2004 had been an exciting and fruitful year. Compared to 2003 when the Group had to overcome the negative effects of the war in Iraq and Severe Acute Respiratory Syndrome in the first half year, as well as the generally weak economy that persisted in the region, 2004 was a much brighter year with market conditions and sentiment in Singapore and the region improving.

Against this backdrop, the Group had a busy year with several strategic initiatives. These included:

Another successful REIT – CapitaCommercial Trust ("CCT")
This transaction gave shareholders an additional investment instrument which is liquid and more tax efficient. The successful listing and management of CCT saw its unit market price increase by over 50% from its opening price of S$1.00 on 11 May 2004. Shareholders also enjoyed a re-rating of CapitaLand shares.

Increasing our Presence in China and Thailand
The Group's operations in China continued to be a strong contributor to its profits in 2004. The Group believes favourable market conditions will continue in the next few years and accordingly had acquired four more parcels of land in Shanghai, Beijing and Guangzhou for residential and serviced residence development. In addition, our Retail SBU ("CRTL") has entered into two separate co-operative agreements which will enable CRTL to gain access to a sizeable number of retail assets anchored respectively by Wal-Mart and Beijing Hualian Group, the latter being one of the largest retailers in China.

The Group also remains positive on Thailand and has embarked on a residential development in addition to our existing hotels and serviced residence operations. During the year, CapitaLand's joint venture company in Thailand, TCC Capital Land, launched its first luxury residential project, Athenee Residence. More than 80% of the 219-unit freehold condominium was booked after the launch in December 2004.

Management Contracts in New Markets
The Group enlarged its geographical spread to United Arab Emirates, South Korea, Russia and French Polynesia. In 2003, Ascott secured management contracts for two serviced residences in Dubai which are expected to be operational in 2005. In addition, PREMAS set up a joint venture in 2004 to provide integrated facility management services in Dubai.

Marking the Group's entry into the South Korean market, Ascott secured its first serviced residence management contract for 348 units in Seoul's central business district in 2004. During the same year, Raffles also secured two hotel management contracts in new markets, namely Swissôtel Krasnye Holmy in Moscow and Raffles Resort Taimana Tahaa in French Polynesia.



Expanding Fee-based Income
Several new property funds and real estate financial products were originated by our Financial Services SBU. New management contracts were also secured by both our hospitality arms, Ascott and Raffles.

Monetisation of Assets
The Group continues with its monetisation programme. This included the sale of Scotts Shopping Centre and The Ascott Singapore, 11 floors of Shinjuku Square Tower, as well as the injection of Plaza Singapura into CapitaMall Trust (”CMT”) and La Park Mizue into CapitaRetail Japan Fund.

Earnings before interest and tax ("EBIT") at S$901.8 million were S$312.8 million or 53.1% better than 2003. Improvement was across the board in all SBUs and in all geographical regions. The increase in EBIT came from higher residential contributions, better performances from hotels and serviced residences operations, higher fee-based income, reversal of provisions no longer required, as well as lower revaluation deficits charged to the profit and loss account ("P/L"). The net revaluation deficit arising from year-end valuation of investment properties charged to P/L for 2004 was S$41.7 million compared to S$161.8 million in 2003. Write-backs in capital values of our investment properties in Hong Kong and China helped to cushion the revaluation deficits of Singapore investment properties.

Finance costs in 2004 were S$272.1 million, about S$31.3 million higher than 2003. This was largely due to consolidation of Citadines' interest expenses as well as higher interest expenses from the enlarged stapled Australand Property Group which were also translated to S$ at higher amounts due to higher exchange rates compared to 2003.

Although operating profits were substantially higher in 2004 than 2003, taxation expense for 2004 at S$153.1 million was only marginally higher by S$4.8 million or 3.2%. This was due to higher non-taxable profits in Australia, non-taxable recognition of negative goodwill on acquisition, as well as a lower Singapore corporate tax rate of 20% compared to 22% in 2003.

As a result of the factors discussed above, profit after tax and minority interests (”PATMI”) achieved for 2004 tripled to S$313.0 million from the profit of S$102.6 million recorded in 2003. The Group is pleased to report that this is the highest PATMI recorded so far in the four years since its formation.