facility I, the Aggregate Leverage Limit is 31.0% as at 30 September 2007.

The Trust Term Loan Facility II is expected to be fully drawn on completion date.

It is assumed that the Trust Money Market Facility I and Trust Money Market Facility II are partially drawn to an amount of S$22.0 million and S$7.0 million, respectively, during FY2008.

The Trust Term Loan Facilities and the Trust Money Market Facilities are taken at the trust level by the Trustee and are repayable in full at maturity. However, CRCT has the option to make prepayments.

The Manager intends to put in place a CMBS structure either in the PRC or offshore before the maturity of the debt facilities in order to optimise the capital structure and cost of capital, with a possible prepayment of the debt facilities.

B-9 The Anzhen Term Loan Facility was entered into by CapitaRetail Anzhen and is secured by a mortgage over Anzhen Mall. The Anzhen Term Loan Facility is repayable in full at maturity on 30 June 2011. However, CapitaRetail Anzhen has the option to make prepayments without incurring prepayment fees and it is assumed that RMB55.0 million will be repaid in FY2008.

The Anzhen Term Loan Facility bears an interest corresponding to 90.0% of the People’s Bank of China base lending rate and reprices on a semi-annual basis.

(IX) Interest on External Loans The Manager has assumed the following interest rates for FY2008: • Anzhen Term Loan Facility — 7.0% per annum • Trust Term Loan Facility I — 2.0% from January 2008 to November 2008 and 5.0% in December 20082 • Trust Term Loan Facility II — 5.0% per annum • Trust Money Market Facility I and II — 5.0% per annum

The assumed weighted average effective interest rate for FY2008 is 4.0% per annum which is inclusive of all margins, amortisation of debt arrangement fee, charges and upfront fees to be incurred in relation to the Facilities. (See “Sensitivity Analysis” for the impact of changes in interest rates on the forecast distribution per Unit.)

(X) Repayment of Shareholder’s Loans Based on accounting standards in the PRC, depreciation of real estate is a mandatory expense at the Project Company level when determining the net profits from operations of a Project Company that would be available for payment as dividends. Although this acts to reduce corporate income tax in the PRC, it effectively traps cash in the Project Companies as depreciation is not a cash expense.

However, the Properties are treated as real properties carried at valuation under Singapore Financial Reporting Standards and hence are not depreciated. Accordingly, such depreciation of real properties is not treated as an expense item when computing the distributable income of CRCT. To distribute this portion, there is a need to extract the cash that is trapped in the Project Company in the form of depreciation expense. Hence, it is assumed that a principal repayment of shareholder’s loan is made and this repayment sum is equal to the lower of: • depreciation expense for the period; or • profit before taxes and depreciation.

(XI) Interest on Shareholder’s Loans It is assumed that the interest rates on the shareholder’s loans extended by the Trustee to the Barbados Companies and by the Barbados Companies to the Project Companies will be approximately 6.3% and 7.5% per annum respectively. The lower interest rate at the Barbados Company level reflects the withholding and business taxes payable at the Project Company level in respect of the interest on the Shareholder’s Loans.

2 Interest rate in December 2008 is assumed to be 5.0% as the Trust Term Loan is expected to be refinanced in December 2008.

B-10 (XII) Other Expenses Other expenses of CRCT include recurring operating expenses such as annual listing fees, valuation fees, legal fees, registry and depository charges, accounting, audit and tax adviser’s fees, postage, printing and stationery costs, costs associated with the preparation of annual reports, investor communications costs and other miscellaneous expenses.

(XIII) Currency and Interest Rate Exposure The Manager has entered into a two-year non-deliverable RMB cross-currency interest rate swap to hedge the currency and interest rate exposure for the notional amount of the Trust Term Loan Facility I (which is in US dollars).

As CRCT intends to be a long term investor in China, the Manager has taken a view not to hedge the currency exposure. The Manager’s strategy is to achieve a natural hedge through local RMB financing and any non-RMB denominated loan will be hedged to protect the ongoing concern of CRCT in the event of large currency fluctuation. However, the Manager will hedge the RMB cash flow from operations if it is determined that they are to be remitted back to Singapore for distribution purposes.

(XIV) Capital Expenditure An allowance for expected capital expenditure on the Properties of RMB75.0 million has been included for FY2008. It has been assumed that capital expenditure will be partially funded by bank borrowings. Capital expenditure incurred is capitalised as part of the Deposited Property and has no impact on distribution other than incurring additional interest expense on the bank borrowings, and increasing the Manager’s Base Fee and Trustee’s fee.

(XV) Investment Properties For the financial year ending 31 December 2008, the Manager has assumed no increase in property value over the 30 September 2007 valuation except for forecast capital expenditure described in paragraph (XIV) above for FY2008. The assumption is applied when estimating the Property Value (as defined herein) and the value of the Deposited Property for the purposes of forecasting the Base Fee component of the Manager’s management fees and the Trustee’s fee..

(XVI) Taxes The following taxes have been factored into this forecast: • PRC deed tax • PRC corporate income tax • PRC business tax • PRC property tax • PRC land use tax • PRC stamp duty • PRC withholding tax on dividend • PRC withholding tax on offshore interest payment • Barbados corporate income tax

New Income Tax Law With effect from 1 January 2008, the Income Tax Law of the PRC will be replaced by a new enterprise income tax law (the “New Income Tax Law”).

B-11 Under the New Income Tax Law, among others, the current 33.0% statutory enterprise income tax rate will be reduced to 25.0% for PRC tax resident enterprises and a statutory PRC withholding tax rate of 20.0% is levied on payments of PRC-sourced dividends and other payments such as interest, rents, royalties and capital gains to non-resident enterprises. This withholding tax rate of 20.0% may be reduced under applicable tax treaty.

It has been assumed that the dividends and interest payable by the Project Companies to the applicable Barbados Companies will benefit from the reduced withholding tax rates of 5.0% and 10.0% respectively, as provided for under the PRC-Barbados tax treaty.

(See Appendix E — Tax Considerations)

(XVII) Unitholders’ Distribution Unitholders’ distribution for a distribution period or a financial year may be accounted for as distribution from operations or distribution from Unitholders’ contributions or a combination of both:

(a) Distribution from operations This refers to distribution made by CRCT that is represented by income received or receivable during the distribution period or the financial year, as the case may be, net of expenses. Such income comprises mainly the following: • dividend income from Barbados Companies paid out of dividends declared by the Project Companies; • dividend income from Barbados Companies paid out of net interest income earned by Barbados Companies on shareholders’ loans extended to Project Companies; and • interest income earned by CRCT on shareholders’ loans extended to Barbados Companies.

The above income may originate from profits or income derived by the Project Companies in respect of prior period(s) or year(s).

(b) Distribution from Unitholders’ contributions This refers to the amount of distribution made by CRCT for a distribution period or a financial year where the underlying cash is not, or may not be, received or receivable as income by CRCT during that period or year. Such distribution comprises mainly the following: • profits from operations arising from the Properties which are declared as dividend income after the distribution period or financial year, as the case may be, and accordingly also received as dividends by CRCT after that period or year; • profits from operations arising from the Properties which cannot be declared as dividends; • adjustment for depreciation expenses of the Properties; and • adjustments for trust expenses that are paid in Unit, foreign currency differences attributable to net investment hedges undertaken by CRCT and certain unrealised expenses. The Manager has assumed that 100.0% of the distributable income will be distributed to Unitholders for FY2008. The Manager has also assumed that all profits from operations arising from the Properties that can be declared as dividends have been declared as such in FY2008.

B-12 (XVIII) Accounting Standards and Policies The Manager has assumed that there will be no change in applicable accounting standards or other financial reporting requirements that may have a material effect on this forecast.

Significant accounting policies adopted by the Manager in the preparation of this forecast is set out in Appendix D.

(XIX) Foreign Exchange Rates The profit forecast for FY2008 is prepared based on the assumed exchange rates of the United States Dollar and the RMB to the S$ of US$1 to S$1.5144 and S$1 to RMB5.0068 respectively.

The Manager wishes to highlight that the exchange rates applied are current estimates and actual exchange rates in FY2008 are likely to be different from these estimates.

(XX) Other Assumptions The following additional assumptions have been made in preparing this forecast: • There will be no material changes in taxation legislation or other applicable legislation. • The tax exemption and tax ruling remain valid. • All leases are enforceable and will be performed in accordance with their terms. • The legal title to Wangjing Mall has been issued in the name of CapitaRetail Wangjing. • The property portfolio remains unchanged throughout FY2008. • 100.0% of the distributable income will be distributed. • There will be no change in the fair value of all financial instruments throughout FY2008.

Section II : Sensitivity Analysis — Existing Portfolio

Retention of Wangjing Mall The distribution per Unit in FY2008 assuming (i) the retention of Wangjing Mall and (ii) the non-retention of Wangjing Mall on the basis of an issue price of S$2.50 per Unit are set out below.

Distribution per Unit FY2008 (cents) Base Case — Retention of Wangjing Mall 6.53 Non-retention of Wangjing Mall 3.58

Manager’s Management Fee Assuming that the Manager receives its Performance Fees in respect of the Properties for FY2008 in cash, the impact on the annualised distribution per Unit in FY2008 on the basis of an issue price of S$2.50 per Unit is set out below.

Distribution per Unit Manager’s Performance Fee FY2008 (cents) Base Case — Performance Fees paid in Units 6.53 Performance Fees paid in cash 6.12 Percentage reduction in DPU (%) 6.3

B-13 Section III : Sensitivity Analysis — Enlarged Portfolio The forecast distributions are based on a number of key assumptions that have been outlined earlier in this appendix.

Unitholders should be aware that future events cannot be predicted with any certainty and deviations from the figures forecast in this Circular are to be expected. To assist Unitholders in assessing the impact of these assumptions on this forecast, a series of tables demonstrating the sensitivity of the distribution per Unit to changes in the key assumptions are set out below.

The sensitivity analysis is intended to provide a guide only and variations in actual performance could exceed the ranges shown. Movements in other variables may offset or compound the effect of a change in any variable beyond the extent shown.

Market Rent Growth Rates Changes in market rental’s growth rates for the assumed new leases (or lease renewable) signed in FY2008 will impact the Gross Rental Income of CRCT. The Market Rent base case rental growth rate adopted is set out earlier in this appendix. The impact of variations in the growth rate on distribution per Unit on the basis of an issue price of S$2.50 per Unit is set out below.

Distribution per Unit Market Rent growth rates FY2008 (cents) 4.0% 7.19 Base Case (6.0%) 7.20 8.0% 7.20

Vacancy Allowance for Retail Leases Changes in vacancy allowances assessed by the Manager will impact the Gross Rental Income of CRCT. The base case vacancy allowance assumptions are set out earlier in this appendix. The impact of variations in the vacancy allowance on distribution per Unit on the basis of an issue price of S$2.50 per Unit is set out below.

Distribution per Unit Vacancy Allowance FY2008 (cents) 75.0% of expiring leases incur one month vacancy period 7.18 Base Case(1) 7.20 25.0% of expiring leases incur one month vacancy period 7.22

Note: (1) Assumes 50.0% of expiring leases incur one-month vacancy period.

The above sensitivity analysis on the Market Rent growth rate and vacancy allowance for retail leases do not result in any meaningful variance in the distribution per Unit over FY2008. The lack of DPU sensitivity is attributed to the fact that for a significant portion of the Properties, Gross Rental Income is supported by long-term master leases and other long-term leases which provide for rental income stability and which are expected to expire beyond FY2008.

B-14 Property Operating Expenses Changes in property operating expenses will impact the NPI of CRCT. The base case property operating expenses assumed in this forecast are set out earlier in this appendix. The impact of variations in property operating expenses on distribution per Unit on the basis of an issue price of S$2.50 per Unit is set out below.

Distribution per Unit Property Operating Expenses FY2008 (cents) 2.5% above estimate(1) 7.05 Base Case(2) 7.20 2.5% below estimate(3) 7.35

Notes: (1) Implies an increase of 2.5% in Property Operating Expenses. (2) Assumes Property Operating Expenses as described in paragraph (II) Property Operating Expenses of Section I of this appendix. (3) Implies a decrease of 2.5% in Property Operating Expenses.

Interest Rates on External Loans Changes in interest rates of the external loans will impact the interest expenses, and therefore the distributable income of CRCT. The base case interest rates assumed in this forecast are set out earlier in this appendix. The impact of variations in interest rates on distribution per Unit on the basis of an issue price of S$2.50 per Unit is set out below.

Distribution per Unit Interest Rates on External Loans FY2008 (cents) 50 basis points above the Base Case 6.93 Base Case(1) 7.20 50 basis points below the Base Case 7.46

Note: (1) Assumed interest rates as described in Section 1 paragraph (IX) Interest on External Loans

Distribution per Unit FY2008 (cents) Base Case — Retention of Wangjing Mall 7.20 Non-retention of Wangjing Mall 4.81

B-15 Manager’s Management Fee Assuming that the Manager receives its Performance Fees in respect of the Properties for FY2008 in cash, the impact on the annualised distribution per Unit in FY2008 on the basis of an issue price of S$2.50 per Unit is set out below.

Distribution per Unit Manager’s Performance Fee FY2008 (cents) Base Case — Performance Fees paid in Units 7.20 Performance Fees paid in cash 6.74 Percentage reduction in DPU (%) 6.4

B-16 APPENDIX C

INDEPENDENT ACCOUNTANTS’ REPORT ON THE PROFIT FORECAST

The Board of Directors CapitaRetail China Trust Management Limited (as manager of CapitaRetail China Trust) 39 Robinson Road #18-01 Robinson Point Singapore 068911

HSBC Institutional Trust Services (Singapore) Limited (as trustee of CapitaRetail China Trust) 21 Collyer Quay #14-01 HSBC Building Singapore 049320

14 November 2007

Dear Sirs

Letter from the Independent Accountants on the Profit Forecast for the Year Ending 31 December 2008 This letter has been prepared for inclusion in the Circular to be issued in connection with the proposed issue of New Units in CapitaRetail China Trust (“CRCT”) and the associated acquisition of Xizhimen Mall (the “Mall”).

The directors of CapitaRetail China Trust Management Limited (the “Directors”) are responsible for the preparation and presentation of the forecast consolidated statement of total return of CRCT and its subsidiaries (collectively, the “Group”) for the year ending 31 December 2008 (the “Profit Forecast”) as set out on pages B-2 and B-3 of the Circular, which have been prepared on the basis of the assumptions as set out on pages B-4 to B-13 of the Circular.

We have examined the Profit Forecast as set out on pages B-2 and B-3 of the Circular in accordance with Singapore Standards on Assurance Engagements (“SSAE”) 3400: The Examination of Prospective Financial Information. The Directors are solely responsible for the Profit Forecast including the assumptions set out on pages B-4 to B-13 of the Circular on which it is based.

Based on our examination of the evidence supporting the relevant assumptions, nothing has come to our attention which causes us to believe that these assumptions do not provide a reasonable basis for the Profit Forecast. Further, in our opinion the Profit Forecast, so far as the accounting policies and calculations are concerned, is properly prepared on the basis of the assumptions, is consistent with the accounting policies normally adopted by the Group, and is presented in accordance with the relevant presentation principles of Recommended Accounting Practice 7 “Reporting Framework for Unit Trusts” (but not all the required disclosures for the purposes of this letter), issued by the Institute of Certified Public Accountants of Singapore, which is the framework to be adopted by the Group in the preparation of its financial statements.

Events and circumstances frequently do not occur as expected. Even if the events anticipated under the hypothetical assumptions occur, actual results are still likely to be different from the Profit Forecast since other anticipated events frequently do not occur as expected and the variation may be material. The actual results may therefore differ materially from those forecast. For the reasons set out above, we do not express any opinion as to the possibility of achievement of the Profit Forecast.

C-1 Attention is drawn, in particular, to the sensitivity analysis of the Directors’ Profit Forecast set out on pages B-13 to B-16 of the Circular.

Yours faithfully

KPMG Certified Public Accountants (Partner-in-charge: Eng Chin Chin) Singapore

C-2 APPENDIX D

SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Preparation The financial statements have been prepared in accordance with the Statement of Recommended Accounting Practice (“RAP”)7“Reporting Framework for Unit Trusts” issued by the Institute of Certified Public Accountants of Singapore, and the applicable requirements of the Code on Collective Investment Schemes issued by the Monetary Authority of Singapore (“MAS”) and the provisions of the Trust Deed.

The financial statements have been prepared on the historical cost basis, except as set out in the accounting policies below.

The financial statements are presented in Singapore dollars which is CRCT’s functional currency. All financial information presented in Singapore dollars has been rounded to the nearest thousand, unless otherwise stated.

The preparation of financial statements in conformity with RAP 7 requires the Manager to make judgements, estimates and assumptions that affect the application of policies and 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.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and any future periods affected.

Significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are valuation of investment properties and valuation of financial instruments.

The accounting policies set out below have been applied consistently by CRCT (the “Trust”) and its subsidiaries (the “Group”). The accounting policies used by the Group have been applied consistently to all periods presented in these financial statements.

(b) Functional 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.

Subsidiaries Subsidiaries are companies controlled by the Trust. Control exists when the Trust has the power, directly or indirectly, to govern the financial and operating policies of a company so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from that date that control commences until the date that control ceases.

D-1 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.

Transactions eliminated on consolidation Intra-group balances, 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.

Accounting for subsidiaries by the Trust Investments in subsidiaries are stated in the Trust’s balance sheet at cost less accumulated impairment losses.

(d) Foreign Currency Transactions

Foreign currency transactions Transactions in foreign currencies are translated at foreign exchange rates ruling at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated 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. Non-monetary assets and liabilities measured at fair value in foreign currencies are translated at foreign exchange rates ruling at the dates 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 liabilities designated as hedges of the net investment in a foreign operation (see Note (g)).

Foreign operations The assets and liabilities of foreign operations are translated to Singapore dollars at exchange rates prevailing at the reporting date. The income and expenses of foreign operations are translated to Singapore dollars at exchange rates prevailing at the dates of the transactions. Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operation and translated at the closing rate.

Foreign currency differences are recognised in net assets attributable to unitholders. When a foreign operation is disposed of, in part or in full, the relevant amount is transferred to the statement of total return.

Net investment in a foreign operation Exchange differences arising from monetary items that in substance form part of the Group’s net investment in a foreign operation are recognised in net assets attributable to unitholders in the consolidated financial statements. When the hedged net investment is disposed of, the cumulative amount in net assets attributable to unitholders is transferred to the statement of total return as an adjustment to the profit and loss arising on disposal.

D-2 (e) Investment Properties Investment properties are accounted for as non-current assets and are stated at initial cost on acquisition, and at valuation thereafter. The cost of a purchased property comprises its purchase price and any directly attributable expenditure. Valuations are 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 Code on Collective Investment Schemes issued by the MAS.

Any increase or decrease on revaluation is credited or charged to the statement of total return as a net appreciation or depreciation in the value of the investment properties.

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.

(f) Plant and Equipment Plant and equipment are stated at cost less accumulated depreciation and 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.

The cost 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 costs of the day-to-day servicing of plant and equipment are recognised in the statement of total return as incurred.

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:

Furniture, fittings and plant and equipment - 10 years

Computers - five years

Renovations - 37 to 47 years

Motor vehicles - five years

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.

Depreciation methods, useful lives and residual values are reviewed, and adjusted as appropriate, at each reporting date.

D-3 (g) Financial Instruments

Non-derivative financial instruments Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, financial liabilities, and trade and other payables. Cash and cash equivalents comprise cash balances and bank deposits.

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition, non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses.

A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset to another party without retaining control or transfers substantially all the risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, ie, the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are discharged or cancelled.

Derivative financial instruments and hedging activities 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.

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 recognised in the statement of total return.

Hedge of net investment in a 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 in net assets attributable to unitholders, as 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 net assets attributable to unitholders arising from foreign currency translation attributable to that investment is transferred to the statement of total return as an adjustment to the profit or loss on disposal.

Impairment of financial assets A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

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 original effective interest rate.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

D-4 All impairment losses are recognised in the statement of total return.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in the statement of total return.

(h) Net Assets Attributable to Unitholders Net assets attributable to unitholders represent the unitholders’ residual interest in the Group’s net assets upon termination.

Expenses incurred on the issuance of units in the Trust are deducted directly against net assets attributable to unitholders.

(i) Impairment — Non-Financial Assets The carrying amounts of the Group’s non-financial assets, other than investment properties and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment losses are recognised in the statement of total return unless it reverses a previous revaluation, credited to net assets attributable to unitholders, in which case it is charged to net assets attributable to unitholders. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

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 or cash-generating unit.

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.

(j) Employee benefits

Defined contribution plans Obligations for contributions to defined contribution pension plans are recognised as an expense in the statement of total return as incurred.

Short-term benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

D-5 A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans 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.

(k) Revenue Recognition

Rental income from operating leases 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 are recognised as income in the accounting period in which they are earned. No contingent rental is recognised if there are uncertainties due to the possible return of the amounts received.

Interest income Interest income is accrued on an effective interest rate method.

(l) Expenses

Property expenses Property expenses are recognised on an accrual basis.

Manager’s management fees, property management fees and trustee’s fees These are recognised on an accrual basis using the applicable formula stipulated in the Trust Deed.

(m) Finance Costs Finance costs comprise interest expense on borrowings and similar charges, and are recognised in the statement of total return on an effective interest rate method over the period of the borrowings.

(n) Income Tax Expense Taxation on the returns for the period comprises current and deferred tax. Income tax is recognised in the statement of total return except to the extent that it relates to items directly related to net assets attributable to unitholders, in which case it is recognised in net assets attributable to unitholders.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The temporary differences on initial recognition of assets or liabilities that affect neither accounting nor taxable profit are not provided for. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

D-6 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 benefit will be realised.

(o) Distribution Policy 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.

D-7 This page has been intentionally left blank. APPENDIX E

TAX CONSIDERATIONS

The following summary of certain Singapore, Barbados and PRC income tax considerations to Unitholders in respect of the Proposed Acquisition is based upon laws, regulations, rulings and decisions now in effect, all of which are subject to change (possibly with retroactive effect). This summary is not a tax advice and does not purport to be a comprehensive description of all the considerations that may be relevant to Unitholders. Unitholders should consult their own tax advisers on the tax implications that may apply to their own individual circumstances.

Singapore Income Tax

Income from the Proposed Acquisition CRCT has obtained approval of the Inland Revenue Authority of Singapore (“IRAS”) for the following income to be exempt from Singapore income tax under section 13(12) of the Income Tax Act: (a) dividends payable by CRCI Beta Barbados; and (b) interest on shareholder’s loan payable by CRCI Beta Barbados, where such income originates from rental and property-related income derived from the Mall.

This tax exemption is granted subject to certain conditions, including the condition that the Trustee is a tax resident of Singapore.

Distributions to Unitholders Unitholders may receive tax-exempt income distributions or capital distributions or both out of income generated from the Proposed Acquisition.

Tax-exempt income distributions Unitholders will be exempt from Singapore income tax on tax-exempt income distributions made by CRCT. These distributions may be made by CRCT out of its tax-exempt income, for example, dividends and interest income received in Singapore from CRCI Beta Barbados which are exempt from tax under section 13(12) of the Income Tax Act. No tax will be deducted at source or withheld on such distributions.

The profits derived from the Mall for a distribution period may only be received in Singapore by CRCT in the form of dividends from CRCI Beta Barbados subsequent to that distribution period. In this respect, CRCT has obtained a tax ruling from the IRAS to treat distributions based on tax-exempt dividends that it expects to receive from CRCI Beta Barbados within nine months after the end of the relevant financial year to which the tax-exempt dividends relate as distributions made out of tax-exempt income.

This tax ruling is subject to a rollover adjustment mechanism. Under this mechanism, the amount of tax-exempt income that CRCT expects to receive is compared to the actual amount of tax-exempt income it subsequently receives from CRCI Beta Barbados. In the event that the actual amount is lesser, the amount of tax-exempt income available for distribution for the distribution period ending immediately after the receipt of the tax-exempt income will be reduced by the amount of tax-exempt income over-distributed.

E-1 Capital distributions Unitholders will not be subject to Singapore income tax on capital distributions made by CRCT. These distributions may be made by CRCT out of cash received from repayment of principal on the shareholder’s loan by CRCI Beta Barbados. For Singapore income tax purposes, such distributions will be treated as returns of capital to the extent that the aggregate amount of capital distributions made by CRCT does not exceed the capital of CRCT.

For Unitholders who hold the Units as trading or business assets and are liable to Singapore income tax on gains arising from disposal of the Units, the amount of capital distribution will be applied to reduce the cost of the Units for the purpose of calculating the amount of taxable trading gains when the Units are disposed of. If the amount of capital distribution exceeds the cost or the reduced costs of the Units, as the case may be, the excess will be subject to tax as trading income of such Unitholders.

Barbados Income Tax CRCI Beta Barbados, a Barbados tax resident, will be liable to Barbados corporate income tax on its worldwide income at rates of tax reducing from 2.5% to 1.0% depending on the level of its taxable income (the “Reduced Rates”).

Dividends and interest income from CapitaRetail Xizhimen SPV Dividends and interest income paid by CapitaRetail Xizhimen SPV to CRCI Beta Barbados will be subject to corporate income tax in Barbados at the Reduced Rates of tax in the year of income in which the dividends and interest income are received.

CRCI Beta Barbados will be allowed to claim a foreign tax credit for the PRC withholding tax imposed on the interest and dividends, if any. In addition to the PRC withholding tax, CRCI Beta Barbados will be allowed to claim a foreign tax credit for the PRC income tax payable by CapitaRetail Xizhimen SPV on the profits out of which the dividends are paid. This is because CRCI Beta Barbados owns at least 10% of the capital of CapitaRetail Xizhimen SPV.

Foreign tax credits are allowable to the extent that they do not reduce the tax payable in Barbados by CRCI Beta Barbados to less than 1.0% of its taxable income.

Any excess foreign tax credits will be deductible in calculating the assessable income of CRCI Beta Barbados.

Withholding tax Dividends and interest income paid by CRCI Beta Barbados to CRCT will not be subject to withholding tax in Barbados.

PRC Income Tax

Current Income Tax Law

Corporate Income Tax Under current Income Tax Law of the PRC on Foreign Investment Enterprises (“FIEs”) and Foreign Enterprises, CapitaRetail Xizhimen SPV is subject to corporate income tax at the rate of 33.0% on its taxable income.

E-2 Withholding Tax Under a unilateral concessionary tax treatment, the interest payable by CapitaRetail Xizhimen SPV to CRCI Beta Barbados will be subject to PRC withholding tax at the reduced rate of 10.0%. This is provided that CRCI Beta Barbados does not have an establishment in the PRC. This concessionary withholding tax rate of 10.0% is the same as the reduced tax rate provided under the PRC-Barbados tax treaty for payment of interest to a tax resident of Barbados.

Dividends payable by CapitaRetail Xizhimen SPV to CRCI Beta Barbados are exempt from PRC withholding tax.

New Income Tax Law With effect from 1 January 2008, the Income Tax Law of the PRC will be replaced by a new enterprise income tax law which was promulgated by the Chinese National People’s Congress on 16 March 2007 (the “New Income Tax Law”). The actual application of the New Income Tax Law is subject to detailed implementation rules and further guidance which the PRC State Council has yet to issue. The following changes will or are expected to occur under the New Income Tax Law:

Scope The New Income Tax Law introduces a tax residency concept under which an enterprise, whether foreign or domestic, tax resident in the PRC will be subject to enterprise income tax in the PRC on its worldwide income. A PRC tax resident enterprise is defined to include enterprises incorporated within the territory of the PRC under PRC law and enterprises that have their place of effective management in the PRC. Non-resident enterprises without their place of effective management in the PRC will generally be subject to tax only on their PRC-sourced income, which will be collected on a withholding basis. However, if a non-resident enterprise is deemed to have its place of effective management in the PRC, the non-resident enterprise will be subject to PRC income tax as if it were a PRC tax resident enterprise.

Tax rate The current 33.0% statutory enterprise income tax rate will be reduced to 25.0% for PRC tax resident enterprises.

Withholding tax rate The New Income Tax Law provides a statutory PRC withholding tax rate of 20.0% on payments of PRC-sourced dividends and other payments such as interest, rents, royalties and capital gains to non-resident enterprises. It is not yet known whether the PRC, through the detailed implementation rules to the New Income Tax Law or other tax circulars, might grant concessionary PRC withholding tax treatment for such payments to non-resident enterprises. Notwithstanding the withholding tax rate under the PRC domestic tax law, payments made by CapitaRetail Xizhimen SPV to CRCI Beta Barbados may benefit from the reduced withholding tax rates on interest and dividends of 10.0% and 5.0% respectively, as provided for under the PRC-Barbados tax treaty. This is provided that CRCI Beta Barbados can show to the PRC tax authorities that it is a tax resident of Barbados.

Deductions The New Income Tax Law is expected to apply uniform expense deduction rules to PRC tax resident enterprises. Expense deduction caps are expected to be imposed on certain types of expenses, such as advertising expenses and donation expenses. In addition, the New Income Tax Law will introduce thin-capitalisation rules that will limit the amount of interest expense that a PRC tax resident enterprise can deduct. For FIEs, simlar limitations (albeit with different limits) are already in place to control the amount of minimum registered capital such enterprises must maintain compared to its total investment.

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SUMMARY VALUATION REPORTS

F-1 F-2 F-3 F-4 F-5 F-6 F-7 F-8 F-9 F-10 F-11 F-12 F-13 This page has been intentionally left blank. F-14 APPENDIX G

EXISTING INTERESTED PERSONS TRANSACTIONS

Details of the Existing Interested Persons Transactions which CRCT has entered into with the CapitaLand Group during the course of the current financial year are set out below:

Value of Interested Person transactions with Transaction CapitaLand Group Nature of Transaction S$ million CapitaRetail XinCheng (Beijing) Project Project Management fee and 0.3 Consulting Co., Ltd (“CRPM”), a subsidiary of consultancy services for asset CapitaLand Retail Ltd enhancement works in Qibao Mall CRPM Project Management fee and 0.5 consultancy services for asset enhancement works in Jinyu Mall Total for the CapitaLand Group 0.8

The above existing interested person transactions have been subject to the internal control procedures established by the Manager to ensure that such transactions are undertaken on normal commercial terms and are not prejudicial to the interests of CRCT or its minority Unitholders and in accordance with the applicable requirements of the Property Funds Guidelines as well as the Listing Manual. These procedures include the review and approval of such transactions by the Manager’s audit committee.

Project Management and Consultancy Services for Asset Enhancement Works at Qibao Mall The Manager has implemented the following asset enhancement works at Qibao Mall: • Additions and alterations of the front plaza of Qibao Mall including civil works, steel structure, membrane structure and landscaping; • Additions and alterations to the fac¸ade, structural steel foundation and frame works, exterior wall coating, additional chiller and outdoor pavement work.

The Trustee has approved the appointment of CRPM to provide project management and consultancy services in respect of these works at Qibao Mall for a fee of S$0.3 million.

Project Management and Consultancy Services for Asset Enhancement Works at Jinyu Mall The Manager is in the process of implementing the following works at Jinyu Mall: • Structural strengthening of existing retail floor, relocation of escalators/travellators, new void opening and space configuration; • Waterproofing system to toilets, interior fit-out for lifts, external fac¸ade and special features; • Conversion of rooftop and existing Level 4 and Level 5 to carpark spaces and creating car park ramps.

The Trustee has approved the appointment of CRPM to provide project management and consultancy services in respect of the works at Jinyu Mall for a fee of S$0.5 million.

G-1 This page has been intentionally left blank. APPENDIX H

PRC RETAIL MARKET REVIEW BY THE INDEPENDENT PROPERTY CONSULTANT

Xizhimen Mall, Beijing

Independent Market Review

Prepared for : CapitaRetail China Trust Management Limited

31 October 2007

H-1

TABLE OF CONTENTS

Introduction...... i

Executive Summary...... iii

1 Overview of the PRC and its Economy...... 1 1.1 System of Government and Political Background ...... 1 1.2 Current Economic Policy and the Transformation of the PRC Economy...... 1 1.3 Population Growth and Distribution ...... 2 1.3.1 Population Growth...... 2 1.3.2 Urbanisation...... 2 1.3.3 Major Cities...... 3 1.3.4 Household Size ...... 3 1.3.5 Age Profile ...... 3 1.4 Economic Performance ...... 5 1.4.1 Size of the Economy ...... 5 1.4.2 Real GDP Growth...... 5 1.4.3 GNI (Adjusted for PPP)...... 6 1.4.4 Real GDP Forecasts ...... 7 1.5 Inflation...... 8 1.6 Exchange Rates ...... 9 1.7 Real Income...... 9 1.7.1 Real Income Growth ...... 9 1.7.2 Income Disparity...... 10 1.8 Trends in Private Consumption Expenditure...... 10 1.9 Tourism ...... 11 1.9.1 Tourists Contribution to Retail Sales ...... 11 1.9.2 Outbound Tourists...... 11 1.10 The Impact of the Beijing Olympics ...... 12 1.11 The Impact of the PRC Joining the WTO ...... 12 1.12 Economic Outlook and Implications on the Retail Market...... 12

2 The Retail Boom in the PRC ...... 13 2.1 Retail Sales Growth, Past & Forecast ...... 13 2.1.1 Total Retail Sales ...... 13 2.1.2 Total Retail Sales - Food/Non-Food Split...... 14 2.1.3 Retail Price Inflation ...... 15 2.1.4 Total Retail Sales Forecasts ...... 15 2.2 Changes in Income and Retail Spending ...... 15 2.2.1 The PRC Middle Class...... 16 2.2.2 Changing Consumption Patterns ...... 17 2.2.3 Shift to Upscale/Higher-end Brands ...... 18 2.2.4 Brand Acceptance ...... 18 2.3 New Retail Formats and Retailers ...... 18 2.3.1 Hypermarkets/Supercentres...... 19 2.3.2 Concession Stores ...... 19 2.3.3 Discount Stores ...... 20 2.3.4 Franchising ...... 20 2.3.5 Internet Retailing ...... 20 2.3.6 Mail Order ...... 20 2.4 Retail Provision – The Growth of Shopping Centres ...... 20

XizhimenXIZHIM~1.DOC Mall, Beijing (M154G)

H-2

TABLE OF CONTENTS CONTINUED

2.5 Retail Floorspace Sales Productivity ...... 21 2.6 Supply Constraints and the Regulatory Environment...... 22 2.7 Retail Rentals ...... 23 2.8 Retail Investment Yields ...... 23 2.9 Future Outlook...... 23

3 Xizhimen Mall, Beijing ...... 24 3.1 Regional Context & Economic Overview...... 24 3.2 Location and Accessibility ...... 26 3.3 Description of Mall and Tenant Mix...... 31 3.4 Target Market ...... 32 3.5 Trade Area Analysis...... 32 3.5.1 Trade Area Definition ...... 32 3.5.2 Trade Area Profile ...... 34 3.6 Competition...... 35 3.6.1 Existing Competition ...... 35 3.6.2 Future Competition...... 35 3.7 Future Outlook for the Mall ...... 36

APPENDICES: ...... Appendix A Xizhimen Mall Floor Plans

XizhimenXIZHIM~1.DOC Mall, Beijing (M154G)

H-3 INTRODUCTION

Introduction

CapitaRetail China Trust Management Limited (“CRCTML”) as manager of CapitaRetail China Trust (“CRCT”) commissioned Urbis to provide an independent market review report on the retail sector in the Peoples Republic of China (“PRC”) and on Xizhimen Mall, a new asset being acquired by CRCT. This report has been prepared by Urbis in conjunction with Cushman & Wakefield.

Format of Report This report commences with an Executive Summary, followed by three sections as follows : Section 1 outlines the recent and projected performance of the PRC economy including population, GDP growth, private consumption expenditure (“PCE”) growth, inflation, employment and tourism. Section 2 provides an overview of the retail market in the PRC by examining retail sales, retail spending, consumer behaviour and preferences, brand acceptance, new retail formats, retail floorspace productivity and rental trends. Section 3 provides a market review of Xizhimen Mall in Beijing including an assessment of its trade area and future outlook.

Sources of Information The principal source of information drawn upon for the preparation of this report include : The PRC National Bureau of Statistics 2006 China Statistics Yearbook 2007 Beijing Statistics Yearbook Cushman and Wakefield. IMD World Competitiveness Yearbook 2006 Consensus Economics Inc., Asia Pacific Economic Forecasts

“The Rise of the Chinese Consumer,” Jonathan Garner, 2005 Research archives of Urbis

Abbreviations The following abbreviations are used in this report : CCP Chinese Communist Party CPI Consumer Price Inflation FDI Foreign Direct Investment CAGR Compound Annual Growth Rate GDP Gross Domestic Product GFA Gross Floor Area GNI Gross National Income GRA Gross Rentable Area GRP Gross Regional Product IMD Institute of Management Development MOFCOM Ministry of Commerce NPC National People’s Congress PCE Private Consumption Expenditure

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H-4

INTRODUCTION

PLA People’s Liberation Army PPP Purchasing Power Parity RPI Retail Price Inflation SEZ Special Economic Zone WTO World Trade Organisation

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H-5 EXECUTIVE SUMMARY

Executive Summary

The purpose of this report is to provide an independent review of the retail market in the PRC together with a review of Xizhimen Mall, proposed to be acquired by CRCT. Outlined below is a summary of the analysis contained in the report.

Stable Population and Increasing Urbanisation 1. The PRC is the most populated country in the world with an estimated 1.3 billion people in 2006. Growth per annum since 1980, when the one child per family policy was introduced, has consistently slowed to the current level of 0.6%. However this growth still represents an annual increase of around 7.5 million people. 2. There has been an increasing trend towards urbanisation of the population predominantly due to industrialisation and advancement of the economy. In 1980, over 80% of the population lived in rural areas compared with 56% in 2006. This trend is expected to continue, driven by rapidly changing economic landscape of the PRC. 3. At present the PRC has more than 40 cities with a population of in excess of 1.5 million people. The Beijing urban area is the second largest city in China, with a population of more than 10 million and is among the 20 largest cities in the world.

Robust Economic Growth 4. The PRC has the second largest economy in the world when measured by PPP. In 2006, its GDP adjusted for PPP was US$10.0 trillion which, when measured in nominal USD exchange rate terms (US $2.6 trillion), represents the third largest globally. 5. There have been significant changes to the PRC economy over the last two decades. It has developed from a centrally planned system, largely closed to international trade, to a more open market oriented economy that has a rapidly growing private sector. This change has transformed PRC to becoming a major player in the global economy. International trade, finance and trade services have become more important drivers of its economic growth. This fast paced growth has gradually shifted the PRC economy away from its agrarian base to a more modernised, manufacturing and services based economy. 6. The PRC has consistently been one of the fastest growing economies in recent years. Average real GDP growth has been an impressive 9.8% per year over the long term period from 1980. This level of growth has also been consistent in the recent period beginning 2000. Growth is the highest amongst all Asian economies and typically 2-3 times greater than GDP growth experienced in most western countries. 7. PRC’s real GDP growth for 2007 is forecast at 10%, higher than any of the major economies in the Asia Pacific region. Importantly, for the next 10 years the PRC is forecast to remain the fastest growing economy in Asia and one of the fastest in the world, with an average forecast growth of 8.7% per year.

Rising Real Incomes 8. A result of strong economic growth has been the significant increase in overall standards of living and real incomes. Over the long term period between 1990-2005, real income grew at 9.7% per annum, predominantly due to the accelerated pace of growth witnessed since 2000 when real income grew by 12.9%.

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H-6 EXECUTIVE SUMMARY

9. Despite the extraordinary real income growth over recent years, there has been a growing gap in household income between urban and rural residents. The latest official statistics indicate that urban per capita incomes were approximately 3.4 times higher than the average rural per capita incomes. The higher levels of income in urban areas is largely attributable to the concentration of economic growth in certain PRC cities such as Beijing and Shanghai.

Strong Fundamentals Propelling Growth in Retail 10. With strong economic growth forecast in the short to medium term, the outlook for the retail market in the PRC is extremely positive. The burgeoning middle class, growing real incomes, continuing urbanisation, and a concentration of major shopping centres and retail outlets in urban areas, all bode well for retail growth and suburban retail malls. 11. Growing urbanisation and increased standards of living have been critical growth fundamentals to the retail sector in the PRC. In addition, robust macro economic performance has increased disposable incomes, driving retail sales across the PRC.

Booming Retail Sales Growth and Stable Inflation 12. Retail sales in the PRC have grown strongly over the past decade, despite significant economic disruptions due to the Asian financial crisis and SARS. Nominal retail sales growth (i.e. including inflation) over the last decade has been 11.7% per annum. 13. The total retail sales (excluding wholesale, motor vehicles, transport costs and utilities) for the PRC in 2006 were estimated at RMB 4.8 trillion and is forecast to grow in nominal terms at an CAGR rate of 10.9% for the next five years. By contrast, 2008 retail sales growth expectations in the US and Japan are less than 5.0%. 14. Throughout the 1980s and 1990s, the PRC experienced relatively high inflation by global standards with average rates of 7.5% and 7.8% per annum respectively. Since 2000 however, consumer price inflation (“CPI”) has averaged only 1.5% per annum with retail price inflation (“RPI”) being even lower. Forecasts indicate that CPI would stabilise around 3% and RPI around 1.3% per annum over the next five years.

Changes in Retail Spending 15. The double digit annual retail sales growth achieved by PRC’s retail market has been driven by a strong economy, increasing income and consumer spending power, which has spurred an increase in retail floorspace to cater to the demand. This growth however, has not been uniform due to the diversity amongst cities and provinces. In 2006, the estimated average retail spending per capita in the PRC was RMB 3,632 compared with the 1989 level of RMB 449. 16. Strong income per capita growth is spurring the growth of the middle class. Both domestic and foreign retailers are eyeing this large market segment, along with a much thinner slice of society above it that is already rich, as key growth drivers for their products. Latest estimates compiled by the McKinsey Global Institute suggest there are 42.1 million households (in 2005) categorised as middle class, and that number is set to grow to 198.6 million households in 2015. 17. As incomes increase, PRC households will also spend more on retail goods and services. However, given the high rate of savings by PRC households, each additional dollar of income is unlikely to translate into an additional dollar of retail spending. 18. Further, given the continuing price sensitivity of middle class households, we expect that retailers are able to sell at low price points, such as hypermarkets, are well placed to continue a leading role.

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H-7 EXECUTIVE SUMMARY

19. The performance of luxury and high-end brands in China is difficult to establish in the absence of reliable numbers. Smaller personal luxury items such as handbags, jewellery and other accessories, cosmetics and footwear, are, anecdotally at least, already achieving sufficient sales to justify some of the high expectations for the future. However, except for some pockets of wealth in cities such as Beijing and Shanghai, high-end designer brands may have to wait another five to 10 years for the market to reach a size sufficient for profitable trading.

Emergence of New Retail Formats 20. Domestic retailers continue to dominate the PRC market, with the top retailers being the Shanghai Bailian Group, Gome Electrical Appliances, Dalian Dashang Group and Suning Home Appliances. However, the acceptance of foreign brands and retailers in the PRC is evident from foreign firms accounting for 23% of sales of the top 100 food retailers in 2005 in China. There are now over 1,000 foreign retailers in the PRC compared with 314 two years ago. International retailing giants such as Walmart, Carrefour, IKEA and Starbucks have each stimulated new consumer demand in China and helped to expand the retail market. 21. Hypermarkets (which combine a discount department store and supermarket) have been well accepted by the PRC consumer. This segment has been popularised by international retailers such as Carrefour, Walmart and Metro. However, there are also strong domestic players such as Wumart in this segment. 22. Discount stores, such as Daily, ‘5 RMB’ and LCX, are a new kind of community supermarket that are expected to become one of the major retail business types in the PRC by the end of this decade. The main characteristics of discount stores in the PRC are high quality products at low prices contained in a store size between 300-600 sq.m. 23. Franchising is amongst the most established retail formats in the PRC as it allows people within limited capital to enter an established business. The format first emerged in the PRC in the late 1980s and since then experienced a period of rapid development. Leading international franchises from various segments have established their presence in the PRC including 7-Eleven, McDonald’s, KFC, Pierre Cardin, Pizza Hut, TGI Friday’s, Subway, Century 21 and Kodak. 24. Before the significant market reforms instigated in the 1980s, the PRC had limited organised retail and an insignificant middle class. The opening up of the economy over the past two decades has been associated with a “retail boom”, which has resulted in the rapid development of retail space across formats in the PRC. 25. The retail explosion in the PRC is expected to continue into the foreseeable future, buoyed by rapid increases in consumer spending and the accession of China to the WTO, which will strongly encourage foreign retailers to enter the market. Sizeable investments from global institutions operating in the retail sector is a new phenomenon in the PRC. 26. The retail mall format, in our view, will be accepted by PRC residents because of convenience and comfort; greater appreciation of design, quality and presentation of goods and services; the globalisation of consumer behaviour; and the presence of global brands within malls. 27. We estimate there was approximately 1.6 billion sq.m of retail floorspace in the PRC at 2006, equating to an average provision of 1.2 sq.m per person. This provision is very low by western standards (US 3.5 sq.m per person), but slightly above the provision in Singapore (1.0 sq.m) and at a similar level to Hong Kong (1.2 sq.m) and South Korea (1.2 sq.m). Within the PRC, it must be noted that a significant proportion of the current retail floorspace is located in rural areas and is inefficient, old and of low quality.

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H-8 EXECUTIVE SUMMARY

Sound Future Outlook for the PRC Retail Property Sector 28. The overall outlook for retail property sector in the PRC is, sound, in our view. We expect continued strong growth in retail sales and a desire by international retailers to gain a presence in the PRC will fuel a highly positive sentiment towards retail property, in particular towards contemporary shopping centres.

Xizhimen Mall, Beijing – Market Overview and Future Outlook 29. Beijing, where Xizhimen Mall is located, experienced an accelerated rate of population growth of 2.7% per annum over the past five years, more than 2% higher than growth for the PRC as a whole. Population growth in the urban areas of Beijing has grown at an even more accelerated pace of 4.3% per year over 2001-2006. 30. Beijing’s economic growth has also consistently outpaced the PRC over recent years. During the last decade the size of Beijing’s economy (measured in terms of GDP) increased by an average annual rate of 16.0%. In 2006 total retail sales in Beijing were estimated at RMB 327.5 billion, which represents an average annual growth over the past decade of 11.9% in line with the overall growth of the PRC. 31. At RMB 22,417 per annum (approximately US $11,200 at PPP) Beijing’s urban residents have an average per capita income which is 1.7 times higher than that of urban dwellers elsewhere in the PRC. Beijing is at, or near, the top of the list of desirable locations for all forms of international retailers looking to establish a presence in China, including those at the higher end of the price spectrum who require a denser cluster of the most affluent households. 32. Xizhimen Mall is located in the western half of Beijing, just outside the west second ring road, approximately 4.3 kms north-west of the Forbidden City. The centre is located on a key inter-modal transportation hub in Beijing, at the juncture of MRT, LRT, Beijing Railway and bus services. 33. Xizhimen Mall is located near four train stations, MRT Line 2, LRT Line 13, the Beijing railway line and the proposed future MRT Line 4. In addition, a proposed major bus interchange terminus is under construction across from the mall. 34. Public transport access to the mall provides an outstanding opportunity to capitalise on large commuter traffic volumes, which will increase substantially once new transport infrastructure is completed. In addition, the mall has access to workers from the adjoining Xihuan Plaza, office workers at the nearby Beijing Finance Street and high-technology zones, students of the nearby Zhongguancun district as well as residents from surrounding mid-high income residential areas. 35. Xizhimen Mall comprises a basement level and six above ground storeys. It has a gross rentable area (“GRA”) of 73,857 sq.m. Located directly above Xizhimen Mall are three commercial office towers. 36. The combination of a strong supermarket operator in the basement (Beijing Hualian), international food tenants such as KFC, Pizza Hut and McDonald’s, extensive mid-priced Gen Y fashion offerings, together with an overall attractive and modern ambiance and interior, should be attractive to shoppers. 37. The main trade area for Xizhimen Mall has a population of 783,000 people in 2006 and is expected to grow to 808,000 by 2011. Retail spending per capita is estimated to be 15%-20% higher than the Beijing average. By 2011, the total size of the available retail market for the trade area is forecast to be RMB 20.8 billion in nominal terms.

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EXECUTIVE SUMMARY

38. Existing competition to Xizhimen Mall is mainly through mid market department stores. These stores are generally of low quality and Xizhimen Mall has an excellent opportunity to differentiate itself from the local competitors by providing a modern shopping environment, with vibrant contemporary brands and with highly professional centre management. It is also the only one-stop shopping-dining and entertainment destination in the vicinity. 39. There are a number of new centres currently under construction or proposed to be built within the trade area over the next five years. Most of these centres are considerably smaller than Xizhimen Mall and will perform a more localised function. 40. On the basis of our analysis the overall outlook for the future trading of Xizhimen Mall is positive. Once fully leased and operational, Xizhimen Mall should perform strongly with sales growth (including inflation) of 10% per annum expected. This growth will be driven by the overall quality of the retail offer and mall, the professional management of the centre, growth in the trade area spending market and improved public transport accessibility.

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OVERVIEW OF THE PRC AND ITS ECONOMY

1 Overview of the PRC and its Economy The PRC is currently one of the fastest growing economies in the world predominantly due to its attractive fundamentals and the economic reforms introduced over the past three decades, which include a flexible regulatory regime on foreign investment. Importantly, the PRC’s economic outlook is exceedingly positive, with solid growth expected into the future. The consensus among some economic experts is that by 2030, the PRC will have overtaken the United States as the world’s largest economy. This first section of the report provides an overview of the PRC and its economy with particular focus on the phenomenonal growth it has achieved over the past two decades and the fundamentals driving its economy.

1.1 System of Government and Political Background The political system in the PRC has three main elements of power : the Communist Party of China (“CCP”); the State Council and the People’s Liberation Army (“PLA”). The CCP is the ruling political party; the State Council enacts and administers rules and regulations over various ministries; and the PLA, while technically subordinate to the government, still exerts substantial influence and independence over political affairs.

1.2 Current Economic Policy and the Transformation of the PRC Economy “Socialism with Chinese characteristics” is the official term coined for PRC’s economic reform. This reform has resulted in the PRC economy transforming from one based on public ownership to an economy that allows for simultaneous operation of publicly and privately owned enterprises. Beginning in 1978 with the CCP under the leadership of Deng Xiaoping the goal of the reform was to generate sufficient surplus value to finance the modernisation of the PRC economy. There have been several phases of economic reform in the PRC. In the 1970s and early 1980s the first reforms consisted of opening trade with the outside world, allowing farmers to sell their surplus crops on the open market, and the establishment of township village enterprises (where the local population is mobilised into a business or industry run by the state). In the late 1980’s and early 1990’s the reforms focused on creating a pricing system and decreasing the role of the state in resource allocations. By the late 1990’s, the reforms focused on closing unprofitable enterprises and dealing with insolvency in the banking system. For the new millennium, increased focus has been placed on the growing wealth gap between the rich and poor. This gap is becoming more evident with ongoing urbanisation as more and more people from the rural areas move to the cities. The PRC’s economic reform has been a success story with two decades of exceptionally strong growth. The standard of living for most PRC residents has improved substantially since reform began in the late 1970’s. Evidence of modernisation is visible throughout the PRC, in the form of modern infrastructure such as new highways, modern skyscrapers, airports, and telecommunication facilities.

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1.3 Population Growth and Distribution

1.3.1 Population Growth With an estimated population of 1.315 billion people in 2006, the PRC has the largest population of any country in the world. This has risen from a population of just under 1.0 billion in 1980. Growth per annum since 1980 has consistently slowed falling to its current level of 0.6% per annum, but which still represents an additional 7-8 million people per year (Chart 1.1).

PRC Historic and Forecast Population, 1980 - 2011 Chart 1.1

1.8% 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4%

Compound Annual Growth Rate 0.2% 0.0% 1980-85 1985-90 1990-95 2000-05 2005-11 F (1)

1. Forecasts assumeassume urbanurban populationpopulation growthgrowth ofof 2020 mmillionillion per per annum. annum. Sources :: ChinaChina StatisticalStatistical Yearbook Yearbook 2006; 2006; Economist Economist Inte Intelligencelligence Unit Unit forecasts, forecasts, as atas June at June 2006 2006

A stable but a low population growth rate is forecast by the Economic Intelligence Unit for the PRC over the remainder of this decade. The lower average population growth is a result of both an ageing population and the one-child policy initiated in the late 1970’s. Over-population in the PRC had in the past, been considered to be a constraint to economic development and the government’s success in containing population growth has prevented the PRC from suffering the major problems that come with over population.

1.3.2 Urbanisation Since 1990 the urban population has grown at an average rate of 4.3% per annum (or 17.3 million persons per annum). This contrasts markedly with the rural population which has declined at an average rate of 0.8% per annum or 6.1 million persons per annum. The urbanisation trend has been particularly strong since 2000 and over the 2000-2006 period the urban population of the PRC grew at an average rate of 21 million or 4.3% per annum. Rural population, on the other hand, declined on average by 13 million people or 1.7% each year. As indicated in Chart 1.2 the shift from rural to urban areas in the PRC has been significant. In 1980 only 20% of the population lived in urban areas. Over time however, with the modernisation of the economy as a whole, and major cities in particular, the urban population has grown to 44% in 2006. Despite the rapid pace of urbanisation, the level of urbanisation in the PRC today is still well below that of the US and Western Europe.

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PRC Urban Population Share of Total Population, 1990 - 2011 Chart 1.2

60% Forecast (1) 55% 50% 45% 40% 35%

Urban Share (%) 30% 25% 20% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

1. Forecasts assume urban population growth of 20 million per annum. Sources : China Statistical Yearbook 2006; Economist Intelligence Unit forecasts, as at 1 June, 2006

Looking forward over the short to medium term, it is expected that urbanisation within the PRC will continue and with most of the population growth occurring in the major cities at the expense of the rural areas. If the urban population continues to grow on average at 20 million people each year (i.e. close to the 2000-2006 average) then by 2011 the urban share of total population will have increased to 50.7%, exceeding the rural population.

1.3.3 Major Cities Within the PRC there are more than 40 urban areas with a population in excess of 1.5 million people. The Beijing urban area, with a population of more than 10.3 million, is the second largest city within the PRC and is ranked in the top 20 largest cities in the world.

1.3.4 Household Size Not surprisingly, the average household size in the PRC has fallen significantly over recent years to 3.13 as a result of the introduction and adoption of the one-child policy. The average household size in urban areas however is considerably lower and for Beijing the average size is 2.70. Rural regions on the other hand typically have larger household sizes with the average size being 3.50 people.

1.3.5 Age Profile In Table 1.1 the PRC’s population by age group is compared with other countries. Whilst the PRC population is, on average, younger than Japan, the United States and Australia, it is similar to Singapore but older than India.

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PRC and Selected Countries Age Distribution, 2007 Table 1.1

Share of Total Population (%) 0-14 15-64 65+

PRC 20% 72% 8% Singapore 19% 73% 8% Japan 14% 65% 21% Australia 20% 67% 13% India 33% 62% 5% USA 20% 68% 12% Hong Kong SAR 14% 74% 12% Korea (South) 18% 72% 10%

Source : 2007 World Population Data Sheet, Population Reference Bureau.

Similar to the majority of the western world, the PRC is now facing a future population that will be considerably older than it has been in the past. This is as a result of : The baby boom that occurred after World War 2, with the oldest of this demographic now aged over 60. The rise in hygiene and medical technology that resulted in less infant deaths as well as prolonging average life expectancy. The one-child policy introduced in the 1970’s. Chart 1.3 illustrates the forecast change in the demographic profile in the PRC over the next 20 years and compares it to the 1994 and 2004 profiles. The chart clearly shows the significant rise in the proportion of the population aged 40-59 and 60+, while showing the fall in the proportion of the population aged less than 40 years old. This assumes no change in the one child policy which, in reality may be unrealistic given recent indications of some easing up of the hard line nature of this policy in Beijing and Shanghai.

PRC Historic and Forecast Age Cohort Share of Population, 1994-2024 Chart 1.3

Share of Total Population (%)

1994 2004 2014 2024 0-19 20-39 40-59 60+

Source : "The Rise of the Chinese Consumer", Jonathan Garner, 2005.

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1.4 Economic Performance

1.4.1 Size of the Economy The PRC has experienced strong economic growth since 1980. Over the quarter of a century the PRC’s economy has increased over eight-fold from US $308 billion in 1980 to US $2,630 billion in 2006. Table 1.2 shows the size of the PRC economy in US dollars at the exchange rate at the time.

PRC and Selected Countries GDP, 1980-2006 Table 1.2

Current USD at Market Exchange Rates Average 1980 1985 1990 1995 2000 2003 2004 2005 2006 04-06

Australia 161 172 318 371 390 528 639 712 755 702 Canada 269 356 583 591 725 868 994 1,132 1,269 1,132 PRC 308 305 388 728 1,198 1,641 1,932 2,244 2,630 2,268 Hong Kong SAR 29 35 77 144 169 158 166 178 190 178 India 177 220 316 356 461 577 667 781 887 778 Indonesia 95 101 126 223 166 235 257 287 364 303 Japan 1,060 1,357 3,032 5,278 4,669 4,235 4,608 4,557 4,367 4,511 Korea 64 97 264 517 512 608 681 792 888 787 Malaysia 25 32 44 89 90 104 118 131 151 133 Philippines 32 31 44 76 76 80 87 98 117 101 Singapore 12 18 37 84 93 92 107 117 132 119 Taiwan 42 63 165 274 321 300 322 347 356 342 Thailand 32 39 86 168 123 143 161 176 206 181 United Kingdom 537 461 996 1,136 1,445 1,815 2,155 2,231 2,374 2,253 United States 2,790 4,220 5,803 7,398 9,817 10,961 11,712 12,456 13,245 12,471

Source : International Monetary Fund (IMF), World Economic Outlook Database, 2007.

1.4.2 Real GDP Growth Real GDP growth rates (i.e. excluding the effects of inflation) are shown in Table 1.3. Over the 26 year growth period, the PRC’s average real GDP growth rate of 9.8% per year has represented the highest growth rate of the countries assessed. This growth is the result of a series of economic reforms transforming the economy from a centrally planned to a more market oriented economy. As shown in Table 1.3, the fastest periods of growth over the past 26 years have been between 1980 and 1985 (10.6%) and between 1990 and 1995 (12.3%), while growth has averaged 9.2% per annum over the last 10 years.

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PRC and Selected Countries Real GDP Growth, 1980-2006 Table 1. 3 (Compound Average Annual Growth) 1980-06 1980-85 1985-90 1990-95 1995-00 2000-03 2003-06

Australia 3.3% 3.1% 3.3% 2.7% 4.2% 3.1% 3.0% Canada 2.8% 2.7% 2.9% 1.7% 4.1% 2.2% 3.0% PRC 9.8% 10.6% 7.9% 12.3% 8.6% 9.1% 10.4% Hong Kong SAR 5.4% 5.6% 8.0% 5.6% 3.4% 1.9% 7.6% India 6.0% 5.4% 6.2% 5.1% 6.0% 5.2% 8.7% Indonesia 4.8% 4.7% 6.3% 7.2% 0.8% 4.3% 5.4% Japan 2.3% 3.1% 4.8% 1.5% 1.0% 0.6% 2.3% Korea 6.8% 7.8% 9.6% 7.8% 4.4% 4.6% 4.6% Malaysia 6.1% 5.2% 6.9% 9.5% 4.8% 3.4% 6.1% Philippines 2.9% -1.3% 4.7% 2.2% 3.9% 3.7% 5.5% Singapore 6.8% 6.4% 8.5% 8.8% 6.3% 1.6% 7.8% Taiwan 6.3% 6.7% 9.2% 7.2% 5.8% 1.8% 4.9% Thailand 5.9% 5.4% 10.4% 8.5% 0.4% 4.9% 5.2% United Kingdom 2.5% 2.0% 3.2% 1.7% 3.2% 2.4% 2.6% United States 3.1% 3.2% 3.3% 2.5% 4.1% 1.6% 3.5%

Source : International Monetary Fund (IMF), World Economic Outlook Database, 2007.

1.4.3 GNI (Adjusted for PPP) Purchasing power parity (PPP) is a widely accepted measure designed to equalise the purchasing power of different currencies in their home countries for a given basket of the same goods or services. GDP adjusted for PPP forms the basis for direct comparisons of various economies, and further, it is frequently used to broadly compare standards of using two or more counties. Table 1.4 shows per capita gross national income (GNI) in both nominal US dollars and in PPP terms. GNI is a measure similar to GDP, and is used by the World Bank to measure the relative sizes of various economies. The first column in Table 1.4 shows that GNI per capita in 2006 in the PRC was US$ 2,010, or about 4.5% of the United States GNI per capita. However, adjusting for PPP, GNI per capita in the PRC was $7,730 (in International dollars), or about 17.5% of the United States GNI per capita adjusted for PPP. In other words, when per capita incomes are adjusted for what can be actually purchased with those incomes, the differential between the PRC and the USA narrows substantially. Other than for Australia, Canada, Japan and the United States, the GNI per capita adjusted for PPP is higher than GNI unadjusted for PPP. The PRC is representative of a number of Asian economies whereby there is a significant upwards adjustment when adjusted for PPP. In PPP terms, the PRC’s economy was US$9.98 trillion, the second largest globally.

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PRC and Selected Countries Gross National Income Per Capita, 2006 Table 1. 4

GNI Per Capita GNI Per Capita Per Capita PPP Country US$ Rank Int$ 1 PPP Rank Differential

Australia 35,990 24 31,860 24 -11% Canada 36,170 23 34,610 19 -4% PRC 2,010 129 7,730 102 285% Hong Kong 28,460 32 38,180 8 34% India 820 161 3,800 145 363% Indonesia 1,420 139 3,950 143 178% Japan 38,410 19 33,730 21 -12% Korea 17,690 49 23,800 44 35% Malaysia 5,490 80 11,300 80 106% Philipines 1,420 139 5,980 122 321% Singapore 29,320 31 31,700 26 8% Thailand 2,990 111 9,140 87 206% United States 44,970 10 44,260 4 -2%

1. International dollars adjusted for Purchasing Power Parity (PPP). Source : "World Development Indicators", World Bank 2007.

1.4.4 Real GDP Forecasts For 2007, the PRC’s real GDP growth is forecast at 10%, higher than any of the other key countries in Asia Pacific. For the next 5 to 10 years, the PRC is forecast to remain the fastest growing economy in Asia, and one of the fastest in the world, with an impressive average forecast growth rate of 9.3% and 8.7% respectively (Table 1.5).

PRC and Selected Countries Historical and Forecast Real GDP Growth, 2003-2017 Table 1.5

South Hong Year PRC India Singapore Malaysia Thailand Korea Taiwan Kong Australia Japan

Actual 2003 10.0% 8.5% 3.1% 5.5% 7.1% 3.1% 3.4% 3.2% 3.1% 1.5% 2004 10.1% 7.5% 8.8% 7.2% 6.3% 4.7% 6.1% 8.6% 3.7% 2.7% 2005 10.4% 9.0% 6.6% 5.2% 4.5% 4.2% 4.0% 7.5% 2.8% 1.9% 2006 10.7% 9.2% 7.9% 5.9% 5.0% 5.0% 4.6% 6.8% 2.7% 2.2% Forecast 2007 10.0% 8.0% 5.5% 5.6% 4.2% 4.4% 4.1% 5.3% 3.1% 2.2% 2008 9.6% 7.7% 5.9% 5.8% 4.9% 4.9% 4.6% 5.0% 3.3% 2.2% 2009 9.0% 7.6% 5.6% 5.4% 5.1% 4.8% 4.9% 5.2% 3.3% 1.2% 2010 9.0% 7.8% 6.0% 5.7% 5.0% 4.8% 4.7% 5.0% 3.1% 1.9% 2011 8.8% 7.8% 5.6% 5.7% 5.1% 4.6% 4.5% 4.7% 3.1% 2.1% 2012 8.1% 7.6% 5.5% 5.3% 5.1% 4.5% 4.7% 4.4% 3.1% 1.9% 2013-2017 8.2% 7.3% 5.3% 4.7% 4.7% 4.1% 4.1% 4.4% 3.0% 1.8%

Avg 2007-17 8.7% 7.5% 5.5% 5.2% 4.8% 4.4% 4.4% 4.7% 3.1% 1.9%

Source : Consensus Economics Inc (London) April 2007.

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1.5 Inflation Throughout the 1980’s and the 1990’s the PRC experienced relatively high inflation by global standards, with average rates of 7.5% and 7.8% respectively, for these two decades as shown in Table 1.6. Since 2000, however, the PRC has had low levels of inflation and in 2002 prices actually fell by 0.8%. Over the past three years the PRC’s inflation rate has ranged between 1.5% and 3.9% and for the most recent year, 2006, it was 1.5%. During this period, interest rates have also remained low. In general, households in the PRC have little debt either in accumulated mortgages or consumer credit. As such, households have effectively been penalised by negative real interest rates in the deposit market in recent years.

PRC and Selected Countries Consumer Price Inflation, 1980-2006 Table 1.6

Average 1980-89 1990-99 2000 2001 2002 2003 2004 2005 2006 04-06

PRC 7.5% 7.8% 0.4% 0.7% -0.8% 1.2% 3.9% 1.8% 1.5% 2.4% Australia 8.4% 2.5% 4.5% 4.4% 3.0% 2.8% 2.3% 2.7% 3.5% 2.8% Hong Kong 7.4% 6.9% -3.7% -1.6% -3.0% -2.6% -0.4% 0.9% 2.0% 0.8% India 9.1% 9.6% 4.0% 3.8% 4.3% 3.8% 3.8% 4.2% 6.1% 4.7% Indonesia 9.6% 14.4% 3.8% 11.5% 11.8% 6.8% 6.1% 10.5% 13.1% 9.9% Japan 2.5% 1.2% -0.4% -0.8% -0.9% -0.2% 0.0% -0.6% 0.2% -0.1% Korea 8.4% 5.7% 2.3% 4.1% 2.8% 3.5% 3.6% 2.8% 2.2% 2.9% Malaysia 3.6% 3.7% 1.6% 1.4% 1.8% 1.1% 1.4% 3.0% 3.6% 2.7% Philippines 14.1% 9.7% 4.0% 6.8% 2.9% 3.5% 6.0% 7.6% 6.2% 6.6% Singapore 2.8% 1.9% 1.3% 1.0% -0.4% 0.5% 1.7% 0.5% 1.0% 1.1% Taiwan 4.6% 2.9% 1.3% 0.0% -0.2% -0.3% 1.6% 2.3% 0.6% 1.5% Thailand 5.8% 5.0% 1.6% 1.7% 0.6% 1.8% 2.8% 4.5% 4.6% 4.0% United States 5.6% 3.0% 3.4% 2.8% 1.6% 2.3% 2.7% 3.4% 3.2% 3.1%

Source : International Monetary Fund (IMF), World Economic Outlook Database, 2007.

Table 1.7 shows the Consensus Economics CPI forecasts through to 2017 for a select group of countries. The CPI for the PRC is forecast to increase to 3.3% by 2008 and settling at this level beyond. This is at the upper end when compared with most other countries except for Indonesia where inflation is forecast to average 5.4% per annum over the next decade.

PRC and Selected Countries Consumer Price Inflation, 2007-2017 Table 1.7

Singa- Thai- Hong Austr- Indon- Year PRC India pore land Malaysia Korea Taiwan Kong alia Japan esia

2007 2.6% 5.5% 1.3% 2.7% 2.7% 2.3% 1.5% 2.2% 2.6% 0.1% 6.7% 2008 2.8% 5.4% 1.3% 2.7% 2.5% 2.6% 1.7% 2.8% 2.6% 0.5% 6.3% 2009 3.3% 4.5% 1.2% 2.6% 2.3% 2.6% 2.1% 3.0% 2.5% 1.8% 5.9% 2010 3.2% 4.4% 1.4% 2.6% 2.5% 2.6% 2.1% 3.3% 2.5% 0.9% 5.5% 2011 3.2% 4.5% 1.4% 2.6% 2.4% 2.5% 2.1% 3.3% 2.6% 1.0% 5.1% 2012 3.5% 4.4% 1.3% 2.7% 2.1% 2.5% 2.3% 2.9% 2.6% 1.5% 4.9% 2013-2017 3.3% 4.2% 1.2% 3.0% 2.3% 2.4% 2.4% 2.7% 2.6% 1.2% 4.9% Avg. '07-17 3.2% 4.5% 1.3% 2.8% 2.4% 2.5% 2.2% 2.8% 2.6% 1.1% 5.4%

Source : Consensus Economics Inc (London) April 2007.

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1.6 Exchange Rates Over the last decade the PRC’s currency was pegged to the US Dollar (Table 1.8). In July 2005, it was revalued at RMB 8.11 per US$ following the removal of the peg to the US Dollar. This was, in part, due to pressure from both the United States and the World Economic Council. The People’s Bank of China also announced that the RMB would be pegged to a basket of foreign currencies and would trade within a narrow 0.3% band against this basket of currencies. This was in preference to being strictly tied to the US$. The basket of currencies that the PRC has pegged its currency to includes the US Dollar, the Euro, the Japanese Yen and the South Korean Won, together with, but at a lower proportion, the British Pound, the Thai Baht and the Russian Ruble. There has been significant pressure, particularly from the US, for the PRC to allow its currency to fluctuate against other currencies, much as the US Dollar and the Euro do today. However there is concern that the PRC’s banks are too weak to withstand the shock of a sudden liberalisation of the currency, and the government, with this belief in mind, has stood by its current policy.

RMB/USD Average Exchange Rate, 1990-2007 Table 1.8 Year RMB/USD Year RMB/USD

1990 4.78 1999 8.28 1991 5.32 2000 8.28 1992 5.51 2001 8.28 1993 5.76 2002 8.28 1994 8.62 2003 8.28 1995 8.35 2004 8.28 1996 8.31 2005 8.19 1997 8.29 2006 7.98 1998 8.28 2007 YTD 7.52

Note: 2007 YTD exchange rate as of September 12, 2007. Source : China Statistical Yearbook 2006.

1.7 Real Income

1.7.1 Real Income Growth Since 1990 real incomes have increased significantly, keeping pace with and, at times, exceeding the real GDP growth. Since 1998, real income growth has been at double digit levels for all years except 2004. The real income growth seen in the PRC has largely been attributable to the economic reforms implemented in late 1970’s as the economy moved to a market based economy and as an agricultural society moved to an urban, industrial society. The average per capita income for the PRC in 2005 was RMB 6,950 but there is a significant difference between average urban and rural incomes. The average urban per capita income was RMB 10,600 approximately 3.4 times higher than the average rural per capita income at RMB 3,100, illustrating the significant disparity that exists in the PRC between the urban and rural households.

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1.7.2 Income Disparity Over recent years the gap in household income between urban and rural residents, has been growing. As indicated in Chart 1.4, average urban incomes are currently nearly three times higher than rural incomes. A decade earlier this disparity was significantly less with urban incomes, on average, only twice average rural incomes. The higher levels of income in urban areas are largely attributable to the concentration of economic growth in certain PRC cities such as Beijing and Shanghai.

PRC Real Incomes - Urban Versus Rural, 1995-2013 Chart 1.4

50,000 Forecast 45,000 40,000 Urban 35,000 30,000 25,000 20,000 15,000 Rural 10,000 5,000 RMB Per Annum Household 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Source : The Rise of the Chinese Consumer, Chapter 4.

The Economics Institute, a government think-tank in the PRC operating under the Chinese Academy of Social Sciences, has warned that the PRC must find an effective way to counteract the inequality of income distribution. Despite low income families having improved living conditions than in the past, the change that is occurring is at a far slower pace than most of its counterparts. The Economic Institute has suggested two remedies by which income disparity can be potentially controlled : Firstly, the government must attempt to speed up the process of industrialisation and urbanisation which in turn, will erase the inequalities due to different economic development levels between rural and urban areas. Secondly, employees in state owned enterprises can no longer benefit from earning higher incomes (i.e. artificially set above market incomes), and discriminative measures attached to different social identifies must be removed.

1.8 Trends in Private Consumption Expenditure Private Consumption Expenditure (PCE, also known as Household Consumption Expenditure) is a driver of domestic demand. Retail spending forms a significant component of this. Table 1.9 shows the past decade of real growth in PCE for the PRC and other selected countries. Of all the countries analysed, the PRC achieved the strongest growth in PCE, at 8.1% per annum between 1999 and 2005. This is not surprising given the strength of the economy, and the significant increase in living standards. Much of PRC’s growth in PCE has been due to an export and investment led strategy. The government now acknowledges however that this strategy can no longer achieve the results of the past and as such, growth into the future is likely to be as a result of domestic and consumer spending strategies. Accordingly, it is expected in the short to medium term PCE will continue to grow strongly.

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PRC and Selected Countries Private Consumption Expenditure, 1996-2004 Table 1.9

Year PRC Singapore Malaysia Thailand Korea Taiwan Hong Kong Australia Japan Indonesia

1999 5.9% 8.2% 2.9% 4.3% 11.2% 5.4% 0.6% 4.9% 0.2% 4.6% 2000 8.5% 14.0% 12.5% 5.0% 8.1% 4.9% 5.9% 3.2% 0.9% 3.6% 2001 6.5% 3.2% 2.8% 4.1% 4.8% 1.0% 2.0% 2.9% 1.7% 5.9% 2002 6.1% 4.9% 4.2% 5.4% 6.8% 1.9% -1.0% 4.1% 1.4% 4.7% 2003 7.4% 0.9% 6.6% 6.5% -1.3% 0.9% 0.9% 3.5% 0.4% 3.9% 2004 11.7% 5.9% 10.5% 6.2% -0.4% 3.9% 7.2% 5.7% 1.6% 5.0% 2005 10.4% 2.5% 9.2% 4.3% 3.6% 2.7% 3.3% 3.0% 1.5% 4.0% Avg '99-02 6.8% 7.6% 5.6% 4.7% 7.7% 3.3% 1.9% 3.8% 1.1% 4.7% Avg '03-05 9.8% 3.1% 8.8% 5.7% 0.6% 2.5% 3.8% 4.1% 1.2% 4.3%

Source : China Statistical Yearbook, 2006; Consensus Economics Inc (London) April 2003 & April 2007.

1.9 Tourism Whilst not a major contributor to the PRC economy, tourism nevertheless is growing at a rapid rate and is of relevance to the overall retail market in the PRC. With the reform of the economy and growth in foreign direct investment (FDI), the PRC has emerged as a growing and attractive tourist destination. According to a recently published Visa Asia Pacific Tourism Spending Report, the PRC was expected to be Asia’s second largest tourism destination in 2006 measured by US$ spending. Importantly, the tourism market is expected to experience accelerated growth with improved tourism infrastructure coming on stream and as interest is fuelled by heightened marketing and tourism campaigns leading up to the 2008 Beijing Olympics. The PRC attracted over 20 million international visitors in 2006, which represents more than a threefold increase over the number of visitors to the PRC a decade earlier in 1995. This indicates average growth of 13.2% per annum over the past decade.

1.9.1 Tourists Contribution to Retail Sales Despite the strong growth experienced in international tourism within the PRC over recent years and the strong growth expectations, international tourists contribute only a minor proportion (i.e. 3%) of PRC’s total retail sales. Growth expectations on increased spending in the retail sector will however, be boosted by the Beijing Olympics in 2008 and the World Expo in Shanghai in 2010.

1.9.2 Outbound Tourists There is a small loss of retail sales attributable to PRC residents spending outside the PRC and, more particularly, in Hong Kong. At present, luxury goods, because of the tax regime, are more expensive in mainland PRC which means there is a cost advantage to buy such goods outside the PRC. With the recent liberalisation occurring in the PRC, making it is easier for residents now to visit other countries outside the PRC, including Hong Kong, there has been growth in outbound trips from the PRC with the most popular destination being Hong Kong. This trend is not expected to change in the immediate future but over time we expect the taxation regime may well change to make the cost of luxury goods in the PRC more competitive with other countries, thereby reducing the need to buy such goods outside the PRC.

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1.10 The Impact of the Beijing Olympics In 2008 Beijing will host the world’s highest profile sporting event, the Olympic Games. Beijing city officials claim they will spend some RMB 170 billion on improvements to Beijing’s infrastructure and environment, as well as the new sports facilities, leading up to the games. This amount is around 2.2% of China’s annual GDP. Beijing, as host city, will clearly benefit more than any other city in the PRC from the Olympic Games. The impact on retail sales activity in Beijing, while most pronounced in the year of the Olympics, 2008, will also flow-on to the following years as a result of the improved infrastructure and attractiveness of Beijing as a tourist destination. The increased provision of retail mall space through the completion of a number of major new malls will coincide with the Olympics. Xizhimen Mall, together with many other retail malls in Beijing, will clearly benefit from the Olympic Games.

1.11 The Impact of the PRC Joining the WTO The PRC gained entry into the World Trade Organisation (WTO) in 2002 and as a result, was required to implement a number of strict entry obligations. These obligations included amending a number of laws and regulations. More than 2,000 laws have been amended to date and this has enabled greater trade liberalisation. This has occurred in several industries including cargo trade, service trade, intellectual property and investment. The easing of restrictions on all forms of retailing has led to a transformation in the retail environment in the PRC for foreign operators. These foreign operators are now allowed to take control of their own supply chain and can sell their goods through wholly owned units. As such, future foreign investment in the PRC is likely to be further encouraged and should continue to occur coinciding with the strong growth forecast in the overall PRC economy.

1.12 Economic Outlook and Implications on the Retail Market The overall outlook for the retail market in the PRC is extremely positive, coinciding with the strong economic growth forecast over the next decade. As has been the case in other economies such as Singapore and Korea, as economies thrive and the standard of living increases, household consumption and retail sales also grow. This situation is applicable to the current PRC economy whereby there is a burgeoning middle class with growing real incomes. This factor, together with increased urbanisation and the concentration of major shopping centres and retail outlets in urban areas, all bodes well for future growth in retail sales and for suburban retail malls in the PRC. With ongoing urbanisation of the PRC and increased living standards, household ownership will continue to increase and this will require additional furnishing. Also, as incomes increase, disposable income in turn will rise again leading to increased retail spending and growth of the retail sector. This will be tempered only slightly by slower population growth and an ageing population. Government policy is now being focussed on growing the country’s economy through domestic consumption as opposed to exports and manufacturing as was previously the case. Such a strategy is possible in a favourable economic climate and is consistent with the government’s policy of continuing to allow living standards and real incomes to grow which, in turn, will lead to growth in local consumption and in retail sales.

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2 The Retail Boom in the PRC The PRC is currently in the midst of a retail boom driven by growing disposable incomes and a burgeoning middle class, both associated with increasing urbanisation. On the supply side there has been a surge in retail mall developments and a steady influx of foreign-based retailers. These favourable demand and supply trends have combined to produce double digit retail sales growth in recent years. China regularly appears with other developing nations such as India and Russia at the top of various rankings of places for retailers to invest. One of the most widely-cited of these lists is A.T. Kearney’s Global Retail Development Index, which is published annually and ranks countries in order of attractiveness for retailers to do business. In 2007, China moved up from fifth to third place behind India and Russia. The principal reasons for the PRC’s progress up the rankings were strong GDP and consumer spending growth, and a highly fragmented retail sector with the top 100 retailers accounting for just 11% of sales. Fragmentation would lend itself to potential economies of scale and improved efficiencies arising from industry consolidation by both domestic retailers and foreign entrants. Clearly, there is a tremendous expectation on the part of global retailers that the emergent PRC middle and affluent classes will provide a much needed growth engine. Facing saturation in their traditional markets and continuing pressure for growth from their shareholders, many U.S. and European retailers are eyeing China with a mixture of optimism and anxiety. The issue is not so much the size of the market, which is impressive as we demonstrate below, but rather the mix of retailers and formats that are likely to be ascendant at different stages of the market’s transition from a largely rural population without discretionary income to a modern sophisticated consumer market. For both retailers and shopping centre owners, good timing and an accurate reading of the consumer market at each stage of its transition will be of the essence. In some instances these qualities have been in evidence, e.g. with the rapid acceptance achieved by hypermarket operators such as Carrefour. However, there are many examples of retailers, and the properties in which they are tenants, struggling due either to oversizing or to a mismatch between what they are offering and what the market wants. In some instances, significant uncertainty surrounds the ability of retailers with more premium offerings to market their value proposition to a consumer who is cash-strapped, price-sensitive and brand-aware but not brand-loyal. This section of the report examines the past, current and future state of the retail market in the PRC.

2.1 Retail Sales Growth, Past & Forecast

2.1.1 Total Retail Sales Retail sales in the PRC have grown strongly, averaging 11.7% per annum, over the past decade, despite significant economic disruptions brought about by the Asian financial crisis in 1997-98 and the outbreak of SARS in 2003. The good performance of retail has been correlated with GDP growth as indicated in Chart 2.1. According to the National Bureau of Statistics, total retail sales for the PRC in 2006 were approximately RMB 7.6 trillion, up an impressive 13.7% on the previous year. In this series, retail sales includes wholesale trades, motor vehicles, transport costs and utilities.

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PRC Nominal Retail Sales Growth vs Nominal GDP Growth Chart 2.1

35.0%

30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

Percentage Growth Per Annum 0.0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Retail Sales Growth GDP Growth

Source : National Bureau of Statistics China; China Statistics Yearbook 2006.

2.1.2 Total Retail Sales - Food/Non-Food Split Table 2.1 shows the pattern of food and non-food retail sales between 1999 and 2006. Food sales have accounted for a significant proportion of retail sales in the PRC averaging in excess of 50% over the past seven years. In 2006 retail sales of food items (including food catering) were estimated to account for 58.3% of total retail sales in line with the historical trend. At 58.3%, this is a comparable share to that achieved in many other countries but is higher than most western and developed countries. With incomes continuing to rise in the PRC, it is expected that this proportion will decline over time with a greater proportion becoming attributable to non food goods and services.

PRC Food and Non-Food Share of Retail Sales, 1999-2006 Table 2.1

Percentage of Total Retail Sales 1 Year Food Non-Food

1999 57.8% 42.2% 2000 57.7% 42.3% 2001 58.5% 41.5% 2002 58.9% 41.1% 2003 58.4% 41.6% 2004 58.6% 41.4% 2005 58.5% 41.5% 2006 58.3% 41.7%

1. Year end December. Sources : National Bureau of Statistics China; China Statistics Yearbook 2006; Euromonitor; Urbis.

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2.1.3 Retail Price Inflation Retail Price Inflation (“RPI”) measures movement in retail prices across time periods. Throughout the first half of the 1990s, the PRC experienced relatively high RPI by global standards, with average rates of approximately 10% per annum. RPI was negative between 1998 and 2003, before assuming an upward trend again during the past couple of years. In 2006, the RPI rose by 2.4% and in the year through July 2007 has increased by 4.4%. For the next five years RPI in the PRC is conservatively forecast by Urbis to average 1.3% per annum, which is lower than the 3.3% per annum forecast for CPI. This forecast is consistent with the historic pattern, in which RPI has been around 1% 2% below CPI.

2.1.4 Total Retail Sales Forecasts Table 2.2 provides our forecasts for retail sales growth in the PRC over the next five years to 2011. Taking into account our estimate of total retail sales in 2006 (RMB 4.75 trillion), by 2011, total retail sales are forecast to reach RMB 7.86 trillion. This growth equates to an average nominal increase of 10.9% per annum over the 2006 to 2011 period. Retail sales growth in the PRC will be driven primarily by the strength of the local economy. A strong local economy is characterised by rising per capita income and an increasing disposable income which will drive resident spending. Other factors expected to drive the growth in retail sales include changing consumer preferences, the opening up of ownership restrictions on foreign retailers, the surge in retail mall development and the availability of credit. By contrast, 2008 retail sales growth expectations for the US and Japan are less than 5.0%.

PRC Forecast Total Retail Sales, 2005-2011 Table 2.2

Retail Sales 2 Year 1 RMB billion 3 YoY%

2005 (a) 4,188 - 2006 (a) 4,753 13.5% 2007 (f) 5,323 12.0% 2008 (f) 5,908 11.0% 2009 (f) 6,529 10.5% 2010 (f) 7,182 10.0% 2011 (f) 7,864 9.5%

1. Year end December. 2. Excludes national wholesale trades, as well as motor vehicle related sales, transport costs and utilities. 3. Nominal RMB. (a) actual; (f) forecast. Sources : National Bureau of Statistics China; China Statistics Yearbook 2006; Urbis.

2.2 Changes in Income and Retail Spending The double-digit annual sales growth achieved by PRC’s retail market has been driven by a strong economy that has simultaneously boosted income and consumer spending power, coupled with a steady increase in retail floorspace to match the demand. However, it would be a misconception to see the PRC as one single nearly homogeneous economy. Due to the diversity among cities and provinces in terms of geography, population, regulation, economic systems and business culture and ethics, different regions within the PRC are developing at their own pace. As a result, income distribution within the PRC is as diverse as consumer behaviour and preferences. Not surprisingly, wealth and consumption are concentrated in large urban areas. As a general rule, the income and spending of an urban dweller is much higher than that of a rural resident.

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Retail spending per capita in the PRC has increased significantly over the past seventeen years. In 1989, retail spending per capita was estimated to be approximately RMB 449. Based on our estimate of total retail sales for 2006 of RMB 4.75 trillion, retail spending per capita is estimated to have increased to RMB 3,632, representing an average increase in retail sales per capita of 13.1% per annum. Underpinning this growth in retail spending per capita is per capita income. In 1989, income per capita in the PRC was estimated to be approximately RMB 854. By 2006, this was estimated to have increased to RMB 7,231, representing an average increase in per capita income of 13.4% per annum. Although the increase in per capita retail spending in the PRC has been driven primarily by per capita income growth, the accompanying deregulation of the retail sector has allowed foreign retailers to enter and establish a presence in the market. These foreign entrants have helped both to satisfy existing consumer demand and create new demand. Over the seventeen year period between 1989 and 2006, retail spending per capita as a proportion of income per capita decreased from close to 53% to just over 50%. In 1989, with lower incomes, PRC residents would have spent a greater proportion of their incomes on food and essential items. As incomes increased, PRC residents have been able to direct a larger proportion of their income to non- food items.

2.2.1 The PRC Middle Class Strong income per capita growth is spurring the growth of the PRC middle class and both domestic and foreign retailers are eyeing this middle class, along with the much thinner slice of society above it that is already rich, as key growth markets for their products. Estimates of the size of the middle class vary widely, partly because of different definitions used by various sources of what middle class actually means. It is worthwhile taking a closer look at this definitional issue and placing a factual underpinning beneath some of the hype surrounding the China market. Table 2.3 uses estimates compiled by McKinsey Global Institute of the number of PRC urban households in various income brackets in 2005 and 20151. McKinsey defines five different household income segments: global affluent, mass affluent, upper middle class, lower middle class and poor. McKinsey’s lower middle class segment has an annual after-tax income of RMB 25,001-40,000 while the upper middle class has an annual income of RMB 40,001-100,000. At the current market exchange rate this means the middle class spans from approximately US $3,125-$12,500.

Disposable Income of PRC Urban Households, 2005 and 2015 Table 2.3 Household Type No. of Urban Households Disposable USD (Mkt USD (millions) Income (RMB) Exchange Rate) (Purchasing Power Parity) 2005 2015

Global Affluent 0.2 1.1 >200,000 >25,000 >100,000 Mass Affluent 1.0 15.7 100,001-200,000 12,501-25,000 50,001-100,000 Upper Middle Class 18.0 59.4 40,001-100,000 5,001-12,500 20,001-50,000 Lower Middle Class 24.1 139.2 25,001-40,000 3,125-5,000 12,500-20,000 Poor 147.6 65.0 <25,000 <3,125 <12,500

Source : McKinsey & Company; Urbis

1 Diana Farrell, Ulrich A. Gersch, Elizabeth Stephenson The Value of China’s Emerging Middle Class in Mckinsey Quarterly, 2006 special edition.

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At first sight this appears to be a generous definition of middle class given that the US poverty line for a family of three is currently above US $16,500. However, since it is generally conceded that the tightly managed PRC currency is substantially undervalued, the market exchange rate is not the most appropriate conversion rate for coming to grips with the true living standards of China’s households. Most economists use a purchasing power parity (PPP) exchange rate of about RMB 2 per dollar, which would expand the income enjoyed by the PRC middle class under McKinsey’s definition to $12,500-20,000. Within the McKinsey middle class bracket were an estimated 42.1 million households in 2005 and that number is set to grow to 198.6 million households by 2015. The vast majority of the numeric growth— 115.1 million households—will occur in the lower middle class as rising wages and incomes lift the standard of living of erstwhile poor families to a new condition where they have some limited amount of discretionary income. Meanwhile, the number of households in the more affluent income segments above the middle class is estimated to grow from just over one million in 2005 to almost 17 million in 2015. Two key implications emerge from this data : 1. The PRC middle class as it is commonly defined by McKinsey and other sources and cited in media reports, is growing rapidly and will reach huge proportions within a relatively short time- frame. Within 10 years, the number of households encompassed by these middle class definitions is likely to approach 200 million. 2. Over the next five to ten years the standard of living of this middle class will not be directly comparable to the middle class in the US and other developed countries. Households will have some limited amount of discretionary income to spend but most will be allocated to mass consumer products rather than high-end or luxury products.

2.2.2 Changing Consumption Patterns As their disposable incomes increase the consumption patterns of middle class urban households will change. As noted earlier, everyday items like food will account for a diminishing percentage of the household budget. However, China has a strong saving culture (the saving rate is approximately 40%) and this will not change overnight. Unlike in the US or western Europe where an individual’s upward mobility occurs in an environment of relatively strong health care and education systems, where the standard of housing is generally high and where the unemployed, sick or retired are provided for by the state, China’s new middle class will be focused on improving all of these elements of life largely self- financed. Saving will therefore continue to be of critical importance. Middle-class consumers can be expected to improve their living standards by purchasing a modest number of discretionary items. A substantial percentage of this discretionary spending is likely to follow from a higher rate of home ownership. Retailers catering to spending on home improvement, furniture, furnishings, kitchen appliances, small electrics and bigger ticket home entertainment products are likely beneficiaries of elevated discretionary spending in the first instance. As the limitation in incomes over the short-medium term suggests, China’s consumers will likely continue to be price-sensitive and formats that are able to sell at low price points such as hypermarkets are well-placed to continue their leading role in the market. The vast mass market for consumer products is virtually a given and the question is not one of the adequacy of market size but of who will win and who will lose. From the shopping centre owner’s perspective, the success of a property will revolve around the extent to which he has done his research, accurately assessed the market, and right sized and tenanted his centre accordingly.

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2.2.3 Shift to Upscale/Higher-end Brands Market positioning is all-important, particularly in view of the perception of scores of luxury and high-end brands that China represents an almost unlimited growth engine in the coming decades. According to some sources, sales of luxury products are increasing rapidly in the PRC. However, specific numbers are elusive and the situation is further muddied by different interpretations of what constitutes “luxury.” For example, plasma televisions, which are included on some lists of sought-after luxury items in the PRC, are hardly considered to be luxury items in the US or Australia. As noted in Table 2.3, the number of households currently falling into the category of “global affluent” (meaning those who have attained a comparable lifestyle to very affluent people in the developed world) number only about 200,000. These are the households with the means at their disposal to be relatively frequent purchasers of luxury items. Members of households in the tiers immediately below— i.e. “mass affluent” and “upper middle class”—are able to indulge themselves only occasionally. Despite these limitations, smaller personal luxury items such as handbags, jewellery and other accessories, perfume, cosmetics and footwear are, anecdotally at least, already achieving sufficient sales to justify some of the high expectations for the future. Within a decade the question for luxury goods will likely not be: “Is the market big enough?” but rather “Which brands came out on top?”

2.2.4 Brand Acceptance Despite the current inaccessibility of luxury brands to most of the PRC population because they are too expensive, it is almost a cliché that people are very brand-conscious when it comes to their everyday purchasing behaviour. Generally speaking, the greater exposure of the PRC to western influences in recent years has elevated brand awareness. The increasing prevalence of foreign television programming, better education and increasing domestic and international travel have all brought the PRC consumer in touch with modern marketing channels. Retailers are now using those channels to communicate with consumers on an emotional level. Yet the limited means and extreme price- sensitivity of most households already noted in this report cause them to lack brand-loyalty or brand- commitment, particularly when it comes to bigger ticket items. Small price differentials can sway purchasing decisions one way or another and it is frequently difficult for brands and their marketers to convey a value premium to PRC consumers that convinces them to pay a price premium in return. The ability of foreign retailers to establish themselves in the PRC retail market will hinge to a large extent on the effectiveness of their marketing message and how they ultimately succeed in differentiating their products, since it is the perceived differentness of the product that determines whether profitable margins can be achieved. US and European firms have had long experience of this in their home markets but it remains to be seen whether this success can be migrated to China.

2.3 New Retail Formats and Retailers Domestic retailers continue to dominate the PRC market, with the top retailers being the Shanghai Bailian Group, Gome Electrical Appliances, Dalian Dashang Group and Suning Home Appliances. Increasingly, the chain store model has been adopted by retailers of apparel, toys, personal care products and office equipment. Adding to these now are international retailing giants such as Wal-Mart, Carrefour, IKEA and Starbucks, which have each stimulated new consumer demand in China and helped to expand the retail market. For example, the surge in PRC consumer demand for bread is widely attributed to Carrefour’s freshly- baked fare, while Starbucks’ PRC expansion has probably made many young consumers coffee lovers. The acceptance of foreign brands and retailers in the PRC is evident from their presence on the PRC’s top 100 retailers list. In 2005, foreign firms accounted for 23% of sales of the top 100 food retailers in China. Furthermore, there are now over 1,000 foreign retailers in the PRC compared with 314 two years ago.

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Apart from Carrefour, Wal Mart, Tesco and Germany’s Metro AG, other international retailers/brands with a presence in China include the leading fashion labels (e.g. Louis Vuitton, Armani, Hugo Boss), middle market large-format players like Best Buy and Home Depot, and prominent food and beverage retailers such as McDonalds and Yum! Brands Inc. Yum! Brands, based in the United States, operates the KFC and Pizza Hut chains. KFC is now the number-one quick-service brand restaurant in the PRC with over 1,480 outlets and Pizza Hut has 180 stores. Changing working and living patterns have resulted in the gradual shift from traditional retailing models to modern formats such as malls and hypermarkets. The increasing incidence of two-income households has precipitated lifestyle changes that will drive the growth of emerging retail formats. Many families are no longer finding the time to frequent wet markets on a daily basis as they did in the past, and now prefer to shop at hypermarkets and supermarkets that offer one-stop shopping and late night trading. This was confirmed in a recent study conducted by Jonathan Garner which found that 85% of the survey respondents were now buying food in hypermarkets/supermarkets as compared with 58% three years earlier. One important impact of rising incomes is the increase in car ownership, which has about doubled since 2000. However, compared with most countries the PRC car ownership rate of about 2 per 100 persons is still low. For instance, in Australia the rate is 48 per 100 persons, in Taiwan 20 per 100 and in Singapore 10 per 100. Over time, increasing car ownership and improved road infrastructure in the PRC will make shopping centres more accessible and also raise the size of the average shopping basket. Meanwhile, the flourishing PRC retail market has led to the importation of a number of international formats, encouraging the expansion and transformation of domestic retailers and the accelerated entry of foreign retailers with their well-established models. As the quality of retail property and property management/leasing/research techniques in the PRC market improve over time, these trends will only be reinforced and further enrich the offering for China’s consumers. Another important inducement for foreign entry into China is the fragmentation of the existing market, which provides ample opportunity in many retail segments for consolidation. A good example is the modern grocery market, where the top five retailers account for less than 10% of sales. Consolidation offers international entrants such as Wal-Mart an opportunity to expand their PRC footprints in the absence of a good alternative menu of real estate opportunities, given that local players and earlier foreign entrants such as Carrefour are already established in many key locations.

2.3.1 Hypermarkets/Supercentres Hypermarkets or supercentres, which combine a discount department store and supermarket, have been well accepted by the PRC consumer. The segment has been popularised by international retailers such as Carrefour (70 stores in China), Wal-Mart (approximately 80 supercentres in China), Germany’s Metro (more than 20 stores in China), and Tesco (more than 50 stores via its 90% stake in the Taiwanese-based Hymall chain). However, there are also strong domestic players such as Wumart in this segment. According to the China Chain Store and Franchise Association, one-third of urban shoppers choose hypermarkets as their preferred food shopping channel over supermarkets and wet markets.2 The success of foreign retailers in the hypermarket business has encouraged many domestic retailers to adopt a similar format.

2.3.2 Concession Stores Concession stores operate in floorspace leased from master tenants, including department stores and hypermarkets. They are becoming prevalent in the PRC as department stores and, to a lesser extent, hypermarkets increasingly sub-lease a portion of their floorspace to various retail operators. Concessions are generally regarded as good for business, with large footfalls, ease of management, more product variety and relatively high profitability, particularly if they occupy prime space.

2 Dune Lawrence, Carrefour Lures Shoppers, Investors as Food Scares Grip China, Bloomberg.com, September 9, 2007

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2.3.3 Discount Stores Discount stores sell high quality food and household products at low prices out of a store format sized between 300-600 sq.m. Before 2003 there were no pure discount stores in the PRC. In that year, Carrefour, buoyed by the success of its hypermarkets, decided to import its discount store brand, 'Dia Daily' to the PRC. Dia Daily and ‘5 RMB’ are now the major players in the discount store segment. Other’ operators include Shenzhen Huarun Wanjia, Shenzhen Renrenle, Tianjin Nanxijiu and the LCX discount store.

2.3.4 Franchising Franchising is a business relationship in which the franchisor (the owner of the business providing the product or service) assigns independent parties (the franchisees) the right to market and distribute the franchisor’s goods or services, and to use the brand name for a fixed period of time. The PRC currently has approximately 100,000 franchise outlets across more than 200 franchise brands, ranging from supermarkets and drug stores to fitness centres. Foreign retail chain stores have used franchising as a major channel for entering and expanding in the PRC market. Some of the leading international franchises in the PRC include Subway, 7-Eleven, McDonald’s, KFC, Pierre Cardin, Pizza Hut, T.G.I. Friday’s, Subway, Century 21, Kodak, and Athlete's Foot.

2.3.5 Internet Retailing Internet retailing in the PRC is still a small but fast-growing mode of retail with the growth coinciding with general growth in internet usage. It is expected that the PRC’s accession to the WTO will provide further impetus to e-commerce development given the PRC’s commitment to the liberalisation of its telecommunication network. Most of the merchandise sold over the internet comprises books, computers and home appliances. Popular internet retailers in the PRC include Joyo.com, Dangdang.com, My8848.com, Sohu.com and Bettlesmen.com, along with increasingly larger retailers seeking to sell their services (such as Gome) over the Internet.

2.3.6 Mail Order Mail order first appeared in the PRC in the mid-1990s, but its development has been hampered by regulatory and practical obstacles and remains under developed. To date there are less than a dozen mail-order joint ventures operating in Shanghai, one market where mail order businesses have managed to gain a foothold.

2.4 Retail Provision – The Growth of Shopping Centres Before the significant market reforms instigated in the 1980s, the PRC had very little organised retail, and a not too significant middle class. The opening up of the PRC economy over the past two decades has been associated with a “retail boom”, which has resulted in an explosion in the amount of shopping centre floorspace provided throughout the nation. As the PRC moves towards becoming the world’s biggest consumer society, “build and they will come” seems to be the motto among the country’s retailers and shopping centre developers. The PRC has become home to some of the biggest and most extravagant shopping malls in the world. This includes a pair of mega malls in Beijing (Golden Resources 680,000 sq.m GFA) and the southern factory city of Dongguan (South China Mall 845,000 sq.m GFA), which are in the Top 10 largest shopping malls in the world. According to research by management consulting firm Deloitte, the PRC will feature seven of the world’s Top 10 shopping centres by 2010 if all current projects are completed.

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Euromonitor reported in 2003 that there were an estimated 236 shopping malls in the major cities of the PRC, with Shanghai, Guangzhou, Shenzhen, Beijing, Chengdu, Dalian, Chongqing and Wuhan accounting for 72% of the total malls. Since 2003 there has been considerable new construction activity and we would expect this figure of 236 shopping malls will have increased to well in excess of 500 malls. The shopping centre explosion in the PRC is expected to continue into the foreseeable future, buoyed by rapid increases in consumer spending and the removal of laws that restricted access to all but the largest and best-funded international retailers. Furthermore, residential development and associated population increases in smaller cities across the nation are beginning to attract investors willing to develop big, new shopping centres. While wet markets and traditional department stores still remain popular with PRC residents, we anticipate that over time the expansion of hypermarkets and the development of enclosed malls will place increasing pressure on these formats. Wet markets, which have in the past tended to account for a large proportion of the PRC’s fresh food shopping needs, will diminish in importance. They generally have limited operating hours compared with hypermarkets and supermarkets, which also have a competitive advantage with respect to their high quality storage facilities, greater variety and relatively sharper pricing. The shopping centre mall format, in our view, will be accepted by the PRC residents for a number of reasons, including : The convenience and comfort for shoppers associated with the enclosed mall format, particularly given the relatively harsh climate that exists in the PRC at certain times of the year (both hot and cold). The changing demographics of the PRC mean greater expectations with respect to design, quality and presentation of goods and services. Moreover, as consumers become better off they become more attentive to the recreational as opposed to the purely functional aspects of shopping. Thus, PRC consumers will have elevated expectations for the amenities and entertainment that are taken for granted as part of the mall shopping experience in developed markets. The impact of improved telecommunications, including the internet and cable television, has led to the globalisation of consumer behaviour. PRC residents are increasingly becoming more westernised in their ways and this in turn, will flow through to their spending behaviour and demand for retail goods and services, particularly for non food shopping including fashion, homewares and leisure items. The presence of global brands within the malls. There are many global retail brands with aggressive expansion plans into the PRC and in many instances the preferred retail format for these retailers is the shopping mall. It is expected that the PRC’s accession to the WTO, and the continued growth in consumer spending, will lead to an influx of foreign retailers to the PRC over the next decade. This can be reasonably expected to lead to increased tenant demand for floorspace in centres across the nation.

2.5 Retail Floorspace Sales Productivity Our indicative estimate is that there was approximately 1.62 billion sq.m of retail floorspace in the PRC as at 2006 and this equates to an overall average provision of 1.2 sq.m per person. This is very low by western standards with the United States at 3.5 sq.m per person, Australia (2.1) and the United Kingdom (1.3). It is slightly above Singapore however, at 1.0 sq.m per person, which is a very highly planned and controlled environment. It is at a similar level to Hong Kong (1.2) and Korea (1.2).

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With the PRC it must be noted that a significant proportion of the retail floorspace is located in rural areas and is relatively old, inefficient and of a low quality. Importantly, the provision of retail floorspace per capita for shopping centres in the PRC is much lower than the other countries where the typical proportion is around 25%-40% with the exception of US where it is much higher at over 50%. In the PRC we would expect this proportion to be below 10%, implying there is significant potential for the further provision of shopping malls. As with the quality of shopping centres there is also a significant variation in retail floorspace sales productivity throughout the PRC both in terms of retailer type and location. Based on total 2006 retail sales for the PRC of RMB 4.75 trillion and with an estimated floorspace of 1.62 billion sq.m, we estimate an overall average productivity level of around RMB 2,930 per sq.m per annum. This is very low when compared with most other countries but is to be expected given the lower incomes and lower quality of retail generally throughout the PRC. In PPP adjusted terms, the average productivity level would be closer to RMB 11,500 per sq.m or US $1,440 per sq.m. This is closer to westernised countries. While the overall productivity level for the PRC is estimated RMB 2,930 per sq.m, we would expect the urban average to be significantly higher at around RMB 4,800 per sq.m compared with only RMB 1,600 per sq.m in rural areas. Again, the larger cities will trade at higher rates and particularly Beijing and Shanghai where it is anticipated that average productivity levels are closer to RMB 10,000-16,000 per sq.m per annum.

2.6 Supply Constraints and the Regulatory Environment The restrictions placed on the PRC retail market before its accession to the WTO in 2001 placed severe constraints on the ability of both foreign and domestic retailers to operate effectively in the market. With the accession to the WTO in December 2001, the door to the PRC was well and truly opened. The accession to the WTO resulted in the easing of restrictions on retailing, wholesaling and franchising across the country that have subsequently created unprecedented opportunities for multi-national retail organisations. However, the perils facing retailers (in particular foreign retailers) still remain, as the national government is interested in encouraging retail development in the less urbanised parts of the nation. In June 2004 the Ministry of Commerce (MOFCOM) passed a regulation that requires foreign chain store retailers to pass annual inspections before they can open any new stores. Another regulation that still exists restricts foreign investment in chain stores with more than 30 outlets nationwide. It is expected that this regulation will be removed in the near future. Eventually, and at its future discretion, it is expected that the PRC will adopt planning principles for retail floorspace provision similar to the more Westernised countries such as the United States, United Kingdom and Australia. One such policy that has been submitted to the National State Department for approval surrounds the construction of a retail property with more than 3,000 sq.m of floorspace. Under this regulation any planned retail property with more than 3,000 sq.m of floorspace will require approval by a public meeting with the participation of local city planning department, traffic control department, consumer association, and business administrations. It is expected that this regulation will be executed in the near future. MOFCOM remains the key regulatory body for the retail industry in China, and are responsible for regulations at a national level. Other regulations influencing the retail market exist at an administrative level. Some of the laws have been created to protect domestic retailers from the foreign invasion, whilst others exist to promote sensible development ensuring that the needs of the community are adhered to. Otherwise, regulation of the industry is handled by local authorities at a province and city level.

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2.7 Retail Rentals The PRC retail market has seen strong demand for shop space as both foreign and local retailers are keen to tap into the spending power of the fast-expanding middle class. Demand for prime retail space appears to be increasing with a number of retailers looking for flagship locations. Other foreign retailers have continued to maintain an active stance in the rental market with respect to penetrating or expanding existing operations across the PRC. This has resulted in some increases to rents at major developments, however retailers are showing some resistance to paying rents at increased levels. As with retail productivity levels, retail rentals also exhibit considerable variation between rural and urban areas and by type of retail space throughout the country. Within shopping malls however, we understand that average gross rentals for specialty shops in suburban malls are typically RMB 4,000- 5,000 per sq.m per annum in the larger cities such as Beijing, Shanghai and Guangzhou but considerably lower for the smaller cities. Prime ground floor rentals for shopping malls and leading shopping districts in Beijing typically range between RMB 6,000-15,000 per sq.m per annum. The average gross market rental in Beijing and Shanghai has grown at an average rate per annum of 6% and 11% respectively over the past six years. The future level of retail rentals in the PRC will be determined by, among other things, sales growth (i.e. retail sales), floorspace growth (i.e. amount of floorspace), and productivity growth. Assuming that current retail rents are realistic, it would not be unreasonable to expect retail rent growth in the PRC of between 6% and 8% over the next five years.

2.8 Retail Investment Yields In comparison with other premier Asian countries such as Hong Kong and Singapore and western nations, there has been very little retail investment activity in the PRC over the past decade. Most of the investment activity has occurred since the relaxation of foreign ownership laws in December 2004. Of the other retail investment activity, much of it relates to the purchase of strata titled ‘retail podium’ shops on yields of between 8% and 10% according to industry analysts.

2.9 Future Outlook The overall outlook for retail property within the PRC, in our view, is sound. We expect continued strong nominal growth in retail sales over the next five years. This will be attributable to a number of factors, including ongoing strong economic growth, rising incomes; the increasing acceptance of western style living and brand consciousness, the ongoing shift from rural areas to cities (an estimated 15-20 million persons per annum) and the very strong desire by many international retailers to gain a presence within the PRC’s major and secondary metropolitan areas. Other factors of more secondary importance include higher levels of car ownership, increased demand for merchandise with elevated design and quality attributes, increasing acceptance of the hypermarket format for food and grocery shopping, and the increasing acceptance of the shopping centre as preferred format for all shopping needs. Finally, international retailer chains have focused their efforts to date on the major cities of Beijing, Shanghai and Guangzhou. However, they are now beginning to turn their attention to secondary markets in the interior of the country where wealth and income are both lower and more dispersed. As they learn to reach these consumers more efficiently, new demand will be created and retail sales will accelerate.

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3 Xizhimen Mall, Beijing

3.1 Regional Context & Economic Overview Beijing, the capital of the PRC (Map 3.1), is the centre of the nation’s political, cultural and international exchanges. Beijing’s permanent population in 2006 was approximately 15.8 million, with an additional 3.8 million temporary residents. Of the permanent population, almost four out five persons reside within the urban boundary. The city’s population growth has been impressive, increasing at an average annual rate of 2.9% during the last decade and 2.7% in the past five years (Table 3.1). Those growth rates are more than two percentage points higher than the average growth rate for the PRC over the same period. Map 3.1 – Location of Beijing in the National Context

The country-wide trend of urbanisation has been pronounced in Beijing. Growth of the urban population has averaged an impressive 3.4% per annum over the past decade but a marked acceleration has occurred just in the past five years. In the 2001-2006 period, the number of urban dwellers in Beijing has swelled by 4.3% per annum.

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Meanwhile, the City’srural population has declinedat a relatively fasterrate by1.9% perannum since 1996 and by 4.0% per year since 2001. One notable characteristic of the city’s population is the number of transients. The permanent population’s growth has averaged 2.7% per annum over the last five years compared to around 10.0% per year growth for the transient population, which now accounts for approximately 20% of the city’s total population and has had a positive impact on the retail market and consumer spending.

Beijing Population Compound Annual Growth Rates and Totals, 1978-2006 Table 3.1

Period 1978-2006 1996-2006 2001-2006

Compound Annual Growth Rate Population 2.1% 2.9% 2.7% Urban Population 3.7% 3.4% 4.3% Rural Population -1.6% -1.9% -4.0%

Total Population, 2006 Permanent Population 2006 15,810,000 Including Non-Permanent Residents 19,644,000

Source : Beijing Statistical Yearbook 2007

Beijing is one of the most well-connected cities in the PRC with improving accessibility to and within the various parts of the metropolitan area. It is the PRC’s most important transportation node with excellent rail and air networks. It was also the first city in the PRC to develop a subway system. Even though Beijing is 100 kms from the sea and has no port, the city’s excellent transport links with neighbouring Tianjin enables high access to shipping routes. Construction of a high-speed rail link to Tianjin began in early 2005 and services are scheduled to begin in the summer of 2008. The city’s rail transport system will be expanded significantly in the lead-up to the 2008 Olympics. The billions spent on infrastructure-related works in the lead up to the Olympics will significantly improve Beijing’s transport infrastructure and provide world class sporting facilities for future events and the local population. In addition, the Olympics has generated growing public anticipation. Research conducted by the WPP Group showed 53% of Chinese respondents were interested in attending one or more events at the Olympic Games. The local interest in the Games has flowed to some retail sectors (e.g. sports apparel and footwear has grown 20%-25% per year since 2000), and specifically to companies sponsoring the Olympic Games. The Games are seen as a once in a lifetime opportunity to highlight the PRC’s ascend asa modern nation. Environmental damage remains a serious issue for Beijing and the government is now striving for dramatic reductions in the amount of pollution by investing in and installing new purifying equipment, sewerage plants and recycling facilities. Beijing’s economic growth has consistently outpaced that of the PRC over recent years. During the last decade the size of Beijing’s economy (measured in terms of GDP) increased by an average annual growth rate of 16.0%, from RMB 178.9 billion in 1996 to RMB 787.0 billion in 2006 (Table 3.2).

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Beijing Province Economic Performance, 1996-2006 Table 3.2

CAGR 1996 2006 96-06

GDP (RMB billions) 178.9 787 16.0% GDP/capita (RMB) 14,254 50,467 13.5% Income/capita (RMB) 7,946 22,417 10.9% Retail Sales (RMB billions) 106.2 327.5 11.9% % of Income Spent on Food 33.6% 20.3% -

Source : Beijing Statistical Yearbook 2007.

Beijing boasts an educated workforce and a large graduate population. The city has many research institutes and universities that produce high quality technical and scientific personnel. These educational facilities, in turn, are magnets for foreign research and development institutions. The city’s retail market has consistently outperformed the PRC as a whole, in recent years. In 2006, retail sales in Beijing were RMB 327.5 billion, representing 12.8% growth over the RMB 290.3 billion achieved in 2005. Average annual growth over the past decade has been approximately 12%. At RMB 22,417 per annum (approximately US $11,200 at purchasing power parity), Beijing’s urban residents have an average per capita income 1.7 times higher than that of urban dwellers elsewhere in the PRC. Thus, Beijing has been at, or near, the top of the list of desirable locations for international retailers entering China, including those at the higher end of the price spectrum that require a denser cluster of the most affluent households. During the past decade, increasing prosperity has resulted in food expenditures declining from 34% of total income to around 20%. Beijing is home to the 680,000 sq.m Golden Resources Mall, one of the largest shopping centres in the world. A substantial amount of new retail supply is in the pipeline but the nature of the new supply will depart from the existing mix in that it will reflect a distinct shift away from the traditional freestanding department store model. Much of the new retail floorspace to come online in the shorter term is within mixed-use projects that include office, residential and other non-retail components. Other significant projects are hypermarket-anchored shopping centres (e.g. Dazhongsi International Plaza, with GRA of around 115,500 sq.m). In all, retail space in projects over 10,000 sq.m is expected to add approximately 11.1 million sq.m to the Beijing retail stock between mid-2007 and the end of 2009. The effect of this sharp increase in the supply of retail floorspace may be an increase in the vacancy rate and an escalation in the competition among developers for quality tenants in the Beijing metropolitan area.

3.2 Location and Accessibility Xizhimen Mall is located in the western part of Beijing, approximately 4.3 kms north-west of the Forbidden City. (Maps 3.2, 3.3 and 3.4) Just outside the West Second Ring Road, the mall is located on a key inter-modal transportation hub. The mall is located near four train stations : MRT Line 2; LRT Line 13; the Beijing Railway; and the proposed future MRT Line 4. In addition, a new bus interchange terminal is under construction across from the mall. The bus terminal, and the direct connection of Xizhimen MRT and LRT stations will improve commuter flows in the immediate vicinity.

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Map 3.2 –Xizhimen Mall in the Beijing City Context

XIZHIMEN MALL,BEIJING

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Map 3.3 – Xizhimen Mall Location

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Map 3.4 – SubwayMap Map

XIZHIMEN MALL,BEIJING

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H-39 XIZHIMEN MALL, BEIJING

The public transport access to the centre provides an outstanding opportunity to capitalise on large commuter traffic volumes. While official government data on commuter traffic volumes are not published, informal estimates of commuter traffic through the combined stations around Xizhimen Mall suggest volumes of approximately 300,000 persons per weekday and double that on weekends. Once the new public transport infrastructure has been completed, it is reasonable to expect that daily commuter traffic will increase substantially. The mall will have further opportunities to increase pedestrian footfall. Road access to Xizhimen Mall is via the Second Ring Road (Deshengmen Xidajie) and Xizhimen Beidaja and Xizhimen Dajie. Although the mall is near major road connections, local traffic can at times be congested. The mall is located in a substantial mid-high income residential district. Over the next 2-3 years, new mid-high end projects in the vicinity are expected to account for a further 3,000 units. Projects include Guang Da Yi Pin, C-PARK International Apartments, Jing Qiao International Apartments and Xi Cheng Jin Hua. There are seven major universities within about 4 kms of the centre broadly known as the Zhongguancun District : Beijing National University; Central University of Finance and Economics; Beijing Jiaotong University; Beijing Institute of Technology; Beijing Foreign Studies University; Central University for Nationalities; and Capital Normal University. Beyond the 4 km mark (north of Beisanhuan XiLu) lie more universities, including the famous Peking University and Tsinghua University, both regarded as among the best in the PRC.

Images of Xizhimen Mall and Surrounding

Picture 3.1 – Xizhimen Mall – pedestrian link construction site Picture 3.2 – Xizhimen Mall with mall in background

Picture 3.3 – Xizhimen Mall – current pedestrian traffic flow in Picture 3.4 – Xizhimen Mall – pedestrian link between front of entrance subway and elevated rail station under construction

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3.3 Description of Xizhimen Mall and Tenant Mix Xizhimen Mall opened for trading on the 15 September 2007. At the time of this report the mall had been trading for less than three months. The mall comprises a basement level and six above-ground levels, as shown in Appendix A. The building footprint slightly narrows toward the northern end of the mall, meaning that shops have decreasing depth as one goes from south to north. However, good shop sizes are available at the northern end of the centre through employing wider shopfronts. On a land area of 42,400 sq.m, the mall has a gross rentable area of 73,857 sq.m. There is parking provision for around 365 cars, which is shared with the three distinctive 15 storey office towers above the shopping centre. Two of the towers are owned by Citigroup, which occupies some of the space. The layout of the mall is simple and easy to navigate. Basement 1 focuses on food and convenience. The anchor tenant, Beijing Hualian Group (BHG) supermarket, is expected to open by the second half of 2008. Level 1 has an entry from the main road into a central promotions area. A double sided mall continues down to the other end of the centre. The shape and circulation of the next five levels is similar to Level 1, with Level 6 slightly smaller than the other five levels. Traffic circulation flow around the central court area is uncomplicated on all levels and will easily cope with higher customer traffic as occupancy increases. Sight lines on each level around the central void are excellent, allowing high visibility of shopfronts. Key destinational retailers have been targeted to anchor the northern (i.e. the narrower) end of the centre. These strong anchors will help to pull shopper traffic past the specialty stores along the double- sided corridor that runs the length of the mall. A Watson’ tenancy is planned on Level 1 and Sport 100 currently occupies the large space on Level 4. Table 3.3 shows the 10 largest tenants and tenant groups by total gross rent, based on committed leases at 31 August 2007. Sport 100 and Colour Jeans, under single ownership, account for 7.8% of total gross rent. Similarly Vero Moda, Jack & Jones and ONLY combined, account for a further 6.7% of total gross rent. The mix of tenants in the top ten include : a major supermarket chain (Beijing Hualian); international food and beverage tenants (KFC, Pizza Hunt and McDonald’s); significant fashion brands (Colour Jeans, Vero Moda, Jack & Jones, Only, In-Base, Esprit); and an internationally known cosmetics and beauty products chain (Sephora). The interior of Xizhimen Mall is bright, colourful and modern. Compared with most of the other retail malls in Beijing, Xizhimen Mall provides excellent amenity, outstanding public transport access, and all of the facilities associated with a modern, contemporary and well-designed shopping centre. The tenant mix is weighted toward Gen Y fashion, giving it a well-differentiated market position.

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Xizhimen Mall Top 10 Tenants by Total Gross Rent (at 31 August 2007) Table 3.3

Trade Share of Total Tenant Lease ExpirySub-Sector Monthly Gross Rent

Sport 100, Colour Jeans Sep-7K\-12 Sports & Fitness/Fash ion 7.8% Vero Moda, Jack&Jones, ONLY Sep- Fashion 6.7% KFC, Pizza HutSep- Food & Beverage/Foodcourt 3.8% Beijing Hualian Supermarket Sep-28 Supermarket 3.1% Da Shi Dai, Bread TalkSep- Dec-12 Food & Beverage/Foodcourt 2.8% SephoraSep- Cosmetics & Beauty 2.4% In-BaseOct- Fashion 2.1% Weider Nov-13 Sports & Fitness 2.0% Esprit, Red EarthOct-)]O- Fashion 1.9% McDonald’sSep- Food & Beverage/Foodcourt 1.4% Total Top 10 34.0% Other tenants 66.0% TOTAL 100.0%

Source: Capitaland; Urbis.

3.4 Target Market The combination of a strong supermarket operator in Basement 1 and strong mid-priced Gen Y fashion offerings should ensure a broad and complementary shopper profile. We believe this mall has significant destinational appeal. The supermarket will provide convenience shopping for local residents as well as other relevant market segments for Xizhimen Mall will include nearby university students and office workers, particularly the office workers located in the three towers directly above Xizhimen Mall. Compared with other retail offers in the region, Xizhimen Mall is the only one-stop-shopping, dining and entertainment destination. Accordingly, it is able to attract strong footfall from diverse segments.

3.5 Trade Area Analysis

3.5.1 Trade Area Definition The trade area defined for Xizhimen Mall is shown on Map 3.5. The primary sector is bounded by the following major roads : in the north by Bei Sanhuan Zhonglu; in the west by Xi Sanhuan Beilu; in the south Fucheng Lu; and has a border directly south from the Deshengmen Dajie. Further, given the excellent rail connections to the north, a secondary sector has been defined that extends as far as the southern border of the ruins of Yuanmingyuan and across to the Xiaojia River.

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Map 3.5 – XizhimenMapAreaMall Trade

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3.5.2 Trade Area Profile In 2006, we estimate the resident population of the primary trade area to be more than 600,000 people. The secondary north sector has a population of nearly 180,000 people, resulting in a main trade area population of 782,950. (Table 3.4)

Xizhimen Mall Population and Retail Spending Forecasts (Inflated RMB), 2006-2011 Table 3.4

2006 2011 Average Annual (Estimate) (Forecast) Growth

Resident Population Primary Sector 603,450 618,450 0.5% Secondary North Sector 179,500 189,500 1.1% Main Trade Area 782,950 807,950 0.6%

Retail Spending per Capita (Inflated RMB) Primary Sector 16,800 25,968 9.1% Secondary North Sector 16,100 24,886 9.1% Main Trade Area 16,640 25,714 9.1%

Retail Spending (Inflated Million RMB) Primary Sector 10,138 16,060 9.6% Secondary North Sector 2,890 4,716 10.3% Main Trade Area 13,028 20,776 9.8%

Source: Capitaland; Urbis.

We estimate the population within a 5 km radius of the centre to be around 2.5 million, while an estimated 6.2 million live within a 10 kms radius. Future residential development in both the primary and secondary north sectors is expected to be limited given the built-up nature of the area. In the primary sector we expect population growth of around 0.5% per year to 2011, while higher growth in the secondary north sector (1.1% per year) is forecast. By 2011, the resident population for the main trade area is expected to be 808,000 people. The resident population (i.e. those registered to live in Beijing) excludes the informal and non-registered population. Most of the people classed as non-Beijing residents tend to live in lower-cost outer suburbs. Accordingly, we expect that a relatively small proportion of the non-resident Beijing population would live in the trade area of Xizhimen Mall. At best, the population numbers in Table 3.4 may be under-estimated by 3%-5%. The primary trade area contains a mix of middle to upper-income households, together with a substantial university population comprising both students and academics. Although the student population reduces the overall income profile of the trade area, it provides an offsetting increase in mall traffic due to the strong moderately-priced fashion offer for younger and trendier people. In addition to outlining population forecasts Table 3.4 also details retail spending per capita in the trade area. We estimate the average retail spending per capita in Beijing in 2006 totalled approximately RMB 14,000 per person. Given higher income profiles in both the primary and secondary north sectors, we estimate per capita retail spending to be, respectively, 20% and 15% above the Beijing average.

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Multiplying resident population numbers by retail spending per capita results in the retail spending market generated by residents of the Xizhimen Mall trade area. In total, we estimate that the 2006 resident spending market was RMB 13.0 billion. In 2011, with population growth and increases in retail spending per capita (estimated to be 9.1% per year) the total retail market in the trade area of Xizhimen Mall is forecast to be RMB 20.8 billion. Average annual growth of 9.8% is forecast over the five year period through to 2011.

3.6 Competition

3.6.1 Existing Competition Within 3 kms of Xizhimen Mall, there are five department stores, a new upmarket luxury branded shopping centre and a Carrefour hypermarket. Table 3.5 shows these centres, GRA, opening dates, positioning and distance to Xizhimen Mall. All of the centres in Table 3.5 are essentially single tenant properties – either department stores or the Carrefour hypermarket. The exception is the Seasons Palace Centre, a higher end mall featuring international brands such as Gucci, Hugo Boss, Salvatore Ferragamo and Louis Vuitton.

Xizhimen Mall Existing and Proposed Competing Centres, 2007 Table 3.5

Distance from Date GRA Centre Centre Type Xizhimen Mall Established Positioning (sq.m) Xin Jie Kou Department Store Department Store 2.1 km 1958 Middle 5,500

Hualian Department Store, Department Store 1.9 km 1997 Middle 19,250 Ganjiakou Tower Department Store 2.3 km 2000 Middle 16,500 Ito Yokado Department Store 0.7 km 2004 Middle 10,290 Xinhua Department Store Department Store 1.7 km 2006 Middle 35,750 Seasons Place Shopping Centre 2.9 km 2007-09 High 39,050 Carrefour Hypermarket 2.3 km 2000 Middle 13,750

Source: Cushman and Wakefield; Urbis.

The department stores are middle market. For example, the Xinhua Department Store, although only opened in 2006, is a traditional older-style department store, designed in a manner that would be considered very dated in more modern shopping environments such as in the US. Middle market positioning, poor visual merchandising, inefficient circulation and a lack of quality brands limit the appeal of this store and other department stores in the neighbourhood. In addition, poor maintenance standards and the lack of professional, world class centre management teams inhibit the competitive strength of these stores. Xizhimen Mall therefore has an excellent opportunity to differentiate itself from local competitors by providing a modern shopping environment with vibrant contemporary brands. Professional management of the centre will also be a key differentiating factor.

3.6.2 Future Competition Competition in the trade area is expected to intensify over the next five years, with planned development of one large and several small shopping centres. In Table 3.6, the proposed centres are noted.

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The most significant new competitor will be Dazhongsi International Plaza, with around 115,500 sq.m GRA. This centre is within 3 kms to the north of Xizhimen. It is in an advanced stage of construction and market intelligence suggests it may be operational by the end of 2007. The centre comprises four separate buildings and we understand that committed tenants include a Carrefour hypermarket and a cinema chain. The other four new planned centres in the trade area are much smaller and, with the exception of Fenglan International Centre, are typically around 11,000-18,000 sq.m GRA. Although these centres are expected to have mid to mid-low positioning, it is unlikely that they will be able to match the overall level of amenity and offer provided at Xizhimen Mall.

Xizhimen Mall Proposed Competing Centres, 2007 Table 3.6 Distance from Date GRA Centre Centre Type Xizhimen Mall Established Positioning (sq.m) Tian Mei Fashion Mall Fashion City 2.9 km 2007 Middle 11,000 Wante Shopping Centre Fashion City 1.7 km 2008-12 Middle 18,150 Fenglan International Centre Shopping Centre 1.2 km 2007 Middle 33,000 Dazhongsi International Plaza Shopping Centre 3.0 km 2007 Middle 115,500 Xing Jie Fang Shopping Centre 1.6 km 2008-12 Middle 17,600

Source: Cushman and Wakefield; Urbis.

Competing Centres

Picture 3.5 – Xinhua Department Store (approximately Picture 3.6 – Dazhongsi International Plaza construction site 35,750 sq.m – within the 3 km ring for Xizhimen) (115,500 sq.m approx opening 2007, within the 3 km ring for Xizhimen)

3.7 Future Outlook for the Mall On the basis of our analysis, the overall outlook for trading over the next five years is positive. Once fully leased and operational Xizhimen Mall should perform strongly and sales growth (including inflation) of 10% per annum is expected over the next five years. This growth will be driven by the overall quality of the retail offer, the professional management of the centre, growth in the trade area spending market and improved public transport accessibility.

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H-46 NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an EXTRAORDINARY GENERAL MEETING of CapitaRetail China Trust (“CRCT”) will be held at 168 Robinson Road, Capital Tower Level 9, STI Auditorium, Singapore 068912 at 10.00 a.m. on 4 December 2007 for the purpose of considering and, if thought fit, passing, with or without modifications, the following resolutions:

ORDINARY RESOLUTION

1. THE PROPOSED ACQUISITION OF THE MALL That subject to and contingent upon the passing of Resolution 2: (a) approval be and is hereby given for the acquisition of the Mall (as defined in the circular dated 14 November 2007 (the “Circular”) issued by CapitaRetail China Trust Management Limited, as manager of CRCT (the “Manager”), to unitholders of CRCT (“Unitholders”)) pursuant to the right of first refusal agreement entered into on 8 November 2006 between (i) the Manager; (ii) HSBC Institutional Trust Services (Singapore) Limited, as trustee of CRCT (the “Trustee”); (iii) CapitaRetail China Fund Management Pte. Ltd., as manager of CapitaRetail China Incubator Fund (the “Incubator Fund”) and (iv) CapitaLand Retail Trustee Pte. Ltd., as trustee of the Incubator Fund (the “Vendor”), through the acquisition by CRCT of the entire issued share capital of CapitaRetail China Investments (B) Beta Pte. Ltd. at the Purchase Consideration of S$332.0 million (the “Proposed Acquisition”) and on the terms set out in the conditional share purchase agreement dated 18 October 2007 entered into between the Trustee and the Vendor, and for the payment of all fees and expenses relating to the Proposed Acquisition (as described in the Circular); and (b) the Manager, any director of the Manager (“Director”) and the Trustee be and are hereby severally authorised to complete and do all such acts and things (including executing all such documents as may be required) as the Manager, such Director or (as the case may be) the Trustee may consider expedient or necessary or in the interests of CRCT to give effect to the Proposed Acquisition.

ORDINARY RESOLUTION

2. THE PROPOSED ISSUE OF NEW UNITS UNDER THE EQUITY FUND RAISING That subject to and contingent upon the passing of Resolution 1: (a) approval be and is hereby given for the issue of new units in CRCT (“New Units”)soasto raise gross proceeds of up to approximately S$280.0 million (the “Equity Fund Raising”)in the manner described in the Circular; and (b) the Manager, any Director and the Trustee be and are hereby severally authorised to complete and do all such acts and things (including executing all such documents as may be required) as the Manager, such Director or (as the case may be) the Trustee may consider expedient or necessary or in the interests of CRCT to give effect to the Equity Fund Raising.

ORDINARY RESOLUTION

3. THE PROPOSED PLACEMENT OF NEW UNITS TO CAPITALAND LIMITED AND ITS SUBSIDIARIES That subject to and contingent upon the passing of Resolution 1 and Resolution 2: (a) approval be and is hereby given for the placement of up to such number of New Units under the private placement tranche of the Equity Fund Raising to CapitaLand Limited and its subsidiaries (the “CapitaLand Group”) as would be required to maintain their respective proportionate unitholdings, in percentage terms, at their respective pre-placement levels; and (b) the Manager, any Director and the Trustee be and are hereby severally authorised to complete and do all such acts and things (including executing all such documents as may be required) as the Manager, such Director or (as the case may be) the Trustee may consider expedient or necessary or in the interests of CRCT to give effect to such placement of New Units to the CapitaLand Group.

ORDINARY RESOLUTION

4. THE PROPOSED PLACEMENT OF NEW UNITS TO CAPITAMALL TRUST That subject to and contingent upon the passing of Resolution 1 and Resolution 2: (a) approval be and is hereby given for the placement of up to such number of New Units under the private placement tranche of the Equity Fund Raising to CapitaMall Trust as would be required to maintain its proportionate unitholding, in percentage terms, at its pre-placement level; and (b) the Manager, any Director and the Trustee be and are hereby severally authorised to complete and do all such acts and things (including executing all such documents as may be required) as the Manager, such Director or (as the case may be) the Trustee may consider expedient or necessary or in the interests of CRCT to give effect to such placement of New Units to CapitaMall Trust.

ORDINARY RESOLUTION

5. THE PROPOSED PLACEMENT OF NEW UNITS TO THE DIRECTORS That subject to and contingent upon the passing of Resolution 1 and Resolution 2: (a) approval be and is hereby given for the placement of up to such number of New Units under the private placement tranche of the Equity Fund Raising to each of the Directors and his/her immediate family members, provided that such number of New Units are no more than what would be required for each of them to maintain his/her proportionate unitholding, in percentage terms, at his/her pre-placement level; and (b) the Manager, any Director and the Trustee be and are hereby severally authorised to complete and do all such acts and things (including executing all such documents as may be required) as the Manager, such Director or (as the case may be) the Trustee may consider expedient or necessary or in the interests of CRCT to give effect to such placement of New Units to the Directors.

ORDINARY RESOLUTION

6. THE GENERAL MANDATE TO ISSUE NEW UNITS AND CONVERTIBLE SECURITIES That: (a) approval be and is hereby given for the general mandate to be given to the Manager for the issue of new Units and convertible securities (“Convertible Securities”) in CRCT in the financial year ending 31 December 2008, provided that the aggregate number of new Units and Convertible Securities does not exceed 50.0% of the number of Units in issue as at 31 December 2007 (taking into account the New Units to be issued under the Equity Fund Raising and the new Units to be issued as payment of the Acquisition Fee to the Manager), of which the aggregate number of new Units and Convertible Securities to be issued other than on a pro-rata basis to existing Unitholders shall not be more than 20.0% of the number of Units in issue as at 31 December 2007 (taking into account the New Units to be issued under the Equity Fund Raising and the new Units to be issued as payment of the Acquisition Fee to the Manager) (the “General Mandate”); and (b) the Manager, any Director and the Trustee be and are hereby severally authorised to complete and do all such acts and things (including executing all such documents as may be required) as the Manager, such Director or (as the case may be) the Trustee may consider expedient or necessary or in the interests of CRCT to give effect to the General Mandate.

ORDINARY RESOLUTION

7. THE PROPOSED RETENTION OF WANGJING MALL IN CRCT’S EXISTING PORTFOLIO That, subject to the legal title to Wangjing Mall in the name of CapitaRetail Wangjing being obtained before the date of the EGM: (a) approval be and is hereby given for the retention of Wangjing Mall in the property portfolio of CRCT under the terms of the Wangjing Put Option Agreement dated 8 November 2006 entered into between CapitaLand Retail Limited and the Trustee and as described in the Circular (the “Retention of Wangjing Mall”); and (b) the Manager, any Director and the Trustee be and are hereby severally authorised to complete and do all such acts and things (including executing all such documents as may be required) as the Manager, such Director or (as the case may be) the Trustee may consider expedient or necessary or in the interests of CRCT to give effect to the Retention of Wangjing Mall.

BY ORDER OF THE BOARD CAPITARETAIL CHINA TRUST MANAGEMENT LIMITED (Company Registration Number: 200611176D) (as manager of CapitaRetail China Trust)

Kannan Malini Company Secretary Singapore 14 November 2007

Notes: (1) A Unitholder entitled to attend and vote at the Extraordinary General Meeting is entitled to appoint not more than two proxies to attend and vote in his stead. A proxy need not be a Unitholder. (2) The instrument appointing a proxy or proxies must be lodged at the Manager’s registered office at 39 Robinson Road, #18-01 Robinson Point, Singapore 068911 not less than 48 hours before the time appointed for the Extraordinary General Meeting. IMPORTANT: PLEASE READ THE NOTES TO PROXY FORM BELOW

Notes To Proxy Form 1. A Unitholder entitled to attend and vote at the Extraordinary General Meeting is entitled to appoint one or two proxies to attend and vote in his stead. 2. Where a Unitholder appoints more than one proxy, the appointments shall be invalid unless he specifies the proportion of his holding (expressed as a percentage of the whole) to be represented by each proxy. 3. A proxy need not be a Unitholder. 4. A Unitholder should insert the total number of Units held. If the Unitholder has Units entered against his name in the Depository Register (as defined in the Companies Act, Chapter 50 of Singapore) maintained by The Central Depository (Pte) Limited (“CDP”), he should insert that number of Units. If the Unitholder has Units registered in his name in the Register of Unitholders of CRCT, he should insert that number of Units. If the Unitholder has Units entered against his name in the said Depository Register and registered in his name in the Register of Unitholders, he should insert the aggregate number of Units. If no number is inserted, this form of proxy will be deemed to relate to all the Units held by the Unitholder. 5. The instrument appointing a proxy or proxies must be deposited at the Manager’s registered office at 39 Robinson Road #18-01 Robinson Point, Singapore 068911, not less than 48 hours before the time set for the Extraordinary General Meeting. 6. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its common seal or under the hand of its attorney or a duly authorised officer. 7. Where an instrument appointing a proxy is signed on behalf of the appointor by an attorney, the power of attorney or a duly certified copy thereof must (failing previous registration with the Manager) be lodged with the instrument of proxy; failing which the instrument may be treated as invalid. 8. The Manager shall be entitled to reject a Proxy Form which is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified on the Proxy Form. In addition, in the case of Units entered in the Depository Register, the Manager may reject a Proxy Form if the Unitholder, being the appointor, is not shown to have Units entered against his name in the Depository Register as at 48 hours before the time appointed for holding the Extraordinary General Meeting, as certified by CDP to the Manager. 9. All Unitholders will be bound by the outcome of the Extraordinary General Meeting regardless of whether they have attended or voted at the Extraordinary General Meeting. 10. At any meeting, a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded by the Chairman or by five or more Unitholders present in person or by proxy, or holding or representing one-tenth in value of the Units represented at the meeting. Unless a poll is so demanded, a declaration by the Chairman that such a resolution has been carried or carried unanimously or by a particular majority or lost shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against such resolution. 11. On a show of hands, every Unitholder who (being an individual) is present in person or by proxy or (being a corporation) is present by one of its officers as its proxy shall have one vote. On a poll, every Unitholder who is present in person or by proxy shall have one vote for every Unit of which he is the Unitholder. A person entitled to more than one vote need not use all his votes or cast them the same way. -

CAPITARETAIL CHINA TRUST IMPORTANT (Constituted in the Republic of Singapore pursuant to a trust deed dated 23 October 2006 (as amended)) 1. For investors who have used their CPF moneys to buy units in CapitaRetail China Trust, this Circular is forwarded to them at

------the request of their CPF approved nominees, and is sent FOR INFORMATION ONLY. PROXY FORM 2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or is EXTRAORDINARY GENERAL MEETING purported to be used by them. 3. PLEASE READ THE NOTES TO PROXY FORM.

I/We (Name) of (Address) being a unitholder/unitholders of CapitaRetail China Trust (“CRCT”), hereby appoint:

Proportion of Unitholdings NRIC/Passport Name Address Number Number of % Units

and/or (delete as appropriate)

Proportion of Unitholdings NRIC/Passport Name Address Number Number of % Units

or, both of whom failing, the Chairman of the Extraordinary General Meeting as my/our proxy/proxies to attend and to vote for me/us on my/our behalf and if necessary, to demand a poll, at the Extraordinary General Meeting of CRCT to be held at 10.00 a.m. on 4 December 2007 at 168 Robinson Road, Capital Tower Level 9, STI Auditorium, Singapore 068912, and any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the resolution to be proposed at the Extraordinary General Meeting as indicated hereunder. If no specific direction as to voting is given, the proxy/proxies will vote or abstain from voting at his/their discretion, as he/they will on any other matter arising at the Extraordinary General Meeting.

To be used on a To be used in show of hands the event of a poll Resolutions Number of Number of For * Against * Votes Votes For ** Against ** 1. To approve the Proposed Acquisition (Ordinary Resolution) 2. To approve the issue of New Units so as to raise up to approximately S$280.0 million (Ordinary Resolution) 3. To approve the placement of New Units to the CapitaLand Group (Ordinary Resolution) 4. To approve the placement of New Units to CapitaMall Trust (Ordinary Resolution) 5. To approve the placement of New Units to the Directors (Ordinary Resolution) 6. To approve the General Mandate for the issue of new Units and Convertible Securities (Ordinary Resolution) 7. To approve the Retention of Wangjing Mall in CRCT’s property portfolio, if applicable (Ordinary Resolution)

* If you wish to exercise all your votes “For” or “Against”, please tick () within the box provided. ** If you wish to exercise all your votes “For” or “Against”, please tick () within the box provided. Alternatively, please indicate the number of votes as appropriate.

Dated this day of 2007 Total number of Units held

Signature(s) of Unitholder(s)/Common Seal ✂ ------2nd fold here ------

Affix Postage Stamp

The Company Secretary CapitaRetail China Trust Management Limited (as manager of CapitaRetail China Trust) 39 Robinson Road #18-01 Robinson Point Singapore 068911

------3rd fold here BENEFITS TO UNITHOLDERS

1. Attractive DPU accretion 3. Competitive strengths of Xizhimen Mall: 4. Greater income and tenant mix diversiﬁ cation

1 Refers to the Deposited Property FOR INFORMATION ONLY

CIRCULAR DATED 14 NOVEMBER 2007 (Constituted in the Republic of Singapore THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. pursuant to a trust deed dated 23 October 2006 (as amended)

Managed By IMPORTANT DATES AND TIMES FOR UNITHOLDERS to and conditional upon the passing of the resolution for the Proposed Acquisition (see Resolution 1). Event Date Time CAPITARETAIL CHINA TRUST MANAGEMENT LIMITED (the “MANAGER”) Last date and time for 2 December 2007 10 a.m. A member of lodgement of Proxy Forms Date and time of Extraordinary General 4 December 2007 10 a.m. Meeting (“EGM”)

Joint Lead Managers, Bookrunners and Underwriters for the Equity Fund Raising Place of EGM 168 Robinson Road Capital Tower Level 9 STI Auditorium Singapore 068912