UOA REIT ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER Contents. 2 Financial Highlights. 4 Glossary. 5 Corporate Information

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1 UOA REIT ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2008 Contents 2 Financial Highlights 4 Glossary 5 Corporate Information 6 Board of Directors of the Manager 11 Analysis of Unitholdings 12 Top 30 Unitholders Listing 14 Chairman s Statement Financial Statements 16 Manager s Report 28 Statement by Manager 29 Statutory Declaration 30 Trustee s Report to the Unitholders 31 Report of the Auditors to the Unitholders 32 Balance Sheet 33 Income Statement 35 Statement of Changes in Equity 36 Cash Flow Statement 37 Notes to the Financial Statements ANNUAL REPORT 2008 UOA REIT

2 Financial Highlights 1 month Year ended Year ended Year ended Total Gross Income () 2,275,275 31,380,053 34,264,076 42,311,651 Income before taxation () 900,954 20,311,549 99,986,876 25,184,282 Income after taxation () - Realised 900,954 19,599,862 21,236,876 25,184,282 - Unrealised - 650,000 78,750, Total 900,954 20,249,862 99,986,876 25,184,282 Earnings per unit (sen) - Realised Unrealised Total Distribution per unit (sen) Net asset value () 240,330, ,962, ,003, ,510,362 Net asset value per unit () Market price per unit () Distribution yield % 6.17% 9.37% , ,311,549 25,184, ,986,876 Income before taxation () Earnings per unit (sen) Distribution per unit (sen) Net asset value per unit () UOA REIT ANNUAL REPORT 2008

3 Financial Highlights (cont d) Net Asset Value ( 000) 400, , , , , , ,000 50, Market Price Per Unit () & Net Asset Value Per Unit () Market price per unit Net asset value per unit ANNUAL REPORT 2008 UOA REIT 3

4 Glossary Distribution Income Distribution of 5.55 sen per unit for the six (6) months financial period ended 31 December 2008 to be paid by 27 February 2009 DPU Distribution per unit Financial Year Financial year ended 31 December 2008 Manager UOA Asset Management Sdn Bhd Properties Wisma UOA Pantai and the parcels within Wisma UOA Centre, UOA II and UOA Damansara Property Manager Colliers, Jordan Lee & Jaafar Sdn Bhd Unitholders Unitholders of UOA REIT UOA Holdings Group UOA Holdings Sdn Bhd and its subsidiaries UOA REIT/ The Trust UOA Real Estate Investment Trust 4 UOA REIT ANNUAL REPORT 2008

5 Corporate Information Manager UOA Asset Management Sdn Bhd ( U) (Incorporated in Malaysia) Registered Address Of The Manager No. 9, Jalan Indah 16 Taman Cheras Indah Kuala Lumpur Malaysia Telephone No: Facsimile No: Board Of Directors Of The Manager Tan Sri Dato Alwi bin Jantan Chan Cecelia Khor Soo Beng Kong Chong Chi Suim Alan Charles Winduss Dato Gan Boon Khuay Jeswant Natarajan Kung Beng Hong Secretaries Of The Manager Yap Kai Weng (MAICSA No: 74580) Wong Yoke Leng (MAICSA No: ) Management Team Chan Cecelia (Executive Director & Chief Executive Officer) Khor Soo Beng (Executive Director) Kong Sze Choon (Assets Management Manager) Registrar Of The Trust In Charge Of The Register Of Unitholders Symphony Share Registrars Sdn Bhd ( D) Level 26, Menara Multi-Purpose Capital Square No 8, Jalan Munshi Abdullah Kuala Lumpur Malaysia Telephone No: Facsimile No: Auditors Moores Rowland (AF: 0539) 7th Floor, South Block Wisma Selangor Dredging 142-A, Jalan Ampang Kuala Lumpur Malaysia Telephone No: Facsimile No: Bankers For The Trust CIMB Bank Berhad AmBank Berhad Stock Exchange Listing Bursa Malaysia Securities Berhad Trustee OSK Trustees Berhad ( U) 6th Floor, Plaza OSK Jalan Ampang Kuala Lumpur Malaysia Telephone No: Facsimile No: Property Manager Colliers, Jordan Lee & Jaafar Sdn Bhd (55901-U) Level 6, Block G North Pusat Bandar Damansara Damansara Heights Kuala Lumpur Malaysia Telephone No: Facsimile No: ANNUAL REPORT 2008 UOA REIT 5

6 Board Of Directors Of The Manager Profile Of Directors Of The Management Company Name Nationality Age Position Tan Sri Dato Alwi bin Jantan Malaysian 73 Non-Independent Non-Executive Chairman Chan Cecelia Singaporean 54 Chief Executive Officer/ Non-Independent Executive Director Khor Soo Beng Malaysian 46 Non-Independent Executive Director Kong Chong Chi Suim Malaysian 67 Non-Independent Non-Executive Director Alan Charles Winduss Australian 67 Non-Independent Non-Executive Director Dato Gan Boon Khuay Malaysian 54 Independent Non-Executive Director Jeswant Natarajan Malaysian 57 Independent Non-Executive Director Kung Beng Hong Malaysian 63 Independent Non-Executive Director 6 UOA REIT ANNUAL REPORT 2008

7 Board Of Directors Of The Manager (cont d) Further information on the Directors is set out in the ensuing paragraphs. Tan Sri Dato Alwi bin Jantan is our Non-Independent Non-Executive Chairman. He hails from Terengganu and attended the Malay College Kuala Kangsar. On leaving the college, he entered University Malaya in Singapore from where he graduated with a Bachelor of Arts (Honors in History) in Upon graduation, he joined the Administrative and Diplomatic Service ( Service ). He had a distinguished career in public service culminating as Director General of Public Service, the position he held for 3 ½ years until his retirement on 16 April His other top appointments were as Secretary General, Ministry of Agriculture ( ), Deputy Secretary General, Prime Minister s Department ( ), Secretary General, Ministry of Health ( ), Secretary General, Ministry of Local Government and Federal Territory ( ), State Secretary, Selangor ( ), Director General of National Archives and Library ( ). He concurrently served as Private Secretary to His Royal Highness the Timbalan Yang di Pertuan Agong in and Upon his retirement, after serving 32 years in the public service, he joined Resorts World Bhd as Executive Director. He joined the Board of United Overseas Australia Limited in He also sits on the Board of several public listed companies including Hiap Teck Venture Bhd. While in service he attended the Stage Technique International d Archives, Paris, was a UNESCO Fellow, a recipient of an Honorary Degree from the University of Rome and attended Harvard Graduate School of Business. He is past President of the Harvard Business School Alumni Club of Malaysia and Honorary Member of the International Council on Archives. Chan Cecelia is our Chief Executive Officer / Non-Independent Executive Director. She started her career in Singapore in several private limited companies mainly in the property development sector with the last being Chong Soon Land & Development Pte Ltd where she was principally involved in property sales and marketing of the company. After her stints in Singapore, she joined UOA Holdings Group, a property development and investment company with operations mainly in Malaysia. Over the last 12 years, she has held the positions as Group Executive Director cum Property Director of UOA Holdings Sdn Bhd where she oversees the sales and rental of property development and investment undertaken by the Group. She oversees the UOA Property Division which has over 25 employees. She is a member of the senior management of UOA Holdings Group and was successful in developing over 1.5 billion worth of commercial and residential properties over the last 17 years. She plays a major role in leading and formulating the marketing and sales strategies for the UOA Holdings Group s development properties. At the same time, she also oversees and spearheads UOA Holdings Group s property investments in the residential and commercial sector where she is the key decision maker in the formulation of future strategies and rental rates. She is also presently the director of Ganda Wijaya Sdn Bhd which is an investment holding company. Khor Soo Beng is our Non-Independent Executive Director. He possesses a degree in Bachelor of Science (Hons) in Building from University of Ulster, Belfast, United Kingdom and is an Incorporated Member of The Chartered Institute of Building (CIOB), United Kingdom. Prior to his appointment as Contracts Manager at UOA Holdings in 1994, he held various managerial positions as Project Manager, Quantity Surveyor and Site Supervisor in various entities including Bandaraya Development Berhad, HC Project Management Consultancy Sdn Bhd and MCB Management Services Sdn Bhd. In his tenure in UOA Holdings Sdn Bhd, he was instrumental in setting up UOA Holdings Group s in-house building maintenance and security services in He is actively involved in the development project and property investment divisions of the UOA Holdings Group where he oversees the UOA Holdings Group s Contracts Department, M&E Design Department, New Project Development Coordination, Building Maintenance and Security Department. He also oversees 128 employees from the various departments/divisions of the UOA Holdings Group. He does not hold any directorship or equity in any private limited companies. He is the Chairman of the Management Corporation for Desa Bangsar Ria Condominium, Bangsar. ANNUAL REPORT 2008 UOA REIT 7

8 B o a r d O f D i r e c t o r s O f T h e M a n a g e r (c o n t d) Kong Chong Chi Suim is our Non-Independent Non-Executive Director. He is a graduate in civil engineering from Australia and a Member of Chartered Engineer of Australia. He has over 30 years experience in the construction and property development industry both in Singapore and Malaysia. He is a seasoned entrepreneur who started his business under Vista Engineering Enterprises (Pte) Ltd in the early 1970s in Singapore which was principally in the construction and property development business. He also played a key role as Project Advisor to Harapan Group of Companies where he was instrumental in overseeing the successful construction of 3 internationally-rated hotels in Singapore, namely Hotel Meridien, Glass Hotel and Changi Meridien Hotel, worth in excess of SGD866.0 million during the 1970s and 1980s. In 1987, he co-founded UOA Holdings Group and spearheaded UOA Holdings Group s rapid growth in Malaysia. Over the last 21 years, UOA Holdings Group has successfully completed numerous residential, industrial and commercial developments in various parts of the Klang Valley. He is a substantial shareholder and Executive Chairman cum Chief Executive Officer of United Overseas Australia Limited, a company listed on the Australian Stock Exchange. He had in the past served in various capacities in several public listed companies both in Malaysia and Singapore which include Raleigh Bhd, Town and City Properties Ltd, Tuan Sing Holdings Ltd and Singapore Paper Product Ltd. He presently sits on the Boards of numerous private limited companies which principally are investment holding, property development and property management companies. Alan Charles Winduss is our Non-Independent Non-Executive Director. He is a Director of Winduss & Associates Pty Ltd Chartered Accountants and a member of various professional bodies including The Institute of Chartered Accountants in Australia, Certified Public Accountants Australia, Associate Fellow of the Australian Institute of Management, Fellow of the Taxation Institute of Australia, Fellow of the Australian Institute of Company Directors and Registered Australian Company Auditor. He has been involved in Professional Accounting in public practice for over 27 years specialising in matters relating to corporate management, restructuring, company secretarial including Stock Exchange and Securities Commission compliance and corporate finance matters. The accounting practice of Winduss & Associates Pty Ltd lists among its specialties matters relating to real estate development, management and ownership. He sits on the Board of public limited companies such as United Overseas Australia Limited, Alloy Steel International Inc., Advanced Shares Registry Ltd. and Scarborough Equities Ltd. He also sits on the board of several private limited companies in Australia. Dato Gan Boon Khuay is our Independent Non-Executive Director. He possesses a degree in Bachelor of Science (First Class Honors) in Civil, Structural and Environmental Engineering from University College London, University of London, United Kingdom. He was awarded the Chadwick Medal & Prize in He has also successfully gone through the East Asian Executive Leadership Course from Harvard University, Massachusetts, the United States of America. He has over 30 years of experience in property and project management and property development and investment. After a three (3) year stint in Rahim & Co, Chartered Surveyors as Property and Project Manager, he co-founded the Senawang Land group of companies and served on the Board initially as its Project Director and for the last 18 years as its Managing Director. He also holds directorships in various private limited companies. Jeswant Natarajan is our Independent Non-Executive Director. He is a graduate of University Malaya majoring in Economics and Business Administration. He started his merchant banking career in the Corporate Finance department of Malaysian International Merchant Bankers Berhad until Thereafter he held various senior management positions in several private and public listed companies which included the Chandan Property Group, Hong Hong group of companies and Paper Products (M) Berhad. In 1982, he was appointed as Group Corporate Adviser of the YTL group of companies. He was responsible for the acquisition of Hongkong Tin PLC, a London-based public company, which later was re-domiciled and restructured into YTL Corporation Berhad. He joined the Board of Hongkong Tin PLC in 1983 and the Board of the restructured YTL Corporation Bhd in He resigned from the Board of YTL Corporation Bhd in 1994 to join the Sunrise Group of companies as their Group Corporate Advisor and Executive Director. He was appointed to the Board of Sunrise Berhad in 1995 as Group Executive Director in charge of Corporate Finance and was instrumental in the listing of the company on the Main Board of the Kuala Lumpur Stock Exchange. In 1996, he was instrumental in the disposal of the Group s majority stake in Sunrise Berhad. He then helped establish Bukit Kiara Properties Sdn Bhd and was Group Executive Director until his resignation in Currently he is Director of UOA REIT, and Director of Hopetech Sdn Bhd, a technology company. 8 UOA REIT ANNUAL REPORT 2008

9 Board Of Directors Of The Manager (cont d) Kung Beng Hong is our Independent Non-Executive Director. He is a graduate from University Malaya majoring in Economics and is a Fellow of the Institute of Bankers, Malaysia. He had a distinguished career in the banking industry over the last 39 years where he held numerous senior management posts including stints in United States, Singapore, Indonesia and Japan. Notable positions held include General Manager/Executive Director of United Asian Bank ( ), CEO/ Director of Overseas Union Bank ( ), Managing Director/CEO of AmBank Bhd ( ) and Group CEO/Director of EON Bank Group ( ). He is currently an adviser with Fullerton Financial Holdings Pte Ltd and sits on the Board of Alliance Financial Group Berhad as a Non-Independent and Non-Executive Director and is also a council member of the Institute of Bankers, Malaysia. Other Information Relationship There is no family relationship among the Directors of the Manager as well as between the Directors of the Manager and the major unitholders of UOA REIT. Conflict of Interest There was no conflict of interest during the Financial Year, save for the Director s interest in UOA REIT as disclosed under Directors Interest in the Manager s Report and the transactions with companies related to the Manager as disclosed in Note 27 of the financial statements. Conviction of Offences None of the Directors of the Manager have been convicted for any offence other than traffic offences within the past (10) years. Training Attended During the Financial Year, the following Directors have attended the training and seminars as follows:- Directors Training and seminars attended Tan Sri Dato Alwi bin Jantan - Directors Continuing Education Programme 2008 Kung Beng Hong Dato Gan Boon Khuay - Directors Duties under the Companies Act and Common Law & The Business Judgment Rule - The Greatness Challenge (Organized by IBBM) - Real Estate Leadership Strategies For The 21st Century - KPMG Audit Committee Round Table Discussion Other Directorships in Public Companies in Malaysia During the Financial Year, the following Directors have held directorships in other public companies in Malaysia:- Directors Tan Sri Dato Alwi bin Jantan Kung Beng Hong Company - Resorts World Bhd - Hiap Teck Venture Berhad - Alliance Financial Group Berhad ANNUAL REPORT 2008 UOA REIT 9

10 Board Of Directors Of The Manager (cont d) Remuneration of Directors The remuneration paid by the Manager to its Directors for the year ended 31 December 2008 is as follows:- Fees Salaries Others Total Executive Directors - 280, , ,110 Non-Executives Directors 60, ,000 Range of Remuneration Per Annum () Executive Non-Executive 50,000 and below ,000 to 100, ,000 to 150, UOA REIT ANNUAL REPORT 2008

11 Analysis Of Unitholdings Distribution of Unitholders as at 31 December 2008: Unit Class No. of Unitholders % No of Units held % Less than to 1,000 units , ,001 to 10,000 units ,176, ,001 to 100,000 units ,700, ,001 to less than 5% of issued units ,039, % and above of issued units ,864, , ,948, Classification of Unitholders as at 31 December 2008: No. of Holders No. of Units Category of Unitholders Malaysian Malaysian Foreign Malaysian Malaysian Foreign Bumiputra Non-Bumiputra Bumiputra Non-Bumiputra 1) Individual ,800 10,888, ,400 2) Body Corporate a) Banks/Finance Companies 1 3-2,586,500 12,500 - b) Investment Trusts/ Foundations ,000 - c) Other types of companies ,006, ,441,900 5,250,000 3) Government Agencies/ Institutions ) Nominees ,318,800 4,521,800 8,167,800 5) Others Total ,025, ,984,400 13,939,200 Grand Total 1,0 45,948,700 ANNUAL REPORT 2008 UOA REIT 11

12 Top 30 Unitholders Listing as at 31 December 2008 Unitholders No of Units % 1) Wisma UOA Sdn Bhd 102,000, ) Damai Positif Sdn Bhd 48,000, ) Dynasty Portfolio Sdn Bhd 17,864, ) Amanah Raya Nominees (Tempatan) Sdn Bhd Kumpulan Wang Bersama 6,380, ) TM Asia Life Malaysia Bhd As Beneficial Owner (PF) 5,250, ) Kurnia Insurans (Malaysia) Berhad 4,461, ) LTG Development Sdn Bhd 4,214, ) HSBC Nominees (Asing) Sdn Bhd Exempt An for the HongKong and Shanghai Banking Corporation Limited (HBFS-I CLT ACCT) 4,043, ) Mayban Securities Nominees (Tempatan) Sdn Bhd Pledged securities account for Choo Thye (REM 110-Margin) 4,030, ) Uni.Asia General Insurance Berhad 3,000, ) Kencana Capital Sdn Bhd 3,000, ) Mayban Nominees (Tempatan) Sdn Bhd Avenue Invest Berhad for Kumpulan Wang Amanah Pencen (E ) 2,745, ) ValueCap Sdn Bhd 2,586, ) Kurnia Insurans (Malaysia) Berhad 2,054, ) Amanah Raya Nominees (Tempatan) Sdn Bhd Amanah Saham Nasional 2 1,954, ) Kurnia Insurans (Malaysia) Berhad 1,853, ) Citigroup Nominees (Asing) Sdn Bhd Exempt An for Mellon Bank (ABNAMRO Mellon) 1,765, ) Amsec Nominees (Tempatan) Sdn Bhd Eng Guan Chan Sdn Berhad ( ) 1,380, ) Mayban Nominees (Tempatan) Sdn Bhd Mayban Life Assurance Berhad (Non-Par Fund) 1,366, ) Mayban Nominees (Tempatan) Sdn Bhd Mayban Life Assurance Berhad (Par Fund) 1,350, ) Mayban Securities Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Labuan Reinsurance (L) Ltd (Dealer 001) 1,000, ) Citigroup Nominees (Tempatan) Sdn Bhd Uni.Asia Life Assurance Berhad (Life Fund) 987, UOA REIT ANNUAL REPORT 2008

13 Top 30 Unitholders Listing as at 31 December 2008 (cont d) Unitholders No of Units % 23) HSBC Nominees (Tempatan) Sdn Bhd HSBC (M) Trustee Bhd for MAAKL Progress Fund (4082) 838, ) HSBC Nominees (Tempatan) Sdn Bhd HSBC (M) Trustee Bhd for MAAKL Dividend Fund ( ) 780, ) PM Nominees (Tempatan) Sdn Bhd PCB Asset Management Sdn Bhd for MUI Continental Insurance Berhad 750, ) Kong Pak Lim 689, ) HDM Nominees (Asing) Sdn Bhd Phillip Securities Pte Ltd for Mitchell William David 650, ) Amsec Nominees (Tempatan) Sdn Bhd Sieh Kok Swee ( ) 628, ) Chong Thuah Realty Sdn Bhd 590, ) HSBC Nominees (Tempatan) Sdn Bhd HSBC (M) Trustee Bhd for MAAKL Asia Pacific REIT Fund ( ) 501, TOTAL 6,713, ANNUAL REPORT 2008 UOA REIT 13

14 Chairman s Statement On behalf of the Board, I am very pleased to present UOA REIT s annual report for the financial year ended 31 December Results & Operations The Fund has delivered yet another strong performance for the year with both gross revenue and distributable income exceeding the previous year by 23.5% and 18.6% respectively. Gross revenue and distributable income of 42,311,651 and 25,184,282 respectively marked the third consecutive year of record performance by the Fund. The Fund continues to deliver its primary objective in enhancing Unit holders value with Distribution Per Unit ( DPU ) increasing by 17.7% from 8.52 sen to sen over the corresponding year. During the year, all the portfolio of properties held by the Fund enjoyed strong occupancy save for Wisma UOA Damansara which had decreased from 94% to 79% during the year primarily due to the departure of a major tenant. The Fund had since commenced and completed refurbishment of the vacated office area by the major tenant and had initiated marketing activities in an effort to increase the occupancy. We have proposed to enhance the common areas of Wisma UOA Damansara to give the building a fresher look and improve the building s security features via the introduction of the pedestrian gate system which is expected to be initiated in stages in Significant Events The year saw the Fund complete 2 major transactions which involved the completion of the sale of Wisma UOA Bangsar and the acquisition of Wisma UOA Pantai. In April 2008, the acquisition of Wisma UOA Pantai was completed for a cash consideration of 86,000,000 adding 157,579 sq ft of lettable area and 272 car park bays to the Fund. During the year, the Fund was able to increase the occupancy of Wisma UOA Pantai from 86% to 100% from tenants including Tenaga Nasional Bhd, Financial Reporting Foundation, Kementerian Perumahan & Kerajaan Tempatan, Extol Corporation Sdn Bhd and ALD Automotive Sdn Bhd. Since the completion of the acquisition, the building has contributed positively to the improvement in the Fund s revenue and income. In May 2008, the disposal of Wisma UOA Bangsar was completed for 32,000,000 which translates into a 52% gain from the original investment cost of 21,000,000. As part of the Fund s strategy to optimize its capital, the entire proceeds from the disposal was utilized to reduce bank borrowings. 14 UOA REIT ANNUAL REPORT 2008

15 Chairman s Statement (cont d) Significant Events (cont d) The completion of the 2 major transactions has resulted in the Fund s asset to rise by 13.08% from 425,346,423 to 481,011,461. The Future Despite the unfavourable economic outlook of Malaysia, we are positive of the Fund s performance over the coming years mainly due to the continued limited supply of office space in Kuala Lumpur city centre and the major decentralized business districts. Demand for well maintained and strategically located office space is expected to attract demand particularly from local corporations and agencies. We will continuously review our strategies and will focus on an active asset management on the Fund s existing portfolio of properties. The completion of the acquisition of Wisma UOA Pantai will further consolidate our position as one of the leading office space providers in Kuala Lumpur. It has also increased our diversification in tenant mix from various industries and geographical representation. On behalf of the Board, I would like to extend our appreciation to all our staff for their hard work and dedication in producing yet another strong result for the year. I would like to take this opportunity to welcome our new tenants and to express gratitude to our existing tenants and business partners. Finally, I would like to thank our Unit holders for their confidence in the Fund to continue to deliver a sustainable income growth. Tan Sri Dato Alwi Jantan Chairman ANNUAL REPORT 2008 UOA REIT 15

16 Manager s Report For The Year Ended 31 December 2008 UOA Asset Management Sdn Bhd, the Manager of UOA Real Estate Investment Trust ( UOA REIT ), has pleasure in presenting the Manager s Report on UOA REIT together with the audited financial statements of UOA REIT for the year ended 31 December 2008 ( financial year ). Principal Activity Of The Manager The Manager, a company incorporated in Malaysia, is a subsidiary company of UOA Corporation Bhd (an effectively 60% owned subsidiary company of UOA Holdings Sdn Bhd which in turn is a wholly owned subsidiary company of United Overseas Australia Limited). The principal activity of the Manager is the management of real estate investment trusts. There has been no significant change in the nature of this activity during the financial year. Principal Activities And Investment Objective Of The Trust UOA REIT is a Malaysia-domiciled real property trust fund constituted under a Deed dated 28 November 2005 ( Deed ) by UOA Asset Management Sdn Bhd ( Manager ) and OSK Trustees Berhad ( Trustee ). UOA REIT was established on 13 December 2005 and listed on the Main Board of Bursa Malaysia Securities Berhad on 30 December The principal activity of UOA REIT is to invest in a diversified portfolio of real estate and real estate-related assets used or predominantly used for commercial purposes, whether directly or indirectly through the ownership of single-purpose companies who wholly own real estate with the objective of achieving a stable return from rental income and long term capital growth. There has been no significant change in the nature of this activity during the financial year. UOA REIT will continue its operations until such time as determined by the Trustee and the Manager as provided under Clause 26 of the Deed. Investment Strategies During the financial year, the management continued to adopt the following strategies in achieving UOA REIT s investment objective:- (I) Operating Strategy UOA REIT s operating strategy is to continue to enhance the performance of the Properties by increasing yields and returns from the Properties through a combination of retaining existing tenants, reducing vacancy levels, adding and/or optimising retail/office space at the Properties and minimising interruptions in rental income and operational costs. The Manager expects to apply the following key operating and management principles via the following: (a) to optimise rental rates via active management of tenancies, renewals and new tenancies; (b) maintaining a close relationship with tenants to optimise tenant retentions; (c) actively working with the Property Manager to pursue new tenancy opportunities; (d) to optimise tenant mix and space configuration; (e) continuous review of tenant mix and if practicable, reconfigure lettable space; and (f) continually maintaining the quality of the Properties. (II) Acquisition Strategy The Manager seeks to increase cash flow and enhance unit value through selective acquisitions. The acquisition strategy takes into consideration: (a) Location; (b) Occupancy and tenant mix; (c) Building and facilities specifications; (d) Opportunities; and (e) Yield thresholds. The Manager has access to a network of and good relationships with leading participants in the real estate industry which may assist UOA REIT in identifying (a) acquisition opportunities that have favorable returns on invested capital and growth in cash flow; and (b) under-performing assets. The Manager believes that these deal-sourcing capabilities will be an important competitive advantage of UOA REIT. 16 UOA REIT ANNUAL REPORT 2008

17 Manager s Report For The Year Ended 31 December 2008 (cont d) (II) Acquisition Strategy (cont d) The Manager intends to capitalise on the relationship with UOA Holdings Group, which is one of Malaysia s leading property development, property investment, property management services and construction group of companies. This relationship is expected to accord UOA REIT competitive advantages and benefits towards achieving its longterm objectives. The Manager intends to hold the Properties on a long-term basis. In the future where the Manager considers that any property has reached a stage that offers only limited scope for growth, they may consider selling the property and using the proceeds for alternative investments in properties that meet their investment criteria. (III) Capital Management Strategy The Manager aims to optimise UOA REIT s capital structure and cost of capital within the borrowing limits prescribed by the Guidelines on Real Estate Investment Trusts issued by the Securities Commission of Malaysia and intends to use a combination of debt and equity funding for future acquisitions and improvement works at the Properties. Our capital management strategies involve:- (a) adopting and maintaining an optimal gearing level; and (b) adopting an active interest rate management strategy to manage risks associated with changes in interest rates while maintaining flexibility in UOA REIT s capital structure to meet future investment and/or capital requirements. Investment Policies (I) Portfolio Composition UOA REIT s investments may be allocated in the following manner, as prescribed by the Securities Commission s Guidelines on REIT: (a) at least 75% of UOA REIT s total assets shall be invested in real estate, single-purpose companies, real estaterelated assets or liquid assets; (b) at least 50% of UOA REIT s total assets must be invested in real estate or single-purpose companies; and (c) the remaining 25% of UOA REIT s total assets may be invested in other assets (i.e. real estate-related assets, non-real estate-related assets or asset-backed securities). Currently, approximately 99.9% of the UOA REIT s investment is in the Properties. (II) Diversification UOA REIT will seek to diversify its real estate portfolio by property and location type. UOA REIT will focus on investing in real estates that are primarily used for office, retail and/or residential purposes and will continue to look for opportunities in these types of properties. In addition, it may also look into other properties that will provide attractive risk-adjusted returns. (III) Leverage UOA REIT will be able to leverage on its borrowings to make the permitted investments. Leveraging on its borrowings will increase the returns to Unitholders. However, UOA REIT is permitted to procure borrowings of up to 50% of its total asset value. Distribution Policy At least 90% of the distributable income of UOA REIT will be distributed semi-annually or at such other intervals as determined by the Manager, in arrears. ANNUAL REPORT 2008 UOA REIT 17

18 Manager s Report For The Year Ended 31 December 2008 (cont d) Performance Of The Trust As at As at As at 31 December December December 2006 Total Net Asset Value ( 000) 341, , ,963 Units in Circulation (Units 000) 245, , ,949 Net Asset Value per unit () Highest Net Asset Value per unit () Lowest Net Asset Value per unit () Market Value per unit () Highest Traded Price for the financial year () Lowest Traded Price for the financial year () Operating Results Year ended Year ended Year ended 31 December December December Total Gross Income 42,311 34,264 31,380 Property operating expenses 9,419 7,836 6,858 Non-property expenses 3,059 2,273 1,883 Borrowing cost 4,649 2,918 2,977 Income before taxation and net appreciation on fair value of investment properties 25,184 21,237 19,662 Net appreciation on fair value of investment properties - 78, Income before taxation 25,184 99,987 20,312 Taxation Income after taxation 25,184 99,987 20,250 The Manager is pleased to report that total gross income for the financial year was 42,311,651 comprising rental income of 42,123,523, interest income of 49,408 and other income of 138,720. Total gross income for the financial year was 23.49% higher than the previous financial year. Realised income before taxation was 25,184,282, posted an 18.59% increase over the previous financial year and was attributed mainly to the improvement in rental rates as well as contribution from the newly acquired property. During the financial year, the disposal of an investment property, Wisma UOA Bangsar, for a cash consideration of 32,000,000, was completed on 15 May The Trustee had on 16 January 2008 entered into a Sale and Purchase Agreement for the acquisition of an investment property, Wisma UOA Pantai, from Magna Tiara Development Sdn Bhd for a cash consideration of 86,000,000. The acquisition was completed on 2 April Income Distribution The Trust has on 29 August 2008 paid an interim distribution of 4.48 sen per unit for the six months ended 30 June On 13 January 2009, the Manager has recommended and the Trustee has approved a final income distribution of 5.55 sen per unit totaling 13,650,153 for the financial year to be paid by 27 February 2009 ( Distribution ). The Distribution comprises a taxable income of approximately 4.20 sen per unit and a tax-exempt income of approximately 1.35 sen per unit. Against the previous financial year, the DPU has registered an improvement of approximately 17.72% or 1.51 sen per unit and is in line with the UOA REIT s objective to achieve stable and attractive returns for its unitholders. 18 UOA REIT ANNUAL REPORT 2008

19 Manager s Report For The Year Ended 31 December 2008 (cont d) Income Distribution (cont d) Pursuant to the amended Part X, Schedule I of the Income Tax Act, 1967 under the Finance Act 2006 and the announced Budget 2009, the following withholding tax rate would be applicable on distribution of income which is tax exempt at Trust s level: a) Non-corporate investors and local institutional investors are subject to a final withholding tax at the rate of 10% up to year b) Foreign institutional investors are subject to a final withholding tax at the rate of 10% up to year c) Foreign corporate investors are subject to a final withholding tax at the rate of 26% for year 2008 and 25% for year d) Local corporate investors are subject to the existing tax treatment and tax rates (corporate tax rate is 26% for year 2008 and 25% for year 2009). Benchmark Relevant To The REIT For the year ended For the year ended For the year ended 31 December December December 2006 Income Distribution per unit - Gross (sen) Distribution Yield based on Issued Price of 1.15 per unit (%) Distribution Yield based on market price of 1.07 per unit (as at 31 December 2008) (%) Management Expense Ratio ( MER ) (%)* Portfolio turnover ratio ( PTR ) (times)** * MER is calculated based on the total administrative expenses incurred by the Trust divided by the average value of the Trust fund for the financial year calculated on a weekly basis. As the basis of calculation may vary among real estate investment trusts, no accurate comparison can be made between UOA REIT s MER and other real estate investment trusts. ** PTR is the ratio of the average sum of acquisition and disposal of the Trust fund for the financial year to the average value of the Trust fund for the financial year calculated on weekly basis. Composition Of Investment Portfolio As at 31 December 2008, UOA REIT s composition of investment portfolio is as follows:- 000 % REAL ESTATE PROPERTIES Commercial UOA Centre Parcels 70, UOA II Parcels 223, UOA Damansara Parcels 101, Wisma UOA Pantai 86, OTHERS Deposits with licensed financial institutions , ANNUAL REPORT 2008 UOA REIT 19

20 Manager s Report For The Year Ended 31 December 2008 (cont d) MANAGER S REPORT (CONT D) The details of the real estate properties are as follows:- Existing use Commercial Status of holding Freehold Tenancy period 1 to 2 years subject to rental review at the expiration of each tenancy. Major tenants (based on monthly rental receivable) a) Dats Management Sdn Bhd b) UOA Holdings Sdn Bhd c) Penaga Dresser Sdn Bhd Occupancy rate 89.7% Rental received 6,861,005 Maintenance costs and capital expenditure Maintenance costs amount to 2,558,154. Capital expenditure of 22,406 was incurred during the financial year to improve the property. UOA Centre Parcels Address/Location Within UOA Centre at No. 19, Jalan Pinang, Kuala Lumpur Title Details Master Title: Geran 46212, Lot No. 1312, Section 57, Town and District of Kuala Lumpur, State of Wilayah Persekutuan. Strata Title: The application for the issuance of strata titles was submitted to the Wilayah Persekutuan Land Registry on 2 June 2005 and is now awaiting approval. Property Type Office Parcels Description Parcels within the 33 storey office building known as UOA Centre inclusive of 6-levels of car parking space. Net Lettable Area 126,984 sq ft Parking spaces 208 bays Age Approximately 14 years Encumbrances The Sale and Purchase Agreement relating to UOA Centre parcels and UOA II parcels was assigned to AmBank Berhad and upon issuance of strata titles, a first party legal charge over UOA Centre parcels and UOA II parcels will be effected in favor of AmBank Berhad as part of the securities for the loan facility granted to partfinance the acquisition of UOA Centre parcels and UOA II parcels. Date of acquisition 29 November 2005 Cost of acquisition 57,600,000 Last valuation 70,000,000 Date of last valuation 15 June 2007 Basis of valuation Investment and Comparison Method Independent Valuer PPC International Sdn Bhd Net Book Value 70,022, UOA REIT ANNUAL REPORT 2008

21 Manager s Report For The Year Ended 31 December 2008 (cont d) Existing use Commercial Status of holding Freehold Tenancy period 1 to 3 years subject to rental review at the expiration of each tenancy. Major tenants (based on monthly rental receivable) a) Dats Management Sdn Bhd b) Allianz Life Insurance (M) Bhd c) Envico Enterprise Sdn Bhd Occupancy rate 97.0% Rental received 20,627,557 Maintenance costs and capital expenditure Maintenance costs amount to 3,496,252. Capital expenditure of 1,573,302 was incurred during the financial year to improve the property. UOA II Parcels Address/Location Within UOA II at No. 21, Jalan Pinang, Kuala Lumpur Title Details Master Title: Geran 46212, Lot No. 1312, Section 57, Town and District of Kuala Lumpur, State of Wilayah Persekutuan. Strata Title: The application for the issuance of strata titles was submitted to the Wilayah Persekutuan Land Registry on 2 June 2005 and is now awaiting approval. Property Type Office Parcels Description Parcels within the 39 storey office building known as UOA II inclusive of 5-levels of car parking space. Net Lettable Area 407,702 sq ft Parking spaces 643 bays Age Approximately 10 years Encumbrances The Sale and Purchase Agreement relating to UOA Centre parcels and UOA II parcels was assigned to AmBank Berhad and upon issuance of strata titles, a first party legal charge over UOA Centre parcels and UOA II parcels will be effected in favor of AmBank Berhad as part of the securities for the loan facility granted to partfinance the acquisition of UOA Centre parcels and UOA II parcels. Date of acquisition 29 November 2005 Cost of acquisition 180,900,000 Last valuation 221,300,000 Date of last valuation 15 June 2007 Basis of valuation Investment and Comparison Method Independent Valuer PPC International Sdn Bhd Net Book Value 223,626,275 ANNUAL REPORT 2008 UOA REIT 21

22 Manager s Report For The Year Ended 31 December 2008 (cont d) Existing use Commercial Status of holding Freehold Tenancy period 1 to 2 years subject to rental review at the expiration of each tenancy. Major tenants (based on monthly rental receivable) a) Skrine & Co b) Dats Management Sdn Bhd c) BBDO (Malaysia) Sdn Bhd Occupancy rate 79.0% Rental received 7,677,071 Maintenance costs and capital expenditure Maintenance costs amount to 2,033,862. Capital expenditure of 66,630 was incurred during the financial year to improve the property. UOA Damansara Parcels Address/Location Within UOA Damansara at No. 50, Jalan Dungun, Damansara Heights, Kuala Lumpur Title Details Master Title: Geran 67371, Lot 55917, Mukim and District of Kuala Lumpur, State of Wilayah Persekutuan. Strata Title: The application for the issuance of strata titles was submitted to the Wilayah Persekutuan Land Registry on 19 September 2005 and is now awaiting approval. Property Type Office Parcels Description Parcels within the 13 storey office building known as UOA Damansara inclusive of 4-levels of basement car park. Net Lettable Area 190,739 sq ft Encumbrances The property is free from encumbrances. Date of acquisition 29 November 2005 Cost of acquisition 72,000,000 Last valuation 101,000,000 Date of last valuation 15 June 2007 Basis of valuation Investment and Comparison Method Independent Valuer PPC International Sdn Bhd Net Book Value 101,360,080 Parking spaces 356 bays Age Approximately 11 years 22 UOA REIT ANNUAL REPORT 2008

23 Manager s Report For The Year Ended 31 December 2008 (cont d) Major tenants (based on monthly rental receivable) a) Kerajaan Malaysia (Kementerian Perumahan dan Kerajaan Tempatan) b) Tenaga Nasional Berhad c) Extol Corporation (M) Sdn Bhd Occupancy rate 100% Rental received 6,155,587 (for a period of 9 months) Wisma UOA Pantai Address/Location No. 11, Jalan Pantai Jaya, Kuala Lumpur Title Details PT 7525 H.S.(D) , Bandar Kuala Lumpur, Daerah Kuala Lumpur, State of Wilayah Persekutuan. Property Type Commercial building Description A 5 storey office building with 2 mezzanine floors and 3 levels of basement car park. Net Lettable Area 157,579 sq ft Parking spaces 272 bays Age Approximately 1 year Existing use Commercial Maintenance costs and capital expenditure Maintenance costs amount to 1,180,449. No major capital expenditure incurred during the financial year. Encumbrances The property is free from encumbrances. Date of acquisition 2 April 2008 Cost of acquisition 86,000,000 Last valuation 93,100,000 Date of last valuation 6 September 2007 Basis of valuation Investment and Comparison Method Independent Valuer Param & Associates (KL) Sdn Bhd Net Book Value 86,002,700 Status of holding Freehold Tenancy period 1 to 2 years subject to rental review at the expiration of each tenancy. ANNUAL REPORT 2008 UOA REIT 23

24 Manager s Report For The Year Ended 31 December 2008 (cont d) Investment Properties Acquired During The Financial Year The Trust had on 16 January 2008, entered into a Sale and Purchase Agreement with Magna Tiara Development Sdn Bhd to acquire a freehold land held under PT 7525 H.S. (D) , Bandar Kuala Lumpur, Daerah Kuala Lumpur, Wilayah Persekutuan measuring approximately 3,883 square metres together with a five storey building with two mezzanine floors and three levels of basement car park known as Wisma UOA Pantai and located at No. 11, Jalan Pantai Jaya, Kuala Lumpur, for a total consideration of 86,000,000. The transaction was completed on 2 April Gearing Pursuant to the Revised Guidelines on REITs published by the Securities Commission ( SC Guidelines ), the permitted limit on the gearing ratio of REITs is 50%. As at 31 December 2008, the Trust has a total borrowings of 113,600,000, representing a gearing ratio of 23.47% (14.89% as at 31 December 2007). The debt is in the form of a revolving credit and is short term in nature renewable on a one (1) to six (6) months term at an interest rate as disclosed in Note 10 of the financial statements. Total credit facilities available to the Trust amount to 140,500,000 and there are unutilised facilities of 26,900,000 as at the end of the financial year. The Trust has the capacity to raise its borrowings by an additional 128,362,816 before reaching the 50% limit permitted under the SC Guidelines. Units In Issue As at As at As at 31 December December December 2006 No of Units in issue 245,948, ,948, ,948,700 Net Asset Value ( NAV ) As at As at As at 31 December December December 2006 NAV ( 000) 341, , ,963 NAV Per Unit before distribution () NAV Per Unit after distribution ()* * Net Asset Value per unit is posted on Bursa Malaysia s website on a weekly basis. With effect from 21 August 2008, Net Asset Value is posted on a quarterly basis. Prospect All the original properties of UOA REIT continue to enjoy high occupancy rates and improving average rental rates due to their strategic location and excellent facilities. The Manager will continue to pursue its acquisition strategy in year 2009 by taking advantage of the increased borrowing capacity to further improve the performance of the Trust. Soft Commission During the financial year, the Manager did not receive any soft commission from its broker, by virtue of transactions conducted by the Trust. 24 UOA REIT ANNUAL REPORT 2008

25 Manager s Report For The Year Ended 31 December 2008 (cont d) Breakdown Of Unitholdings Unit Class No. of Unitholders % No of Units held % 5,000 and below ,050, ,001 to 10, ,294, ,001 to 50, ,038, ,001 to 500, ,852, ,001 and above ,713, , ,948, Board Of Directors Of The Manager Directors Date of Appointment Tan Sri Dato Alwi bin Jantan 8 June 2005 Chan Cecelia 8 June 2005 Khor Soo Beng 8 June 2005 Kong Chong Chi Suim 28 November 2005 Alan Charles Winduss 28 November 2005 Dato Gan Boon Khuay 16 November 2005 Jeswant Natarajan 16 November 2005 Kung Beng Hong 28 November 2005 Meeting Attendance Directors Board Meetings (No. of meetings held 4) Tan Sri Dato Alwi bin Jantan 3 Chan Cecelia 4 Khor Soo Beng 4 Kong Chong Chi Suim 4 Alan Charles Winduss 3 Dato Gan Boon Khuay 4 Jeswant Natarajan 4 Kung Beng Hong 3 Directors Benefits Neither at the end of the financial year, nor at any time during that financial year, did there subsist any arrangement to which UOA Asset Management Sdn Bhd was a party, whereby directors might acquire benefits by means of the acquisition of units in or debentures of UOA REIT or any other body corporate. During the financial year under review, no director has received or become entitled to receive any benefit by reason of a contract made by UOA Asset Management Sdn Bhd or a related corporation with any director or with a firm of which he is a member, or with a company in which he has a substantial financial interest, except as disclosed in Note 27 of the financial statements. ANNUAL REPORT 2008 UOA REIT 25

26 Manager s Report For The Year Ended 31 December 2008 (cont d) Directors Interest No. of Units As at Bought/ (Sold) As at January December 2008 Direct Interest Tan Sri Dato Alwi bin Jantan 100,000 (100,000) - Chan Cecelia 141, ,800 Khor Soo Beng 101, ,800 Kong Chong Chi Suim 362, ,000 Alan Charles Winduss 100, ,000 Dato Gan Boon Khuay 100, ,000 Kung Beng Hong 100, ,000 Indirect Interest Kong Chong Chi Suim (1) 172,244, , ,409,200 Tan Sri Dato Alwi bin Jantan (2) - 100, ,000 Note: (1) By virtue of his interest in shares of United Overseas Australia Limited (the ultimate holding company of Wisma UOA Sdn Bhd, Damai Positif Sdn Bhd, Dynasty Portfolio Sdn Bhd, LTG Development Sdn Bhd and Kumpulan Sejahtera Sdn Bhd), he is deemed to have an interest in UOA REIT. (2) By virtue of being a beneficiary of Equity Trust (Malaysia) Berhad. During and at the end of financial year, there was no material contract entered into involving any directors and major unitholders, except as disclosed in Note 27 of the financial statements. Other Statutory Information (a) Before the income statement and balance sheet of UOA REIT were made out, directors of UOA Asset Management Sdn Bhd took reasonable steps: (i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts have been written off and that adequate allowance had been made for doubtful debts; and (ii) to ensure that any current assets which were unlikely to realise their values as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise. (b) At the date of this report, directors of UOA Asset Management Sdn Bhd are not aware of any circumstances: (i) which would render the amount written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of UOA REIT inadequate to any substantial extent; or (ii) which would render the values attributed to the current assets in the financial statements of UOA REIT misleading; or (iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of UOA REIT misleading or inappropriate. 26 UOA REIT ANNUAL REPORT 2008