Sights Set on Asia Markets

Transcription

1 Sights Set on Asia Markets Annual Report 2007

2 Content Financial Highlights 01 Message to Unitholders 02 Board of Directors 04 Management Team 06 Growth Strategy 10 Market Outlook 16 Our Portfolio 20 Financial Review 28 Corporate Governance 30 Our Mission We aim to deliver regular and stable distributions and achieve long term growth for our Unitholders. Corporate Profile Parkway Life Real Estate Investment Trust ( Parkway Life REIT ) was constituted on 12 July 2007 with the principal investment strategy of investing in income producing real estate or real estate related assets in the Asia Pacific region (including Singapore) that are used primarily for healthcare and/or healthcare-related purposes.

3 Annual Report Financial Highlights 23 Aug to 31 Dec 2007 Variance Income Statement (in S$ 000) Actual Forecast 1 % Gross Rental Revenue 16,900 16, Net Property Income 15,812 15, Distributable Income (S$ 000) +5.8% 12,886 13,635 Forecast Actual Distribution higher than forecast Income Available for Distribution 13,635 12, Available Distribution Per Unit (Cents) 2 - For the period Annualised Annualised DPU Yield (%) Investment Properties (S$ 000) +7.3% Balance Sheet (in S$ 000) As at 31 Dec 2007 Pro Forma Variance (%) Total Assets 858, , Unitholders Funds 820, , , ,570 Pro Forma Actual Higher property valuation Total Borrowings 33,276 33,390 (0.3) Key Financial Ratios As at 31 Dec 2007 Pro Forma Variance (%) Net Asset Value Per Unit (S$) Adjusted Net Asset Value Per Unit 4 (S$) Gearing (%) -0.3% Gearing 5 (%) (0.3) Notes: 1 As stated in the Prospectus dated 7 August No comparison against a corresponding period in the previous year can be made as no pro forma financials are available. SGX-ST had granted Parkway Life REIT a waiver from the requirement to prepare historical pro forma statements of total return, cash flow statements and balance sheets for the purpose of its initial public offering. The forecast is based on management s forecast for the period from 1 July 2007 to 31 December 2007, pro-rated for 23 August 2007 to 31 December The number of Units used to calculate the Distribution Per Unit ( DPU ) comprise 601,418,000 Units issued at the Initial Public Offering, and Units to be issued as satisfaction of Parkway Life REIT Manager s management fees. Pro Forma Actual Strong financial flexibility with substantial debt capacity NAV per Unit ($) +8.8% 3 Based on closing price of $1.13 of Parkway Life REIT as at 31 December Net of distribution. Pro Forma Actual 5 Total borrowings before unamortised transaction costs Total assets. Higher net assets attributable to unitholders from properties revaluation gain

4 02. Annual Report 2007 Message to Unitholders

5 Annual Report Dear Unitholders, On behalf of the Board, it gives us great pleasure to present Parkway Life REIT s first Annual Report for the financial year ended 31 December Listing 2007 was an exciting year for Parkway Life REIT, listing on the Singapore Stock Exchange on 23 August Despite volatile market conditions, we saw strong demand for Parkway Life REIT prior to the IPO, with the institutional placement tranche 14x over-subscribed. The defensive nature of the REIT, which has very long term master lease agreements of 15 years plus 15 years and which guarantees the rental income stream across the entire portfolio, was well received by investors. In addition, with recent concerns about rising inflation the CPI peg provides certainty that the rental income will grow in line with inflation with the ability for further upside through Parkway Holdings Limited s turnover growth. Performance Exceeds Forecasts We were delighted that Parkway Life REIT s maiden 4 th quarter 2007 results exceeded forecast. Income available for distribution was S$13.64 million which is 5.81% higher than the forecast amount of S$12.89 million. DPU for the period was 2.27 cents or a 5.81% increase over the forecast figure. Positive Credit Rating and Gearing We are pleased to announce that Fitch Ratings assigned an Investment Grade Credit Rating of BBB+ for Parkway Life REIT. This confirms the quality and depth of the existing strategically located portfolio. With current gearing at a very low level of 4% and the average leverage limit now able to increase to a maximum of 60%, we have great financial flexibility to execute our growth and acquisition strategies. Largest Healthcare REIT As the largest healthcare REIT in the Asian Region, our intention is to offer unitholders a unique proposition - the ability to benefit from the demand for good quality healthcare assets, which are under-pinned by the growing demand for private healthcare in Asia. By the year 2050, the over 65 year old population is expected to grow by 314% up to 857 million. The aging population has a strong correlation with the increase in medical expenditure associated with old age. Health revenues in the Asia Pacific region are anticipated to grow by 10% over the course of the next year to US$236.4 billion. So, the key drivers for healthcare expenditure point to strong continuing projected demand. Acquisition Growth Strategy We will continue to source for good quality well secured healthcare real estate assets including Hospitals; Nursing Homes; Medical Offices and Clinics; Pharmaceutical properties and healthcare facilities used in connection with healthcare research; education; the manufacturing and storage of drugs, medicine, goods and devices. We will pursue opportunities that are yield accretive. In evaluating future acquisition opportunities, we will seek acquisitions that enhance the diversification of the portfolio by asset class and tenant as well as by geography. Potential sources of acquisition could come from a variety of sources. These include: * The grant of the right of first refusal to Parkway Life REIT by the sponsor over all their existing and future real estate assets. * Third party asset and portfolio acquisitions and alliances with Asian healthcare players. * Development opportunities for healthcare related assets that fall with the SGX guidelines for REITs. Acknowledgements We would like to thank our fellow Board Members for their invaluable contribution and guidance in managing Parkway Life REIT and helping to implement Parkway Life REIT s growth strategies. We would also like to say a sincere thank you to our staff for their hard work and dedication in ensuring the success of Parkway Life REIT. On behalf of the Board, we would also like to thank our Unitholders, Tenants and Business Partners for their steadfast confidence and strong support. Lim Kok Hoong Chairman Justine Victoria Wingrove Chief Executive Officer

6 04. Annual Report 2007 Board of Directors From left to right: Dr. Lim Cheok Peng, Mr. Puah Tuan Soon Benson, Ms. Choo Oi Yee, Mr. Lim Kok Hoong, Ms. Justine Victoria Wingrove, Mr. Tan Bong Lin, Mr. Ashish Jaiprakash Shastry Mr. Lim Kok Hoong Independent Director and Chairman Mr. Lim is an independent director on the board of several public listed companies in Singapore. He also serves as a board member of the Singapore Tourism Board. Mr. Lim has over 32 years experience in public accountancy. He was a senior partner with Ernst & Young Singapore from 2002 to 2003 and prior to that was the managing partner of Arthur Andersen Singapore from 1990 to He also previously held the position of Regional Managing Partner, Asean, for Arthur Andersen during the period 2000 to Mr. Lim graduated from the University of Western Australia in 1971 with a Bachelor of Commerce. He is a member of the Institute of Chartered Accountants in Australia and the Institute of Certified Public Accountants of Singapore. Mr. Puah Tuan Soon Benson Independent Director Mr. Puah has been the Chief Executive Officer of The Esplanade Co Ltd since Prior to this appointment, he was the Chief Executive Officer of Temasia Health Pte Ltd, the international business and management arm of Health Corporation of Singapore (HCS), an entity linked to the Government of Singapore that invests and develops businesses in health services, from 1997 to From 1995 to 1997, Mr. Puah was the director and Chief Executive Officer of Sentosa Development Corporation (SDC), a government statutory board responsible for the development, management and promotion of Sentosa, Sentosa Cove and 11 off-shore islands. From 1982 to 1994, Mr. Puah worked in various senior positions in hotels managed by global hotel operators including Mandarin Oriental Hotel Group in Hong Kong and Singapore. Shangri-la s Rasa Sentosa Resort in Singapore, Shangrila Hotel Surabaya in Indonesia, Hilton International in Singapore amongst others. Mr. Puah graduated from the University of Surrey, Guildford in the United Kingdom with a Bachelor of Science in Hotel, Catering & Tourism Administration.

7 Annual Report Mr. Tan Bong Lin Independent Director and Chairman of the Audit Committee Mr. Tan has over 28 years experience working in financial institutions. Between 1990 and 2007, he was with Citigroup Global Markets Singapore Pte Ltd and was its Managing Director from 1991 to His responsibility included overseeing the Smith Barney brokerage and advisory business. Prior to his appointment in Citigroup Global Markets Singapore Pte Ltd, he held various positions in Drexel Burnham Lambert (S) Pte Ltd, including as a dealer, an operations manager and an assistant general manager, from 1980 to Mr Tan was a member of the Finance Committee at Singapore Broadcasting Authority from 1997 to Mr. Tan graduated from the University of Singapore in 1980 with a Bachelor of Accountancy. Dr. Lim Cheok Peng Non-Executive Director Dr. Lim has over 25 years international experience in the healthcare sector. He is the Managing Director of the Sponsor, an appointment which he has held since He is also a Consultant Physician & Cardiologist in private practice in Singapore. Dr. Lim is the Co-Chairman of Health & Life Science of the Singapore British Business Council and is a member of the Council for the Third Age of Ministry of Community Development, Youth & Sports. He is also a board member of Republic Polytechnic and acts as consultant to various ongoing healthcare projects in Kampuchea, Vietnam, Bangladesh and China. Dr. Lim was a member of the Economic Review Subcommittee for Healthcare Singapore and a member of the government parliamentary committee for healthcare in Dr. Lim graduated from the University of Singapore in 1972 with a MBBS. In 1976, he obtained a Master in Medicine (Internal Medicine) from the University of Singapore. In 1991, Dr. Lim obtained the Diploma of Fellowship from the Royal College of Physicians and Surgeons of Glasgow and Royal College of Physicians and Surgeons of Edinburgh. Dr. Lim was elected to the membership from the Royal College of Physicians of the United Kingdom in 1977 and was admitted as a Fellow of the Academy of Medicine, Singapore (Cardiology) at the Academy of Medicine, Singapore in Ms. Choo Oi Yee Non-Executive Director Ms. Choo has been the Group Senior Vice- President, Strategic Planning & Business Development of the Sponsor since Prior to her appointment in the Sponsor, she was a Vice-President in the Investment Banking Division in Citigroup from 2000 to 2006, she was more recently responsible for the origination, structuring and execution of mergers & acquisitions and capital markets transactions in the real estate and REIT sectors in Singapore and Southeast Asia. From 1999 to 2000, Ms. Choo was a Financial Analyst with Schroders International Merchant Bankers Limited. From 1996 to 1998, she was with Arthur Andersen. Ms. Choo graduated from the Nanyang Technological University in 1996 with a Bachelor in Accountancy. She also holds a Master in Business Administration from Manchester Business School. Mr. Ashish Jaiprakash Shastry Non-Executive Director Mr. Shastry is a Managing Director and the Head of Southeast Asia at TPG Capital. Since joining TPG Capital in 1998, he has been based in Singapore and Hong Kong, focusing on TPG Capital s investment activities in India, Australia and Southeast Asia. Prior to joining TPG Capital, he was an investment banker at Lehman Brothers in New York, specializing in power and telecom mergers & acquisitions. He serves as a non-executive director on the boards of Parkway Holdings Limited (the Sponsor), United Test and Assembly Center Limited and Fairmont Raffles Holdings International (alternate). Mr. Shastry received an A.B. in Economics with Honors from Princeton University. Ms. Justine Victoria Wingrove Chief Executive Officer and Executive Director Ms. Wingrove is the Chief Executive Officer of the Manager. Ms. Wingrove has extensive experience in the areas of real estate acquisitions and disposals, asset management, valuations, development and finance. She has held a number of senior positions, including Senior Vice President of Capital Services Group, Singapore from 2005 to Capital Services Group provides asset management, acquisition advice, investment disposal services, quarterly valuations and cashflow management services to Lehman Brothers throughout Asia. From 2003 to 2005, Ms. Wingrove was Head of Investment at Savills (Singapore) Pte Ltd where she was working with funds and property companies, on their real estate investment requirements in Asia and the UK. From 2000 to 2003, Ms. Wingrove was a Property Investor & Developer and from 1997 to 2000, she worked at Jones Lang La Salle, Singapore as a Senior Manager, Global Client Services. From 1995 to 1997, Ms. Wingrove was a Senior Investment Surveyor at Strutt & Parker, London, UK, involved in the marketing, sale and acquisition of commercial investment property for pension funds, insurance companies and property companies. From 1994 to 1995, Ms. Wingrove was a Trainee Investment Surveyor in Hermes Property Asset Management Ltd, London, UK, which manages and invests the British Telecom and Post Office Pension Funds. She was also the Sales & Marketing Manager for the Palco Group, London, UK from 1988 to Ms. Wingrove is a Chartered Surveyor and Member of the Royal Institution of Chartered Surveyors. She graduated from South Bank University with a Bachelor of Science in Estate Management.

8 06. Annual Report 2007 Management Team From left to right: Mr. Ong Eng Yaw, Mr. Yong Yean Chau, Ms. Justine Victoria Wingrove, Ms. Ang Lay Kheng, Mr. Tan Tee Meng, Mr. Wong Hoong Wai Ms. Justine Victoria Wingrove Chief Executive Officer Details of her working experience have been set out in the section Board of Directors. Mr. Yong Yean Chau Chief Financial Officer Mr. Yong brings with him more than 16 years of experience in the areas of financial management, taxation, corporate finance and treasury. He was previously the Chief Financial Officer of the Singapore Tourism Board, overseeing the Finance and Corporate Services functions. Before joining the Singapore Tourism Board, he was the Chief Financial Officer of Ascendas Private Limited, instrumental in the launching of Ascendas Real Estate Investment Trust. He has also worked as the Chief Financial Officer for the China-Singapore Suzhou Development Private Limited and Singapore-Suzhou Township Development Private Limited. He has extensive experience in property development and property investment, as well as its related financial structuring and financing. Mr. Yong is a Certified Public Accountant with the Institute of Certified Public Accountants of Singapore and has completed the Advance Management Programme in the Harvard Business School. Mr. Ong Eng Yaw Vice-President, Investment Management Prior to his appointment in the Manager, he was the Vice-President, Investment Banking of CIMB-GK Securities Pte Ltd from 2005 to While at CIMB-GK Securities Pte Ltd, Mr. Ong worked on various real estate-related transactions which involved Malaysia and Singapore listed corporate entities. From 2003 to 2005, Mr. Ong was the Manager,

9 Annual Report Investment of Hwa Hong Corporation Limited ( Hwa Hong.) While at Hwa Hong, Mr. Ong was responsible for, inter alia, Hwa Hong s real estate investment activities in Singapore and the United Kingdom and Hwa Hong s residential development activities in Singapore. From 1997 to 2001, Mr. Ong worked as an investment banker at Vickers Ballas Holdings Limited and at Oversea- Chinese Banking Corporation Limited. Mr. Ong graduated from University College London with a Bachelor of Law in In 1997, he obtained a Masters of Science (Investment Management) from Cass Business School in London. In 2002, Mr. Ong obtained a Masters of Business Administration from INSEAD. Mr. Tan Tee Meng Vice President, Asset Management & Development Prior to his appointment in the Manager, Mr. Tan was the Vice-President, Asset Management of Capital Services Group which provides asset management, acquisition and disposal advice to Lehman Brothers Real Estate Fund throughout Asia. From 2004 to 2006, Mr. Tan was the Regional Category Manager, Real Estate of DHL International Pte Ltd where he was responsible for the company s real estate matters in the Asia Pacific region ranging from site sourcing, leasing, development, renovation, management to disposal. Mr. Tan gzraduated from the National University of Singapore with a Bachelor of Science in Building in In 1996, he obtained a Masters of Business Administration from Nanyang Technological University. Ms. Ang Lay Kheng Financial Controller Ms. Ang brings with her about 8 years experience in financial and management reporting, taxation and compliance. Prior to her appointment in the Manager, she was an audit manager with PricewaterhouseCoopers ( PwC ). While at PwC, Ms. Ang had worked on the audit of several Singapore listed corporations and multinational companies, mainly in the real estate sector. Prior to this, she was with KPMG and has worked on the audits of manufacturing and trading companies, restructured hospitals in Singapore and financial institutions. Her experience includes financial reporting, consolidation, compliance with statutory requirements and financial reporting standards, appraising effectiveness of internal controls, and risk management. Ms. Ang graduated from Nanyang Technological University in 2000 with a Bachelor of Accountancy, minor in Banking and Finance. She is also a Chartered Financial Analyst. Mr. Wong Hoong wai Assistant Vice President, Investment Management Prior to his appointment in the Manager, Mr. Wong was with SingHealth (Singapore largest public healthcare group) from 2005 to 2008 as a manager for private healthcare investment. His role included conducting investment evaluation, due diligence and execution on the following classes of healthcare asset: private medical centres and hospitals, wholistic/specialised treatment centres, and contract research organisations. He has also restructured and turned around a non-performing healthcare entity. From 2003 to 2005, he worked for the technology arm of Greendot Capital and was the director for market and business development working on private investment ventures targeting the payment technology sector. From 2001 to 2003, he was a manager in the Strategic Planning and Business Development team of VISA International working on commercial services investment and partnership with financial institutions. From 1999 to 2001, he was vice president with Finesse Alliance based in Taiwan doing business development. From 1995 to 1998, he worked as a solution analyst with Hewlett Packard Singapore. Mr Wong graduated from the National University of Singapore in 1995 with a Bachelor of Science.

10 08. Annual Report 2007

11 Annual Report ExpLORING ACQUISITION OPPORTUNITIES A timely, farsighted investment, Parkway Life REIT is seeing promising growth driven by a myriad of factors. We enjoy exceptional competitive advantages. By leveraging on the Manager s operational expertise and economies of scale in the healthcare sector across the Asia Pacific region and with expected consolidation among Asia s hospital and healthcare operators, Parkway Life REIT believes that it can secure attractive yield accretive acquisition opportunities from third parties. Riding the wave of the dynamic opportunities, we will move forth to yield greater value for all our Unitholders.

12 10. Annual Report 2007 Growth Strategy UNIHOILDERS Geographically diversified portfolio of assets across the Asia-Pacific region Financial strength arising from our low debt level and strong credit rating Diversified portfolio of healthcare real estate assets (e.g. hospitals, medical offices, pharmaceutical facilities, and retirement facilities Long term stable growth and distributions Growth in the Asia-Pacific healthcare industry driven by rising incomes and demographics Acquisition growth through partnerships with Asia-Pacific healthcare players and our strategic relationship with Parkway Strong and experienced management team Following our successful listing on the Main Board of the Singapore Exchange Securities Trading Limited ( SGX-ST ) on 23 August 2007, we own the largest portfolio of strategically located private hospitals in Singapore comprising Mount Elizabeth Hospital, Gleneagles Hospital and East Shore Hospital (together, the Hospitals ). The Hospitals are supported by world class physicians and state-of-the-art medical equipment. Our highly experienced management team and initial body of assets laid a solid foundation to spur Parkway Life REIT s growth in Asia. Parkway Life REIT is able to: Leverage on the management team s deal sourcing capabilities to develop the pipeline of acquisition opportunities. Benefit from Singapore s strengthening position as a regional healthcare hub and biomedical and pharmaceutical centre of excellence. Tap into the strong growth in demand for healthcare services across Asia. Benefit from Parkway Holdings Limited ( PHL ) s healthcare industry expertise and vast Asian network. With the 5-year right of first refusal granted by PHL, both Parkway Life REIT and PHL provide an integrated and synergistic platform for the acquisition of hospitals and healthcare-related assets in the region, thus benefiting both in our efforts to expand in Asia.

13 Annual Report Our Growth Strategy Our mission is to deliver regular and stable distributions and achieve long term growth for our Unitholders. In this pursuit, we will only acquire assets that are currently or have potential to be yielding returns to our Unitholders that are higher than our cost of capital. With total debt only making up 4.0% of our total deposited properties, we have substantial debt capacity to fund our acquisitions. Our investment mandate covers the entire Asia Pacific region. We are exploring acquisition opportunities across real estate asset types in the healthcare sector. Rising incomes, the aging population, increasing medical travel and more cases of lifestyle and chronic diseases in Asia are driving the increasing demand for private healthcare. These trends bode well for healthcare operators and Parkway Life REIT as we offer another alternative for operators to be asset light and to reinvest their capital to expand their businesses. We will have multiple channels to drive our acquisition growth strategy to improve portfolio and geographical diversification. Partnering other healthcare players in the region As our investment mandate covers an extensive universe of real estate types, we are able to pursue opportunities with a wide spectrum of operators within the healthcare sector. We are well positioned to pursue opportunities brought about by Singapore s position as a major hub for healthcare in the region and the government s initiatives in building world class capabilities in biomedical sciences and pharmaceuticals. Asset types allowed by our investment mandate include but are not limited to: Hospitals Ambulatory surgical centers Primary clinics Medical office buildings Step-down care facilities / Nursing Homes Healthcare research & development facilities Pharmaceutical storage and distribution facilities Mixed used projects with significant healthcare elements Healthcare education facilities Relationship with Parkway Holdings Limited We will leverage on our strategic relationship with PHL and tap on its expertise and vast healthcare network in the region. Our strategic relationship includes a 5-year right of first refusal granted by PHL to us over future sales of its healthcare or healthcare-related assets across the Asia Pacific region to grow our portfolio. We believe this relationship is a key competitive advantage as PHL is a leading integrated healthcare operator in Asia with one of the largest networks of hospitals and healthcare services across the region. Furthermore, with PHL s strong track record in hospital development and healthcare consultancy services, future greenfield hospital developments by PHL will add to our pipeline of potential acquisitions. We will also seek to work with PHL on the repositioning and redevelopment of existing brownfield projects.

14 12. Annual Report 2007 INDIA ChINA HONG KONG SOUTH KOREA THAILAND PHILIPPINES VIETNAM JAPAN Our Investment Mandate covers the entire Asia Pacific region Parkway Life REIT has an investment mandate that covers healthcare and healthcare-related real estate investments across the Asia Pacific region. Private healthcare spending is expected to increase in Asia, supported by rising affluence, an ageing population, increased medical travel/tourism and more cases of lifestyle and chronic diseases. We started with an initial body of high quality hospital assets in Singapore and aim to expand to other Asian countries to improve portfolio diversification. MALAYSIA SINGAPORE INDONESIA AUSTRALIA Core Markets Our Target Markets NEW ZEALAND

15 Annual Report Asset Enhancement Initiatives We constantly explore the opportunity to implement various asset enhancement initiatives to improve the performance, maximize the operational efficiency and enhance the competitiveness of the assets which ultimately lead to increases in revenue. We also have a strong working relationship with PHL on evaluating space planning initiatives to support its growth trajectory for its centres of excellence. In 2007, East Shore Hospital saw the closure of its Nursing Residence and this space has been repositioned into an inpatient ward for higher revenue intensive cases. At Gleneagles Hospital, space originally used for IT and sterilization departments was converted into the Parkway Eye Centre. At Mount Elizabeth Hospital, the Haematology and Stem Cell Transplant Centre was set-up from space in a general ward. All these asset enhancement projects served to increase the revenue of the hospitals and hence improve the revenue of Parkway Life REIT. Other than revenue-intensifying initiatives, we have also worked on projects to improve the service levels at the hospitals such as setting-up and expanding visitor lounges and renovating and upgrading works. We believe such initiatives will have a positive impact on future revenues. The costs of all the above asset enhancement projects were borne by PHL. Parkway Life REIT is thus able to benefit from revenue enhancement initiatives without additional capital outlays. Going forward, we will continue to explore asset enhancement opportunities such as converting non-revenue generating space into revenue-generating use, changing the use of existing space to higher revenue-generating usage, as well as increasing the usable space in the hospitals. Our Capital and Financial Management The success of our IPO also meant that we are in an enviable position of having low financial gearing. As at 31 December 2007, total debt accounts for 4.0% of our Total Deposited Properties. This translates into availability of substantial debt capacity to fund our acquisitions. On 19 February 2008, Parkway Life REIT received a long term investment grade issuer rating BBB+ (BBB plus) by Fitch, which is a further testament to our financial strength. With this rating in place, Parkway Life REIT is able to increase its aggregate leverage up to a maximum of 60% as prescribed by the Property Funds Guidelines. Without this rating, the limit is 35%. We will endeavour to maintain an optimal capital structure and given our debt capacity, we have substantial financial flexibility to use debt and/or equity to fund future acquisitions. As we continually evaluate various acquisition opportunities in the region, it is our objective to secure diversified sources of funding from both the capital markets and financial institutions. We adopt a proactive approach in risk management. As we expand in Asia, we will be actively monitoring foreign exchange movements and hedge, where appropriate, our periodic cashflows from our overseas assets. Where viable, we will borrow locally to fund the acquisition to achieve a natural hedge for our capital values. In addition, at least 50% of our exposure to fluctuating interest rates will be hedged and thus, augmenting the stability of our distributions.

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17 DYNAMIC PROSPECTS As the leader in healthcare in this region, Singapore remains an attractive destination for international patients. Singapore aims to attract one million international patients annually by the year 2012, which is expected to generate S$2.6 billion in value and contribute 1% to Singapore s GDP. Higher education levels, rising incomes, the ageing population, increasing medical travel and more cases of lifestyle and chronic diseases in Asia are driving the increasing demand for private healthcare, translating into an increased demand for healthcare real estate assets.

18 16. Annual Report 2007 Market Outlook Market Review and Outlook - SingaPORE Singapore s economy grew by 7.7% in 2007, a slight moderation compared to the 8.2% growth in 2006 but outpacing the average growth of 6.1% in According to the Ministry of Trade and Industry, Singapore s economy is forecast to grow at 4-6% in Singapore s consumer price index ( CPI ) grew at 2.1% in 2007 compared to 1.0% in As Parkway Life REIT has rental guarantee from the Master Lessee that is linked to inflation, we are a direct beneficiary in an environment of rising inflation. Private healthcare expenditure has been increasing at a compound annual growth rate ( CAGR ) of 4.76% over , contributed by higher education and income levels in Singapore. This trend indicates opportunities for private sector hospitals with increasing numbers of individuals demanding for premium healthcare services and products. Moreover, as Singapore grapples with the issue of an ageing population, healthcare spending is expected to increase. An ageing population also means higher demand for nursing homes and step-down care facilities. The Singapore government projects that by 2030, the proportion of people aged 65 or older will increase to 18.9% of total population from 8.5% in significant rise in healthcare expenditures increasing demand for private healthcare services robust growth in medical tourism

19 Annual Report Market Review and Outlook - ASIA PACIFIC As a healthcare REIT targeting a Pan-Asian footprint, Parkway Life REIT sees ample opportunities in the region. The Asia Pacific region has 54% of the world s population, and one-third of the world s GDP. Demand for better quality healthcare has been driven by high population growth, increasing affluence and an ageing population. Hence, investment in healthcare infrastructure and expenditure is expected to increase, particularly in the private healthcare sector. As clinical research and manufacturing shift away from the US and Europe, the growth outlook for pharmaceutical and healthcare related real estate in Asia Pacific remains strong. In 2007, Asia Pacific saw over 2 million medical tourists with a total spending of US$3 billion. Key Asian destinations include India, Singapore, Malaysia and Thailand, which are the core markets of Parkway Life REIT. Healthcare industry in the region has evolved from one of a basic healthcare infrastructure into one with greater demand for sophisticated equipment and better service quality from the private sector. A more demanding patient base has increased the expectation of providing comprehensive healthcare services, better diagnostics, more focused treatments and coordinated care. Healthcare services in China and India ballooned in growth in In China, Healthcare expenditure in 2007 increased to US$8.7 billion, up by 277% from Healthcare expenditure has increased 12% annually from 2004 to 2007 in India, contributing to 8% of GDP and expected to employ 9 million people by Being a healthcare REIT focusing on these markets, Parkway Life REIT is well positioned to capitalise on the potential acquisition opportunities. Revenue (USD billion) Healthcare Market Revenue (APAC), Philippines Singapore Source: Frost & Sullivan, 2008 Malaysia India Indonesia Thailand China South Korea Taiwan Hong Kong Australia Japan Percentage of Population Over 65 Year Old Percentage Source: Frost & Sullivan, 2008

20 18. Annual Report 2007

21 Annual Report our properties We own a portfolio of three renowned hospitals in Singapore, namely Mount Elizabeth Hospital, Gleneagles Hospital and East Shore Hospital. Offering an array of healthcare services, our award-winning hospitals have gained regional recognition as premium healthcare centres.

22 20. Annual Report 2007 Our Portfolio Mount Elizabeth Gleneagles East Shore Hospital Hospital Hospital Total Property Property Property Porfolio Gross floor area (sq m) 1 58,139 49,003 10, ,135 Licensed beds ,039 Operational beds Operating theaters Medical office/retail units Carpark lots Reversionary lease (years) (Average) 72 Appraised value 3 (17 July 2007) S$524.4m S$216.0m S$34.2m S$774.6m Appraised value 3 (31 December 2007) S$571.8m S$225.3m S$34.5m S$831.6m Each of the Hospitals is leased to Parkway Hospitals Singapore Pte Ltd (the Master Lessee ), a wholly-owned subsidiary of Parkway Holdings Limited, under separate Master Lease Agreements. Based on the triple net lease concept, the Master Lessee will bear operating costs relating to the Hospitals, including but not limited to maintenance, repair and replacement works, relevant taxes and insurance. The term of each of the Master Lease Agreements is for an initial term of 15 years from 23 August The Master Lessee has an option to extend the lease of each of the Hospitals for a further term of 15 years. As at 31 December 2007, our portfolio of Hospitals is valued at S$831.6 million, an increase of S$56.3 million or 7.3% over the valuation (including acquisition costs) at which Parkway Life REIT purchased the Hospitals. Notes: 1 Aggregate strata area. 2 As at 31 March Appraised value by independent valuer (DTZ Debenham Tie Leung (SEA) Pte Ltd DTZ ) FavoUrable Lease Terms Higher of: 1 a) Base rent of S30 million and b) 3.8% of Adjusted Hospital Revenue or 2 A minimum guaranteed rent of $45 million in the first year of the lease, and for the second till final year of the lease, the equivalent of {1 + (CPI + 1%)} of the total rent payable for the immediately preceding year. Where CPI is negative for any given year, CPI shall be deemed to be zero.

23 Annual Report Valuation of our portfolio (in S$ m) EAST SHORE 34.2 GLENEAGLES MOUNT ELIZABETH July 2007 EAST SHORE 34.5 GLENEAGLES MOUNT ELIZABETH December 2007 For period ending 31 December Change % Inpatient admissions 49,107 48, Number of Day Cases 30,866 28, Net revenue per adjusted patient day S$1,749 S$1, Average Length of Stay (days) (S$ 000) 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Gross Revenue - Breakdown by 3 Hospitals +17.3% 4,648 5,454 Gleneagles 10,619 10,619 Mount Elizabeth +0.6% East Shore +5.0% 16,089 16,900 Total Gross Revenue Rent contribution was the highest from Mount Elizabeth Hospital Property Gleneagles 32.3% East Shore 4.9% Mount Elizabeth 62.8% Forecast Actual Gross revenue for the period was S$16.9 million or 5.0% higher compared to the minimum guaranteed rent of S$45 million assumed in forecast (prorated for 23 August 2007 to 31 December 2007). This was due to higher variable rent caused by adjusted hospital revenue for the period being higher than the minimum rent (variable portion only) of S$15 million per annum assumed in the forecast. Of the three Hospital Properties, Mount Elizabeth Hospital is the largest (in terms of number of operational beds and contribution to Adjusted Hospital Revenue) Rent collected from Mount Elizabeth Hospital accounts for two-thirds of total gross revenue

24 22. Annual Report 2007 Our Properties: Mount Elizabeth Hospital 3 Mount Elizabeth, Singapore bed private tertiary acute care hospital. One of the largest in the region, Mount Elizabeth Hospital provides a wide range of medical and surgical services. Mount Elizabeth Hospital has an established reputation in Asia in private healthcare. It is well known for the depth of expertise of its specialists, quality care of its nurses and staff, and state-of-the-art technology. Mount Elizabeth Hospital performs the largest number of cardiac surgeries & neurosurgeries in the private sector in the region. The hospital is accredited with the Joint Commission International (JCI); and is the first private hospital in Asia to win the Asian Management Award for exceptional people development and management.

25 Annual Report Property Description The Mount Elizabeth Hospital Development comprises Mount Elizabeth Hospital, a medical centre and car parks. Mount Elizabeth is made up of a 10-storey block and a 5-storey block as well as car park lots. The medical centre comprises a 17-storey medical and retail block with a total of 232 Medical Centre Units and a car park on the 4 th to 8 th storey. All the blocks are linked by a common podium with basement car park. The Mount Elizabeth Hospital Property comprise of Mount Elizabeth Hospital which has 505 licensed beds, 30 Medical Centre Units and 363 car park lots. Parkway Life REIT owns 56.71% of the total share value of the strata lots in Mount Elizabeth Hospital Development, representing the Mount Elizabeth Hospital and 30 Medical Centre Units and carparks. Competitive Strategies Largest private hospital in Singapore Located in the heart of Singapore s prime shopping district of Orchard Road Excellent access to public transportation Located adjacent to retail properties such as Paragon Shopping Centre and Lucky Plaza Shopping Centre Key statistics Strata Area of Property 58,139 sq m Tenure 67 Years from 23 August 2007 Lease Term 15 years with an option to renew for a further term of 15 years Purchase Price (1) at 23 August 2007 S$524.4 m Valuation (1) as at 31 December 2007 S$571.8 m Number of Licensed beds 505 Number of Medical Centre units 232, of which 30 owned by Parkway Life REIT Number of Car park Lots 363 Gross rental revenue from 23 August to 31 December 2007 S$10.6 m Net Property income from 23 August to 31 December 2007 S$9.8 m Revenue Performance 3.0 Millions Forecast Actual August 2007 September 2007 October 2007 November 2007 December 2007 Based on the chart above, we can see that actual rental revenue for 2007 was in line with forecasts. (1) The property was valued by DTZ Debenham Tie Leung (SEA) Pte Ltd by the Capitalisation Approach, Discounted Cash Flow Analysis and Direct Comparison Method.

26 24. Annual Report 2007 Our Properties: Gleneagles Hospital 6 Napier Road, Singapore A Napier Road, Singapore bed private tertiary acute care hospital providing a wide range of medical and surgical services for the total management of patients. Gleneagles key strengths include its patient focus, user-friendly services, quality care, specialists expertise and proven technology. Gleneagles is accredited with the Joint Commission International (JCI), the world leader in improving the quality of healthcare.

27 Annual Report Property Description The Gleneagles Hospital Development comprises Gleneagles Hospital, a medical centre and car parks. Gleneagles Hospital is made up of a 10-storey block with 2 basements and a 5-storey annexe block. The medical centre is a 10-storey block with 3 basements and comprises 164 Medical Centre Units from the 2 nd to 10 th storey. The car parks with an aggregate of 402 car park lots are located at basement 2 to 1 st storey of the hospital building and basement 3 to 1 st storey of the medical centre within the compound of the development. Parkway Life REIT owns 69.05% of the total share value of the strata lots in Gleneagles Hospital Development, representing the Gleneagles Hospital which has 380 licensed beds, 10 Medical Centre Units and 121 car park lots. Competitive Strategies Close proximity to Singapore s prime residential districts Located at the fringe of Singapore s prime shopping district of Orchard Road. Excellent access to public transportation Key statistics Strata Area of Property 49,003 sq m Tenure 75 Years from 23 August 2007 Lease Term 15 years with an option to renew for a further term of 15 years Purchase Price (1) at 23 August 2007 S$216.0 m Valuation (1) as at 31 December 2007 S$225.3 m Number of Licensed beds 380 Number of Medical Centre units 164, of which 10 owned by Parkway Life REIT Number of Car park Lots 402, of which 121 owned by Parkway Life REIT Gross rental revenue from 23 August to 31 December 2007 S$5.5 m Net Property income from 23 August to 31 December 2007 S$5.2 m Revenue Performance Millions Forecast Actual 0 August 2007 September 2007 October 2007 November 2007 December 2007 Based on the chart above, we can see that actual rental revenue has exceeded forecasts throughout the year of (1) The property was valued by DTZ Debenham Tie Leung (SEA) Pte Ltd by the Capitalisation Approach, Discounted Cash Flow Analysis and Direct Comparison Method.

28 26. Annual Report 2007 Our Properties: East Shore Hospital 319 Joo Chiat Place, Singapore ; and 321 Joo Chiat Place, Singapore bed private general acute care hospital; and an outreach specialist centre in Eastern Singapore providing a wide range of medical and surgical facilities. East Shore Hospital has built a loyal niche among residents in Eastern Singapore for its personalised care approach, convenient location and user-friendly services.

29 Annual Report Property Description The East Shore Hospital Property comprises East Shore Hospital, a medical centre and car parks. East Shore Hospital is a 4-storey block with 154 licensed hospital beds and the medical centre is a 5-storey block comprising 28 Medical Centre Units. The 1 st and 5 th storey of the medical centre are linked to the 1 st and 4 th storey of the hospital block. The car park lots are located on the 1 st storey deck and within the compound of the development. Competitive Strategies Located on the eastern part of Singapore Easily accessible by public transportation Approximately 15 minutes from the Singapore Changi Airport Key statistics Strata Area of Property 10,993 sq m Tenure 75 Years from 23 August 2007 Lease Term Purchase Price (1) at 23 August 2007 Valuation (1) as at 31 December 2007 Number of Licensed beds 154 Number of Medical Centre units 28 Number of Car park Lots 75 Gross rental revenue from 23 August to 31 December 2007 Net Property income from 23 August to 31 December years with an option to renew for a further term of 15 years S$34.2 m S$34.5 m S$0.8 m S$0.8 m Revenue Performance Millions Forecast Actual 0 August 2007 September 2007 October 2007 November 2007 December 2007 Based on the chart above, we can see that actual rental revenue for 2007 came in line with forecasts. (1) The property was valued by DTZ Debenham Tie Leung (SEA) Pte Ltd by the Capitalisation Approach, Discounted Cash Flow Analysis and Direct Comparison Method.

30 28. Annual Report 2007 Financial Review Financial Performance For the period ended 31 December 2007, Parkway Life REIT recorded gross revenue of S$16.9 million, which was an increase of 5.0% from our forecast of S$16.1 million. This higher revenue was primarily driven by the higher variable rent component that is linked to the Hospitals Adjusted Hospitals Revenue. The forecast for the period ended 31 December 2007 was prepared based on the minimum guaranteed rent of S$45 million for that year. Correspondingly, net property income was 4.32% higher than forecast, during the period under review. Whilst trust expenses were in line with the forecast, the finance costs (net of interest income) were marginally lower. As a result, this contributed to the 6.16% improvement in overall net income as compared to forecast. Parkway Life REIT will be making a distribution of 2.27 cents per unit for the period from 23 August 2007 to 31 December This translates into an annualised distribution per unit of 6.32 cents, which is 5.81% higher than the forecast distribution per unit of 5.96 cents. Assets As at 31 December 2007, Parkway Life REIT had total assets of S$858.2 million. This is 9.1% higher than the proforma total assets as at Listing Date. The increase was largely attributed to a revaluation gain of S$56.3 million arising from the increase in the capital values of the hospitals in our portfolio. Leverage and Borrowings As at 31 December 2007, Parkway Life REIT had total borrowings of S$34 million (excluding capitalised transaction costs) from a term loan, which was part of our syndicated facilities from Standard Chartered Bank and Commonwealth Bank of Australia. The syndicated facilities also included a S$50 million floating rate revolving credit facility, which remained undrawn as at 31 December In line with our strategy to provide regular and stable distributions to our unitholders, Parkway Life REIT entered into an interest rate swap to provide fixed rate funding for S$34 million. Following Parkway Life REIT s IPO, its proforma leverage was 4.3% of total deposited properties. With the revaluation gain, Parkway Life REIT s leverage improved to 4.0% as at 31 December This translates into substantial debt capacity for Parkway Life REIT to fund our future acquisitions. Coupled with our BBB+ credit rating by Fitch in place, Parkway Life REIT will be able to increase the leverage up to 60% of total deposited properties as prescribed by the Properties Funds Guidelines. Cashflow As at 31 December 2007, Parkway Life REIT had cash and cash equivalents of S$21.1 million. Cashflow generated from operations was S$12.2 million for the financial period ended 31 December The net proceeds from Parkway Life REIT s IPO and the drawdown of term loan were primarily used to finance the purchase of the initial hospitals portfolio for S$774.6 million (partially settled in units). Resulting from the revaluation gain, the net asset value attributable to unitholders ( NAV ) was S$1.36 per unit as at 31 December 2007, 8.8% higher compared to the proforma NAV of S$1.25 per unit.

31 Annual Report Unit Price Performance Parkway Life REIT priced its Initial Public Offering ( IPO ) at S$1.28 per unit on 23 August 2007 against a backdrop of declining valuations in the equity markets and widening credit spreads in the debt markets. Volatility in the global markets continued as the subprime crisis in the U.S. exacerbated. As a result, Parkway Life REIT had a challenging debut on the SGX-ST when we saw our unit price reaching an intra-day high of S$1.30 before closing at S$1.19, a decline of 7% from our IPO price. However, this was in line with the general performance of Singapore REITs who are also affected by the global market volatility. The chart below plots the relative performance of Parkway Life REIT against the average price performance of Singapore REITs and the SESPROP Index based on closing unit prices from 23 August 2007 to 12 February Over this period, notwithstanding the market volatility, Parkway Life REIT s unit price had a smaller decline of 2.5% compared to the average decline in Singapore REITs unit prices of 14.03% and the decline in the SESPROP Index S-REIT % SESPROP -7.50% Parkway Life REIT -2.52% ** S-REIT* SES PROP Index** Parkway Life REIT Source: Bloomberg * Index based on average change in prices of all listed Singapore REITs as at 23 August 2007 ** Index no longer available on bloomberg on 1 January 2008

32 30. Annual Report 2007 Corporate Governance Parkway Trust Management Limited, in its capacity as the Manager of Parkway Life REIT recognises that an effective corporate governance culture is critical to the performance of the Manager and consequently, the success of Parkway Life REIT. The Manager is firmly committed to good corporate governance and has adopted a comprehensive corporate governance framework that meets best practice principles. In particular, the Manager has an obligation to act honestly, with due care and diligence, and in the best interests of Unitholders. The following sections describe the Manager s main corporate governance policies and practices. They encompass proactive measures for avoiding situations of conflict and potential conflicts of interest, including prioritising the interests of Unitholders over the Manager s. They also ensure that applicable laws and regulations within the listing rules of the Singapore Exchange Securities Trading Limited ( SGX-ST ), the Code of Collective Investment Schemes ( CIS ) (including the Property Funds Guidelines) issued by the Monetary Authority of Singapore ( MAS ) and the Securities and Futures Act ( SFA ), are complied with, and that the Manager s obligations under Parkway Life REIT s Trust Deed are properly and efficiently carried out. THE MANAGER OF PARKWAY LIFE REIT The Manager has general powers of management over the assets of Parkway Life REIT. The Manager s main responsibility is to manage Parkway Life REIT s assets and liabilities for the benefit of Unitholders. The Manager will set the strategic direction of Parkway Life REIT and make recommendations to the Trustee on the acquisition, divestment and enhancement of assets of Parkway Life REIT in accordance with its stated investment strategy. Other main functions and responsibilities of the Manager are as follows: 1. Using its best endeavours to carry on and conduct its business in a proper and efficient manner, to ensure that Parkway Life REIT is carried on and conducted in a proper and efficient manner and to conduct all transactions with or on behalf of Parkway Life REIT at arm s length and on normal commercial terms; 2. Preparing property plans on an annual basis for review by the Directors of the Manager, which may contain proposals and forecasts on net income, capital expenditure, sales and valuations, explanations of major variances to previous forecasts, written commentary on key issues and underlying assumptions on inflation, annual turnover, rental rates, occupancy costs and any other relevant assumptions. The purpose of these plans is to explain the performance of Parkway Life REIT s assets; 3. Ensuring compliance with the applicable provisions of the SFA and all other relevant legislation, the listing rules of the SGX-ST, the CIS Code (including the Property Funds Guidelines), the Trust Deed, the tax ruling issued by the Inland Revenue Authority of Singapore on the taxation of Parkway Life REIT and its Unitholders and all relevant contracts; 4. Attending to all regular communications with Unitholders; and 5. Supervising the Property Manager, which provides project management services including co-ordination of pre-qualification and tender exercises as well as project meetings, recommendation of project budget and appointment of project consultants as well as monitoring and supervising projects under the property management agreement entered into with Parkway Life REIT. Parkway Life REIT, constituted as a trust, is externally managed by the Manager and accordingly, it has no personnel. The Manager appoints experienced and well-qualified management to handle its day-to-day operations. All directors and employees of the Manager are remunerated by the Manager, and not Parkway Life REIT. Parkway Trust Management Limited is appointed as manager of Parkway Life REIT in accordance with the terms of the Trust Deed dated 12 July 2007 (the Trust Deed ). The Trust Deed outlines certain circumstances under which the Manager can be retired in favour of a corporation approved by the Trustee or be removed by notice given in writing from the Trustee upon the occurrence of certain events. BOARD OF DIRECTORS The Board of Directors of the Manager (the Board ) is responsible for the overall corporate governance of the Manager including establishing goals for management and monitoring the achievement of these goals. All Board members participate in matters relating to corporate governance, business operations and risks, financial performance and the nomination and review of directors. The Board has established a framework for the management of the Manager including a system of internal controls and a business risk management process.