HALF-YEARLY. Tower Real Estate Investment Trust

Transcription

1 HALF-YEARLY R E P O R T 7 Tower Real Estate Investment Trust

2 CONTENTS Salient Features of Trust 02 Corporate Directory 03 Property Portfolio 04 Financial Highlights 08 Manager s Report 10 Financial Statements 18 Unitholders Statistics 40

3 Salient Features of Trust Trust category Trust type Approved size of Trust Authorised investments Financial year end Distribution policy Real Estate Investment Trust ( REIT ) Income and growth 280,500,000 units At least 75% of Gross Asset Value ( GAV ) are invested in real estate and/or single-purpose companies which principal assets comprise real estate, real estate-related assets and/or liquid assets out of which at least 50% of GAV are invested in real estate and/or single-purpose companies which principal assets comprise real estate and the remaining 25% may be invested in any other permitted investment. 31 December The Manager intends to distribute 100% of the Distributable Income to unitholders for the fi nancial year ending 31 December Thereafter, the Manager intends to distribute at least 90% of the Distributable Income for the relevant fi nancial years. The Manager intends to make semi-annual distributions to unitholders with the amount calculated as at 30 June and 31 December each year or such other percentages and at such other intervals as determined by the Manager at its discretion. Borrowing limitations Valuation policy No redemption by unitholders Initial Public Offering retail price Minimum initial investment Minimum additional investment Board lot Investor profile Stock Exchange Listing Total borrowings of the Trust shall not exceed 50% of the GAV at the time the borrowings are incurred or such other levels as may be permitted by the Securities Commision s Guidelines on REITs. The real estate shall be revalued at least once every year from the date of the last valuation. Unitholders have no right to request the Manager to repurchase or redeem the units while the units are listed on Bursa Malaysia Securities Berhad ( Bursa Securities ). It is intended that unitholders may only deal with their listed units through trading on Bursa Securities. RM1.07 per unit Minimum of 100 units Multiples of 100 units 100 units per board lot Tower REIT may appeal to an investor who: understands the risk related to the real estate industry and REITs; has long-term investment objectives with moderate risk appetite; and seeks regular distribution of income and long-term capital appreciation. Main Board of Bursa Malaysia Securities Berhad Bursa Malaysia stock number TWRREIT TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT 2007

4 Corporate Directory MANAGER GLM REIT MANAGEMENT SDN. BHD. ( H) MANAGER S PRINCIPAL ADDRESS Level 8, Wisma Hong Leong 18 Jalan Perak Kuala Lumpur Tel No : Fax No : MANAGER S REGISTERED ADDRESS Level 10, Wisma Hong Leong 18 Jalan Perak Kuala Lumpur Tel No : Fax No : BOARD OF DIRECTORS OF GLM REIT MANAGEMENT SDN. BHD. KWEK LENG SENG Chairman KHOO POH CHYE Managing Director DATO AHMAD JOHARI BIN TUN ABDUL RAZAK Director GOH TIAN SUI Director COMPANY SECRETARIES LIM YEW YOKE (LS ) 2, Jalan SG 7/12 Taman Sri Gombak Batu Caves Selangor Darul Ehsan LEE SOW YEANG (MAICSA ) 11A, Jalan Alam Jaya 5 Taman Alam Jaya Selangor Darul Ehsan TRUSTEE AMTRUSTEE BERHAD 22nd Floor, Bangunan AmBank Group 55 Jalan Raja Chulan Kuala Lumpur Tel No : Fax No : PROPERTY MANAGER YAP BURGESS RAWSON INTERNATIONAL (Proprietor : Yap & Partners Sdn. Bhd.) Level 5, Bangunan MIDF 195A Jalan Tun Razak Kuala Lumpur Tel No : Fax No : REGISTRAR HONG LEONG SHARE REGISTRATION SERVICES SDN. BHD. Level 5, Wisma Hong Leong 18 Jalan Perak Kuala Lumpur Tel No : Fax No : AUDITORS KPMG CHARTERED ACCOUNTANTS Wisma KPMG, Jalan Dungun Damansara Heights Kuala Lumpur Tel No : PRINCIPAL BANKERS HONG LEONG BANK BERHAD Level 1, Wisma Hong Leong 18 Jalan Perak Kuala Lumpur Tel No : PUBLIC BANK BERHAD 27th Floor, Menara Public Bank 146 Jalan Ampang Kuala Lumpur Tel No : HSBC BANK MALAYSIA BERHAD 2 Leboh Ampang Kuala Lumpur Tel No : TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT

5 Property Portfolio Summary As at 30 June 2007, Tower REIT s investment portfolio comprises 3 prime offi ce buildings situated in the Klang Valley. At Valuation % of Total Real Estate RM million Real Estate Portfolio Menara HLA % HP Towers % Menara ING* 77 # 16.4 % % * This represents 78.33% of the total share unit entitlement and 100% of the car park bays of Menara ING ( Menara ING ). # Included the cost of acquisition of approximately RM2.5 million. Property : Menara HLA Address : No. 3, Jalan Kia Peng, Kuala Lumpur Menara HLA is situated in the heart of the Golden Triangle of Kuala Lumpur, the main central business district accommodating prime offi ce building, prime retail centers and international class hotels. Menara HLA is diagonally opposite Kuala Lumpur Convention Centre. Property : Address : HP Towers No. 12, Jalan Gelenggang, Bukit Damansara, Kuala Lumpur HP Towers is situated within the commercial area of Bukit Damansara and is sited on the northern (right) side of Jalan Semantan (forming part of the SPRINT Highway), travelling from Kuala Lumpur city centre towards Petaling Jaya. HP Towers lies about 8 km west of the Kuala Lumpur city centre. Property : Menara ING Address : No. 84, Jalan Raja Chulan, Kuala Lumpur Menara ING is located within the Golden Triangle of Kuala Lumpur. It s sited on the northern (left) side of Jalan Raja Chulan, an established offi ce address within the Kuala Lumpur city centre and Bukit Bintang retail precincts. 4 TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT 2007

6 Property Portfolio Menara HLA ADDRESS Menara HLA, No. 3, Jalan Kia Peng, Kuala Lumpur TITLE DETAILS Sited on part of the land held under Lot No. 1286, Seksyen 57, Title No. Geran 43969, Town and District Kuala Lumpur PROPERTY TYPE/USE Commercial Offi ce Building DESCRIPTION A 32-storey high-rise offi ce building with a 4-level basement car park AGE 8 years STATUS OF HOLDING Freehold ENCUMBRANCES Lien holder caveat entered by Pubilc Bank Berhad NET LETTABLE AREA 396, 820 sq. ft. PARKING SPACE 723 car park bays DATE OF ACQUISITION 17 April 2006 COST OF ACQUISITION RM221,000,000 OCCUPANCY RATES* 97% RENTAL RECEIVED** RM9,852,000 MAINTENANCE COST** RM1,667,000 MAJOR CAPITAL EXPENDITURE Nil LATEST REVALUATION RM240,000,000 DATE OF LAST VALUATION 20 November 2006 FAIR VALUE ADJUSTMENT RM18,660,000 NET BOOK VALUE RM240,000,000 *As at 30 June 2007 **For six-month period ended 30 June 2007 % of Total Net Top 5 Tenants Trade Sector Lettable Area % Hong Leong Assurance Berhad Finance / Insurance 20.6 V Source Asia Berhad Information Technology / Services 13.9 Aker Kvearner Engineering SEA Sdn. Bhd. Oil & Gas 13.5 HLG Capital Berhad Finance / Insurance 11.3 RZ Corporation Sdn. Bhd. Manufacturing / Trading TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT

7 Property Portfolio HP Towers ADDRESS HP Towers, No. 12, Jalan Gelenggang, Bukit Damansara, Kuala Lumpur TITLE DETAILS Lot No. PT 5748, Title No. HS (D) , Mukim and District of Kuala Lumpur PROPERTY TYPE/USE Commercial Offi ce Building DESCRIPTION 2 blocks of 9 and 21 storey offi ce buildings with 3 levels connecting podium and 4 levels of basement car park AGE 15 years STATUS OF HOLDING Freehold ENCUMBRANCES Lien holder caveat entered by Pubilc Bank Berhad NET LETTABLE AREA 350, 056 sq. ft. PARKING SPACE 545 car park bays DATE OF ACQUISITION 17 April 2006 COST OF ACQUISITION RM130, 000, 000 OCCUPANCY RATES* 85% RENTAL RECEIVED** RM7,061,000 MAINTENANCE COST** RM1,982,000 MAJOR CAPITAL EXPENDITURE Nil LATEST REVALUATION RM150, 000, 000 DATE OF LAST VALUATION 20 November 2006 FAIR VALUE ADJUSTMENT RM19,871,000 NET BOOK VALUE RM150, 000, 000 *As at 30 June 2007 **For six-month period ended 30 June 2007 % of Total Net Top 5 Tenants Trade Sector Lettable Area % Hewlett-Packard (M) Sdn. Bhd. Information Technology 39.3 Dagang Net Technologies Sdn. Bhd. Information Technology 6.6 Carat Media Services (M) Sdn. Bhd. Services 3.4 TBWA-ISC Malaysia Sdn. Bhd. Services 3.4 Otis Elevator Company (M) Sdn. Bhd. Manufacturing / Trading TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT 2007

8 Property Portfolio Menara ING ADDRESS Menara ING, No.84, Jalan Raja Chulan, Kuala Lumpur TITLE DETAILS Lot No. 1199, Section 57, Title No. Geran 10041, Town and District of Kuala Lumpur PROPERTY TYPE/USE Commercial Offi ce Building DESCRIPTION A 20-storey highrise offi ce tower with an annexed 3 1 /2 -storey offi ce block and 2 split-level basement car park AGE 18 years STATUS OF HOLDING Freehold ENCUMBRANCES Nil NET STRATA AREA 151,395 sq. ft # PARKING SPACE 190 car park bays DATE OF ACQUISITION 27 March 2007 COST OF ACQUISITION RM75,000,000 OCCUPANCY RATES* 100% RENTAL RECEIVED** RM2,084,000 MAINTENANCE COST** RM518,000 MAJOR CAPITAL EXPENDITURE Nil LATEST REVALUATION RM75,000,000 DATE OF LAST VALUATION 15 September 2006 NET BOOK VALUE RM77,461,000 # This represents 78.33% of the total share unit entitlement and 100% of the car park bays of Menara ING *As at 30 June 2007 **For period from 27 March 2007 to 30 June 2007 % of Total Net Name of Tenant Trade Sector Lettable Area % ING Insurance Berhad Finance / Insurance 100 TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT

9 Financial Highlights Unaudited Audited 1January April 2006 To To 30 June December 2006 Total revenue (RM 000) 19,231 22,893 Income after taxation (RM 000) - Realised and distributable for the period 11,224 12,692 - Unrealised from fair value adjustment of - 38,532 investment properties 11,224 51,224 Provision for income distribution (RM 000) 11,220 12,692 Earnings per unit (sen)* Distribution per unit (sen) Annualised distribution per unit (sen) Annualised distribution yield - Based on respective closing market prices 6.90% 8.29% Market price per unit at close of respective periods (RM) Highest traded price during the period (RM) Lowest traded price during the period (RM) *Based on weighted average number of units in issue during the period As at As at 30 June December 2006 Total assets (RM 000) 482, ,770 Total borrowings (RM 000) 135, ,500 Net asset value (RM 000) 323, ,199 Units in circulation ( 000 unit) 280, ,500 Net asset value per unit (RM) TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT 2007

10 ...our existing properties i.e Menara HLA, HP Towers and Menara ING continue to perform well during the Period, recorded improvement in rental rates and sustainable high occupancy rates......we expect Tower REIT to deliver strong results for the remaining year 2007 i.e sustainable distributions to our unitholders and improvement in Net Asset Value per unit... TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT

11 Manager s Report We, GLM REIT Management Sdn. Bhd. ( GLM REIT or the Manager ), the Manager of Tower Real Estate Investment Trust ( Tower REIT or Trust ), have pleasure in presenting the Half-Yearly Report and unaudited fi nancial statements of Tower REIT for the six-month period ended 30 June 2007 (the Period ). The Trust, The Manager and Their Principal Activities Tower REIT was constituted under a Deed dated 17 February 2006 ( Deed ) entered into between the Manager and AmTrustee Berhad, acting as the Trustee of Tower REIT ( Trustee ) and listed on the Main Board of Bursa Malaysia Securities Berhad ( Bursa Securities ) on 12 April The principal activity of Tower REIT is investment in 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 which principal assets comprise of real estate. There has been no signifi cant change in the nature of this activity during the Period. The Manager is a wholly-owned subsidiary of GuocoLand (Malaysia) Berhad ( GLM ), a member of the Hong Leong Group Malaysia. The principal activity of the Manager is to provide management services to real estate investment trusts. There has been no signifi cant change in the nature of this activity during the Period. Investment Portfolio and Assets Allocation As at 30 June 2007, Tower REIT s composition of investment portfolio is as follows: RM 000 Percentage % At Valuation Real Estate Menara HLA 240, HP Towers 150, Menara ING* 77, , Deposits with licensed fi nancial institutions 14, , *This represents 78.33% of the total share unit entitlement and 100% of the car park bays of Menara ING ( Menara ING ). There has been no signifi cant change in the assets allocation of the Trust during the Period except for the completion of the acquisition of Menara ING on 27 March TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT 2007

12 Manager s Report (cont d) Review of Performance As at As at 30 June December 2006 Variance Net asset value ( NAV ) (RM 000) 323, ,199 14% Units in circulation (Unit) 280,500, ,500,000 18% NAV per unit (RM) % Unaudited Forecast Six-month Ended Six-month Ended 30 June June 2007 Variance RM 000 RM 000 % Net property income 14,829 13,546 9% Other income % Non-property expenses (3,839) (4,262) -10% Income before taxation 11,223 9,426 19% Taxation - - Income after taxation 11,223 9,426 19% Provision for distribution 11,220 9,426 19% Earnings per share (sen)* % Distribution per unit (sen) % Annualised distribution yield ** 6.90% 5.79% 19% * Based on weighted average number of unit in issue during the period ** Based on closing price of RM1.16 as at 30 June 2007 The Trust recorded a net property income of RM14.8 million and income after taxation of RM11.2 million for the six-month period ended 30 June The income after taxation outperformed the forecast result as disclosed in the Circular to unitholders of the Trust dated 14 February 2007 in relation to the acquisition of Menara ING, by approximately 19%, mainly attributable to the improvement in property revenue due to higher occupancy and rental rates and effective cost control on property expenses as well as lower interest expenses. Distribution of Income A fi rst and fi nal income distribution of sen per unit, totalling RM12,692,475, representing approximately 100% of the income after taxation in respect of the fi nancial period from 12 April 2006 to 31 December 2006 was paid on 28 February For the six-month period ended 30 June 2007, the Manager is pleased to declare an interim income distribution of 4 sen per unit, totalling RM11,220,000 and representing approximately 100% of distributable income after taxation, payable on 28 August TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT

13 Manager s Report (cont d) Distribution of Income (cont d) Pursuant to Section 61A of the Income Tax Act, 1967, the Trust is exempted from tax provided that it distributes at least 90% of its total income to its unitholders. Withholding tax will be deducted for distributions to be made to the following categories of unitholders: - Resident corporate tax at prevailing rate - Resident non-corporate withholding tax 15% - Non-resident individual withholding tax 15% - Non-resident corporate withholding tax 27% - Non-resident institutional withholding tax 20% The effect of the income distribution in term of NAV per unit as at 30 June 2007 is as follows: RM NAV per unit before distribution 1.19 NAV per unit after distribution 1.15 Operation Review Underlying Strong Portfolio With the current positive demand-supply dynamics of prime offi ce in particularly, within the Kuala Lumpur city centre, our existing properties i.e Menara HLA, HP Towers and Menara ING continue to perform well during the Period, recorded improvement in rental rates and sustainable high occupancy rates. As at 30 June 2007, Menara HLA and HP Towers shown a high occupancy rate of 97% and 85% respectively while Menara ING was 100% occupied. The steady growth in rental rates is underpinned by market strong demand for quality offi ce space as well as the proactive assets management strategy implemented. Yield Accretive Acquisition On 27 March 2007, Tower REIT completed the acquisition of 78.33% of the total share unit entitlement and 100% of the car park bays of Menara ING. The acquired property is 100% leased to ING Insurance Berhad. In connection with the acquisition of Menara ING, a private placement of 43,000,000 new units at RM0.91 per unit were fully placed out and the new units were listed on the Main Board of Bursa Securities on 20 March This yield accretive acquisition resulted a 21% growth in the real estate investment portfolio of the Trust. Active Capital and Interest Rate Management As at 30 June 2007, the Trust s total borrowings were RM135.5 million while the gearing ratio (total borrowings to total asset value) stood at 28% (25% as at 31 December 2006) as compared to the permitted 50% gearing ratio limit under the Securities Commission ( SC ) s Guidelines on REITs. It is our strategy to maintain an optimal gearing level that provides fl exibility in meeting the Trust s future investments and capital requirements. On interest rate management, the Trust had entered into an interest rate swap, hedging about 48% of its existing fl oating rate borrowing exposure into a fi xed rate as a pre-emptive move to mitigate the Trust s interest rate risk exposure. This interest rate swap allowed the Trust to fi x the interest rate at 3.61% for 5 years against the fl oating 3-month KLIBOR. We will constantly monitor the Trust s risks exposure by closely adhering to established management policies and procedures. 12 TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT 2007

14 Manager s Report (cont d) Review of Office Market Generally, the prime offi ce market in the Klang Valley has experienced strong growth in rental rates and sustainable high occupancy rates as a result of the limited supply and rising demand of prime offi ce spaces. The prime offi ce capital values have appreciated due to limited good investment grade buildings available for sale in the prime area of the Klang Valley coupled with owners holding out for higher prices and hence, leads to compression of property yields. Prospects The Malaysian economy is expected to be favourable in 2007 supported by sustained global growth and resilient domestic demand. The offi ce sector, in particular, is expected to remain active with rental and occupancy rates for prime offi ce spaces trending upwards due to rising demand and tight availability of prime offi ce spaces in the Klang Valley. Driven by this positive industry dynamics in the offi ce sector, we envisage the capital values of prime offi ce to strengthen further; hence, expect Tower REIT to deliver strong results for the remaining year 2007 i.e sustainable distributions to its unitholders and improvement in NAV per unit. Investment Objectives Our investment objectives are: (a) to provide the unitholders with stable distribution per unit as well as sustainable long term growth of such distributions; and (b) to achieve medium to long term growth in the NAV per unit. Investment Strategies We will continue to implement the following strategies to achieve our investment objectives: (i) Active Asset Management Our strategy for organic growth is to enhance the performance of the properties by increasing yields and returns through a combination of retaining existing tenants, reducing vacancy levels, adding and optimising offi ce spaces at the properties and minimising interruptions in rental income and optimising operation costs. We will apply the active asset management principles via the following: (a) (b) (c) (d) (e) maintaining close relationship with tenants to optimise tenants retention; to optimise rental rates via active management of tenancies renewals and new tenancies; actively working through their networking to pursue new tenancy opportunities; to optimise the tenant mix and space confi guration; and continually maintaining quality of the properties. (ii) Prudent Acquisition Strategy We will continue to actively explore acquisition opportunities that would add value to the unitholders. We will focus on the following key criteria when evaluating acquisitions: TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT

15 Manager s Report (cont d) (ii) Prudent Acquisition Strategy (cont d) (a) Economic and property market outlook - Timing and cost of acquisition - Capital appreciation (b) Location - Strategic - Accessibility - Surrounding environment (c) Tenancy - Credit quality - Lease expiry profi le - Tenancy mix (d) Building quality - Building and facilities specifi cation - Effective operations cost As part of the larger Hong Leong Group Malaysia, we stand to benefi t from the established network of business relationships of Hong Leong Group Malaysia with major players in the property industry in Malaysia and overseas for the purpose of identifying acquisition opportunities. Also, being a wholly-owned subsidiary of GLM, we will be able to leverage on GLM s extensive expertise, experience and knowledge in the REIT s properties based on GLM s proven track record in managing large scale commercial property assets. We intend to hold the properties on a medium to long term basis. In the future where any of the properties has reached a stage of optimum growth, we may consider selling the properties and hence, realising potential capital gain and thereafter, use the proceeds for alternative investments in properties that meet Tower REIT s investment criteria to further maximise the total returns to its unitholders. (iii) Capital and Risk Management Strategy We aim to optimise Tower REIT s capital structure and cost of capital and intend to use a combination of debt and equity funding for future acquisitions and property enhancement. Our capital management involves: (a) (b) adopting and maintaining an optimal gearing level; and adopting an active interest rate management strategy to manage risks associated with changes in interest rate; while maintaining flexibility in Tower REIT s capital structure to meet future investments and/or capital requirements. Investment Policies (i) Portfolio composition Tower REIT s investment may be allocated in the following manner, as prescribed by the SC s Guidelines on REITs: (a) at least 75% of Tower REIT s Gross Assets Value ( GAV ) shall be invested in real estate, single-purpose companies which principal assets comprise real estate, real estate-related assets or liquid assets out of which at least 50% of Tower REIT s GAV must be invested in real estate or single-purpose companies which principal assets comprise of real estate; and 14 TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT 2007

16 Manager s Report (cont d) (i) Portfolio composition (cont d) (b) the remaining 25% of Tower 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). (ii) Diversification Tower REIT will seek to explore diversifi cation of its real estate portfolio by property and location. Primarily, Tower REIT will focus on investing in commercial properties for offi ce or retail purposes in prime locations. In addition, it may also look into other types of properties that will provide attractive returns as part of its balanced portfolio management strategy. (iii) Gearing Under the SC s Guidelines on REITs, Tower REIT is permitted to procure borrowings of up to 50% of its total assets value wherein Tower REIT will be able to leverage on its borrowing to make the permitted investment. Notwithstanding the above, Tower REIT may source other means of funding through new issuance of units. Significant Event The acquisition of 78.33% of the total share unit entitlement and 100% of the car park bays of Menara ING was completed on 27 March In connection with the acquisition of Menara ING, the private placement of additional 43,000,000 new units issued at RM0.91 per unit had been completed and the new units were listed on the Main Board of Bursa Securities on 20 March The effect of the private placement in the NAV per unit as at 20 March 2007 is as follows: RM NAV per unit before private placement 1.20 NAV per unit after private placement 1.15 Manager s Fees and Commission Pursuant to the Deed, the Manager s fees consist of a base fee (excluding any goods and service tax payable) of up to 0.75% per annum of the GAV and a performance fee (excluding any goods and services tax payable) of up to 4% per annum of the net property income, but before deduction of property management fee. In addition, the Manager will also be entitled to the following fees for any acquisition or disposal of real estate by Tower REIT: (i) an acquisition fee of 1.0% of the acquisition price of any real estate or single-purpose company which principal assets comprise of real estate, purchased for Tower REIT (pro-rate if applicable to the proportion of the interest of Tower REIT in the asset acquired); and (ii) a divestment fee of 0.5% of the sale price of any real estate or a single-purpose company which principal assets comprise of real estate, sold or diverted by Tower REIT (pro-rate if applicable to the proportion of the interest of Tower REIT in the asset sold). Soft Commission During the Period, the Manager did not receive any soft commission (i.e. goods and services) from its broker, by virtue of transactions conducted by Tower REIT. TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT

17 Manager s Report (cont d) Breakdown of Unitholdings Distribution of unitholders as at 29 June 2007: Size of Holding No. of Unitholders % of Unitholders No. of Units Held % of Units Held 5,000 and below ,792, ,001 10, ,878, ,001 50, ,968, , , ,711, ,001 and above ,148, , ,500, Directors The Directors who served on the Board of GLM REIT at the date of this report are: Mr Kwek Leng Seng (Chairman, Non-Independent Non-Executive Director) Mr Khoo Poh Chye (Managing Director, Non-Independent Executive Director) YBhg Dato Ahmad Johari bin Tun Abdul Razak (Independent Non-Executive Director) Mr Goh Tian Sui (Independent Non-Executive Director) Directors Benefits During and at the end of the Period, no arrangement subsisted to which GLM REIT is a party, with the object or objects of enabling the Directors of GLM REIT to acquire benefi ts by means of the acquisition of units in or debentures of Tower REIT or any other body corporate. Since the establishment of Tower REIT, no Director has received or become entitled to receive any benefi t by reason of a contract made by GLM REIT for Tower REIT or a related corporation with the Director or with a fi rm of which he is a member, or with a company in which he has a substantial fi nancial interest, except as disclosed in the notes to the fi nancial statements. Directors Interests The direct holdings in the units of Tower REIT of those who were Directors of GLM REIT at the six-month period ended 30 June 2007 are as follows: No. of Units At 1 January 2007 Bought /(Sold) 30 June 2007 Mr Kwek Leng Seng 300, ,000 Mr Khoo Poh Chye YBhg Dato Ahmad Johari bin Tun Abdul Razak Mr Goh Tian Sui During and at the end of the Period, no material contracts have been entered into involving any Directors and major unitholders. 16 TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT 2007

18 Manager s Report (cont d) Other Statutory Information a) Before the income statement and balance sheet of Tower REIT were made out, the Manager 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 provision for doubtful debts and satisfi ed themselves that there were no known bad debts and no provision for doubtful debts was necessary; and ii. to ensure that any current assets which were unlikely to realise their value 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, the Manager is not aware of any circumstances which would render: i. it necessary to write off any bad debts or to make any provision for doubtful debts in respect of the fi nancial statements of Tower REIT; and ii. the values attributed to the current assets in the fi nancial statements of Tower REIT misleading. c) At the date of this report, the Directors of the Manager are not aware of any circumstances, which have arisen which would render adherence to the existing method of valuation of assets or liabilities of Tower REIT misleading or inappropriate. d) At the date of this report, the Directors of the Manager are not aware of any circumstances not otherwise dealt with in this report or fi nancial statements of Tower REIT which would render any amount stated in the fi nancial statements misleading. e) As at the date of this report, there does not exist: i. any charge on the assets of Tower REIT which has arisen since the end of the Period which secures the liabilities of any other person, except as disclosed in Note 7 to the fi nancial statements of Tower REIT; and ii. any contingent liability of Tower REIT which has arisen since the end of the Period. f) In the opinion of the Directors of the Manager: i. no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the fi nancial period which will or may affect the ability of Tower REIT to meet its obligations as and when they fall due; and ii. no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the Period and the date of this report which is likely to affect substantially the results of the operations of Tower REIT for the Period in which this report is made. Signed in accordance with a resolution of the Directors of GLM REIT. KWEK LENG SENG KHOO POH CHYE Kuala Lumpur 2 August 2007 TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT

19 FINANCIAL STATEMENTS Statement by the Directors of the Manager 19 Trustee s Report to the Unitholders 20 Balance Sheet 21 Income Statement 22 Statement of Changes in Net Asset Value 24 Cash Flow Statement 25 Notes to the Financial Statements TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT 2007

20 Statement by the Directors of the Manager In the opinion of Directors of the Manager, the financial statements set out on pages 21 to 39 are drawn up in accordance with the provisions of the Deed dated 17 February 2006, the Securities Commission s Guidelines on Real Estate Investment Trusts, applicable securities laws and applicable approved accounting standards for entities other than private entities issued by the Malaysian Accounting Standards Board so as to give a true and fair view of the state of affairs of Tower Real Estate Investment Trust at 30 June 2007 and of the results of its operations and cash flows for the six-month period ended on that date. Signed for and on behalf of the Manager, GLM REIT Management Sdn. Bhd., in accordance with a resolution of the Directors of the Manager: Kwek Leng Seng Khoo Poh Chye Kuala Lumpur 2 August 2007 TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT

21 Trustee s Report to the Unitholders of Tower Real Estate Investment Trust (Established in Malaysia) We, AmTrustee Berhad, have acted as Trustee of Tower Real Estate Investment Trust ( Tower REIT ) for the six-month period ended 30 June In our opinion, GLM REIT Management Sdn. Bhd. (the Manager ) has managed Tower REIT in accordance with the limitations imposed on the investment powers of the Manager and the Trustee under the Deed dated 17 February 2006, other provisions of the Deed, the Securities Commission s Guidelines on Real Estate Investment Trusts, the Securities Commission Act 1993 and other applicable laws during the six-month period then ended. We have also ensured the following: (a) the procedures and processes employed by the Manager to value and price the units of Tower REIT are adequate and that such valuation/pricing is carried out in accordance with the Deed and other regulatory requirements; and (b) the creation of units are carried out in accordance with the Deed and other regulatory requirements. We confirm that the recommended net income distribution of 4.0 sen per unit for the six-month period is in line with and is reflective of the objectives of Tower REIT. For and on behalf of the Trustee, AmTrustee Berhad Raja Amir Shah Bin Raja Abdul Aziz Chief Executive Offi cer Kuala Lumpur 2 August TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT 2007

22 Balance Sheet as at 30 June 2007 (unaudited) Note RM 000 RM 000 Assets Investment properties 3 467, ,000 Trade and other receivables ,683 Deposits placed with licensed financial institutions 14,100 13,669 Cash and bank balances Total assets 482, ,770 Liabilities Trade and other payables 5 11,932 10,379 Provisions for income distribution 6 11,220 12,692 Borrowings (secured) 7 135, ,500 Total liabilities 158, ,571 Net asset value ( NAV ) 323, ,199 Represented by: Unitholders funds Unitholders capital 8 285, ,667 Undistributed income - realised 3 - Undistributed income - unrealised - Investment fluctuation reserves 9 38,532 38, , ,199 Number of Units in circulation ( 000) 280, ,500 NAV per unit (RM) - before income distribution after income distribution The notes set out on pages 26 to 39 form an integral part of, and should be read in conjunction with, these financial statements. TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT

23 Income Statement for the period from 1 January 2007 to 30 June 2007 (unaudited) to to Note RM 000 RM 000 Gross revenue 10 18,998 22,340 Property operating expenses 11 (4,169) (6,013) Net property income 14,829 16,327 Interest income Fair value adjustment on investment properties - 38,532 Other income 9 58 Total income 15,062 55,412 Manager s fees 12 1, Trustee s fees Auditor s fees Valuation fees - 60 Administrative expenses Interest expenses 2,600 3,317 Total expenses 3,839 4,188 Income before taxation 11,223 51,224 Taxation Net income for the period 11,223 51,224 Net income for the period is made up as follows: Realised 11,223 12,692 Unrealised - Fair value adjustment on investment properties - 38,532 11,223 51,224 Earnings per unit - (sen)* 15 - before Manager s fees after Manager s fees * Based on weighted average number of units in issue during the period The notes set out on pages 26 to 39 form an integral part of, and should be read in conjunction with, these financial statements. 22 TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT 2007

24 Income Statement (cont d) for the period from 1 January 2007 to 30 June 2007 (unaudited) to to Note RM 000 RM 000 Net income distribution Proposed interim income distribution of 4.00 sen per unit payable on 28 August ,220 12,692 ( A final income distribution of sen per unit paid on 28 February 2007) Interim income distribution per unit (sen) 16 - Gross Net * Final income distribution per unit (sen) 16 - Gross Net * * Withholding tax will be deducted for distributions made to the following categories of unitholders: Resident corporate - tax at prevailing rate Resident non-corporate - withholding tax 15% Non-resident individual - withholding tax 15% Non-resident corporate - withholding tax 27% Non-resident institutional - withholding tax 20% The notes set out on pages 26 to 39 form an integral part of, and should be read in conjunction with, these financial statements. TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT

25 Statement Of Changes In Net Asset Value for the six-month period ended 30 June 2007 (unaudited) Distributable income Unitholders capital Unrealised Realised Total Note RM 000 RM 000 RM 000 RM 000 At 21 February 2006 (date of establishment) Changes in fair value 3-38,532-38,532 Net income for the period ,692 12,692 Unitholders Transactions Distribution to unitholders (12,692) (12,692) Creation of units 251, ,630 Establishment & issue expenses 17 (4,964) - - (4,964) At 31 December ,667 38, ,199 At 1 January ,667 38, ,199 Net income for the period ,223 11,223 Unitholders Transactions Distribution to unitholders (11,220) (11,220) Creation of units 39, ,130 Establishment & issue expenses 17 (452) - - (452) At 30 June ,345 38, ,880 Note 8 Note 9 The notes set out on pages 26 to 39 form an integral part of, and should be read in conjunction with, these financial statements. 24 TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT 2007

26 Cash Flow Statement for the six-month period ended 30 June 2007 (unaudited) to to RM 000 RM 000 Cash flows from operating activities Income before taxation 11,223 51,224 Adjustments for: Interest expense 2,600 3,317 Interest income (224) (495) Fair value adjustment on investment properties - (38,532) Operating profit before working capital changes 13,599 15,514 (Increase)/Decrease in working capital: Trade and other receivables 9,025 (9,683) Trade and other payables 1,553 10,379 Net cash generated by operating activities 24,177 16,210 Cash flows from investing activities Purchase of investment properties (77,501) (351,468) Interest income Net cash used in investing activities (77,277) (350,973) Cash flows from financing activities Interest paid (2,600) (3,317) Proceeds from issue of units 39, ,631 Proceeds from borrowing 30, ,500 Distribution paid to unitholders (12,692) - Establishment & issue expenses (452) (4,964) Net cash generated by financing activities 53, ,850 Net increase in cash and cash equivalents ,087 Cash and cash equivalents at 1 January ,087 - Cash and cash equivalents at 30 June ,373 14,087 Cash and cash equivalents Cash and cash equivalents included in the cash flow statement comprise the following balance sheet amounts: RM 000 RM 000 Cash and bank balances Deposits placed with licensed financial institutions 14,100 13,669 14,373 14,087 The notes set out on pages 26 to 39 form an integral part of, and should be read in conjunction with, these financial statements. TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT

27 Notes to the Financial Statements Tower Real Estate Investment Trust (Established in Malaysia) Tower Real Estate Investment Trust ( Tower REIT ) is a Malaysia-domiciled real estate investment trust constituted pursuant to the Deed dated 17 February 2006 (the Deed ) between GLM REIT Management Sdn. Bhd. (the Manager ) and AmTrustee Berhad (the Trustee ). The Deed is regulated by the Securities Commission Act, 1993, the Securities Commission s Guidelines on Real Estate Investment Trusts, the Listing Requirements of Bursa Malaysia Securities Berhad, the Rules of the Depository and taxation laws and rulings. Tower REIT will continue its operations until such time as determined by the Trustee and the Manager as provided under the provisions of Clause 19 of the Deed. Tower REIT was listed on the Main Board of Bursa Malaysia Securities Berhad on 12 April The principal activity of Tower REIT is to own or invest in real estate and real estate-related assets, whether directly or indirectly through the ownership of single-purpose companies which principal assets comprise of real estate with the primary objective of achieving an attractive level of return from rental income and for long-term capital growth. There has been no significant change in the nature of this activity during the period. 1. Basis of preparation (a) Statement of compliance The financial statements of Tower REIT have been prepared in accordance with the provisions of the Deed dated 17 February 2006, the Securities Commission s Guidelines on Real Estate Investment Trusts, applicable securities laws, applicable approved accounting standards for entities other than private entities issued by the Malaysian Accounting Standards Board (MASB) and accounting principles generally accepted in Malaysia. These financial statements also comply with the applicable disclosure provisions of the Listing Requirements of Bursa Malaysia Securities Berhad. The MASB has also issued the following Financial Reporting Standards ( FRSs ) and Interpretations that are effective for annual periods beginning after 1 January 2006, and that have not been applied in preparing these financial statements: FRSs / Interpretations FRS 139, Financial Instruments: Recognition and Measurement Effective date To be announced FRS 6, Exploration for and Evaluation of Mineral Resources 1 January 2007 Amendment to FRS , Employee Benefits: Actuarial Gains and 1 January 2007 Losses, Group Plan and Disclosures Amendment to FRS 121, The Effects of Changes in Foreign 1 July 2007 Exchange Rates Net Investment in a Foreign Operation IC Interpretation 1, Changes in Existing Decommissioning, Restoration 1 July 2007 and Similar Liabilities IC Interpretation 2, Members Shares in Co-operative Entities and 1 July 2007 Similar Instruments IC Interpretation 5, Rights to Interests arising from Decommissioning, 1 July 2007 Restoration and Environmental Rehabilitation Funds IC Interpretation 6, Liabilities arising from Participating in a Specific Market 1 July 2007 Waste Electrical and Electronic Equipment 26 TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT 2007

28 Notes To The Financial Statements (cont d) 1. Basis of preparation (cont d) (a) Statement of compliance (cont d) FRSs / Interpretations Effective date IC Interpretation 7, Applying the Restatement Approach under FRS July 2007 Financial Reporting in Hyperinflationary Economies IC Interpretation 8, Scope of FRS 2 1 July 2007 The MASB has also issued FRS 139, Financial Instruments: Recognition and Measurement but for which the MASB has yet to announce the effective date of this standard. Tower REIT has not adopted FRS 139 and by virtue of the exemption in paragraph 103AB of FRS 139, the impact of applying FRS 139 on its financial statements upon first adoption of this standard as required by paragraph 30(b) of FRS 108, Accounting Policies, Changes in Accounting Estimates and Errors are not disclosed. FRS 6, Exploration for and Evaluation of Mineral Resources and Amendment to FRS , Employee Benefits: Actuarial Gains and Losses, Group Plans and Disclosures are not applicable to Tower REIT. Hence, no further disclosure is warranted. The initial application of the other standards and interpretations are not expected to have any material impact on the financial statements of Tower REIT. The financial statements were approved by the Board of Directors of GLM REIT Management Sdn. Bhd. on 2 August (b) Basis of measurement The financial statements have been prepared on the historical cost basis except for investment properties as explained in its accounting policy notes. (c) Functional and presentation currency These financial statements are presented in Ringgit Malaysia (RM), which is Tower REIT s functional currency. All financial information presented in RM has been rounded to the nearest thousand, unless otherwise stated. (d) Use of estimates and judgments The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in Note 3 on valuation of investment properties. TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT

29 Notes To The Financial Statements (cont d) 2. Significant accounting policies The accounting policies set out below have been applied consistently to the period presented in these financial statements. (a) Investment properties Investment properties are properties which are owned or held to earn rental income or for capital appreciation or for both. When an item of property, plant and equipment is transferred to investment property following a change in its use, any difference arising at the date of transfer between the carrying amount of the item immediately prior to transfer and its fair value is recognised directly in unitholders funds as a revaluation of property, plant and equipment. However, if a fair value gain reverses a previous impairment loss, the gain is recognised in the income statements. Upon disposal of the investment property, any surplus previously recorded in equity is transferred to unitholders funds; the transfer is not made through the income statement. When the use of a property changes such that it is reclassified as property, plant and equipment or inventories, its fair value at the date of reclassification becomes its costs for subsequent accounting. An external independent valuation company having appropriate recognised professional qualifications and recent experience in the location and category of property being valued, values the Trust s investment property portfolio every twelve months. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm s length transaction after proper marketing wherein the parties have each acted knowledgeably, prudently and without compulsion. In the absence of current prices in an active market, the valuations are prepared by considering the aggregate of the estimated cash flows expected to be received from renting out the property. A yield that reflects the specific risks inherent in the net cash flows then is applied to the net annual cash flows to arrive at the property valuation. Valuations reflect, where appropriate, the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting vacant accommodation, and the market s general perception of their creditworthiness; the allocation of maintenance and insurance responsibilities between the Trust and the lessee; and the remaining economic life of the property. When rent reviews or lease renewals are pending with anticipated reversionary increases, it is assumed that all notices and where appropriate, counter-notices have been served validly and within the appropriate time. (b) Trade and other receivables Trade and other receivables are initially recognised at their cost when the contractual right to receive cash or another financial asset from another entity is established. Subsequent to initial recognition, receivables are stated at cost less allowance for doubtful debts. Receivables are not held for the purpose of trading. (c) Cash and cash equivalents Cash and cash equivalents consist of cash on hand and balances and deposits with financial institutions which have an insignificant risk of changes in value. 28 TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT 2007

30 Notes To The Financial Statements (cont d) 2. Significant accounting policies (cont d) (d) Borrowings Borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings using the effective interest method. (e) Provisions A provision is recognised if, as a result of a past event, the Trust has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pretax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Provisions for income distribution Provisions for income distribution is recognised when any distribution is declared, determined or publicly recommended by the Directors of the Manager but not distributed at the balance sheet date. (f) Payables Payables are measured initially and subsequently at cost. Payables are recognised when there is a contractual obligation to deliver cash or another financial asset to another entity. (g) Revenue i) Rental income Rental income from investment property is recognised in the income statement on a straight-line basis over the term of the lease unless collectibility is in doubt, in which case, they are recognised on a receipt basis. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease. ii) Interest income (h) Expenses Interest income is recognised in the income statement as it accrues, using the effective interest method. i) Property expenses Property expenses consist of property management fees, quit rent and assessment and other property outgoings in relation to investment properties where such expenses are the responsibility of Tower REIT. Property management fees are recognised on an accrual basis. ii) Interest expenses All borrowing costs are recognised in the income statement using the effective interest method, in the period in which they are incurred. TOWER REAL ESTATE INVESTMENT TRUST HALF-YEARLY REPORT