"With strong corporate governance as a touchstone, we endeavour to continue enhancing returns to Unitholders."

Our Role

Our primary role as the manager of CMT (Manager) is to set the strategic direction of CMT and make recommendations to HSBC Institutional Trust Services (Singapore) Limited, in its capacity as trustee of CMT (Trustee), on the acquisition, divestment or enhancement of the assets of CMT in accordance with its stated investment strategy. The research, evaluation and analysis required for this purpose is co-ordinated and carried out by us as the Manager. We are also responsible for the risk management of CMT.

As the Manager of CMT, we have general powers of management over the assets of CMT. Our primary responsibility is to manage the assets and liabilities of CMT for the benefit of Unitholders. We do this with a focus on generating rental income and enhancing asset value over time so as to maximise the returns from the investments, and ultimately the distributions and total return to Unitholders.

Our internal review procedures encompass proactive measures for avoiding situations of conflict and potential conflicts of interest, including prioritising the interests of Unitholders over the Manager's and ensuring that applicable laws and regulations are complied with, so that Unitholders' interests are best served at all times.

Our other functions and responsibilities as the Manager of CMT include:

• Using our best endeavours to carry on and conduct CMT's business in a proper and efficient manner and to conduct all transactions with, or on behalf of, CMT at arm's length.
• Preparing property plans on an annual basis for review by our Directors, including forecasts on revenue, net income and capital expenditure, explanation of major variances, to previous years' numbers, written commentary on key issues and underlying assumptions on rental rates, operating expenses and any other relevant assumptions. These plans explain the performance of CMT's assets.
• Ensuring compliance with relevant laws and regulations, including the Listing Manual of the SGX-ST (Listing Manual), the CIS Code issued by the Monetary Authority of Singapore (MAS) and the tax rulings issued by the Inland Revenue Authority of Singapore on the taxation of CMT and its Unitholders.
• Attending to all regular communications with Unitholders.
• Supervising CapitaLand Retail Management Pte Ltd (CRMPL) (Property Manager), which performs the day-to-day property management functions (including leasing, accounting, marketing, promotion, coordination, project management and property management) for the CMT malls namely, Tampines Mall, Junction 8, Funan DigitaLife Mall, IMM Building, Plaza Singapura, Bugis Junction, Sembawang Shopping Centre, Hougang Plaza, Jurong Entertainment Centre, Lot One Shoppers' Mall, Bukit Panjang Plaza, Rivervale Mall and The Atrium@Orchard pursuant to the property management agreements signed for each mall. With regard to Raffles City Singapore (RCS), which is held by CMT and CapitaCommercial Trust (CCT) in the proportions of 40.0% and 60.0% respectively, the Property Manager holds 40.0% interest in CapitaLand (RCS) Property Management Pte. Ltd. which provides property management services to RCS. CapitaLand Commercial Management Pte Ltd, which is the property manager of the properties owned by CCT, holds the other 60.0%. As a result of its interest in CapitaLand (RCS) Property Management Pte. Ltd., the Property Manager is able to play a key role in directing the property management function for RCS.

CMT, constituted as a trust, is externally managed by the Manager and therefore has no personnel of its own. The Manager appoints experienced and wellqualified management to run its day-to-day operations. All Directors and employees of the Manager are remunerated by the Manager and not CMT.

CapitaMall Trust Management Limited (CMTML) is appointed as the Manager of CMT in accordance with the terms of the Trust Deed dated 29 October 2001 as amended by the First Supplemental Deed dated 26 December 2001, the Second Supplemental Deed dated 28 June 2002, the Amending and Restating Deed dated 29 April 2003, the Fourth Supplemental Deed dated 18 August 2003, the Second Amending and Restating Deed dated 9 July 2004, the Sixth Supplemental Deed dated 18 March 2005, the Seventh Supplemental Deed dated 21 July 2005, the Eighth Supplemental Deed dated 13 October 2005, the Ninth Supplemental Deed dated 20 April 2006, the Third Amending and Restating Deed dated 25 August 2006, the Eleventh Supplemental Deed dated 15 February 2007, the Twelfth Supplemental Deed dated 31 July 2007 and the Thirteenth Supplemental Deed dated 20 May 2008 (collectively, the Trust Deed). The Trust Deed outlines certain circumstances under which the Manager can be removed, by notice in writing given by the Trustee, in favour of a corporation appointed by the Trustee upon the occurrence of certain events, including by a resolution passed by a simple majority of Unitholders present and voting at a meeting of Unitholders duly convened and held in accordance with the provisions of the Trust Deed.

Our Corporate Governance Culture

Strong corporate governance has always been our priority as the Manager. We recognise that an effective corporate governance culture is critical to our performance and, consequently, to the success of CMT. As such, corporate governance will always be at the top of our agenda.

Our Achievements

Our commitment towards strong corporate governance was affirmed with CMT winning the 'Most Transparent Company' Award (REITs category) at the Securities Investors Association Singapore (SIAS) Investors' Choice Awards for the fifth consecutive year in 2008. CMT was also voted 5^th in categories of Best Corporate Governance (Singapore) and Most Committed To A Strong Dividend Policy (Singapore), 8^th in Best Managed Company (Singapore) and 10^th in Best Investor Relations (Singapore) in the Finance Asia Awards 2008. CMT was also the winner of Best Investor Relations by a CEO in the IR Magazine Awards 2008 (South East Asia).

We are committed to high standards of corporate governance and transparency in our management of CMT, and operate in the spirit of the Code of Corporate Governance 2005 (Code) in the discharge of our responsibilities as the Manager in our dealings with Unitholders and the other stakeholders. The following paragraphs describe our corporate governance policies and practices in 2008 as the Manager of CMT, with specific references to the Code. They encompass proactive measures adopted by us for avoiding situations of conflict and potential conflict of interest, including prioritising the interests of Unitholders over the Manager's and ensuring that applicable laws and regulations are complied with. For ease of reference, the relevant provisions of the Code under discussion are identified in italics.

(A) BOARD MATTERS

The Board's Conduct of Affairs

Principle 1: Every company should be headed by an effective Board to lead and control the company. The Board works with Management to achieve this and the Management remains accountable to the Board.

The Board of Directors of the Manager (the Board) is responsible for the overall management and governance of the Manager and CMT, in the best interests and for the benefit of Unitholders.

The Board provides leadership to the Manager, sets strategic directions and oversees competent management of CMT, including necessary financial and human resources, to meet its objectives. The Board establishes goals for management and monitors the achievement of these goals. It ensures that proper and effective controls are in place to assess and manage business risk, and compliance with applicable laws. It also sets the disclosure and transparency standards for CMT and ensures that obligations to Unitholders and other stakeholders are understood and met.

Each Director must act honestly, with due care and diligence, and in the best interests of Unitholders. This obligation ties in with the Manager's prime responsibility in managing the assets and liabilitiesof CMT for the benefit of Unitholders. Decisions are taken objectively in the interests of CMT. The Manager has adopted guidelines, details of which are set out on here for Interested Party Transactions (as defined herein) and dealing with conflicts of interest.

The Board meets regularly to discuss and review the Manager's key activities, including its business strategies and policies for CMT. Board meetings are scheduled in advance, and are held at least once every quarter, to deliberate on the strategic policies of CMT, including any significant acquisitions and disposals, review the annual budget, review the performance of the business, review the financial performance of the Manager and CMT and approve the release of the quarterly and full-year results. The Board also reviews the risks to the assets of CMT and acts upon any comments from the auditors of CMT. Additional Board meetings are held, where necessary, to address significant transactions or issues. The Articles of Association of the Manager permit Board meetings to be held by way of teleconference and videoconference.

In the discharge of its functions, the Board is supported by specialty Board committees that provide independent oversight of management, and which also serve to ensure that there are appropriate checks and balances. These Board committees are the Audit Committee, Executive Committee and Corporate Disclosure Committee. Each of these Board committees operate under delegated authority from the Board. Other committees may be formed as dictated by business imperatives and/or to promote operational efficiency.

The number of Board and committee meetings held in the year, as well as the attendance of their membership, are set out here.

Information on the Audit Committee can be found in the section 'Audit Committee' below. The Executive Committee oversees the day-to-day activities of the Manager on behalf of the Board including, to:

• Approve or make recommendations to the Board on new investments, acquisitions, financing offers and banking facilities.
• Approve or make recommendations to the Board on divestments and write-offs of property assets/ equity stakes.
• Approve specific budgets for capital expenditure for development projects, acquisitions and enhancements/ upgrading of properties.
• Review management reports and operating budgets.
• Award contracts for development projects.
• Recommend changes to the financial limits for investment, etc.
• Report to the Board on decisions made by the Executive Committee.
• Perform such other functions as varied or delegated by the Board.

The members of the Executive Committee also meet informally during the course of the year.

The Corporate Disclosure Committee reviews corporate disclosure matters relating to CMT, including announcements to the SGX-ST, and pursues best practices in terms of transparency.

The Board has adopted a set of internal controls which sets out approval limits for, amongst others, capital expenditure, new investments and divestments, operating of bank accounts, bank borrowings and cheque signatories' arrangements at Board level. Apart from matters that specifically require the Board's approval - such as the issue of new Units, income distributions and other returns to Unitholders - the Board approves transactions exceeding certain threshold limits, while delegating authority for transactions below those limits to Board committees. Appropriate delegation of authority and approval sub-limits are also provided at management level to facilitate operational efficiency.

The Manager issues formal letters upon appointment of new Directors. Newly appointed Directors are briefed on the business activities of CMT, its strategic directions and policies, the regulatory environment in which CMT operates, the Manager's corporate governance practices, and their statutory and other duties and responsibilities as Directors. Directors are routinely updated on developments and changes in the operating environment, including revisions to accounting standards, and laws and regulations affecting the Manager and/or CMT. Directors are also encouraged to participate in industry conferences, seminars or any training programme in connection with their duties.

Board Composition and Guidance

Principle 2: There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management. No individual or small group of individuals should be allowed to dominate the Board's decision-making.

Currently, the Board consists of nine Directors of whom three are Independent Non-Executive Directors.

The majority of the Board members are Non-Executive with one-third of the Board being independent. Non-Executive Directors actively participate in setting and developing strategies and goals for management, and reviewing and assessing management's performance. This enables management to benefit from their external and objective perspective of issues that are brought before the Board. It also enables the Board to interact and work with management through a healthy exchange of ideas and views to help shape the strategic process. Coupled with a clear separation of the roles of the Chairman and the Chief Executive Officer, this provides a healthy professional relationship between the Board and management with clarity of roles and robust deliberation on the business activities of CMT.

A Director is considered independent if he has no relationship with the Manager or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the Director's independent business judgment in the best interests of CMT. The Chairman of the Board, Hsuan Owyang1, James Glen Service and David Wong Chin Huat are considered to be Independent Directors.

The Board is of the view that its current composition comprises persons who, as a group, provide the necessary core competencies and that the current Board size is appropriate, taking into consideration the nature and scope of CMT's operations.

The profiles of the Directors are set out on pages 32 to 35 of this Report. Report to Unitholders 2008.

Chairman and Chief Executive Officer

Principle 3: There should be clear division of responsibilities at the top of the company - the working of the Board and the executive responsibility of the company's business - which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power.

The roles of Chairman and Chief Executive Officer are separate and the positions are held by two separate persons. This is to ensure an appropriate balance of power, increased accountability and greater capacity of the Board for independent decision making. The division of responsibilities between the Chairman and the Chief Executive Officer facilitates effective oversight and a clear segregation of duties. The Chairman and the Chief Executive Officer are not related to each other.

The Chairman leads the Board to ensure the effectiveness on all aspects of its role and sets its agenda. He ensures that the members of the Board receive accurate, clear and timely information, facilitates the contribution of Non-Executive Directors, encourages constructive relations between Executive Directors, Non-Executive Directors and management, ensures effective communication with Unitholders and promotes a high standard of corporate governance.

The Chairman also ensures that the Board works together with management with integrity, competency and moral authority, and to engage management in constructive debate on strategy, business operations and enterprise risks.

The Chief Executive Officer has full executive responsibilities over the business directions and operational decisions of managing CMT.

Board Membership and Board Performance

Principle 4: There should be a formal and transparent process for the appointment of new directors to the Board.

Principle 5: There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board.

As the Manager is not itself a listed entity, the Manager does not consider it necessary for the Board to establish a nominating committee as it believes that the performance of the Manager, and hence, its Board, is reflected in the long term success of CMT. Thus, the Board performs the functions that such a committee would otherwise perform, namely, it administers nominations to the Board, reviews the structure, size and composition of the Board, and reviews the independence of Board members. Directors of the Manager are not subject to periodic retirement by rotation.

The composition of the Board is reviewed regularly to ensure that the Board has the appropriate size and mix of expertise and experience. In particular, the Manager strives to ensure the Board as a whole has the requisite blend of background, experience and knowledge in business, finance and management skills critical to CMT's businesses, and that each Director with his special contribution brings to the Board an independent and objective perspective to enable balanced and well-considered decisions to be made. A Director with multiple board representations is expected to ensure that sufficient attention is given to the affairs of the Manager and CMT.

The composition of the Board, including the selection of candidates for new appointments to the Board as part of the Board's renewal process, is determined using the following principles:

• The Chairman of the Board should be an Independent Non-Executive Director.
• The Board should comprise Directors with a broad range of commercial experience, including expertise in funds management, the property industry and in the banking and legal fields.
• At least one-third of the Board should comprise Independent Directors.

The selection of candidates is evaluated taking into account various factors including the current and mid-term needs and goals of CMT, and hence, the Manager, as well as the relevant expertise of the candidates and their potential contributions. Candidates may be put forward or sought through contacts and recommendations.

The independence of each Director is reviewed upon appointment, and thereafter annually, by the Board.

Reviews of Board performance as appropriate are informal. Renewal or replacement of Board members do not necessarily reflect their contributions to date, but may be driven by the need to position and shape the Board in line with the medium term needs of CMT and its business.

The financial indicators, set out in the Code as guides for the evaluation of the Board and its Directors, are in the Manager's opinion more of a measurement of management's performance and therefore less applicable to Directors. In any case, such financial indicators provide a snapshot of CMT's performance, and do not fully measure the sustainable long term wealth and value creation of CMT. The Manager believes that Board performance and that of individual Board members would perhaps be better reflected in, and evidenced by, proper guidance, diligent oversight and able leadership, and the support that it lends to management in steering CMT in the appropriate direction, and the long term performance of CMT whether under favourable or challenging market conditions. This is ultimately reflected in safeguarding the interests of CMT and maximising Unitholder value.

Contributions by an individual Board member can also take other forms, including providing objective perspectives of issues, facilitating business opportunities and strategic relationships, and accessibility to management outside of a formal environment of Board and/or Board committee meetings.

The matrix of Board members' participation and attendance record at meetings of the Board and the specialty Board committees during the financial year is provided below. This also reflects a Board member's additional responsibilities and special focus on the respective Board committees.

Board and Board Committees

Composition

Five Board meetings were held in 2008. The tables contain the attendance record of Directors at Board meetings and committee meetings during the year, and details of their memberships in the Board and committees.

BOARD MEMBERS	AUDIT COMMITTEE	EXECUTIVE COMMITTEE	CORPORATE DISCLOSURE COMMITTEE
Hsuan Owyang1	C		C
Liew Mun Leong		C	M
Pua Seck Guan2		M
Lim Beng Chee3		M
James Glen Service	M
David Wong Chin Huat	M
S. Chandra Das
Kee Teck Koon		M	M
Olivier Lim Tse Ghow	M	M	M
Wen Khai Meng4 (Alternate to Kee Teck Koon)
Lui Chong Chee5
Denotes: C - Chairman, M - Member

Meeting Attendance

BOARD MEMBERS	BOARD NO. OF MEETINGS HELD: 5	AUDIT COMMITTEE NO. OF MEETINGS HELD: 4
Hsuan Owyang1	5	4
Liew Mun Leong	5	N.A.
Pua Seck Guan2	5	N.A.
Lim Beng Chee3	N.A.	N.A.
James Glen Service	5	4
David Wong Chin Huat	5	4
S. Chandra Das	5	N.A.
Kee Teck Koon	5	N.A.
Olivier Lim Tse Ghow	4	2
Wen Khai Meng4 (Alternate to Kee Teck Koon)	N.A.	N.A.
Lui Chong Chee5	N.A.	N.A.

1. Resigned with effect from 1 January 2009 (James Koh Cher Siang has been appointed with effect from 1 January 2009 in place of Hsuan Owyang).
2. Resigned with effect from 1 November 2008.
3. Appointed with effect from 1 November 2008.
4. Resigned with effect from 24 November 2008.
5. Appointed with effect from 24 November 2008.

Access to Information and Accountability

Principle 6: In order to fulfil their responsibilities, Board members should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis.

Principle 10: The Board should present a balanced and understandable assessment of the company's performance, position and prospects.

Management provides the Board with complete and adequate information in a timely manner. This is done through regular updates on financial results, market trends and business developments. Changes to regulations, policies and accounting standards are also monitored closely. To keep pace with regulatory changes, where these changes have an important and significant bearing on CMT and its disclosure obligations, the Directors are briefed by management during Board meetings, at specially convened sessions or via circulation of Board papers. Information provided to the Board include explanatory background relating to matters to be brought before the Board, budgets, forecasts and management accounts. In relation to budgets, any material variance between projections and actual results are disclosed and explained.

The Secretary of the Manager works with the Chairman and management to ensure that Board papers and agenda are provided to each Director in advance of Board meetings so that they can familiarise themselves with the matters prior to the Board meetings. Senior executives who can provide additional insights into matters to be discussed are requested to also attend the Board meetings so as to be at hand to answer questions. Board meetings are usually half-a-day affairs and include presentations by senior executives, external consultants and experts on strategic issues relating to specific business areas.

The Board has separate and independent access to the Manager's senior management and the Secretary, and vice versa. The Secretary will give the Board the necessary assistance and is also responsible for assisting the Chairman in ensuring that Board procedures are followed and that the applicable laws and regulations are complied with. Under the direction of the Chairman, the Secretary's responsibilities include ensuring good information flows within the Board and its committees and between senior management and Non-Executive Directors as well as facilitating orientation and assisting with professional development as required. The Secretary attends Board meetings and committee meetings to take minutes. The appointment and removal of the Secretary is a Board reserved matter.

Where necessary, the Manager will, upon the request of Directors (whether as a group or individually), provide them with independent professional advice, at the Manager's expense, to enable them to discharge their duties. The Secretary assists the Directors in obtaining such advice.

The Manager has implemented quarterly financial reporting for CMT since inception. Financial results and other price sensitive public announcements are presented in a balanced and understandable assessment of CMT's performance, position and prospects. The Manager also provides the Directors with management accounts on a monthly basis to enable Directors to keep abreast of CMT's financial performance, position and prospects.

B) REMUNERATION MATTERS

Procedures for Developing Remuneration Policies

Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.

Level and Mix of Remuneration

Principle 8: The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but companies should avoid paying more than is necessary for this purpose. A significant proportion of executive directors' remuneration should be structured so as to link rewards to corporate and individual performance.

Disclosure on Remuneration

Principle 9: Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedure for setting remuneration in the company's annual report. It should provide disclosure in relation to its remunerative policies to enable investors to understand the link between remuneration paid to directors and key executives, and performance.

The remuneration of Directors and staff of the Manager is paid by the Manager, and not by CMT.

The Manager adopts the remuneration policies and practices of its holding company, CapitaLand Limited (CL), which has a remuneration committee that determines and recommends to the CL board of directors, the framework of remuneration, terms of engagement, compensation and benefits for senior executives of the CL Group, which include the Chief Executive Officer of the Manager and members of its senior management team. It is hence not necessary for the Manager to have a remuneration committee.

Since CMT does not bear the remuneration of the Manager's Board and staff, the Manager does not consider it necessary to include a report on remuneration of its Directors (other than as set out below) and its key executives.

The remuneration of Directors for FY2008 is shown in the table below. The Chief Executive Officer and representatives of CL on the Board of the Manager do not receive directors' fees. Non-Executive Directors have no service contracts with the Manager. They receive a basic fee, an additional fee for serving on any of the committees and an attendance fee for participation in meetings of the Board and any of the committees, project meetings and verification meetings. In determining the quantum of such fees, factors such as frequency of meetings, time spent and responsibilities of directors are taken into account. The Chairman and members of the Audit Committee receive additional fees to take into account the nature of their responsibilities and the greater frequency of meetings.

BOARD MEMBERS	FY2008 DIRECTOR'S FEES1	FY2007 DIRECTOR'S FEES 1
Hsuan Owyang2	S$115,000	S$117,000
Liew Mun Leong	-	-
Pua Seck Guan3	-	-
Lim Beng Chee4	-	-
James Glen Service	S$92,700	S$87,700
David Wong Chin Huat	S$69,000	S$69,000
S. Chandra Das	S$46,000	S$44,000
Kee Teck Koon	-	-
Olivier Lim Tse Ghow	-	-
Wen Khai Meng5 (Alternate to Kee Teck Koon)	-	-
Lui Chong Chee6	-	-

1. Including additional fees of S$2,000 (local director) and S$5,000 (foreign director) per meeting attendance and including additional fees of S$1,700 per meeting attendance via teleconference or videoconference.
2. Resigned with effect from 1 January 2009 (James Koh Cher Siang has been appointed with effect from 1 January 2009 in place of Hsuan Owyang).
3. Resigned with effect from 1 November 2008.
4. Appointed with effect from 1 November 2008.
5. Resigned with effect from 24 November 2008.
6. Appointed with effect from 24 November 2008.

(C) ACCOUNTABILITY AND AUDIT

Audit Committee

Principle 11: The Board should establish an Audit Committee with written terms of reference which clearly set out its authority and duties.

The Audit Committee is established by the Board from among the Directors of the Manager and comprises four members, all non-executive, the majority of whom (including the Chairman of the Audit Committee) are independent.

The Manager is of the view that the Audit Committee members have the relevant expertise to discharge the functions of an Audit Committee.

The Audit Committee has a set of terms of reference defining its scope of authority which includes, in relation to its management of CMT:

• Monitoring and evaluating the effectiveness of the Manager's internal control process (including financial, operational and compliance controls and risk management policies and systems) through reviewing internal and external audit reports to ensure that where deficiencies in internal controls have been identified, appropriate and prompt remedial action is taken by management.
• Reviewing the quality and reliability of information prepared for inclusion in the financial reports and approving the financial statements and the audit report before recommending to the Board for approval.
• Reviewing the adequacy and effectiveness of the internal audit function.
• Monitoring the procedures established to regulate Interested Party Transactions (as defined below ), including ensuring compliance with Chapter 9 of the Listing Manual on interested person transactions, transactions between CMT and an 'interested person', and compliance with the provisions of the Property Funds Guidelines of the CIS Code (the Property Funds Guidelines) relating to transactions between CMT and an 'interested party'.
• Reviewing the appointment and re-appointment of auditors (including remuneration and terms of engagement) before recommending them to the Board for approval and reviewing the adequacy of existing audits in respect of cost, scope and performance.
• Reviewing the scope and results of the audit and its cost effectiveness, and the independence and objectivity of the external auditors and nonaudit services provided by the external auditors and confirming that they would not, in the Audit Committee's opinion, impair the independence of the auditors.
• Monitoring the procedures in place to ensure compliance with applicable legislation, the Listing Manual and the Property Funds Guidelines.

The Audit Committee is authorised to investigate any matters within its terms of reference. The Audit Committee has full access to and co-operation of the management and the internal auditors and has full discretion to invite any executive director or officer to attend its meetings. The internal auditors and CMT's external auditors, have unrestricted access to the Audit Committee. Reasonable resources have been made available to the Audit Committee to enable it to discharge its duties.

The Audit Committee meets CMT's external auditors, and with the internal auditors, without the presence of management, at least annually.

In its review of the audited financial statements for FY2008, the Audit Committee discussed with management and external auditors the accounting principles that were applied. Based on the review and discussions with management and the external auditors, the Audit Committee is of the view that the financial statements are fairly presented, and conform to generally accepted accounting principles in all material aspects.

The Audit Committee has also conducted a review of all non-audit services provided by the external auditors during the financial year and is satisfied that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors. The non-audit fee paid and payable to the external auditors for FY2008 amount to S$145,000.

Audit Committee meetings are generally held after the end of every quarter of every financial year. Four Audit Committee meetings were held during the year.

Internal Controls

Principle 12: The Board should ensure that Management maintains a sound system of internal controls to safeguard the shareholders' investments and the company's assets.

Internal Audit

Principle 13: The company should establish an internal audit function that is independent of the activities it audits.

The Audit Committe reviews, at least once a year, the effectiveness of the Manager's material internal controls, including financial, operational and compliance controls, and risk management, taking into account recommendations from CMT's external auditors and internal auditors. Material non-compliance and internal control weaknesses noted during the audit are reported to the Audit Committee. The Board is satisfied that the Manager's internal controls are adequate.

The Manager has in place an internal audit function supported by CapitaLand's Internal Audit Department (CLIA) in relation to CMT since inception. A majority of the CLIA staff are members of the Singapore branch of the Institute of Internal Auditors, Inc. (IIA), which has its headquarters in the United States. CLIA subscribes to, and is guided by, the Standards for the Professional Practice of Internal Auditing developed by the IIA and has incorporated these standards into its audit practices.

The standards set by the IIA cover requirements in respect of the following:

• Independence.
• Professional proficiency.
• Scope of work.
• Performance of audit work.
• Management of the Internal Audit Department.

To ensure that the internal audits are performed by competent professionals, CLIA recruits and employs suitably qualified staff.

In order that their technical knowledge remains current and relevant, CLIA identifies and provides training and development opportunities to its staff. The internal audit function provided by CLIA has incorporated the auditing standards developed by the IIA into its audit practices and meets with the standards set by the IIA.

CLIA is headed by a senior manager, who reports directly to the Audit Committee on audit matters and to the Chief Executive Officer of the Manager on administrative matters. The Audit Committee reviews the internal audit reports and activities on an on-going basis. The Audit Committee also reviews and approves the annual internal audit plan with respect to CMT. The Audit Committee is of the view that the internal audit department is adequately resourced to perform its functions and have, to the best of its ability, maintained its independence from the activities that it audits.

(D) COMMUNICATION WITH UNITHOLDERS

Principle 14: Companies should engage in regular, effective and fair communication with shareholders.

Principle 15: Companies should encourage greater shareholder participation at AGMs, and allow shareholders the opportunity to communicate their views on various matters affecting the Company.

The Listing Manual requires that a listed entity disclose to the market matters that could, or might be expected to, have a material effect on the price of the entity's securities. In line with CMT's disclosure obligations, the Board's policy is to inform Unitholders, in a timely manner, of all major developments that impact CMT. During the year, a continuous disclosure process was in place to ensure that compliance with such obligations was constantly adhered to.

CMT believes that it should engage in regular, effective, unbiased and transparent communication with Unitholders. The Manager communicates information on CMT to Unitholders and the investing community through announcements that are released to the SGXST via SGXNET. Such announcements include the quarterly and full-year results, material transactions, and other developments relating to the CMT requiring disclosure under the corporate disclosure policy of the SGX-ST. Communication channels with Unitholders are also made accessible via:

• Media and Analysts' briefings (with 'LIVE' webcast available for viewing on CMT's website).
• One-on-one/group meetings or conference calls, investor luncheons, local/oveseas roadshows and conferences.
• Annual Reports
• Press releases on major developments of CMT.
• Notices of, and explanatory memoranda for, extraordinary general meetings (EGMs).
• CMT's website at www.capitamall.com (Email alerts option is available to subscribers who wish to be notified of newly posted announcements/ press releases/presentations/publications).

During the "LIVE" webcast of Media and Analysts' briefings, viewers are also given the opportunity to send in their queries online. The queries received are responded to the Manager during the Webcast's question and answer segment, time permitting. The Manager will then separately address the queries not addressed during the webcast.

CMT is the only Singapore REIT included in the Straits Times Index (STI), the primary Singapore equity market barometer. It is also included in other key indices such as the FTSE4Good Global Index, FTSE/ ASEAN Index, FTSE European Public Real Estate Association (EPRA) /NAREIT Global Real Estate Index, FTSE STI, FTSE Straits Times All Share Index, FTSE ST Financials Index, FTSE ST Real Estate Index, FTSE ST REIT, Global Property Research (GPR) General Index, GPR General ex-US Index, GPR General Far East Index, GPR General Far East ex-Japan Index, GPR General Singapore Index, GPR General Quoted Index, GPR General Quoted ex-US Index, GPR General Quoted Far East Index, GPR General Quoted Far East ex-Japan Index, GPR General Quoted Singapore Index, GPR 250 Index, GPR 250 ex-US Index, GPR 250 Asia Index, GPR 250 Asia ex-Japan Index, GPR 250 Asia Pacific Index, GPR 250 Asia Pacific ex-Japan Index, GPR 250 South-Eastern Asia Index, GPR 250 Singapore Index, GPR 250 REIT Index, GPR 250 REIT ex-US Index, GPR 250 REIT Asia Index, GPR 250 REIT Asia ex-Japan Index, GPR 250 REIT Asia Pacific Index, GPR 250 REIT Asia Pacific ex-Japan Index, GPR 250 REIT South- Eastern Asia Index, GPR 250 REIT Singapore Index, Morgan Stanley Capital International (MSCI) Singapore Standard, MSCI World Standard Index, Standard and Poor's (S&P) BMI Global index, S&P Global Property and S&P Global REIT index - all of which are widely tracked and referred to by international fund managers as performance benchmarks in the selection and monitoring of investments.

With majority of Units held by institutional investors, the Manager considers meetings with local and foreign fund managers an integral part of investor relations.

During the year under review, the Manager met with institutional investors from Singapore, Hong Kong, Japan, the United Kingdom, the United States, Canada, various European countries and Australia. These meetings and roadshows with investors enabled the Manager to update potential and current Unitholders on CMT's significant developments and its medium to long term strategies. CMT also participates in various local and overseas conferences as part of its efforts to build interest in the Singapore REIT market. The Manager will continue to pursue opportunities to educate and keep retail investors informed of the latest developments in the Singapore REIT industry, through relevant seminars and conferences.

Unitholders and potential stakeholders have 24-hour access to CMT's website for information on CMT's major developments, property descriptions, announcements and other corporate information. CMT's unit price information (20 minutes lag-time) is also made available on the website. In addition, the public can pose questions via a dedicated 'Ask Us' email address, and have their queries addressed accordingly. Also available on the website is an archive of CMT's announcements, press releases, annual reports and operational details. The latest information is posted on the website as soon as it is released on the SGX-ST and the media.

All Unitholders are sent a copy of the CMT Annual Report. As and when an EGM of the Unitholders is to be held, each Unitholder is sent a copy of a circular to Unitholders which contains details of the matters to be proposed for Unitholders' consideration and approval. The notice of EGM which sets out all items of business to be transacted at the EGM, is also announced on SGXNET and advertised in the newspapers. Members of the Board, the Manager's senior management and the external auditors of CMT are in attendance at EGMs, and Unitholders are given the opportunity to air their views and ask questions regarding the matters to be tabled at the EGM. Resolutions put to the EGMs are separate unless they are interdependent and linked, and the reasons and material implications are explained. A Unitholder is allowed to appoint one or two proxies to attend and vote at EGMs meetings in his/her stead.

(E) ADDITIONAL INFORMATION

Dealings With Interested Parties

Review Procedures for Interested Party Transactions

In general, the Manager has established internal control procedures to ensure that all future transactions involving the Trustee and a related party of the Manager (Interested Party Transactions) are undertaken on an arm's length basis and on normal commercial terms, which are generally no more favourable than those extended to unrelated third parties. In respect of such transactions, the Manager would have to demonstrate to the Audit Committee that the transactions are undertaken on normal commercial terms which may include obtaining (where practicable) quotations from parties unrelated to the Manager, or obtaining valuations from independent valuers (in accordance with the Property Funds Guidelines).

In addition, the following procedures will be followed:

• Transactions (either individually or as part of a series or if aggregated with other transactions involving the same interested party during the same financial year) equal to or exceeding S$100,000 in value, but below 3.0% of CMT's net tangible assets, will be subject to review and approval by the Audit Committee.
• Transactions (either individually or as part of a series or if aggregated with other transactions involving the same interested party during the same financial year) equal to or exceeding 3.0%, but below 5.0% of CMT's net tangible assets, will be subject to the review and approval of the Audit Committee.
• Transactions (either individually or as part of a series or if aggregated with other transactions involving the same interested party during the same financial year) equal to or exceeding 5.0% of CMT's net tangible assets will be reviewed and approved by the Audit Committee which may as it deems fit request advice on the transaction from independent sources or advisors, including the obtaining of valuations from professional valuers. Further, under the Listing Manual and the Property Funds Guidelines, such transactions would have to be approved by the Unitholders of CMT at a meeting of Unitholders.
• Audit Committee's approval shall only be given if the transactions are on arm's length commercial terms and consistent with similar types of transactions undertaken by the Trustee, with third parties which are unrelated to the Manager.

Where matters concerning CMT relate to transactions entered into, or to be entered into, by the Trustee for and on behalf of CMT with an interested party of the Manager, the Trustee is required to ensure that such transactions are conducted on normal commercial terms, and will not be prejudicial to the interest of CMT and the Unitholders, and in accordance with the applicable requirements of the Property Funds Guidelines and/or the Listing Manual relating to the transaction in question. Further, the Trustee has the ultimate discretion under the Trust Deed to decide whether or not to enter into a transaction involving an interested party of the Manager. If the Trustee is to sign any contract with a related party of the Manager, the Trustee will review the contract to ensure that it complies with applicable requirements relating to interested party transactions in the Property Funds Guidelines (as may be amended from time to time) and the provisions of the Listing Manual relating to interested person transactions (as may be amended from time to time) as well as other guidelines as may from time to time be prescribed by the MAS and the SGX-ST or other relevant authority to apply to REITs.

Role of the Audit Committee for Interested Party Transactions

All Interested Party Transactions are subject to regular periodic reviews by the Audit Committee.

The Manager's internal control procedures are intended to ensure that Interested Party Transactions are conducted at arm's length and on normal commercial terms and are not prejudicial to Unitholders' interests. The Manager maintains a register to record all Interested Party Transactions which are entered into by CMT (and the basis, including the quotations obtained to support such basis, on which they are entered into). The Manager then incorporates into its internal audit plan a review of all Interested Party Transactions entered into by CMT. The Audit Committee reviews the internal audit reports to ascertain that the guidelines and procedures established to monitor Interested Party Transactions have been complied with. In addition, the Trustee will also review such audit reports to ascertain that the Property Funds Guidelines have been complied with.

The Audit Committee periodically reviews Interested Party Transactions to ensure compliance with the internal control procedures and the relevant provisions of the Listing Manual and the Property Funds Guidelines. The review includes the examination of the nature of the transaction and its supporting documents or such other data deemed necessary by the Audit Committee.

If a member of the Audit Committee has an interest in a transaction, he is to abstain from participating in the review and approval process in relation to that transaction.

Details of all Interested Party Transactions (equal to or exceeding S$100,000 each in value) entered into by CMT during the financial year are disclosed on page 171 of this Report. Report to Unitholders 2008 .

Dealings with Conflicts of Interest

The following procedures have been established to deal with potential conflicts of interest which the Manager (including its Directors, executive officers and employees) may encounter in managing CMT:

• The Manager will be a dedicated manager to CMT and will not manage any other REIT or be involved in any other real property business.
• All executive officers of the Manager will be employed by the Manager.
• All resolutions at meetings of the Board of Directors of the Manager in relation to matters concerning CMT must be decided by a majority vote of the Directors, including at least one Independent Director.
• In respect of matters in which CL and/or its subsidiaries have an interest, direct or indirect, any nominees appointed by CL and/or its subsidiaries to the Board will abstain from voting.
• If the Manager is required to decide whether or not to take any action against any person in relation to any breach of any agreement entered into by the Trustee for and on behalf of CMT with an affiliate of the Manager, the Manager shall be obliged to consult with a reputable law firm (acceptable to the Trustee) which shall provide legal advice on the matter. If the said law firm is of the opinion that the Trustee, on behalf of CMT, has a prima facie case against the party allegedly in breach under such agreements, the Manager is obliged to pursue the appropriate remedies under such agreements. The Directors of the Manager will have a duty to ensure that the Manager complies with the aforesaid. Notwithstanding the foregoing, the Manager shall inform the Trustee as soon as it becomes aware of any breach of any agreement entered into by the Trustee for and on behalf of CMT with an affiliate of the Manager, and the Trustee may take such action as it deems necessary to protect the rights of Unitholders and/or which is in the interests of Unitholders. Any decision by the Manager not to take action against an affiliate of the Manager shall not constitute a waiver of the Trustee's right to take such action as it deems fit against such affiliate.
• The Board shall include at least two Independent Directors.

The Directors of the Manager are under a fiduciary duty to CMT to act in its best interests in relation to decisions affecting CMT when they are voting as members of the Board. In addition, the Directors and executive officers of the Manager are expected to act with integrity and honesty at all times.

Additionally, the Trustee has been granted a right of first refusal by CapitaLand Retail Limited (CRTL) over all retail income-producing properties located in Singapore with certain specified characteristics which may in the future be identified and targeted for acquisition by CRTL or any of its subsidiaries.

Under the Trust Deed, in respect of voting rights where the Manager would face a conflict between its own interest and that of the Unitholders, the Manager shall cause such voting rights to be exercised according to the discretion of the Trustee.

RISK ASSESSMENT AND MANAGEMENT OF BUSINESS RISK

Effective risk management is a fundamental part of CMT's business strategy. Recognising and managing risk is central to the business and to protecting Unitholders' interests and value. CMT operates within overall guidelines and specific parameters set by the Board. Each transaction is comprehensively analysed to understand the risk involved. Responsibility for managing risk lies initially with the business unit concerned, working within the overall strategy outlined by the Board.

The Manager's focus on risk management recongnises that risk management is, prima facie, an issue for management. The risk management framework supports this focus but provides a structure context for those personnel to undertake a half-yearly review of the past performance of, and to profile the current and future risks facing, their areas of responsibility.

This risk information is consolidated and used as key input into the corporate strategy sessions attended by management and the Property Manager. Such sessions are held regularly to review CMT's strategic direction in detail, and include specific focus on the identification of key business and financial risks which could prevent CMT from achieving its objectives. Management is then required to ensure that appropriate controls are in place to effectively manage those risks, and such risks and controls are monitored by the Board on a regular basis. The internal audit plan is developed in conjunction with the risk management programme and is focused on ensuring the operation of internal controls and assessing the effectiveness and efficiency of the control environment.

The Board generally meets quarterly, or more often if necessary to review the financial performance of the Manager and CMT against a previously approved budget. The Board also reviews the risks to the assets of CMT and acts upon any comments by the auditors of CMT. In assessing business risk, the Board considers the economic environment and the property industry risk. The Board and its Executive Committee review and approve all investment decisions. Management meets regularly to review the operations of the Manager and CMT and discuss continuous disclosure issues.

The Manager has determined that significant risk for CMT will most likely arise when making property investment decisions. Accordingly, the Manager has established procedures to be followed when making such decisions. In accordance with this policy, the Board requires comprehensive due diligence to be carried out in relation to the proposed investment and a suitable determination is made as to whether the anticipated return on investment is appropriate, having regard to the level of risk.

In addition, the Board requires that each major proposal submitted to the Board for decision is accompanied by a comprehensive risk assessment and, where required, management's proposed mitigation strategies.

DEALINGS IN SECURITIES

The Manager has voluntarily issued guidelines to its Directors and employees which prohibit them from dealing in CMT units while in possession of material unpublished price-sensitive information and during the period commencing from (i) two weeks before the release of CMT's quarterly results and (ii) one month before the release of CMT's full-year results to the date of the release of the relevant results to the SGXST. Under these guidelines, Directors and employees have been directed to refrain from dealing in CMT units on short-term considerations. They are also made aware of the applicability of the insider trading laws at all times.

WHISTLE-BLOWING

The Audit Committee has put in place procedures to provide employees of the Manager with well defined and accessible channels to report on suspected fraud, corruption, dishonest practices or other similar matters relating to CMT and the Manager, and for the independent investigation of any reports by employees and appropriate follow up action. The aim of the whistle-blowing policy is to encourage the reporting of such matters in good faith, with the confidence that employees making such reports will be treated fairly, and to the extent possible, be protected from reprisal. On an ongoing basis, the whistle blowing policy is covered during staff training to promote fraud awareness.

 

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