MACARTHURCOOK INDUSTRIAL REITinvestor.aimsapacreit.com/misc/ar/ar2009.pdf · MacarthurCook...

MACARTHURCOOKINDUSTRIAL REITSGX counter name: MacCookIREIT

ISIN code: BU5U.SI

1090 MCook MI-REIT AR09 COV_FA.indd cov11090 MCook MI-REIT AR09 COV_FA.indd cov1 17/6/09 4:46:20 PM17/6/09 4:46:20 PM

MacarthurCook Industrial REIT2009 Annual Report

STAYING THE COURSE

2008/09 HAS BEEN A CHALLENGING YEAR GLOBALLY. DESPITE THIS, WE ARE FULLY COMMITTED TO DELIVERING SECURE INCOME AND SUSTAINABLE GROWTH TO OUR UNITHOLDERS THROUGH THE PROACTIVE MANAGEMENT OF MACARTHURCOOK INDUSTRIAL REIT.

About MacarthurCook Industrial REIT ( the “Trust” )MacarthurCook Industrial REIT (SGX counter name: MacCookIREIT) invests in quality income-producing real estate predominantly used for industrial purposes in Asia. Listed on the Singapore Exchange Securities Trading Limited (SGX-ST) on 19 April 2007 with an initial portfolio of 12 properties valued at S$316.5 million, MacarthurCook Industrial REIT has grown to comprise 20 properties in Singapore and one property in Japan, with a total carrying value of S$530.3 million as at 31 March 2009.

CONTENTS

02 Financial Highlights 2009

04 Chairman’s Report

06 Chief Executive Offi cer’s Report

09 MacarthurCook Investment Strategy and Approach

12 The MacarthurCook Industrial REIT Portfolio

22 Board of Directors of the Manager

25 Senior Management Team

26 Structure of MacarthurCook Industrial REIT

27 An Overview of the Industrial Real Estate Market in Singapore and Japan

31 Corporate Governance Statement

37 Financial Statements

78 Unitholder Information

80 Investors’ Summary

81 Investor Relations and Corporate Communications

82 Exchange Announcements

84 Financial Performance Summary

85 Corporate Directory


01010010

ABOUT MACARTHURCOOK INVESTMENT MANAGERS (ASIA) LIMITED (THE “MANAGER”)MacarthurCook Investment Managers (Asia) Limited was incorporated on 25 October 2006 and is the Manager of MacarthurCook Industrial REIT. The Manager’s key objectives are to deliver secure, stable distributions to Unitholders, as well as to provide long-term capital growth. MacarthurCook Limited owns 92.5% of the Manager, with the remaining 7.5% owned by United Engineers Development Pte Ltd, a wholly owned subsidiary of United Engineers Limited.

ABOUT MACARTHURCOOK LIMITED (“MACARTHURCOOK”)MacarthurCook Limited is an Australian Securities Exchange (ASX) listed company with offi ces in Australia and Singapore, specialising in the investment management of direct property, real estate securities and mortgage assets.

MacarthurCook manages approximately A$1.3 billion on behalf of over 22,000 investors and is a quality endorsed company (ISO 9001:2000 international standard accreditation).It is the investment manager for real estate funds of which several are listed on the ASX, the SGX-ST and the American Stock Exchange (AMEX). In 2005, 2006, 2007 and 2008 BRW magazine named MacarthurCook as one of Australia’s fastest-growing companies in its Fast 100 list.

For more details, please refer to MacarthurCook’s website at www.macarthurcook.com.au

KEY HIGHLIGHTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2009

Gearing of 41.3%

Total portfolio size of S$530.3 million

increase in distribution per unit from previous year

increase in net property income from previous year

Net Asset Value per unit of S$1.09

Portfolio was 98.6% occupied

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02 MacarthurCook Industrial REIT Annual Report 2009

Financial Highlights 2009

ACTUALFor the fi nancial year ended 31 March 2009 2008 Variance (%)

Gross revenue1 (S$’m) 50.8 32.2 +57.8

Net property income (S$’m) 36.9 24.8 +48.5

Amount available for distribution (S$’m) 23.4 19.6 +19.4

Distribution per unit (DPU) (Cents) 8.925 7.522 +18.7

Distribution yield (%) 9.33 6.54 NM

1 Gross revenue comprises property rental income and property expenses recoverable from tenants. 2 Comprised 1.52 cents for the period from 19 April to 30 June 2007(1QFY08), 1.86 cents for 2QFY08, 1.92 cents for 3QFY08 and 2.22 cents for 4QFY08. 3 Based on the Trust’s closing price of S$0.96 per unit as at 1 April 2008.4 Based on the Trust’s closing price of S$1.16 per unit as at 19 April 2007.

ACTUAL VS FORECASTFor the fi nancial year ended 31 March

2009 Actual

2009Forecast1

Variance (%)

Gross revenue (S$’m) 50.8 35.4 +43.7

Net property income (S$’m) 36.9 25.1 +47.0

Amount available for distribution (S$’m) 23.4 19.8 +18.3

Distribution per unit (DPU) (Cents) 8.925 7.59 +17.6

1 Based on the forecast and assumptions for FY2009 in the Initial Public Offer Prospectus dated 12 April 2007.

BALANCE SHEETAs at 31 March 2009 2008

Total assets (S$’m) 544.0 569.3

Total liabilities (S$’m) 254.9 231.7

Total borrowings (S$’m) 224.4 222.0

Net assets attributable to unitholders (S$’m) 289.1 337.6

Total units in issue and to be issued at end of the period (‘m) 266.4 261.0

Market capitalisation (S$‘m) 60.21 256.82

1 Based on 261.71 million units on issue and the Trust’s closing price of S$0.23 per unit as at 31 March 2009.2 Based on 260.75 million units on issue and the Trust’s closing price of S$0.985 per unit as at 31 March 2008.

FINANCIAL RATIOS As at 31 March 2009 2008

Earnings per unit (cents)1 (10.33) 28.22

Net Asset Value (NAV) per unit (S$) 1.09 1.29

Aggregate leverage ratio (%) 41.3 39.0

Interest coverage ratio2 7.36 times 9.82 times

Management expense ratio (%)3 1.03 1.02

1 Calculated based on total returns (including net appreciation in the value of investment properties). 2 Ratio of EBITDA over interest expense for period up to balance sheet date. 3 Expenses to weighted average net assets (excludes performance related fee): The expenses refers to the expenses of the Group excluding property related

expenses, borrowing costs and foreign exchange gain/(losses). The expense ratio including a performance related fee as at 31st March 2009 is 1.36%. There was no performance fee for FY2008.


03

Distribution per Unit (cents) Gross revenue (S$’m) Net property income (S$’m)

FY2008 FY2009

7.52

8.925

0

2

4

6

8

10

FY2008 FY2009

32.2

50.8

0

10

20

30

40

50

60

FY2008 FY2009

24.8

36.9

0

5

10

15

20

25

30

35

40

MacarthurCook Industrial REIT unit price

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

0

3000000

6000000

9000000

12000000

15000000

S$ Volume

Daily trading volume

Closing unit price

Apr

il 20

07

May

200

7

June

200

7

July

200

7

Aug

ust 2

007

Sep

tem

ber

2007

Oct

ober

200

7

Nov

embe

r 20

07

Dec

embe

r 20

07

Janu

ary

2008

Febr

uary

200

8

Mar

ch 2

009

Apr

il 20

09

May

200

9

Unit price performance

MacarthurCook Industrial REIT unit price (Source: Yahoo! Finance)

Closing price on 31 March 2009 S$0.23

Closing price on 29 May 2009 S$0.38

52 week range (as at 2 June 2009) S$0.20 - S$0.97



Chairman’s Report

Mr Richard HaddockIndependent Non-Executive Chairman

Dear Unitholder,

On behalf of the Board of MacarthurCook Investment Managers (Asia) Limited, the Manager of MacarthurCook Industrial REIT (the “Trust”), I am pleased to present the Trust’s Annual Report for the fi nancial year ended 31 March 2009 (“FY2009”).

In last year’s Annual Report, we articulated that MacarthurCook’s goal for the Trust is to generate stable returns to Unitholders by investing in a diversifi ed portfolio of income-producing, quality industrial real estate in Asia. Since listing on 19 April 2007, we have increased and improved the stability of the Trust’s income stream by growing and diversifying its real estate portfolio from an initial size of S$316.5 million to S$530.3 million as at 31 March 2009.

However, it is impossible to review the past year without fi rst addressing the diffi cult global fi nancial market and economic conditions that have persisted since late 2007 and the impact this has had on MacarthurCook Industrial REIT. What began as an apparently isolated problem in the United States subprime mortgage markets has evolved into a capital market contraction and global economic slowdown that many economists have called the most challenging since the Great Depression. Singapore, where twenty of the Trust’s twenty one properties are located, entered into a technical recession in the second half of 2008 and has since contracted further. In April 2009, the Singapore Ministry of Trade and Industry (MTI) lowered its earlier forecasts by revising downwards Singapore’s forecast GDP to contract by 6.0% to 9.0% in 2009. Japan, where the Trust owns an industrial warehouse, is also experiencing diffi cult economic conditions. Economic uncertainties and fi nancial market volatility are expected to continue dominating the news headlines over the next year.

Against this backdrop, the Trust’s unit price fell from S$0.985 cents on 31 March 2008 to close at S$0.23 cents on 31 March 2009, a signifi cant decline from a price of S$1.20 at IPO and representing a substantial discount to the Trust’s net asset value (NAV) per unit of S$1.09 at the year end.

We believe that this signifi cant discount is partially due to the retreat of international capital from Singapore which had formed a signifi cant portion of our shareholder base as global capital markets contracted and also due to investors’ concerns over the Trust’s ability to refi nance its existing Singapore dollar debt facility. Falling global real estate prices have further contributed to the undermining of investor confi dence.

Our prioritiesWhile details on the management of the Trust’s portfolio and capital management will be provided in the report by the Chief Executive Offi cer, I would like to report that the Trust’s management have been very proactive in managing the Trust in these diffi cult conditions to produce the following commendable results for the fi nancial year ended 31 March 2009:

Gross revenue of S$50.8 million, • which is 57.8% higher than last year’s gross revenue of S$32.2 million and 43.7% higher than the IPO prospectus’ forecast of S$35.4 million for FY2009;

Net property income of S$36.9 • million, which is 48.5% higher than last year’s net property income and 47.0% higher than the S$25.1 million forecast for FY2009 in the IPO prospectus;


05

The portfolio’s high occupancy • level of 98.64% with substantial security deposits for all of the Trust’s properties as at 31 March 2009; and

Achieved credit approval for an • extension of the Trust’s existing drawn Singapore debt facility of S$202.3 million debt facility (the “Facility”) to 31 December 2009.

As Manager of the Trust, our priorities are to continue to proactively manage the Trust’s underlying assets in order to safeguard its rental income stream and to strengthen the Trust’s fi nancial position. We are fully committed to ensuring the Trust is well placed to withstand the present market conditions.

We are also actively involved in maintaining clear communications with existing and prospective investors to ensure that investors are kept fully informed of all relevant aspects of their investment. In addition to disclosing corporate announcements on the SGX website, regular investor meetings are held to provide investors with the opportunity to meet with management and be updated on the Trust’s performance. These meetings and announcements are vital components of investor communication and enable our investors to make informed investment decisions.

ComplianceMacarthurCook Industrial REIT is managed in accordance with its Trust Deed, applicable provisions of the Securities and Futures Act, the Listing Manual of the Singapore Exchange, the Code on Collective Investment Schemes and all other relevant regulations.

The Manager is also in the process of applying for a capital markets licence (CMS) in accordance with requirements of the new licensing regime under the Securities and Futures Act (the “SFA”).

All MacarthurCook staff regularly receive training on their compliance responsibilities to ensure that they remain updated on changes in law and policy that may affect their compliance responsibilities, compliance reporting and monitoring. Our compliance obligations will continue to be treated with the utmost seriousness to ensure that the rights of Unitholders are protected. Our Board seeks external compliance advice where it is considered in the interests of Unitholders to do so.

MacarthurCook Limited has achieved quality accreditation to the AS/NZS ISO 9001 international standard for the Mortgage, Direct Property, Real Estate Securities and Client Services areas of our business. Regular monitoring, analysing and testing of our systems, as required by the standard, ensures that a high level of productivity and quality is maintained and that the requirements of ISO9001:2000 are met as well as any statutory requirements.

Staff and DirectorsDuring the year, we strengthened the management team with the appointment of two senior executives, Mr Lawrence Mendelowitz as Chief Executive Offi cer of MacarthurCook Asia and Mr Nicholas McGrath as Chief Executive Offi cer of MacarthurCook Industrial REIT and Head of Real Estate, Asia. Together, both executives bring to MacarthurCook over 30 years of experience in real estate funds management and fi nancial services sectors. This was a key part of MacarthurCook’s strategy to manage the Trust in the current market conditions whilst ensuring that the Trust as well as MacarthurCook’s Asian business is well-poised to grow when conditions improve.

Whilst we believe that the key Asian economies will weather the current global recession better than most, the Board and Management of MacarthurCook Industrial REIT will continue to implement proactive asset management and prudent capital management strategies to ensure the Trust is well-positioned to ride out current conditions and benefi t from eventual recovery.

I would like to extend my appreciation to my fellow Board members and on behalf of the Board, thank the management team for their hard work and unstinting efforts for the fi nancial year ended 31 March 2009.

Yours faithfully,

Richard HaddockIndependent Non-Executive Chairman



Chief Executive Offi cer’s Report

Mr Nicholas McGrathChief Executive Offi cer

Dear Unitholder,

As outlined by the Chairman in his report, 2008 and early 2009 have seen challenging business conditions worldwide. We are pleased to report that, despite these conditions, MacarthurCook Industrial REIT has delivered another year of strong operating performance and stable distributions to Unitholders underpinned by a quality real estate portfolio with a high occupancy rate of 98.6%.

Performance highlightsOver the fi nancial year, MacarthurCook Industrial REIT delivered distributable income of S$23.4 million and a distribution per unit (“DPU”) of 8.925 cents, which were 19.4% and 18.7% higher respectively, than S$19.6 million and 7.52 cents per unit in FY2008.

The Trust’s portfolio was revalued as at the 31 March 2009 resulting in a portfolio value of S$530.3 million and a net asset value per unit of S$1.09. This represented a decrease of 4.5% from S$555.4 million in portfolio value and a 15.5% decrease in NAV of S$1.29 as at 31 March 2008.

Proactive asset management and a well-diversifi ed and stable portfolioDuring the year, we focused on actively managing the Trust’s properties to maintain high tenant retention and occupancy levels. As a result, the Trust has an occupancy rate of 98.64% and a stable rental income stream. In addition, the strength of the portfolio and the security of its rental income stream was supported by the following factors as at 31 March 2009:

A quality portfolio occupied by • quality tenants, with 65.0% of the Trust’s rental income derived from companies that are publicly listed or are subsidiaries of publicly listed companies;

Improved tenant diversifi cation • since listing, with no head tenant contributing more than 20.2% of rental income as at 31 March 2009, compared to 33.6% at the time of listing. The Trust’s top ten tenants as at 31 March 2009 accounted for 67.3% of the Trust’s rental income, an improvement compared to 94.2% at the time of listing;

Most (eighteen) of the Trust’s • twenty one properties were acquired in sale and lease-back transactions, which should add to rental income security as this allows a greater degree of fi nancial due diligence to be conducted on the tenants and their ability to meet the lease commitments;

Nineteen of the properties are • under head lease arrangements, while thirteen properties have subtenant agreements which provide an additional layer of income protection;

All the properties are supported • by security deposits, which ranged from three months rental to twenty two months rental, with an average of ten months rental per property for the portfolio. Seventeen of the properties have security deposits of six months rental or more;

Built-in rental escalations • staggered throughout the leases of nineteen of the properties support organic rental growth;

Strong lease expiry profi le: As • at 31 March 2009, the Trust had a weighted average lease term to expiry of 4.55 years. Only 0.3% of the Trust’s rental income is subject to lease expiry in FY2010. The majority of the Trust’s leases do not expire until FY2013 (45.0%), FY2015 (18.5%) and FY2017 and beyond (23.9%); and

The majority of the properties • have been built with fl exible layouts and high building specifi cations that increase their attractiveness to a wider range of tenants. Throughout the year, active re-leasing activity to replace short-term occupancies at the multi-tenanted 15 Tai Seng Drive has been successful.


07

The Trust is well-diversifi ed across the main industrial sub-sectors, enabling the Trust to mitigate the risk of being dependent on too few sectors or industries for rental income. Our tenants are engaged in a wide range of economic activity including information technology, food and beverage, consumer goods, pharmaceuticals, oil and gas and logistics. In terms of industrial sub-segments, rental income was diversifi ed among tenants who are primarily engaged in: warehousing and logistics activities (61.4%), manufacturing (35.6%), and research and technology (3.0%). Geographically, Singapore accounted for 93.9% of the portfolio and Japan, 6.1%, by asset value.

We did not announce any new acquisitions during FY2009.

Prudent capital and risk management As at 31 March 2009, the Trust had an aggregate leverage of 41.3%. Together with our fi nancial adviser, Standard Chartered Bank, we have embarked on a rigorous examination of the optimal capital structure for the Trust. In addition to securing an extension of the existing Singapore debt facility to 31 December 2009, we have embarked on a series of initiatives as described below that seek to progressively reduce the Trust’s leverage ratio to 30% - 35% over time by obtaining the optimal combination of debt and equity. These capital management initiatives are intended to strengthen the Trust’s fi nancial profi le, while maintaining fi nancial fl exibility and signifi cantly enhancing the Trust’s attractiveness to both international and local investors.

Debt facility extensionOn 22 May 2009, we announced that the Trust had achieved a credit approval for an extension of its existing drawn Singapore debt facility of S$202.3 million (the “Facility”) to 31 December 2009 with an all in interest margin of 5% per annum. This extension of the Facility gives the Trust additional time to secure a longer term refi nance of its debt, a process in which we are actively engaged.

The interest rate on S$100 million of the Trust’s Singapore denominated debt continues to be fi xed under an interest rate swap that was entered into in February 2008 for three years. The interest rate on the balance of MI-REIT’s debt remains fl oating and management is considering the hedging options in respect of this portion.

We have also commenced discussions with the Trust’s Japanese lenders in relation to the refi nancing of the Trust’s debt facility of JPY 1.5 billion (SGD: 23.139 million), which expires on 18 December 2009.

Equity recapitalisationIn January 2008, the Trust announced that it would withdraw a proposed equity fund raising following entreaties from Unitholders to postpone it until such time when market conditions were more conducive. In parallel with our initiatives to reduce the Trust’s leverage, we are now looking to optimise the Trust’s capital structure by a recapitalisation of the Trust and a reduction of the Trust’s long term debt in order to fi nancially reposition and strengthen the Trust for the future. More details will be announced to the public in due course.

Distribution Reinvestment Plan (DRP) and its benefi ts to Unitholders and the TrustThe current illiquid environment has resulted in the signifi cantly increased need for many real estate investment trusts, including MacarthurCook Industrial REIT, to retain cash arising from its taxable income for working capital purposes and to meet immediate fi nancing needs. In due course we intend to propose to Unitholders to implement a distribution reinvestment plan in which Unitholders will be given the option to elect to receive their distributions in cash or in units in lieu of cash, in proportion to their respective investments in the Trust. The election to receive distributions in units would enable Unitholders to acquire additional units in the Trust without incurring transaction and brokerage costs whilst incrementally enlarging the Trust’s capital base, enhancing trading liquidity in the long term and increasing retained cash.

Plot 4A, InternationalBusiness ParkIn August 2007, the Trust entered into a conditional put and call option agreement to acquire Plot 4A, International Business Park (“Plot 4A, IBP” or the “Property”) from Eurochem Corporation Pte Limited (“Eurochem” or the “Vendor”) for S$91.0 million in a sale and leaseback arrangement. Simultaneous to the completion of the purchase, the Vendor will enter into a binding ten year lease agreement pursuant to which the Trust would receive a contracted and growing income stream over the lease term. The Property is designed to be a state of the art, highly sought after Grade-A offi ce park building in the heart of the International Business Park precinct upon the completion of construction which is estimated to be in the fourth calendar quarter 2009. The Property will enhance the Trust’s attractiveness to local and



Chief Executive Offi cer’s ReportContinued

international investors by providing further diversifi cation and growth to the Trust’s income stream and also broaden and increase the scale of the Trust’s asset base to include a Grade-A offi ce business park property. Together with Standard Chartered Bank, we are reviewing the most appropriate funding structure for the Property.

Moody’s ratingBetween 1 April 2008 and 3 June 2009, Moody’s Investors Service downgraded the Trust’s rating from Baa3 to Caa1 with a negative outlook. The reasons given for the downgrades are related to the debt expiry profi le, the funding obligation relating to the acquisition of Plot 4A, IBP, and the size of the Trust’s portfolio. We are disappointed with the outcome; however, we are working hard to achieve a positive re-rating which we believe is more refl ective of the Trust’s underlying quality. We expect the Trust’s credit rating to be addressed following implementation of a more optimal capital structure for the Trust and completion of the acquisition of Plot 4A IBP.

Share price performanceWe believe that the Trust’s unit price will recover over time from its current lows following the successful implementation of the necessary initiatives outlined above to strengthen the Trust.

Looking aheadThe Asia Pacifi c region’s predominantly export dependent economies have come under signifi cant pressure as major trade partners in the developed countries are in recession. Growing risk aversion and falling asset prices have signifi cantly hurt demand in the developed economies and recovery is expected to be slow. Economists are generally of the opinion that this is the worst recession since the Second World War, and we will do well to be prepared for a deep and prolonged recession in which the industrial property sector will come under pressure as conditions become increasingly diffi cult and businesses are forced to contract. The Trust’s industrial tenants are not immune from the global downturn and rental income may be affected if tenants’ businesses are badly affected. For this reason, we have an active approach in managing the Trust’s assets and tenants so as to mitigate as much as possible any potential negative impact of the global recession.

This has been a diffi cult year for all market participants. We are, however, committed to prevailing over these conditions with a view to enhancing returns for our Unitholders.

I wish to extend my appreciation to our staff for their continued hard work and to also thank our Unitholders, tenants and business partners for their unwavering support during this challenging time.

We look forward to your continued support and a rewarding year ahead.

Yours faithfully,

Nicholas McGrathChief Executive Offi cer


09

MacarthurCook Investment Strategy and Approach

Our investment strategyMacarthurCook Industrial REIT seeks to provide investors with access to income from a diversifi ed portfolio of income-producing industrial real estate located throughout Asia. Since the Trust’s Initial Public Offer in April 2007, the Manager has followed a three pronged investment strategy aimed at achieving the Trust’s investment objectives. During FY2008, we continued to follow an acquisition growth strategy, culminating in the acquisition of a further nine properties. However, due to the sharp downturn in the global fi nancial and economic climate, we have focused our strategic emphasis on actively managing the Trust’s properties to safeguard organic growth and on capital management, as reported in last year’s Annual Report.

1) Prudent capital and risk management strategy

Objective: To optimise the Trust’s capital structure within the targeted leverage ratio range via a combination of debt and equity to maximise distributions to Unitholders, while maintaining fi nancial fl exibility to fund future acquisitions and asset enhancement works.

Our strategies in relation to capital and risk management are to:

Maintain a strong balance sheet and suffi cient liquidity by adopting a new target gearing • ratio of 30-35% over time;

Secure diversifi ed funding sources from both fi nancial institutions and the capital markets • to support the growth of the Trust in size and scale;

Minimise the cost of debt fi nancing; •

Reinstate the investment grade rating from a credit rating agency; •

Actively manage exposure to adverse market movements in interest rates and foreign • exchange through the adoption of appropriate hedging strategies:

– Active interest rate management: manage potential interest rate volatility through the use of interest rate swap contracts and/or fi xed rate borrowings; and

– Foreign exchange risk management: The Trust seeks to invest throughout Asia. In order to manage the currency risk involved in investing in assets outside of Singapore, the Manager has adopted appropriate risk management strategies including:

the use of foreign currency denominated borrowings to match the currency »of the asset investment as a natural currency hedge;

the entry into foreign exchange hedges to hedge the foreign currency income »received from the offshore assets; and

the use of cross currency swaps to hedge any foreign currency denominated »net assets of the Trust.

In parallel with our initiatives to reduce the Trust’s leverage, we will look to optimise the • Trust’s capital structure by a recapitalisation of the Trust and a reduction of the Trust’s long term debt in order to fi nancially reposition and strengthen the Trust for the future.

What we have done during the year or are doing:

Utilising a balanced combination of debt and equity:• We have secured an extension of the Trust’s Singapore debt facility to 31 December 2009. This extension gives the Trust additional time to secure a longer term refi nance of its debt. We are also in advanced negotiations to refi nance our Japanese debt facility of JPY 1.5 billion (SGD: 23.139 million) which expires on 18 December 2009. Together with Standard Chartered Bank Limited, we are also considering the most appropriate longer term capital structure for the Trust;

Active management of interest rate exposure:•

maintain a three year interest rate swap on S$100.0 million entered into in February –2008, in which we pay a fi xed interest rate of 1.905% per annum;

the interest rate on the balance of MI-REIT’s Singapore debt remains fl oating and –we are considering the hedging options in respect of this portion; and

maintain the fi xed interest rate of 1.97% per annum on the Japanese bank loan; –

To manage currency risk to the extent possible, we match the currencies of our debts • with the currencies of our assets to derive a natural long term hedge without the need for capital hedging instruments. To the extent net assets remain exposed, we have entered into cross currency swaps. Where possible, we also hedge the foreign exchange exposure of the net income streams of our overseas assets;

Taking steps to reinstate the Trust’s investment grade credit rating;•

Maintained gearing well within the Trust’s target medium term range of 40-45%; • however, we intend to reduce the Trust’s leverage ratio to between 30-35% over time.



MacarthurCook Investment Strategy and ApproachContinued

2) Active asset management

Objectives: We seek to maintain high tenant retention rates, maintain high occupancy levels, minimise interruptions in rental income, minimise property expenses and reduce costs associated with marketing and leasing space to new tenants.

Our strategies in relation to asset management are to:

Actively manage the Trust’s assets to maintain high tenant retention levels, maintain • a fully leased profi le, maximise rental reversions and minimise property outgoings;

Strengthen property management capabilities; and•

Identify value-added opportunities and potential increases to net lettable area. •

What we have done or are doing:

Maintained the portfolio’s high occupancy level. Occupancy was 98.64% as at • 31 March 2009;

Active re-leasing activity to replace short-term occupancies at the multi-tenanted • 15 Tai Seng Drive have been successful;

Actively manage to maintain high subtenancy levels under head leases to provide an • additional layer of income protection; currently, thirteen properties have subtenant agreements which provide an additional layer of income protection;

Maintain security deposits on each of the properties for additional income security, • which ranged from three months rental to twenty two months rental and averaged ten months rental per property on a portfolio basis;

Manage leases to safeguard built-in rental escalations staggered throughout their leases • to support organic rental growth. The following rental income escalations took place at the start of FY2009:

Property Rental Increase (%)

23 Changi South Avenue 2 2.50

1 Bukit Batok Street 22 1.50 (annual increase)

In FY2010, the following rental income escalations are scheduled to take place:•

Property Rental Increase (%)

31 Admiralty Road 5.00

3 Tuas Avenue 2 5.00

8 & 10 Tuas Avenue 20 5.00

10 Soon Lee Road 5.00

26 Tuas Avenue 7 5.00

10 Changi South Lane 3.25

1 Kallang Way 2A 3.00

135 Joo Seng Road 5.00

7 Clementi Road 5.00

1 Bukit Batok Street 22 1.50

Maintain strong lease expiry profi le: As at 31 March 2009, the Trust had a weighted • average lease term to expiry of 4.55 years.


11

3) Acquisition growth strategy

Objectives: We seek to provide Unitholders with sustained growth in returns through the acquisition of strategic assets that increase rental income and also enhance the Trust’s diversifi cation by geography, asset and tenant profi le. Given the uncertainty in the global economy and fi nancial markets however, our current focus is on optimising the yield from the Trust’s portfolio and on capital management.

When it is appropriate to do so and market conditions are conducive, we will resume our strategy to grow the Trust via the strategies listed below.

Our strategies in relation to acquisition growth are to:

Enter into sale-and-leaseback arrangements with owner occupied industrial facilities;•

Continue on our regional investment strategy throughout selected industrial real estate • markets in Asia;

Grow with our tenants: We intend to benefi t from the regional expansion of our existing • tenant base by supporting our tenants’ growing real estate needs by providing well-located, functional and professional managed real estate; and

Develop strategic partnerships that will provide us quality assets that enhance the • Trust’s profi le.

What we have done or are doing:

The Trust did not make any acquisitions in FY2009. •

Our approachThe fundamental objective of the Trust is to provide Unitholders with stable income distributions on a quarterly basis for the three months ending 30 June, 30 September, 31 December and 31 March of each year.

To support this objective, the Trust seeks to identify those properties that are expected to provide a sustainable level of income and a higher total return than property investments with a similar risk profi le.

While the capital values of all categories of income producing properties fl uctuate, the least volatile investments are those that are assessed by the market as having secure, long term revenue streams.

The Trust also seeks to provide portfolio diversifi cation that is designed to minimize risk through exposing the Trust to a mix of income streams generated by a large number of properties in a variety of industrial property sub-sectors, situated in different geographic locations.



The MacarthurCook Industrial REIT Portfolio

PORTFOLIO SUMMARY AS AT 31 MARCH 2009

Property/Address1 Head tenant Net lettable area Date of acquisition2

sqmWarehouse and Logistics

UE Technology Park8 & 10 Pandan Crescent

United Tech Park Pte Ltd 65,856.4 19/04/2007

Ossia Building 10 Changi South Lane

Ossia International Limited 12,655.9 19/04/2007

Builders Centre 11 Changi South Street 3

Builders Shop Pte Ltd 11,547.4 17/12/2007

KTL Distribution Centre 23 Changi South Avenue 2

KTL Offshore Pte Ltd 9,989.0 19/04/2007

61 Yishun Industrial Park A BTH Global Pte Ltd 13,471.0 21/01/2008

103 Defu Lane 10 Success Global Pte Ltd 8,361.3 21/01/2008

7 Clementi Loop Nova Engineering and Logistic Pte Ltd 9,081.3 31/03/2008

Fook Tong Nam Building 31 Admiralty Road

Fook Tong Nam Industries Pte Ltd 10,197.0 19/04/2007

Japan - Asahi Ohmiya Warehouse 1-398-3, 11, 13 Yoshinocho, Kita-ku, Saitama City, Saitama, Tokyo, Japan

MediceoMedical 9,088.6 20/12/2007

Axis Building15 Tai Seng Drive

Multi-Tenanted: – Khai Huat Trading Pte Ltd– Zenital Marine Asia Pte Ltd – Westphalia Separator (S.E.A.) Pte Ltd– Farnell Components Pte Ltd– Kumpulan Development (S) Pte Ltd

17,975.8 17/12/2007

Subtotal – Warehouse and Logistics

14 tenants 168,223.7

Manufacturing

GRP Industrial Building 1 Bukit Batok Street 22

GRP Limited 14,231.2 19/04/2007

20 Gul Way Enviro Metals Pte Ltd 32,208.0 19/04/2007

3 Tuas Ave 2 Cimelia Resource Recovery Pte Ltd 14,700.0 19/04/2007

8 & 10 Tuas Ave 20 C S Graphics Pte Ltd 8,873.0 19/04/2007

8 Senoko South Road Sin Hwa Dee Food Stuff Industries Pte Ltd

7,278.8 19/04/2007

Fullmark Industrial Building 10 Soon Lee Road

Fullmark Pte Ltd 7,214.4 19/04/2007

Aalst Chocolate Building 26 Tuas Avenue 7

Aalst Chocolate Pte Ltd 5,522.0 19/04/2007

Xpress Building 1 Kallang Way 2A

Xpress Holdings Ltd 6,910.6 30/01/2008

PM Industrial Building135 Joo Seng Road

Powermatic Data Systems Ltd 9,535.0 10/03/2008

541 Yishun Industrial Park A King Plastic Pte Ltd 8,017.5 02/10/2007

Subtotal – Manufacturing

10 tenants 114,490.5

Research and Technology

2 Ang Mo Kio Street 65 CIT Cosmeceutical Pte Ltd 6,255.0 19/04/2007

Subtotal – Research and Technology

1 tenant 6,255.0

TOTAL 25 tenants 288,969.2

1 All the properties in the portfolio are located in Singapore except the Asahi Ohmiya Warehouse, which is located in Japan. 2 Acquisition date refers to the date when the acquisition was legally completed. 3 Per Colliers’ independent valuations for all of the Singapore based properties as at 31 March 2009. The Asahi Ohmiya Warehouse in Japan was valued at JPY

2.1 billion by CB Richard Ellis on 12 November 2008.


13

Purchase price

Appraised value3 as at 31 March 2009

Rental income4 for the fi nancial year ended 31 March 20095

Land leasehold tenure

S$’m S$’m S$’000 Expiry year

115.0 131.3 7,717.25 30/09/2068

33.8 33.5 2,400.00 15/06/2056

20.8 20.2 2,011.50 31/03/2055

19.5 22.5 1,453.11 30/09/2054

24.6 23.6 1,809.78 31/08/2052

14.5 13.8 1,112.41 30/06/2043

18.25 16.8 1,407.60 15/06/2053

13.4 14.2 1,119.56 30/04/2037

28.676 32.4 1,912.09 Freehold

28.9 26.4 2,464.34 31/03/2051

317.42 334.7 23,407.64

18.0 22.5 1,422.67 30/06/2055

39.4 43.8 3,328.20 15/01/2041

20.8 21.9 1,594.95 15/03/2055

11.6 12.2 859.57 8 Tuas Ave 20 - 31/12/205010 Tuas Ave 20 - 30/09/2052

12.8 12.0 930.32 31/10/2054

8.7 9.4 698.90 12/03/2041

8.3 9.3 775.22 31/12/2053

14.0 13.4 981.88 30/06/2055

25.0 23.3 1,820.00 30/06/2054

16.8 15.9 1,190.94 30/06/2054

175.4 183.7 13,602.65

15.2 14.8 1,160.39 31/03/2047

15.2 14.8 1,160.39

508.0 533.27 38,170.68

4 Rental income is the contractual rent receivable under the lease arrangement, with or to be entered into, with the tenants (after rent rebates and provisions for rent-free periods). The amount does not include property expenses recoverable from tenants. Before adjustments for the effect of straight-lining of rental income of S$1.62 million. Total rental income after adjustment is S$39.79 million.

5 Rental income received from 1 April 2008 to 31 March 2009. 6 JPY2,230,000,000 converted at an exchange rate of S$1.00 to JPY 77.79.7 Before adjustments for the effect of straight lining of rental income of S$2.9 million. The appraised value of the investment portfolio after these adjustments is

S$530.3 million.



The MacarthurCook Industrial REIT PortfolioContinued

PORTFOLIO ANALYSIS

MacarthurCook Industrial REIT property portfolio key statistics

As at 19 April 2007 (IPO) As at 31 March 2009

Number of properties 12 21

Portfolio value (S$’m) 316.5 530.3

Net lettable area (sqm) 194,980.7 288,969.2

Number of tenants 12 25

Occupancy 100% leased 98.64%

Location of properties Singapore Singapore, Japan

Strategically located portfolioMacarthurCook Industrial REIT comprises 21 properties, of which 20 are strategically located in Singapore’s established industrial areas and one in Saitama, Japan, a key logistics node in the Greater Tokyo area. The properties are easily accessible by major highways and are in close proximity to sea ports, airports, amenities and public transportation.

TokyoSaitama

NaritaKawasaki

YokohamaKamakura

Chiba

Kusatsu

MaebashiUlsunomiya

Mito

Asahi OhmiyaWarehouse

YoshinoharaStation

HIGASHIOHMIYABYPASS

YOSHINO-CHOINTERCHANGE

KonbaStation

Yoshino-cho

200m

500ft

Singapore portfolio

1

2

34

5 6

7

8

10

1112

1315

16

17

18

19

20

9

14

Major expressways

Port of Singapore

Change Airport

JRun Port

Causeway

Malaysia-SingaporeSecond Link

Warehouse and Logistics 1 - 8 & 10 Pandan Crescent 2 - 31 Admiralty Road 3 - 23 Changi South Avenue 2 4 - 10 Changi South Lane 5 - 7 Clementi Loop 6 - 103 Defu Lane 10 7 - 61 Yishun Industrial Park A 8 - 11 Changi South Street 3 9 - 15 Tai Seng Drive

Manufacturing 10 - 8 Senoko South Road 11 - 20 Gul Way 12 - 3 Tuas Avenue 2 13 - 26 Tuas Avenue 7 14 - 8 & 10 Tuas Avenue 2 15 - 10 Soon Lee Road 16 - 135 Joo Seng Road 17 - 1 Kallang Way 2A 18 - 541 Yishun Industrial Park A 19 - 1 Bukit Batok Street 22

Research and Technology 20 - 2 Ang Mo Kio Street 65

Japan propertyAsahi Ohmiya Warehouse: 1-398-3, 11, 13 Yoshinocho, Kita-Ku, Saitama City, Japan

750m from Konba Station

Approximately 35km northwest of central Tokyo


15

Diversifi ed income baseMacarthurCook Industrial REIT has a well-diversifi ed tenant base, with no single tenant contributing more than 20.2% of rental income as at 31 March 2009. This compares to 33.6% contribution from the largest tenant at the time of listing. The top 10 tenants accounted for 67.3% of the Trust’s rental income as at 31 March 2009, compared to 94.2%1 in the initial portfolio at the time of listing.

Diversifi ed property usage and diverse tenant industry mixThe Trust’s properties are well diversifi ed across a spread of industrial trade sectors. Rental income as at 31 March 2009 was diversifi ed amongst the warehouse and logistics (61.4%), manufacturing (35.6%), and research and technology (3.0%) industries.

Property usage % of rental income as at 31 March 2009

Warehouse and Logistics 61.4

Manufacturing 35.6

Research and Technology 3.0

Offi ce and Tech Park 0

1 Based on contracted rental income for the initial 12 properties at the time of listing.

Top 10 tenants by rental income (%)

Uni

ted

Tech

Par

k P

te L

td

Oss

iaIn

tern

atio

nal

Lim

ited

Bui

lder

s S

hop

Pte

Ltd

BTH

Glo

bal

Pte

Ltd

GR

P L

imite

d

Med

iceo

Med

ical

Pow

erm

atic

Dat

aS

yste

ms

Ltd

Cim

elia

Res

ourc

eR

ecov

ery

Pte

Ltd

Env

iro M

etal

sP

te L

td

KTL

Offs

hore

Pte

Ltd

3.7

0

5

10

15

20

25

30

35

As at Initial Public OfferAs at 31 March 2009

33.6

20.2

13.3

8.710.4

6.96.35.6 5.3 4.9 4.8

6.2

3.8

6.1

4.2




Balanced weighted average lease expiry profi leMacarthurCook Industrial REIT benefi ts from a balanced and diversifi ed weighted average lease expiry profi le, which reduces the Trust’s exposure to lease expiry in any one year.

As at 31 March 2009, the weighted average lease term to expiry (by rental income) of all the properties was 4.55 years. The majority of leases were long term leases: 45.0% expire in FY2013, 18.5% expire in FY2015 and 23.9% expire in FY2017 and beyond. The balanced lease expiry profi le provides greater income security.

Warehouse and Logistics (by rental income as at 31 March 2009 (%))

4.8

Constructionand engineering

Diversifiedproducts distribution

Distributionof lifestyle goods

Building materials supplier

Pharmaceutical productsand medical equipment

Ship handling, warehousingand transportation

Equipment servicing

Property development

10.2

9.1

6.2

6.0

32.8

22.3

8.6

Manufacturing (by rental income as at 31 March 2009 (%))

Metals trading andequipment construction

Computer equipment

Printing and publishing

Food manufacturing

Electronic waste tradingand recycling

Equipment for marine,oil and industrial sector

Production of synthetic products

12.5

11.7

10.5

13.5

24.5

8.8

18.5

Research and Technology (by rental income as at 31 March 2009 (%))

32.3Cosmetics researchand production 100.0


17

Lease expiry profi le by rental income (%)

0.0 0.0 0.0 0.0 0.0 0.00.3

12.38.6

45.0

17.2

32.0

23.9

0

10

20

30

40

50

Expiring in FY2017 or after

FY2016FY2015FY2014FY2013FY2012FY2011FY2010

Expiring tenancies by rental income(as at Initial Public Offer)Expiring tenancies by rental income(as at 31 March 2009)

Exp

irie

s as

a %

of

rent

al in

com

e

3.7

38.5

18.5

Long leasehold for expiry of underlying land leaseAs at 31 March 2009, the weighted average unexpired lease term for the underlying land of all MacarthurCook Industrial REIT’s properties is 42.6 years, compared to 47.8 years as at the Initial Public Offer.

Remaining years to expiry of underlying land

Expires in 2037-2046

% o

f to

tal l

etta

ble

inco

me

Expires in 2047-2056 Expires in 2068 Freehold

25.4

20.06

40.8

54.00

33.8

22.79

3.15

12 properties as at Initial Public Offer21 properties as at 31 March 2009

0

10

20

30

40

50

60




High occupancy levelsAs at 31 March 2009, the portfolio was 98.64% occupied. We are confi dent that our proactive asset management initiatives will continue to maintain occupancy levels.

Releasing activity during the year to replace short term leases at the multi-tenanted 15 Tai Seng Drive had been successful throughout the year.

Security of income stream: head lease arrangements, subtenants and security deposits As at 31 March 2009, the Trust’s income stream continued to be supported by:

Head lease arrangements:• Nineteen properties in the portfolio were acquired under head lease arrangements with strong covenants. Of these, eighteen of the Trust’s properties were acquired in sale and lease-back transactions, which allow a greater degree of fi nancial due diligence to be conducted on the tenants and their ability to meet the lease commitments.

Subtenancies:• Thirteen of the properties have additional sublease arrangements, which have been approved by the relevant authorities (JTC, HDB, Ascendas) under the head leases. These subtenancies provide an additional layer of income protection as both the occupier and the head lessee have a fi nancial commitment. The Trust has the right to existing subtenancies upon the expiry of the head lease.

Security deposits:• As at 31 March 2009, all the properties are supported by security deposits or rental guarantees in the form of cash or bankers’ guarantees ranging from three months to twenty two months of the rent payable to MacarthurCook Industrial REIT:

Seventeen of the properties have security deposits of six months rental or more; and –

The portfolio average is ten months rental per property. –

This enhances income stability in the portfolio and mitigates the risks of rental disruption in the event of a payment default or early termination of a lease.

Security deposits (as at 31 March 2009)

Rental 3 months rental or less

6 months

10 months

12 months

14 months

15 months

18 months

22 months

Number of properties

4 5 1 6 1 1 2 1

Organic rental growth via rental escalation clausesWith the exception of Asahi Ohmiya warehouse in Japan and 15 Tai Seng Drive in Singapore, the leases for the remaining nineteen properties in the portfolio have contracted pre-determined rental escalations that are staggered throughout their leases, thus providing Unitholders with organic rental income growth. These escalations, which commence from the fi rst anniversary of the commencement date of the leases, range from 2.5% to 8.0%, whilst one has an annual escalation of 1.5% and another at the Consumer Price Index.

The following rental escalations took place at the start of FY2009:

23 Changi South Avenue 2 – 2.5% rental increase; and •

1 Bukit Batok Street 22 – 1.5% annual rental increase. •

In FY2010, the following rental escalations are scheduled to take place:

31 Admiralty Road – 5% rental increase;•

3 Tuas Avenue 2 – 5% rental increase;•


19

8 & 10 Tuas Avenue 20 – 5% rental increase;•

10 Soon Lee Road – 5% rental increase;•

26 Tuas Avenue 7 – 5% rental increase;•

10 Changi South Lane – 3.25% rental increase;•

1 Kallang Way 2A – 3.0% rental increase;•

135 Joo Seng Road – 5.0% rental increase;•

7 Clementi Road – 5.0% rental increase; and•

1 Bukit Batok Street 22 – 1.5% annual rental increase.•

Year of lease commencementYear of rental escalation from lease commencement date % of rental escalation

1 FY2008 Annual 1.50%

2 FY2008 Year 2 2.50%

3 FY2008 Years 3, 5, 7 3.00%

4 FY2008 Years 3, 5 3.25%

5 FY2008 Years 3, 5 5.00%

6 FY2008 Years 3, 5, 7 ,9 5.00%

7 FY2008 Years 3, 5 5.00%

8 FY2008 Years 3, 5, 7 5.00%

9 FY2008 Years 3, 5, 7, 9 5.00%

10 FY2008 Years 2, 4 5.00%

11 FY2008 Years 2, 4 5.00%

12 FY2008 Year 3 5.00%

13 FY2008 Years 3, 5 5.00%

14 FY2008 Years 4, 7 6.00%

15 FY2008 Years 4, 7, 10 7.00%

16 FY2008 Year 4 7.50%

17 FY2008 Years 4, 7, 10 7.50%

18 FY2008 Years 4, 7, 10 8.00%

19 December 2004 Years 7, 8, 9, 10 CPI Index

20 FY2008 None None

21 FY2008 None None

Geographic diversifi cation

Property value by country (as at 31 March 2009)

■ Singapore 93.9%

■ Japan 6.1%




8 & 10 Pandan Crescent 10 Changi South Lane 11 Changi South Street 3

23 Changi South Avenue 2 61 Yishun Industrial Park A 103 Defu Lane 10

7 Clementi Loop 31 Admiralty Road Japan - Asahi Ohmiya Warehouse

1 Bukit Batok Street 22 20 Gul Way 3 Tuas Avenue 2


21

8 & 10 Tuas Avenue 20 8 Senoko South Road 10 Soon Lee Road

26 Tuas Avenue 7 1 Kallang Way 2A 135 Joo Seng Road

541 Yishun Industrial Park A 2 Ang Mo Kio Street 65 15 Tai Seng Drive



Board of Directors of the Manager

Richard Michael Haddock Aged 59 BA, LLB, FAIM, FAICD, FFin

Independent and Non-Executive Chairman

Mr Haddock has 25 years experience in the investment banking industry including extensive experience in treasury, funds management and stockbroking. Currently a director of Tishman Speyer Australia Limited, Retirement Villages Group R.E. Limited and Commonwealth Managed Investments Limited, Mr Haddock was formerly Chairman of Cashcard Australia Limited, Deputy Chairman of BNP Paribas Investment Management (Australia) Limited and a director of Colonial First State Private Capital Limited, AXA Insurance (Australia) Limited. Also Chairman of Centacare Catholic Family Services and a board member of the Catholic Superannuation and Retirement Fund.

Mr Haddock is also the Chairman of MacarthurCook Limited, MacarthurCook Investment Managers Limited and MacarthurCook Real Estate Funds Limited.

Appointed a director on 14 November 2006.

Craig Mathew Dunstan Aged 48BComm, LLB, MBA, FFin

Managing Director and Chief Investment Offi cer of MacarthurCook Limited

The founder and a signifi cant shareholder of MacarthurCook Limited, Mr Dunstan held senior management positions with National Mutual and Lend Lease prior to his appointment as General Manager of Financial Services and Chief Investment Offi cer of Australian Unity in 1995. He resigned from Australian Unity in 2002 to establish the MacarthurCook Group.

Mr Dunstan was a director of Australian Unity Funds Management Limited, York Capital Group Limited, Waltus Investments Australia Limited, Acorn Capital Limited and Permanent Friendly Society Limited.

Mr Dunstan is also a director of MacarthurCook Limited, MacarthurCook Investment Managers Limited, MacarthurCook Real Estate Funds Limited and Kinloch Funds Management Limited. He is currently a board member of the Asian Public Real Estate Association.



23

Lawrence Alan Mendelowitz Aged 47 BComm, CA (Aust)

Chief Executive Offi cer of MacarthurCook Asia

Prior to joining MacarthurCook in 2009, Mr Mendelowitz held the role of Chief Operating Offi cer for the Allco Finance Group Ltd’s Real Estate Funds Management Division in Australia from 2006 to 2008.

Other senior management roles held by Mr Mendelowitz include Head of Private Banking and Specialised Finance in Investec Bank Ltd (from 1999 to 2002), Associate Director of Banking and Property at Macquarie Bank Ltd (1996-1999), Senior Manager of Structured Finance at Societe General Australia Ltd (1994 -1996), Senior Manager of fi nancial services at Deloitte, Touche, Tohmatsu (1988-1993). Mr Mendelowitz began his career in audit at Arthur Anderson & Co (1984-1987). Throughout his career, Mr Mendelowitz has specialised in the development of structured fi nancing for private and public investment purposes, including for the Federal Government of Australia, advisory roles in the acquisitions of real estate and private equity businesses and the redevelopment of a public housing estate. From 2002 to 2006, Mr Mendelowitz was involved in entrepreneurial ventures.

Appointed a director on 6 February 2009.

Alastair Hugh Gurner Aged 53BA (Legal Studies), FAICD

Independent Non-Executive Director of the Manager

Mr Gurner has over 20 years experience in corporate fi nance and the fi nancial services industry, with senior roles in research analysis, underwriting and institutional equities sales. Much of his experience has been focused on ASX-listed companies in two main sectors: real estate development and property trusts. Mr Gurner’s past clients include some of the major real estate investment and funds management organisations in Australia.

In early 1997, Mr Gurner became a joint founding executive director of Citadel Pooled Development Limited, a venture and development capital company listed on the ASX. Mr Gurner was an executive director of Citadel Pooled Development Limited from 1997 to 2006.

Mr Gurner is a director of a number of listed and unlisted companies operating in a range of sectors.

He is also a director of MacarthurCook Limited, MacarthurCook Investment Managers Limited and MacarthurCook Real Estate Funds Limited.




Lim How Teck Aged 58 FCPA (Singapore), FCPA (Aust), FCMA (UK), FSID, B.ACC, AIBA, PBM

Independent Non-Executive Director of the Manager and Chairman of the Audit Committee

Mr Lim How Teck is currently the Executive Chairman of Redwood International Pte Ltd, an investment consultancy, the Chairman of Certis Cisco Security Pte Ltd, and the Deputy Chairman of Tuas Power Ltd.

In 2005, Mr Lim retired from Neptune Orient Lines Ltd (NOL), where he had worked since 1979 and held the positions of Executive Director, Group Deputy Chief Executive Offi cer, Group Chief Operating Offi cer and Group Chief Financial Offi cer. He also held directorships in various subsidiaries, associated companies and investment interests of NOL. Prior to joining NOL, he worked in Coopers & Lybrand and Plessey Singapore.

In addition, Mr. Lim is a director of a number of listed and unlisted companies and statutory boards such as Jurong Port Pte. Ltd., ARA Asset Management Limited, M&C REIT Management Limited (manager of CDL Hospitality REIT), M&C Business Trust Management Limited (trustee-manager of CDL Hospitality Business Trust), IFS Capital Ltd, Rickmers Trust Management Pte. Ltd. (trustee-manager of Rickmers Maritime), Lasseters International Holdings Limited, Papua New Guinea Sustainable Development Program Limited, Mermaid Maritime Public Company Limited, Philips Resources Fund Special Purpose Company, CISCO Recall Total Information Management Pte Ltd, Eng Kong Holdings Limited, Gold Prime Holdings Ltd, Japan Industrial Property Pte. Ltd., the Foundation for Development Cooperation (Singapore) Ltd., the Foundation for Development Cooperation, the Foundation for Development Cooperation (Pacifi c), ACAL Holdings Pte. Ltd. and Asian Marine Syndicate 1965 Pte. Ltd.

In 1999, Mr Lim was awarded the Public Service Medal (PBM) by the Singapore Government.

Appointed a director on 1 August 2007.

Tan Kai Seng Aged 57BA (Accountancy), CPA (Singapore), FCCA (UK)

Independent Non-Executive Director of the Manager

Mr Tan was Finance Director of Parkway Holdings Limited from 1988 to 2005 and was its Group Financial Controller from 1980 to 1988. Parkway Holdings Limited is a leading fully integrated healthcare organisation in Asia, with one of the largest network of hospitals and healthcare services in the region.

Prior to joining Parkway Holdings in 1980, Mr Tan worked in the audit team with Price Waterhouse, Singapore for approximately fi ve years and a further two years on an International Exchange Programme with Price Waterhouse, San Francisco.

Mr Tan is an Independent Non-Executive Director and Audit Committee member of IGB Corporation Berhad, a signifi cant property investment and development company listed on Bursa Malaysia, Kuala Lumpur, Malaysia.

Appointed a director on 1 December 2006.

Board of Directors of the ManagerContinued


25

Craig Mathew Dunstan

Chief Investment Offi cer

Mr Dunstan is an Executive Director of the Manager and his profi le can be found under the “Board of Directors” section of this Annual Report.

Lawrence Alan Mendelowitz

Chief Executive Offi cer of MacarthurCook Asia

Mr Mendelowitz is an Executive Director of the Manager and his profi le can be found under the “Board of Directors” section of this Annual Report.

Nicholas Paul McGrath

Chief Executive Offi cer of MacarthurCook Industrial REIT and MacarthurCook’s Head of Real Estate, Asia

Mr McGrath joined MacarthurCook on 12 January 2009.

In 2005 Mr McGrath moved to Singapore to establish Allco Finance Group’s (Allco’s) real estate funds management business (Allco Singapore Limited) in Asia. He led the IPO and was the Fund Manager of Allco Commercial REIT during 2005 / 2006 and was subsequently appointed Chief Executive Offi cer of the REIT and Managing Director of Allco (Singapore) Limited in 2007. Mr McGrath subsequently led the sale of the Allco REIT business to Frasers Centrepoint Limited in August 2008. During this time, Mr McGrath spearheaded the growth of the REIT in Singapore, Japan and Australia and was responsible for growing assets under management in excess of S$2 billion. Mr McGrath joined Allco in 2000 and was a director in the Property Funds Management division of Allco in Sydney until his move to Singapore in 2005.

He has a Bachelors Business/LLB (Hons) from the University of Technology in Sydney, a Practical Legal Certifi cate from the College of Law in 1996, and a Graduate Diploma of Applied Finance & Investment from the Securities Institute of Australia.

Tang Buck Kiau

Senior Finance Manager and Company Secretary of the Manager

Ms Tang joined the Manager as Senior Finance Manager and Company Secretary in 2007. She is responsible for company secretarial, accounting, taxation, treasury, and reporting functions. She has extensive experience in fi nance, accounting and treasury within the real estate industry.

Before joining MacarthurCook, Ms Tang worked at Far East Organization for 12 years in the fi nance, accounting and treasury departments, eventually becoming the Senior Finance Manager in the corporate fi nance department. Her key responsibilities included fi nancial reporting, treasury and structuring, sourcing and management of project fi nancing. Prior to joining Far East Management, she held the position of audit manager at Coopers & Lybrand, Singapore.

Ms Tang is a Certifi ed Public Accountant of Singapore and a fellow of the Chartered Association of Certifi ed Public Accountants.

Senior Management Team



Structure of MacarthurCook Industrial REITAs at 31 March 2009

The following diagram indicates the relationships between MacarthurCook Industrial REIT, the Manager, the Property Manager, the Trustee and the Unitholders.

Ownership of assets Net property income

Property management and other services

MacarthurCookIndustrial

REIT

DistributionsHolding of units

The Trustee, HSBC Institutional

Trust Services (Singapore) Limited

Properties

Unitholders

The Manager, MacarthurCook

Investment Managers (Asia) Limited

Shareholders:MacarthurCook Limited

(92.5%)

United Engineers Development Pte Ltd

(7.5%)

The Property Manager, MacarthurCook Property

Management Pte Ltd

Shareholder:MacarthurCook Limited

(100.0%)

Management fees

Acts on behalf of Unitholders

Trustee’s feesManagement services

Property management and other fees


27

An Overview of the Industrial Real Estate Market in Singapore and Japan

In January 2009, the International Monetary Fund projected that world growth will fall to 0.5% in 2009, its lowest rate since World War II, amidst acute global fi nancial strains and closed credit markets.

The Asia Pacifi c region’s predominantly export-dependent countries have not been immune to the contagion effects of the fi nancial meltdown in the United States and Europe, and in the second half of 2008, were adversely impacted as its major trading partners in the developed Western economies continued to experience the effects of fi nancial deleveraging and economic downturn. Across the region, industrial production and exports have fallen dramatically. China’s industrial production towards the end of 2008 is estimated to have been less than half of the levels seen at the beginning of 2008.

The Singapore economy: the year in review1

Singapore’s economy, which registered a respectable 4.5% growth in the fi rst half of 2008, contracted in the second half of 2008 as the global recession affected demand in Singapore’s key export markets. In April 2009, advance estimates by Singapore’s Ministry of Trade and Industry (“MTI”) indicated that Singapore’s Gross Domestic Product (“GDP”) in the fi rst quarter of 2009 slowed by 11.5% in real terms since the same period last year. The advance estimates also forecast a GDP contraction of 6.0% to 9.0% in 20092.

With the exception of the construction sector which was estimated to have grown by 25.6% in the fi rst quarter of 2009, all the other sectors were adversely affected. The manufacturing sector alone is estimated to have contracted by 29.0% in the fi rst quarter on a year-on-year basis, compared to the 10.7% contraction in the last quarter of 2008. With most of Singapore’s key trading partners still in recession, the manufacturing sector will continue to remain weak for the rest of the year.

The services industries have also been impacted by the sharp contraction in global and regional fi nance, and intra-Asian trade and tourism. The collapse in global trade in recent months severely affected the wholesale and retail trade sector and the transport and storage sector in the fi rst quarter of 2009. Poor global trade prospects will continue to affect these sectors for the rest of 2009; the World Trade Organisation has forecast that world trade will contract by 9% (by volume) in 2009 – the worst performance since the Second World War.

To alleviate the impact of the global recession, the Singapore Government unveiled an expansionary Budget 2009 that would that would address unemployment, assist businesses and enhance national competitiveness. The Government revealed its commitment to enhance business cashfl ow and competitiveness through several initiatives, which include a 40% property tax rebate for industrial and commercial properties and

a 15% rental rebate for Jurong Town Corporation (JTC), Housing Development Board (HDB) and Singapore Land Authority (SLA) managed properties. These cost-saving initiatives are expected to provide immediate relief to the small and medium-enterprises (SMEs) who are tenants in these real estate facilities.

In addition, in January 2009, JTC announced a 15% rental rebate for its 7,700 tenants. The government body will also lift the 50% cap on sub-letting its properties until 31 December 2011. This means that JTC’s tenants are now allowed to sublet up to 100% of their space3.

Singapore industrial market: review and outlookBy mid-2008, investment activity in the Asian and Singapore industrial real estate markets had experienced signifi cant decreases from peaks in late 2007. While Singapore industrial property capital values and rentals saw an overall increase of 1.5% and 4.2% for 2008 as a whole, the last quarter of 2008 experienced a decline in overall industrial prices and rentals of 6.5% and 3.7% respectively, as the global economy and trade continued to contract and affect demand for industrial space.

The trend of declining values and rentals continued into the fi rst quarter of 2009. Prices and rentals of multiple-user factory space contracted by 9.9% and 6.1%, while that of multiple-user warehouse space fell by 12.0% and 3.6% respectively4. Average monthly rentals across all industrial subcategories continued to fall in the fi rst quarter of 20095:

1 Ministry of Trade and Industry, DTZ Debenham Tie Leung (SEA) Pte Ltd.2 “MTI Revises Forecasts for 2009 GDP Growth to -9.0 to -6.0%”, 14 April 2009. The advance GDP estimates for fi rst quarter 2009 are computed largely from

the fi rst two months of the quarter (i.e. January and February 2009). They are intended as an early indication of the GDP growth in the quarter, and are subject to revision when more comprehensive data becomes available.

3 CB Richard Ellis, MarketView Singapore, 1st quarter 2009.4 Urban Redevelopment Authority, Singapore – 1st quarter 2009 and 4th quarter 2008 real estate statistics.5 CB Richard Ellis, MarketView, Singapore 1st quarter 2009.



An Overview of the Industrial Real Estate Market in Singapore and JapanContinued

Average ground and upper fl oor factory monthly rents dropped to fourth quarter 2007 levels, falling by S$0.10 psf • q-o-q to S$1.45 psf and S$1.20 psf respectively.

Average monthly rent for warehouse space decreased by S$0.10 psf q-o-q to S$1.40 psf for ground fl oor units • and S$1.10 psf for upper fl oor units.

Monthly rent for hi-tech space fell by 3.3% q-o-q to S$2.90 psf during the fi rst quarter. The decline in hi-tech • space and business park space rentals can be attributed to the reduced demand as space alternatives to potential offi ce space tenants who are now seeking to benefi t from the sharp drop in Singapore’s offi ce space rents. The take-up of offi ce space in Singapore had fallen nearly 323,000 sq ft in the fourth quarter of 2009 after sliding 366,000 sq ft in the fourth quarter of 2008. Average gross monthly rentals of Grade A space in the central business district, which are already 22% lower than at the end of last year, are expected to continue to ease by up to 30% over the next three quarters of 2009. The weak demand in the offi ce sector affected the business park sector, which saw vacancy rates increase from 6.2 per cent in Q4 2008 to 9.7 per cent in Q1 20096.

At the end of 1st quarter 2009, the total stock of warehouse and factory space in Singapore stood at 6.7 million sqm and 28.9 million sqm, respectively. Current warehouse and factory supply under construction stood at 586,000 sqm and 2.9 million sqm, respectively. Factory vacancies increased to 7.0% in the fi rst quarter of 2009, compared with 6.6% in the fourth quarter of 2008, while warehouse vacancies fell to 7.0% in the fi rst quarter of 2009 from 7.2% in the fourth quarter of 2008.

With the continuation of the global economic recession, industrial capital values and rentals are expected to continue trending downward for the rest of 2009.

Singapore industrial property rental index - historical trend (Source: Urban Redevelopment Authority, Singapore)

0

50

100

150

200

250

4Q01

2Q02

4Q02

2Q03

4Q03

2Q04

4Q04

2Q05

4Q05

2Q06

4Q06

2Q07

4Q07

2Q08

4Q08

Multiple-user Factory

Office

Multiple-user Warehouse

Retail

Ren

tal i

ndex

Industrial property price index - historical trend (Source: Urban Redevelopment Authority, Singapore)

0

50

100

150

200

250

1Q99

3Q99

1Q00

3Q00

1Q01

3Q01

1Q02

3Q02

1Q03

3Q03

1Q04

3Q04

1Q05

3Q05

1Q06

3Q06

1Q07

3Q07

1Q08

3Q08

1Q09

Multiple-user Factory

Office

Multiple-user Warehouse

Retail

Pri

ce in

dex

6 Business Times article, “Watch this vacant space”, 25 April 2009.


29

The Japanese economy in reviewOn 27 April 2009, the Japanese government revised its forecast for Japan’s economy downwards by 3.3% in the year to next March. Forecasts for industrial output and exports were also sharply lowered, with industrial production estimated to fall 23.4% in the current fi scal year against a previous forecast of a 4.8% drop, and exports falling 27.6% compared with a 3.2% fall expected earlier. The overall consumer price index is expected to fall 1.3% in fi scal 20097.

While Japan’s fi nancial system has not been directly exposed to the U.S. subprime crisis, Japan’s manufacturing sector and its manufacturing exports, have been signifi cantly affected by the collapse in global demand, particularly for products such as automobiles, electronics and capital equipment8.

In March 2009, the Bank of Japan’s TANKAN Survey, which measures quarterly corporate sentiment among Japanese enterprises, showed the largest quarterly decline ever in its headline index for large manufacturers9. The manufacturing index had plunged to a record-low of minus 58 in March from minus 24 in December.

The government unveiled a JPY 15.4 trillion (USD 158.5 billion) stimulus package in early April to help raise economic activity by 1.9 percentage points. The outlook for the economy remains uncertain as solutions continue to be sought for the stabilization of the global fi nancial system and economy. However, a survey conducted by Japan’s Mainichi newspaper showed that approximately 70 per cent of leading Japanese corporations expect economic recovery to take hold in the second half of the next fi nancial year starting in April 201010.

Japan industrial market: review and outlook11

Investment activity in the Japanese industrial sector had been affected signifi cantly in 2008, due to the fi nancial crisis and the expectation that capital values would fall further. Offi cially announced land prices in January 2009 showed declines across the board of 3.0% on a nationwide basis and 2.7% for Greater Tokyo. Land and capital values are forecast to ease by 3% to 5% and rents by 6% to 8% over the next twelve months.

7 Reuters news agency: “Japan revises growth forecasts sharply lower”, 27 April 2009.8 International Monetary Fund, World Economic Outlook, 22 April 2009.9 Tankan Outline (March 2009), Bank of Japan, Research and Statistics Department, 1 April 2009.10 The Business Times, “Japan fi rms expect recovery by end 2010”, 6 May 2009. 11 Colliers International, Asia Pacifi c Industrial Market Overview – March 2009.


30

AS MANAGER OF THE TRUST, OUR PRIORITIES ARE TO CONTINUE TO PROACTIVELY MANAGE THE TRUST’S UNDERLYING ASSETS IN ORDER TO SAFEGUARD ITS RENTAL INCOME STREAM AND TO STRENGTHEN THE TRUST’S FINANCIAL POSITION. WE ARE FULLY COMMITTED TO ENSURING THE TRUST IS WELL PLACED TO WITHSTAND THE PRESENT MARKET CONDITIONS.


31

Corporate Governance Statement

The Board of Directors of the Manager (the “Board”), MacarthurCook Investment Managers (Asia) Limited and the management, are fully committed to good corporate governance.

The Manager uses the Code of Corporate Governance 2005 issued by the Ministry of Finance (the “Code”) as its benchmark, as and where relevant. The following describes the Manager’s main corporate governance policies and practices with specifi c reference to the Code.

The Manager of MI-REITThe Manager has general powers of management over the assets of MacarthurCook Industrial REIT (“MI-REIT”). The Manager’s main responsibility is to manage the assets and liabilities of MI-REIT for the benefi t of the Unitholders. It will manage the assets of MI-REIT with a focus on generating rental income and to enhance the returns from the investments of MI-REIT and ultimately the distributions and total return to Unitholders.

The primary role of the Manager is to set the strategic direction of MI-REIT and to instruct HSBC Institutional Trust Services (Singapore) Limited, as trustee of MI-REIT (the “Trustee”), on the acquisition, divestment and enhancement of assets in accordance with its stated investment strategy.

The Manager has covenanted in the Trust Deed to use its best endeavours to ensure that the business of MI-REIT is carried out and conducted in a proper and effi cient manner and to conduct all transactions with or for MI-REIT at arm’s length and on normal commercial terms.

Other functions and responsibilities of the Manager include:

Ensuring compliance with the applicable provisions of the Securities and Futures Act, Chapter 289 of Singapore 1. and all other relevant legislation, the Listing Manual of Singapore Exchange Securities Trading Limited (“SGX-ST”), the Code on Collective Investment Schemes (including the Property Funds Guidelines) issued by the Monetary Authority of Singapore (“MAS”), the Trust Deed, the tax ruling issued by the Inland Revenue Authority of Singapore on the taxation of MI-REIT and its Unitholders and all the relevant contracts;

Manage the fi nances of MI-REIT, including accounts preparation, capital management, coordination of the budget 2. process, forecast modeling and corporate treasury functions;

Communicate with Unitholders; and 3.

Supervise the Property Manager, MacarthurCook Property Management Pte Ltd, which performs the property 4. management functions (including lease management, property management, maintenance and administration), pursuant to the Property Management Agreement.

Board of DirectorsPrinciple 1: Board’s conduct of affairsThe Board delegates certain of its functions to the Audit, Risk & Compliance Committee.

The Board is entrusted with the responsibility for the overall management and the corporate governance of the Manager and MI-REIT, including establishing goals for management and monitoring the achievement of these goals.

The Board meets regularly, at least once every quarter and as warranted by particular circumstances, to discuss and review the strategies and policies of MI REIT, including any signifi cant acquisitions and disposals, the annual budget, the fi nancial performance of MI REIT against a previously approved budget and to approve the release of the quarterly, half-year and full year results. The Board also reviews the risks to the assets of MI-REIT and acts upon any comments from the auditors of MI-REIT.



Corporate Governance StatementContinued

The number of Board, Audit, Risk & Compliance Committee and Nominating and Remuneration Committee meetings held during the year, as well as the attendance of each Board member at these meetings, is disclosed below:

Board Audit, Risk & Compliance Committee

Nominating and Remuneration

Committee

No of meetings No of meetings No of meetings

Eligible to attend Attended



Mr Richard Michael Haddock 4 4 4 4 2 2

Mr Craig Mathew Dunstan 4 4 - - - -

Mr Alastair Hugh Gurner 4 4 - - 2 2

Mr Lim How Teck 4 4 4 4 - -

Mr Mendelowitz Lawrence Alan1 1 1 - - - -

Mr Tan Kai Seng 4 4 4 4 2 2

1 Mr Mendelowitz Lawrence Alan was appointed to the Board on 6 February 2009.

The Manager’s Articles of Association permit Board meetings to be held by way of conference telephone or any other electronic means of communication by which all persons participating in the meeting are able, contemporaneously, to hear and be heard by all other participants.

The Manager has adopted a set of internal guidelines which sets out the fi nancial authority limits for investment properties acquisition and divestment, operating/capital expenditure, leasing, disposal and write-off of assets, bank borrowings as well as arrangements in relation to cheque signatories that require the approval of the Board. Appropriate delegation of authority and approval sub-limits are also provided at management level to facilitate operational effi ciency.

Changes to regulations and accounting standards are monitored closely by the management and members of the Audit, Risk & Compliance Committee. To keep pace with regulatory changes where these changes have an important bearing on the Manager’s or Directors’ disclosure obligations, the Directors will be briefed either during Board Meetings or at specially convened meetings involving the relevant professionals. Management also provides the Board with information in a timely manner through regular updates on fi nancial results, market trends and business developments.

Principle 2: Board composition and guidanceThe Board comprises members with a breadth of expertise in real estate, accounting/fi nance, law, business and management.

Principle 3: Chairman and Chief Executive Offi cerThe roles of Chairman and Chief Executive Offi cer are separate and the positions are held by two separate persons in order to maintain an effective check and balance. The division of responsibilities between the Chairman and the Chief Executive Offi cer facilitates effective oversight and a clear segregation of duties. The Chairman and the Chief Executive Offi cer are not related to each other.

The Chairman is responsible for the overall management of the Board as well as ensuring that the Directors and the management work together with integrity and competency, and that the Board engages the management in constructive debate on strategy, business operations, enterprise risk and other plans. The Chief Executive Offi cer has full executive responsibilities over the business directions and operational decisions in the day-to-day management of the Manager.


33

Principle 4: Board membershipNominating and Remuneration CommitteeThe Manager has established a Nominating and Remuneration Committee to, among other things, make recommendations to the Board on all Board appointments. The members are:

Name Role

Mr Richard Michael Haddock Chairman

Mr Alastair Hugh Gurner Member

Mr Tan Kai Seng Member

The Nominating and Remuneration Committee advises the Manager on board matters including policies, performance, composition and succession planning. This includes identifying, evaluating and recommending candidates to the Board.

Each Director has been appointed on the basis of his professional experience and on his potential contribution to MI-REIT.

Newly appointed directors will be briefed on business activities of MI-REIT and its strategic directions, role of the Board and the contribution they would be expected to make, including the time commitment and any participation in sub-committees of the Board.

The majority of the Directors are non-executive and independent of the management. This enables the management to benefi t from their external, diverse and objective perspective on issues that are brought before the Board. It also enables the Board to interact and work with the management through a robust exchange of ideas and views to help shape the strategic process. This, together with a clear separation of roles of the Chairman and the Chief Executive Offi cer, provides a healthy professional relationship between the Board and the management, with clarity of roles and robust oversight as they deliberate the business activities of MI-REIT.

The Board members are:

Name of Directors Role

Mr Richard Michael Haddock Chairman, Non-Executive Independent

Mr Craig Mathew Dunstan Chief Investment Offi cer, Executive Non-independent

Mr Alastair Hugh Gurner Non-Executive Independent

Mr Lim How Teck Non-Executive Independent

Mr Mendelowitz Lawrence Alan1 Chief Executive Offi cer (Asia), Executive Non-independent

Mr Tan Kai Seng Non-Executive Independent

1. Mr Mendelowitz Lawrence Alan was appointed to the Board on 6 February 2009.

Other key information on the Directors are set out in pages 22 to 24 of this Annual Report under the section “Board of Directors of the Manager”.




Principle 5: Board performanceThe Board uses objective performance criteria to assess the effectiveness of the Board as a whole and the contribution of each Director. Such criteria include Directors’ attendance, commitments and contributions during Board meetings. The Directors contribute in different ways, including using their personal networks to further the interest of MI-REIT.

Principle 6: Access to informationThe respective members of the Board, the Audit, Risk & Compliance Committee and the Nominating and Remuneration Committee are provided with, in advance of each meeting, the meeting agenda and the relevant papers submitted by the management, containing information to enable full deliberation on the issues to be considered at the respective meetings. Management and MI-REIT’s auditors, who can provide additional insight into the matters for discussion, are also invited from time to time to attend such meetings.

Each Director has the right to seek independent advice in the furtherance of his duties at the Manager’s expense. However, prior approval of the Chairman is required, which will not be unreasonably withheld.

Principles 7-9: Remuneration mattersMI-REIT, constituted as a trust, is externally managed by the Manager and accordingly, it has no personnel of its own. The Manager appoints experienced and well-qualifi ed management to handle the day-to-day operations of the Manager. All directors and employees of the Manager are remunerated by the Manager, and not MI-REIT.

Principle 10: AccountabilityThe Board is responsible for providing a balanced and understandable assessment of the MI-REIT’s performance, position and prospects, including interim and other price-sensitive public reports and reports to regulators. Management provides all members of the Board with fi nancial reports which present a balanced and understandable assessment of MI-REIT’s performance, position and prospects on a quarterly basis.

Principle 11: Audit, Risk & Compliance CommitteeThe Audit, Risk & Compliance Committee is appointed by the Board from amongst the Directors of the Manager and comprises three non-executive Directors, all of whom are independent. The members are:

Name Role

Mr Lim How Teck Chairman

Mr Richard Michael Haddock Member

Mr Tan Kai Seng Member

The Audit, Risk & Compliance Committee members have had many years of experience in senior management positions in established organisations and they possess the requisite accounting and fi nancial management expertise and experience to discharge the Audit, Risk & Compliance Committee’s functions.

During the year, the Audit, Risk & Compliance Committee performed independent reviews of MI-REIT’s quarterly and full year fi nancial results before their submission to the Board. In the process, the Audit, Risk & Compliance Committee reviewed its accounting policies and key areas of management judgement applied for adequate provisioning and disclosure.

During the year, the Manager has implemented a “Whistle Blowing Policy”, which was approved by the Board. The Audit, Risk & Compliance Committee reviewed the “Whistle Blowing Policy” which provides a system by which employees and other persons may, in confi dence, raise concerns about possible improprieties in matters of fi nancial reporting and other matters, and was satisfi ed that arrangements are in place for the independent investigation of such matters and for appropriate follow-up action.


35

The Audit, Risk & Compliance Committee met with the external auditors separately once during the year without the presence of management.

The Audit, Risk & Compliance Committee also reviewed the nature and extent of the non-audit services provided to MI-REIT by the external auditors for the fi nancial year and is of the opinion that the provision of such non-audit services would not affect the independence and objectivity of the external auditors.

Principle 12: Internal controlsThe Board recognises the importance of sound internal controls and risk management practices to good corporate governance. The Manager has put in place a system of internal controls comprising procedures and processes to safeguard MI-REIT’s assets, Unitholders’ interest as well as to manage risks.

The Board is satisfi ed that there are no material weakness in MI-REIT’s system of internal control, based on the fi ndings from external auditors and the management control in place.

Principle 13: Internal auditAfter taking into consideration the corporate and management structures of the Manager and the scale of MI-REIT’s operations, the Manager presently does not have in place an internal audit function.

Principles 14-15: Communication with UnitholdersThe listing rules of the SGX-ST require that a listed entity discloses to the market matters that could or might be expected to have a material effect on the price of the entity’s securities. The Manager upholds strong culture of continuous disclosure and transparent communication with Unitholders and the investing community. The Manager’s disclosure policy requires timely and full disclosure of all material information relating to MI-REIT by way of public releases or announcements through the SGX-ST via SGXNET.

The Manager also conducts regular briefi ngs and conference calls for analysts and media representatives which will generally coincide with the release of MI-REIT’s results. During these briefi ngs, the Manager reviews MI-REIT’s most recent performance as well as discusses the business outlook for MI-REIT. In line with the Manager’s objective of transparent communication, briefi ng materials are released to the SGX-ST via SGXNET.

During the year, the Manager also met or teleconferenced with institutional investors in Singapore, Hong Kong, Europe, USA and Australia. In addition, the Manager also participates in real estate focused conferences locally and in the region as part of its efforts to maintain regular contact with investors and analysts.

Dealings in MI-REIT UnitsThe Trust Deed requires each Director to give notice to the Manager of his acquisition of units in MI-REIT (the “Units”) or changes in the number of Units which he holds or in which he has an interest, within two (2) business days after such acquisition or the occurrence of the event giving rise to changes in the number of Units which he holds or in which he has an interest.

The Directors and offi cers are advised not to deal in the Units on short-term considerations.

In addition, the Manager has given an undertaking to MAS that it will announce to the SGX-ST the particulars of its holdings in the Units and any changes thereto within two (2) business days after the date on which it acquires or disposes of any Units, as the case may be. The Manager has also undertaken that it will not deal in the Units one month before the public announcement of MI-REIT’s annual results and two weeks before the public announcement of MI-REIT’s quarterly results, and ending on the date of announcement of the relevant results.




Interested party transactionsThe Manager has established an internal control system to ensure that all interested party transactions will be undertaken on normal commercial terms and will not be prejudicial to the interests of MI-REIT and the Unitholders. As a general rule, the Manager must demonstrate to the Audit, Risk & Compliance Committee that such transactions satisfy the foregoing criteria, which may entail obtaining (where practicable) quotations from parties unrelated to the Manager, or obtaining one or more valuations from independent professional valuers (in accordance with the Property Funds Guidelines).

The Manager will maintain a register to record all interested party transactions which are entered into by MI-REIT and the bases, including any quotations from unrelated parties and independent valuations obtained to support such bases, on which they are entered into. Further, the following rules will be adhered to:

transactions (either individually or as part of a series or if aggregated with other transactions involving the same • interested party during the same fi nancial year) equal to or exceeding $100,000 in value but below 3.0% of the value of MI-REIT’s net tangible assets will be subject to review by the Audit, Risk & Compliance Committee at regular intervals;

transactions (either individually or as part of a series or if aggregated with other transactions involving the same • interested party during the same fi nancial year) equal to or exceeding 3.0% but below 5.0% of the value of MI-REIT’s net tangible assets will be subject to the review and prior approval of the Audit, Risk & Compliance Committee. Such approval shall only be given if the transactions are on normal commercial terms and are consistent with similar types of transactions made by the Trustee with third parties which are unrelated to the Manager; and

transactions (either individually or as part of a series or if aggregated with other transactions involving the same • interested party during the same fi nancial year) equal to or exceeding 5.0% of the value of MI-REIT’s net tangible assets will be reviewed and approved prior to such transactions being entered into, on the basis described in the preceding paragraph by the Audit, Risk & Compliance Committee which may, as it deems fi t, request advice on the transaction from independent sources or advisors, including the obtaining of valuations from independent professional valuers. Further, under the Listing Manual and the Property Funds Guidelines, such transactions would have to be approved by the Unitholders at a meeting of Unitholders.

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

MI-REIT will, in compliance with Rule 905 of the Listing Manual, announce any interested person transaction if such transaction, by itself or when aggregated with other interested person transactions entered into with the same interested person during the same fi nancial year, is 3.0% or more of MI-REIT’s latest audited net tangible assets.


37

Financial Statements31 March 2009

MacarthurCook Industrial REIT and its subsidiaries(Constituted in the Republic of Singapore pursuant to a trust deed dated 5 December 2006)

38 Report of the Trustee

39 Statement by the Manager

40 Independent Auditor’s Report

41 Balance Sheets

42 Statements of Total Return

43 Reconciliation Between Total Return for theYear and Amount Available for Distribution

44 Portfolio Statements

48 Consolidated Cash Flow Statement

50 Notes to the Financial Statements

1090 MCook MI-REIT AR09 FIN_FA.indd 371090 MCook MI-REIT AR09 FIN_FA.indd 37 17/6/09 4:46:05 PM17/6/09 4:46:05 PM


Report of the TrusteeYear ended 31 March 2009

HSBC Institutional Trust Services (Singapore) Limited (the “Trustee”) is under a duty to take into custody and hold the assets of MacarthurCook Industrial REIT (the “Trust”) and its subsidiaries (“the Group”) in trust for the holders (“Unitholders”) of units in the Trust (the “Units”). In accordance with, interalia, the Securities and Futures Act, Chapter 289 of Singapore, its subsidiary legislation and the Code on Collective Investment Schemes issued by the Monetary Authority of Singapore (“MAS”) and the Listing Manual (collectively referred to as the “laws and regulations”), the Trustee shall monitor the activities of MacarthurCook Investment Managers (Asia) Limited (the “Manager”) for compliance with the limitations imposed on the investment and borrowing powers as set out in the amending and restating trust deed dated 8 March 2007 between the Trustee and the Manager (the “Trust Deed”) in each annual accounting period and report thereon to Unitholders in an annual report which shall contain the matters prescribed by the laws and regulations as well as the recommendations of Statement of Recommended Accounting Practice 7 “Reporting Framework for Unit Trusts” issued by the Institute of Certifi ed Public Accountants of Singapore and the provisions of the Trust Deed.

To the best knowledge of the Trustee, the Manager has, in all material respects, managed the Group and the Trust during the year covered by these fi nancial statements, set out on pages 41 to 77, comprising the Balance Sheets, Statements of Total Return and Portfolio Statements of the Group and of the Trust, the Consolidated Cash Flow Statement of the Group and Notes to the Financial Statements, in accordance with the limitations imposed on the investment and borrowing powers set out in the Trust Deed, laws and regulations and otherwise in accordance with the provisions of the Trust Deed.

For and on behalf of the TrusteeHSBC Institutional Trust Services (Singapore) Limited

Johannes Van VerreDirector

Singapore19 June 2009


39

Statement by the ManagerYear ended 31 March 2009

In the opinion of the Directors of MacarthurCook Investment Managers (Asia) Limited, the accompanying fi nancial statements set out on pages 41 to 77 comprising the Balance Sheets, Statements of Total Return and Portfolio Statements of the Group and the Trust, the Consolidated Cash Flow Statement of the Group and Notes to the Financial Statements are drawn up so as to present fairly, in all material respects, the fi nancial position of the Group and of the Trust as at 31 March 2009, and the total return of the Group and of the Trust and cash fl ows of the Group for the year then ended in accordance with the recommendations of Statement of Recommended Accounting Practice 7 “Reporting Framework for Unit Trusts” issued by the Institute of Certifi ed Public Accountants of Singapore and the provisions of the Trust Deed. At the date of this statement, there are reasonable grounds to believe that the Group and the Trust will be able to meet their fi nancial obligations as and when they materialise.

We draw attention to Note 9 to the fi nancial statements which indicates that the Trust has a term loan amounting to $201.3 million and a subsidiary has a term loan of $23.1 million that are due for repayment on 16 April 2009 and 18 December 2009 respectively. On 31 March 2009, the repayment date of the Trust’s term loan of $201.3 million was extended to 16 June 2009. On 22 May 2009, the repayment date of the Trust’s term loan of S$201.3 million was further extended to 31 December 2009. In addition, the Trust has a commitment to acquire a property for $91.0 million. This agreement is expected to be settled in the last quarter of 2009.

The Manager is negotiating with fi nancial institutions to effect the refi nancing of the borrowings and to fund the capital commitment to acquire the property. An unsuccessful refi nancing of the term loan facilities and/or an unsuccessful fi nancing of the capital commitment may cast a signifi cant uncertainty on the Group and the Trust’s ability to continue as a going concern and therefore, they may be unable to realise their assets and discharge their liabilities in the normal course of business.

For and on behalf of the ManagerMacarthurCook Investment Managers (Asia) Limited

Mendelowitz Lawrence AlanDirector




Independent Auditors’ ReportUnitholders of MacarthurCook Industrial REIT Constituted in the Republic of Singapore pursuant to a trust deed

We have audited the accompanying fi nancial statements of MacarthurCook Industrial REIT (the “Trust”) and its subsidiaries (the “Group”), which comprise the balance sheets and portfolio statements of the Group and of the Trust as at 31 March 2009, and the statements of total return of the Group and of the Trust and the cash fl ow statement of the Group for the year then ended, and a summary of signifi cant accounting policies and other explanatory notes, as set out on pages 41 to 77.

Manager’s responsibility for the fi nancial statementsThe Manager is responsible for the preparation and fair presentation of these fi nancial statements in accordance with Statement of Recommended Accounting Practice (“RAP”) 7 “Reporting Framework for Unit Trusts” issued by the Institute of Certifi ed Public Accountants of Singapore. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of fi nancial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Manager of the Trust, as well as evaluating the overall presentation of the fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated fi nancial statements of the Group and the balance sheet, portfolio statement and statement of total return of the Trust present fairly, in all material respects, the fi nancial position of the Group and of the Trust as at 31 March 2009, and the total return of the Group and of the Trust and cash fl ows of the Group for the year then ended, in accordance with recommendations of Statement of Recommended Accounting Practice 7 “Reporting Framework for Unit Trusts” issued by the Institute of Certifi ed Public Accountants of Singapore.

Without qualifying our opinion, we draw attention to Note 9 of the fi nancial statements. At 31 March 2009, the Group and the Trust have interest-bearing borrowings of $224.4 million and $201.3 million, respectively, which are due for repayment within the next 12 months as well as an existing capital commitment of $91.0 million. The refi nancing of the borrowings and fi nancing of the capital commitment have not been completed at the date of this report. These conditions, indicate the existence of a material uncertainty that may cast signifi cant doubt on the Trust and its subsidiaries’ ability to continue as a going concern.

KPMG LLPPublic Accountants andCertifi ed Public Accountants



41

Balance SheetsAs at 31 March 2009

Group Trust

Note2009$’000

2008$’000

2009$’000

2008$’000

NON-CURRENT ASSETS

Investment properties 3 530,341 555,411 497,947 524,622

Subsidiaries 4 - - 10,657 11,748

Intangible asset 5 - 1,000 - 1,000

530,341 556,411 508,604 537,370

CURRENT ASSETS

Derivative fi nancial instruments 6 - 174 - 174

Trade and other receivables 7 3,653 3,140 3,640 3,116

Cash and cash equivalents 8 9,967 9,607 8,039 7,760

13,620 12,921 11,679 11,050

Total assets 543,961 569,332 520,283 548,420

CURRENT LIABILITIES

Interest-bearing borrowings 9 223,813 - 200,852 -

Derivative fi nancial instruments 6 2,635 350 2,635 350

Provision 10 20,000 - 20,000 -

Trade and other payables 11 5,897 8,313 5,847 7,769

252,345 8,663 229,334 8,119

NON-CURRENT LIABILITIES

Rental deposits 2,385 2,366 1,869 1,904

Interest-bearing borrowings 9 - 220,499 - 200,145

Minority interest 157 180 - -

2,542 223,045 1,869 202,049

Total liabilities (excluding net assets attributable to Unitholders)

254,887 231,708 231,203 210,168

Net assets attributable to Unitholders 12 289,074 337,624 289,080 338,252

The accompanying notes form an integral part of these fi nancial statements.



Statements of Total ReturnYear ended 31 March 2009

Group Trust

Note2009$’000

2008$’000

2009$’000

2008$’000

Gross revenue 15 50,827 32,214 48,915 31,715

Property operating expenses 16 (13,971) (7,390) (13,535) (7,256)

Net property income 36,856 24,824 35,380 24,459

Interest income 350 31 347 27

Other income 64 - 48 -

Net foreign exchange (loss)/gain (24) (5) 1,179 555

Manager’s management fees 17 (3,921) (1,950) (3,921) (1,950)

Borrowing costs (6,020) (2,952) (5,394) (2,790)

Write off/amortisation of intangible asset (1,000) (200) (1,000) (200)

Impairment loss on loan to subsidiary - - (1,844) -

Other trust expenses 18 (20,860) (2,991) (20,773) (2,460)

Non-property expenses (31,801) (8,093) (32,932) (7,400)

Net income 5,445 16,757 4,022 17,641

Net change in fair value of investment properties

(29,988) 37,010 (28,132) 37,288

Net change in fair value of fi nancial derivatives

(2,459) (799) (2,459) (799)

Total return before income tax (27,002) 52,968 (26,569) 54,130

Income tax expense 19 - - - -

Total return after income tax (27,002) 52,968 (26,569) 54,130

Minority interest 14 1 - -

Total return after income tax and minority interest, before distributions

(26,988) 52,969 (26,569) 54,130

Distributions 20 (24,215) (13,810) (24,215) (13,810)

Total returns for the year (51,203) 39,159 (50,784) 40,320

Earnings per unit (cents) 21

Basic (10.33) 28.22 (10.17) 28.84

Diluted (10.33) 28.22 (10.17) 28.84



43

Reconciliation Between Total Return for the Year and Amount Available for Distribution Year ended 31 March 2009

Group Trust

Note2009$’000

2008$’000

2009$’000

2008$’000

Total return after income tax and minority interest, before distribution

(26,988) 52,969 (26,569) 54,130

Net effect of non-tax deductible/(chargeable) items

A 51,204 (33,682) 49,990 (34,519)

Other adjustments B (795) 324 - -

Amount available for distribution to the Unitholders

C 23,421 19,611 23,421 19,611

Note A - Net effect of non-tax deductible/(chargeable) items

Amortisation of borrowing costs 1,078 789 1,078 789

Equity fund raising expenses, net (251) 1,631 (251) 1,631

Foreign exchange gain - - (1,202) (559)

Manager’s management fees in units 1,516 585 1,516 585

Provision for onerous contract 20,000 - 20,000 -

Impairment loss on loan to subsidiary - - 1,844 -

Net change in fair value of fi nancial derivatives 2,459 799 2,459 799

Straight-lining of rental income (1,623) (1,278) (1,623) (1,278)

Net change in fair value of investment properties 29,988 (37,010) 28,132 (37,288)

Industrial building allowance (3,311) - (3,311) -

Temporary differences and other tax adjustments 1,348 802 1,348 802

Net effect of non-tax deductible/(chargeable) items 51,204 (33,682) 49,990 (34,519)

Note B – Other adjustments Other adjustments for the Group relate to undistributed results of the subsidiaries.

Note C – Amount available for distribution to Unitholders

Group and Trust

2009$’000

2008$’000

DISTRIBUTIONS TO UNITHOLDERS FOR THE PERIODS:

- 1.52 cents per unit for the period from 19 April 2007 - 30 June 2007 - 3,959

- 1.86 cents per unit for the period from 1 July 2007 - 30 September 2007 - 4,845

- 1.92 cents per unit for the period from 1 October 2007 - 31 December 2007 - 5,006

- 2.22 cents per unit for the period from 1 January 2008 - 31 March 2008 - 5,801

- 2.35 cents per unit for the period from 1 April 2008 - 30 June 2008 6,138 -

- 2.35 cents per unit for the period from 1 July 2008 - 30 September 2008 6,138 -

- 2.35 cents per unit for the period from 1 October 2008 - 31 December 2008 6,150 -

- 1.875 cents per unit for the period from 1 January 2009 - 31 March 20091 4,995 -

23,421 19,611

1 On 21 May 2009, the Manager declared a distribution of 1.875 cents per Unit in respect of the period from 1 January 2009 – 31 March 2009. This distribution has not been recognised on the balance sheet as at 31 March 2009.

Please refer to Note 2.13 for the Trust’s distribution policy.




Portfolio StatementsAs at 31 March 2009

Description of property Location

Term of land lease

Remaining term of

land lease Existing use

Years

PROPERTIES IN SINGAPORE - LEASEHOLD

1. UE Technology Park 8 & 10 Pandan Crescent 92 years and 8 months

59 Logistics and Warehousing

2. GRP Industrial Building 1 Bukit Batok Street 22 60 years 46 Manufacturing

3. Fook Tong Nam Building 31 Admiralty Road 60 years 28 Logistics and Warehousing

4. 20 Gul Way 20 Gul Way 35 years 32 Manufacturing

5. 3 Tuas Ave 2 3 Tuas Ave 2 73 years 46 Manufacturing

6. 8 Tuas Ave 20 8 Tuas Ave 20 57 years and2 months

41Manufacturing

10 Tuas Ave 20 10 Tuas Ave 20 60 years 43 Manufacturing

7. 8 Senoko South Road 8 Senoko South Road 60 years 45 Manufacturing

8. Fullmark Industrial Building 10 Soon Lee Road 60 years 32 Manufacturing

9. Aalst Chocolate Building 26 Tuas Avenue 7 60 years 44 Manufacturing

10. Ossia Building 10 Changi South Lane 60 years 47 Logistics and Warehousing

11. KTL Distribution Centre 23 Changi South Avenue 2 60 years 45 Logistics and Warehousing

12. 2 Ang Mo Kio Street 65 2 Ang Mo Kio Street 65 60 years 38 Research and Technology

13. King Plastic 541 Yishun Industrial Park A 60 years 45 Manufacturing

14. Axis Building 15 Tai Seng Drive 60 years 42

15. Builders Centre 11 Changi South Street 3 60 years 46 Logistics and Warehousing

16. 61 Yishun Industrial Park A 61 Yishun Industrial Park A 60 years 43 Logistics and Warehousing

17. 103 Defu Lane 10 103 Defu Lane 10 60 years 34 Logistics and Warehousing

18. Xpress Building 1 Kallang Way 2A 60 years 46 Manufacturing

19. PM Industrial Building 135 Joo Seng Road 60 years 45 Manufacturing

20. 7 Clementi Loop 7 Clementi Loop 60 years 44 Logistics and Warehousing

TRUST

Investment properties, at valuation

Effect of straight lining of rental income

Other assets and liabilities (net)

Net assets attributable to Unitholders

1 The occupancy rates shown are on committed basis.



Logistics and Warehousing

45

Occupancy rate1 At valuation

GroupPercentage of total

net assets attributable to Unitholders

TrustPercentage of total


2009%

2008%

2009$’000

2008$’000

2009%

2008%

2009%

2008%

100% 100% 131,300 137,900 45.4 40.8 45.4 40.8

100% 100% 22,500 23,000 7.8 6.8 7.8 6.8

100% 100% 14,200 14,800 4.9 4.4 4.9 4.4

100% 100% 43,800 46,000 15.1 13.6 15.1 13.6

100% 100% 21,900 23,000 7.6 6.8 7.6 6.8

100% 100% 12,200 13,000 4.2 3.8 4.2 3.8

100% 100% 12,000 12,700 4.2 3.8 4.1 3.8

100% 100% 9,400 9,800 3.3 2.9 3.3 2.9

100% 100% 9,300 9,100 3.2 2.7 3.2 2.7

100% 100% 33,500 35,400 11.6 10.5 11.6 10.5

100% 100% 22,500 23,600 7.8 7.0 7.8 7.0

100% 100% 14,800 15,500 5.1 4.6 5.1 4.6

100% 100% 15,900 16,800 5.5 5.0 5.5 5.0

78% 88% 26,448 27,700 9.1 8.2 9.1 8.2

100% 100% 20,200 20,800 7.0 6.2 7.0 6.1

100% 100% 23,600 24,600 8.2 7.3 8.2 7.2

100% 100% 13,800 14,500 4.8 4.3 4.8 4.3

100% 100% 13,400 14,000 4.6 4.1 4.6 4.1

100% 100% 23,300 25,400 8.1 7.5 8.1 7.5

100% 100% 16,800 18,300 5.8 5.5 5.8 5.4

500,848 525,900 173.3 155.8 173.2 155.5

(2,901) (1,278) (1.0) (0.4)

497,947 524,622 172.2 155.1

(208,867) (186,370) (72.2) (55.1)

289,080 338,252 100.0 100.0



Portfolio StatementsAs at 31 March 2009Continued

Description of property Location

Term of land lease

Remaining term of

land lease

Years

GROUP

1-20. Properties in Singapore - Leasehold N.A. N.A.

PROPERTY IN JAPAN - FREEHOLD

21. Asahi Ohmiya Warehouse 1-398-3, 11, 13 Yoshinocho, Kita-ku, Saitama City, Saitama, Tokyo

N.A. N.A.

Effect of straight lining of rental income

Other assets and liabilities (net)

Net assets attributable to Unitholders

1 The occupancy rates shown are on committed basis.

Portfolio statement by industry segment is not presented as the Group’s and the Trust’s activities for the year ended 31 March 2009 and 31 March 2008 relate wholly to investing in real estate in the industrial sector in Singapore and Japan.

(a) On 31 March 2009, independent valuations of the investment properties in Singapore were undertaken by a professional valuer, Colliers International Consultancy & Valuation (Singapore) Pte Ltd. The Manager believes that the independent valuers have appropriate professional qualifi cations and recent experience in the location and category of the properties being valued. The valuations were based on capitalisation approach, discounted cash fl ow analysis and direct comparison method.

(b) An ndependent valuation of the property in Japan was undertaken by CB Richard Ellis (Pte) Ltd on 12 November 2008. The Manager believes that the independent valuer has appropriate professional qualifi cations and recent experience in the location and category of the properties being valued. The valuations were based on capitalisation approach, discounted cash fl ow analysis and direct comparison method. The fair value of this property as at 31 March 2009 was based on an internal valuation by the Manager, after taking into consideration the independent valuation on 12 November 2008.

The net changes in fair value of investment properties have been recognised in the Statements of Total Return.



i

47

Existing use Occupancy rate1 At valuation

GroupPercentage of total


2009%

2008%

2009$’000

2008$’000

2009%

2008%

500,848 525,900 173.3 155.8

Logistics and Warehousing 100% 100% 32,394 30,789 11.2 9.1

533,242 556,689 184.5 164.9

(2,901) (1,278) (1.0) (0.4)

530,341 555,411 183.5 164.5

(241,267) (217,787) (83.5) (64.5)

289,074 337,624 100.0 100.0



Consolidated Cash Flow StatementYear ended 31 March 2009

Group

2009$’000

2008$’000

OPERATING ACTIVITIES

Total return before income tax (27,002) 52,968

Adjustments for:

Interest income (350) -

Net change in fair value of fi nancial derivatives 2,459 799

Borrowing costs 6,020 2,952

Straight lining of rental income (1,623) (1,278)

Amortisation of intangible asset 1,000 200

Manager’s management fees in units 1,516 585

Provision for onerous contract 20,000 -

Net change in fair value of investment properties 29,988 (37,010)

Operating income before working capital changes 32,008 19,216

CHANGES IN WORKING CAPITAL

Rental deposits 179 2,452

Trade and other receivables 1,110 (1,861)

Trade and other payables (1,735) 6,221

Cash generated from operating activities 31,562 26,028

INVESTING ACTIVITIES

Purchase of investment properties (including acquisition costs) (1,001) (516,491)

Capital expenditure on investment properties (945) -

Interest received 350 -

Cash fl ows from investing activities (1,596) (516,491)

FINANCING ACTIVITIES

Borrowing costs paid (5,128) (4,418)

Distributions to Unitholders (24,215) (13,810)

Proceeds from issue of new units - 312,516

Proceeds from borrowings - 221,960

Issue expenses paid (292) (14,781)

Minority interest (29) 180

Cash fl ows from fi nancing activities (29,664) 501,647

Net increase in cash and cash equivalents 302 11,184

Cash and cash equivalents at beginning of the year 9,607 -

Effect of exchange rate fl uctuation 58 (1,577)

Cash and cash equivalents at end of the year 9,967 9,607



49

Note:(A) Net cash outfl ow on acquisition of investment properties

Group

2009$’000

2008$’000

Investment properties1 - 508,051

Acquisition related costs 1,001 8,440

Net cash consideration paid 1,001 516,491

1 The amount in 2008 is before adjusting for the rental support of $1.2 million received from the vendor of the investment property at 15 Tai Seng Drive.

(B) Signifi cant non-cash transactions(a) During the fi nancial year, the Trust issued 753,115 Units (2008: 323,751 Units) as payment for the Manager’s

base fees amounting to a value of $429,000 (2008: $384,000); and

(b) As at 31 March 2009, 4,669,249 Units (2008: 208,979 Units) are to be issued as payment for the Manager’s base and performance fees amounting to a value of $1,087,000 (2008:$201,000).




Notes to the Financial StatementsYear ended 31 March 2009

These notes form an integral part of the fi nancial statements.

The fi nancial statements were authorised for issue by the Manager and the Trustee on 19 June 2009.

GENERAL1. MacarthurCook Industrial REIT (the “Trust”) is a Singapore-domiciled real estate unit trust constituted pursuant to the trust deed dated 5 December 2006, subsequently amended by the amending and restating deed dated 8 March 2007 (“Trust Deed”), entered into between MacarthurCook Investment Managers (Asia) Limited (the “Manager”) and HSBC Institutional Trust Services (Singapore) Limited (the “Trustee”). The Trust Deed is governed by the laws of the Republic of Singapore. The Trustee is under a duty to take into custody and hold the assets of the Trust in trust for the holders (“Unitholders”) of units in the Trust (the “Units”).

The Trust was formally admitted to the Offi cial List of the Singapore Exchange Securities Trading Limited (“SGX-ST”) on 19 April 2007 (the “Listing Date”) and was included under the Central Provident Fund (“CPF”) Investment Scheme on 21 February 2007. On 21 March 2007, the Trust was declared as an authorised Unit trust scheme under the Trustees Act, Chapter 337.

The principal activity of the Trust and its subsidiaries is to own and invest in a diversifi ed portfolio of income-producing properties throughout Asia that are primarily used for industrial purposes, including, but not limited to warehousing, manufacturing and distribution activities.

The consolidated fi nancial statements relate to the Trust and its subsidiaries (the “Group”).

The Trust has entered into several service agreements in relation to the management of the Trust and its property operations. The fee structures of these services are summarised below.

Trustee’s fees1.1 Under the Trust Deed, the Trustee fee shall not exceed 0.1% per annum of the value of the Deposited Property (as defi ned in the Trust Deed) or such higher percentage as may be fi xed by an extraordinary resolution at a meeting of Unitholders. The Manager has negotiated a scaled fee with the Trustee at a rate of up to 0.03% per annum of the value of the Deposited Property subject to a minimum of $10,000 per month.

The Trustee’s fee is accrued daily and is payable out of the value of the Deposited Property of the Group on a monthly basis, in arrears. The Trustee is also entitled to reimbursement of expenses incurred in the performance of its duties under the Trust Deed.

Manager’s management fees1.2 Under the Trust Deed, the Manager is entitled to receive the base fee and performance fee as follows:

Base fee The Manager is entitled to a base fee of 0.5% per annum of the value of the Deposited Property or such higher percentage as may be fi xed by an Extraordinary Resolution of a meeting of Unitholders.

The Manager’s base fees are payable in the form of cash and/or units as the Manager may elect. Where the base fee (or any part or component thereof) is payable in the form of cash, such payment shall be made out of the Deposited Property within 30 days of the last day of each calendar month in arrears. Where the base fee (or any part or component thereof) is payable in the form of units, such payment shall be made within 30 days of the last day of each calendar half-year in arrears.


51

Performance feeThe Manager is also entitled to a performance fee of 0.1% per annum of the value of the Deposited Property, provided that growth in distribution per unit (“DPU”) in a given fi nancial year (calculated before accounting for the performance fee in that fi nancial year) relative to the DPU in the previous fi nancial year exceeds 2.5%. The performance fee is 0.2% per annum if the growth in DPU in a given fi nancial year relative to the DPU in the previous fi nancial year exceeds 5.0%.

For a period of 60 months from the Listing Date (save for the period from Listing Date to 31 March 2008 whereby no performance fee is payable), 100% of the performance fee shall be paid to the Manager in units and thereafter, at the Manager’s discretion.

Acquisition and divestment feeThe Manager is entitled to receive the following fees:

(i) An acquisition fee of 1.0% of the acquisition price of any Authorised Investment (as defi ned in the Trust Deed), acquired directly or indirectly by the Trust or such higher percentage as may be fi xed by an extraordinary resolution at a meeting of Unitholders.

(ii) A divestment fee of 0.5% of the sale price of any Authorised Investment sold or divested by the Trustee or such higher percentage as may be fi xed by an extraordinary resolution at a meeting of Unitholders.

The acquisition and divestment fee will be paid in the form of cash or/and units and is payable as soon as practicable after completion of the acquisition or disposal.

Property Manager’s fees1.3 The Manager has appointed MacarthurCook Property Management Pte. Ltd., a company related to the Manager, as the property manager (the “Property Manager”) to operate, maintain and market all of the properties of the Group. The following fee is payable to the Property Manager in respect of all of the investment properties in Singapore:

(i) A property management fee of 2.0% per annum of the rental income of each of the relevant properties.

(ii) A lease management fee of 1.0% per annum of the rental income of each of the relevant properties.

(iii) A marketing services commission equivalent to:

(a) one month’s gross rent for securing a tenancy of three years or less;

(b) two month’s gross rent for securing a tenancy of more than three years;

(c) half of one month’s gross rent for securing a renewal of tenancy of three years or less;

(d) one month’s gross rent for securing a renewal of tenancy of more than three years.

If a third party agent secures a tenancy, the Property Manager will be responsible for all Marketing Services commissions payable to such third party agent, and the Property Manager shall be entitled to a marketing services commission equivalent to:

(a) 1.2 months’ gross rent for securing a tenancy of three years or less; or

(b) 2.4 months’ gross rent for securing a tenancy of more than three years.

The gross rental, where applicable includes service charge, reimbursements, which are the contributions paid by tenants towards covering the operating maintenance expenses of the property, and licence fees.

(iv) A project management fee in relation to development or redevelopment, the refurbishment, retrofi tting and renovation works on a property.

(v) A property tax services fee in respect of property tax objections submitted to the tax authority on any proposed annual value of a property if, as a result of such objections, the proposed annual value is reduced resulting in property tax savings for the relevant property.

The Property Manager’s fees are payable monthly, in arrears.



Notes to the Financial StatementsYear ended March 2009 Continued

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES2.

Basis of preparation2.1 The fi nancial statements have been prepared in accordance with the Statement of Recommended Accounting Practice (“RAP”) 7 “Reporting Framework for Unit Trusts” issued by the Institute of Certifi ed Public Accountants of Singapore and the applicable requirements of the Code on Collective Investment Schemes (“CIS Code”) issued by the Monetary Authority of Singapore (“MAS”) and the provisions of the Trust Deed.

The fi nancial statements have been prepared on the historical cost basis, except for investment properties, derivative fi nancial instruments and certain fi nancial assets and liabilities, which are stated at fair value.

The fi nancial statements are presented in Singapore Dollars, which is the functional currency of the Trust. All fi nancial information presented in Singapore dollars has been rounded to the nearest thousand, unless otherwise stated.

The preparation of fi nancial statements in conformity with RAP 7 requires the Manager to make judgements, estimates and assumptions that affect the application of policies and 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. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

In particular, information about signifi cant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most signifi cant effect on the amount recognised in the fi nancial statements is included in the following notes:

Note 3 - Valuation of investment properties•

Note 10 - Provision•

Note 24 - Valuation of derivative fi nancial instruments.•

The accounting policies set out below have been applied consistently by the Group and the Trust to all periods presented in the fi nancial statements.

Consolidation2.2 Subsidiaries Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities. In assessing control, potential voting rights presently exercisable are taken into account. The fi nancial statements of subsidiaries are included in the consolidated fi nancial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed where necessary to align them with the policies adopted by the Group.

The Group has established a special purpose entity (SPE) for investment purposes. The Group does not have any direct or indirect shareholdings in this entity. A SPE is consolidated if, based on an evaluation of the substance of its relationship with the Group and the SPE’s risks and rewards, the Group concludes that it controls the SPE.

Transactions eliminated on consolidationIntra-group balances and transactions, and any unrealised income or expenses arising from intra-group transactions, are eliminated in preparing the consolidated fi nancial statements.

Accounting for subsidiaries by the TrustInvestments in subsidiaries are stated in the Trust’s balance sheet at cost, less accumulated impairment losses.


53

Foreign currencies2.3 Foreign currency transactionsTransactions in foreign currencies are translated to the respective functional currencies of the entities in the Group at the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date on which the fair value was determined.

Foreign currency differences arising on retranslation are recognised in the Statement of Total Return, except for differences arising on the retranslation of monetary items that in substance form part of the Group’s net investment in a foreign operation (see below) and fi nancial liabilities designated as hedges of the net investment in a foreign operation.

Foreign operationsThe assets and liabilities of foreign operations are translated to Singapore dollars at exchange rates prevailing at the reporting date. The income and expenses of foreign operations are translated to Singapore dollars at exchange rates prevailing at the dates of the transactions. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

Foreign currency differences are recognised in Net Assets Attributable to Unitholders. When a foreign operation is disposed of, in part or in full, the relevant amount is transferred to the Statement of Total Return.

Net investment in a foreign operationExchange differences arising from monetary items that in substance form part of the Trust’s net investment in a foreign operation are recognised in the Trust’s Statement of Total Return. Such exchange differences are reclassifi ed to Net Assets Attributable to Unitholders in the consolidated fi nancial statements. When the foreign operation is disposed of, the cumulative amount in Net Assets Attributable to Unitholders is transferred to the Statement of Total Return as an adjustment to total return arising on disposal.

Investment properties2.4 Investment properties are properties held either to earn rental income or capital appreciation or both. Investment properties are accounted for as non-current assets and are stated at initial cost on acquisition and at fair value thereafter. The cost of a purchased property comprises its purchase price and any directly attributable expenditure. Transaction costs shall be included in the initial measurement. Fair value is determined in accordance with the Trust Deed, which requires the investment properties to be valued by independent registered valuers in the following events:

(i) in such manner and frequency as required under the CIS code issued by MAS; and

(ii) at least once in each period of 12 months following the acquisition of each investment property.

Any increase or decrease on revaluation is credited or charged directly to the Statement of Total Return as a net change in fair value of investment properties.

Subsequent expenditure relating to investment properties that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefi ts, in excess of originally assessed standard of performance of the existing asset, will fl ow to the Group. All other subsequent expenditure is recognised as an expense in the period in which it is incurred.

When an investment property is disposed of, the resulting gain or loss recognised in the Statements of Total Return is the difference between net disposal proceeds and the carrying amount of the property.

Investment properties are not depreciated. The properties are subject to continued maintenance and regularly revalued on the basis set out above.




Intangible assets2.5 Intangible assets, which have fi nite useful lives, are measured at cost less accumulated amortisation and impairment loss. The intangible assets are amortised in the statements of total return on a straight-line basis over the estimated useful lives, from the date on which they are available for use.

Financial instruments2.6 (a) Non-derivative fi nancial instrumentsNon-derivative fi nancial instruments comprise trade and other receivables, cash and cash equivalents, fi nancial liabilities, trade and other payables, interest-bearing borrowings and rental deposits.

Non-derivative fi nancial instruments are recognised initially at fair value plus, for instruments not at fair value through profi t or loss, any directly attributable transaction costs. Subsequent to initial recognition, non-derivative fi nancial instruments are measured at amortised cost using the effective interest method, less any impairment losses.

A fi nancial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group’s contractual rights to the cash fl ows from the fi nancial assets expire or if the Group transfers the fi nancial asset to another party without retaining control or transfers substantially all the risks and rewards of the asset. Regular way purchases and sales of fi nancial assets are accounted for at trade date, i.e., the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group’s obligations specifi ed in the contract expire or are discharged or cancelled.

Cash and cash equivalents comprise cash balances and bank deposits.

(b) Impairment of fi nancial assetsA fi nancial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A fi nancial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash fl ows of that asset.

An impairment loss in respect of a fi nancial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash fl ows discounted at the original effective interest rate.

Individually signifi cant fi nancial assets are tested for impairment on an individual basis. The remaining fi nancial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognised in the Statement of Total Return.

Impairment losses in respect of fi nancial assets measured at amortised cost are reversed if the subsequent increase in fair value can be related objectively to an event occurring after the impairment loss was recognised.

(c) Derivative fi nancial instruments and hedging activitiesThe Group holds derivative fi nancial instruments to manage its exposure to interest rate and foreign currency risks arising from operational, fi nancing and investment activities. The Group does not hold or issue derivative fi nancial instruments for trading purposes.

Derivative fi nancial instruments are recognised initially at fair value; attributable transaction costs are recognised in the Statement of Total Return when incurred. Subsequent to initial recognition, derivative fi nancial instruments are measured at fair value, and changes therein are recognised immediately in the Statement of Total Return.


55

Impairment- non-fi nancial assets2.7 The carrying amounts of the Group’s non-fi nancial assets, other than investment properties are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. A cash-generating unit is the smallest identifi able asset group that generates cash fl ows that largely are independent from other assets and groups. Impairment losses are recognised in the Statement of Total Return unless it reverses a previous revaluation, credited to Net Assets Attributable to Unitholders, in which case it is charged to Net Assets Attributable to Unitholders. Impairment losses recognised in respect of cash-generating units are allocated fi rst to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset or cash-generating unit.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Net assets attributable to Unitholders2.8 Net assets attributable to Unitholders represents the Unitholders’ residual interest in the Group’s net assets upon termination.

Expenses incurred in connection with the issuance, offering and placement of units in the Trust are deducted directly against net assets attributable to Unitholders.

Provision2.9 A provision is recognised if as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outfl ow of economic benefi ts will be required to settle the obligation. Provisions are determined by discounting the expected future cash fl ows at a pre-tax rate that refl ects current market assessments of the time value of money and the risks specifi c to the liability.

Onerous contractsA provision for onerous contracts is recognised when the expected benefi ts to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract.




Revenue recognition2.10 (i) Rental income and service charge from operating leasesRental income and service charges from operating leases is recognised in the Statement of Total Return on a straight-line basis over the term of the lease. Contingent rentals are recognised as an income in the period in which they are earned.

(ii) Interest incomeInterest income is recognised on an accrual basis using the effective interest method.

(iii) Dividend incomeDividend income is recognised in the Statement of Total Return on the date that the Group’s right to receive payment is established.

Expenses2.11 (i) Manager’s management feesManager’s management fees are recognised on an accrual basis based on the applicable formula stipulated in Note 1.2.

(ii) Property expensesProperty expenses are recognised on an accrual basis. Included in property expenses is the Property Manager’s fee which is based on the applicable formula stipulated in Note 1.3.

(iii) Other trust expensesOther trust expenses are recognised on an accrual basis. Included in other trust expenses is the Trustee’s fees which are based on the applicable formula stipulated in Note 1.1.

(iv) Borrowing costsBorrowing costs comprise interest expenses on borrowings and amortisation of borrowing related transaction costs which are recognised in the Statement of Total Return using the effective interest rate method over the period for which the borrowings are granted.

Income tax expenses2.12 Income tax expense on the return for the period comprises current and deferred tax. Income tax expense is recognised in the Statement of Total Return except to the extent that it relates to items recognised directly to net assets attributable to Unitholders, in which case it is recognised in Net Assets Attributable to Unitholders.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for fi nancial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for temporary differences on initial recognition of assets or liabilities that affects neither accounting nor taxable profi t. The amount of deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profi ts will be available against which the temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefi t will be realised.

The Inland Revenue Authority of Singapore (“IRAS”) has issued a tax ruling on the taxation of the Trust and its Unitholders. Subject to meeting the terms and conditions of the tax ruling issued by IRAS, which includes a


57

distribution of at least 90% of the taxable income of the Trust, the Trustee will not be assessed to tax on the taxable income of the Trust that is distributed to the Unitholders. In the event that there are subsequent adjustments to the taxable income when the actual taxable income of the Trust is fi nally agreed with IRAS, such adjustments are taken up as an adjustment to the taxable income for the next distribution following the agreement with IRAS.

Distributions made by the Trust out of such taxable income to Individuals and Qualifying Unitholders (as defi ned below) are distributed without deducting any income tax. This treatment is known as the tax transparency treatment.

The trustee will deduct tax at the reduced rate of 10.0% from distributions made out of the Trust’s taxable income (that is not taxed at the Trust level) during the period from the date of constitution to 17 February 2010, to benefi cial Unitholders who are foreign non-individual Unitholders (as defi ned below).

For other types of Unitholders, the Trustee is required to withhold tax at the prevailing corporate tax rate on the distributions made by the Trust. Such Unitholders are subject to tax on the regrossed amounts of the distributions received but may claim a credit for the tax deducted at source by the Trustee.

Any portion of the taxable income that is not distributed, known as retained taxable income, tax will be assessed on the Trustee in accordance with section 10(1)(a) of the Income Tax Act, Chapter 134. Where such retained taxable income is subsequently distributed, the Trustee need not deduct tax at source.

A “Qualifying Unitholder” is a unitholder who is:

A Singapore-incorporated company which is a tax resident in Singapore;•

A body of persons other than a company or a partnership, registered or constituted in Singapore (e.g. a town • council, a statutory board, a registered charity, a registered cooperative society, a registered trade union, a management corporation, a club and a trade industry association); or

A Singapore branch of a foreign company which has been presented a letter of approval from IRAS granting • waiver from tax deducted at source in respect of distributions from the Trust.

A “foreign non-individual Unitholder” is one which is not a resident of Singapore for income tax purposes and:

who does not have a permanent establishment in Singapore; or•

who carries on any operation in Singapore through a permanent establishment in Singapore, where the funds • used to acquire the units are not obtained from that operation in Singapore.

The above tax transparency ruling does not apply to gains from sale of real estate properties, if considered to be trading gains derived from a trade or business carried on by the Trust. Tax on such gains or profi ts will be assessed, in accordance with section 10(1)(a) of the Income Tax Act, Chapter 134 and collected from the Trustee. Where the gains are capital gains, it will not be assessed to tax and the Trustee and the Manager may distribute the capital gains without tax being deducted at source.

Distribution policy2.13 The Manager’s distribution policy is to distribute at least 90.0% of its taxable income, comprising substantially its income from the letting of its properties after deduction of allowable expenses. The actual level of distribution will be determined at the Manager’s discretion.

The Trust makes distributions to Unitholders on a quarterly basis, with the amount calculated as at 30 June, 30 September, 31 December and 31 March in each distribution year for the three-month period ending on each of those dates. Under the Trust Deed, the Manager is required to pay distributions within 90 days after the end of each distribution period. Distributions, when paid, will be in Singapore dollars.

In the event that there are gains arising from sale of real properties, and only if such gains are surplus to the business requirements and needs of the Group, the Manager may, at its discretion, direct the Trustee to distribute such gains. Such gains, if not distributed, will form part of the Deposited Property.




Segment reporting2.14 A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

INVESTMENT PROPERTIES3.

Group Trust

2009$’000

2008$’000

2009$’000

2008$’000

At beginning of the year 555,411 - 524,622 -

Acquisition of investment properties - 506,851 - 478,184

Capital expenditure 1,450 - 1,450 -

Acquisition related costs 7 9,440 7 9,150

556,868 516,291 526,079 487,334

Net change in fair value of investment properties (29,988) 37,010 (28,132) 37,288

Translation adjustment 3,461 2,110 - -

At end of the year 530,341 555,411 497,947 524,622

Please refer to the Portfolio Statements for details of the investment properties.

The investment properties are mortgaged to banks as security for the interest-bearing borrowings (Note 9).

Investment properties are stated at fair value based on valuations performed by independent professional valuers and internal valuation by the Manager, adjusted for the effect of straight-lining of rental income and rental support.

The fair values are based on current open 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 had each acted knowledgeably, prudently and without compulsion.

The key assumptions used to determine the fair value of investment properties include market corroborated capitalisation rates, discount rates and terminal yields. The Manager is satisfi ed that the valuation methods and estimates used are refl ective of the current market conditions.

SUBSIDIARIES4.

Trust

2009$’000

2008$’000

Unquoted equity, at cost -* -*

Loan to a subsidiary

- Non-current 12,501 11,748

Impairment loss on loan to subsidiary (1,844) -

10,657 11,748

* Less than $1,000.


59

Details of the subsidiaries are as follows:

Country of incorporation

Effective equity interest held by the Group

2009%

2008%

Subsidiary of the Trust

Japan Industrial Property Pte Ltd 1 Singapore 100.0 100.0

Subsidiary of Japan Industrial Property Pte Ltd

Goudou Kaisha Bayside 2 Japan 98.7 98.7

1 Audited by KPMG Singapore.

2 Audited by Akasaka International Tax & Co.

The Group’s investment in Goudou Kaisha Bayside is through a Tokumei-Kumiai Agreement – a silent partnership agreement (“TK Agreement”). Although the Group does not have legal control over this investment, it has a benefi cial interest over the entity through the TK Agreement which entitles the Trust to the share of distributable income from Goudou Kaisha Bayside. Consequently, the Group consolidates its investment in Goudou Kaisha Bayside as a subsidiary of the Group.

The loan to a subsidiary is denominated in Japanese Yen and is non-trade in nature, unsecured and interest-free. The settlement of the amount is neither planned nor likely to occur in the foreseeable future. As this amount is, in substance, a part of the Trust’s net investment in the subsidiary, it is stated at cost less accumulated impairment.

During the year, the Trust assessed the recoverable amount of its loan to subsidiary. Based on this assessment, the Trust recognised impairment loss of $1,844,000 (2008: Nil). Impairment loss was determined based on fair value of its subsidiary. The fair value of the subsidiary is estimated based on the revalued net tangible assets of the subsidiary.

INTANGIBLE ASSET5.

Group and Trust

2009$’000

2008$’000

At beginning of the year 1,000 -

Additions - 1,200

Write off / amortisation charged to Statements of Total Return (1,000) (200)

At end of the year - 1,000

Intangible asset represents the unamortised rental support provided by the vendor of the property at 15 Tai Seng Drive. The rental support is to align the rental returns on the property with that expected in the rental market as at the date of the sale and purchase agreement as well as to top-up for rental in respect of vacant units pending the securing of tenants. Rental support has a fi nite useful life and is amortised on a straight-line basis over a period of two years.




DERIVATIVE FINANCIAL INSTRUMENTS6.

Group Trust

2009$’000

2008$’000

2009$’000

2008$’000

Assets:

Interest rate swaps - 169 - 169

Interest rate cap - 5 - 5

- 174 - 174

Liabilities:

Interest rate swaps 468 - 468 -

Cross currency swaps 1,653 175 1,653 175

Foreign exchange forward contracts 514 175 514 175

2,635 350 2,635 350

The derivative fi nancial instruments as at 31 March 2009 relate mainly to the fair values of the following:

(a) A 3-year interest rate swap for the period from 11 February 2008 to 11 February 2011 on a notional amount of $100 million where the Trust pays fi xed interest rate of 1.905% per annum and receives fl oating interest rates;

(b) A 5-year cross currency swap of ¥730.0 million to manage the foreign currency risk of the Trust’s investment in Japan; and

(c) A 5-year coupon-only foreign exchange forward contract of ¥17.0 million per quarter to minimise the foreign exchange exposure of the forecast distributions from the Trust’s investment in Japan.

The following are the expected contractual undiscounted cash infl ows/(outfl ows) of derivative fi nancial instruments:

Contractual cash fl ows

Group and Trust

Carryingamount

$’000Total$’000

Within 1 year$’000

Within 1 to 5 years

$’000

31 March 2009

Liabilities:

Interest rate swaps 468 (1,000) (806) (194)

Cross currency swaps 1,653 (1,610) 109 (1,719)

Foreign exchange forward contracts 514 (502) (128) (374)

2,635 (3,112) (825) (2,287)


61


Group and Trust

Carryingamount

$’000Total$’000

Within 1 year$’000

Within 1 to 5 years

$’000

31 March 2008

Assets:

Interest rate swaps (169) 404 (303) 707

Liabilities:

Cross currency swaps 175 (185) 158 (343)

Foreign exchange forward contracts 175 (142) (71) (71)

350 (327) 87 (414)

TRADE AND OTHER RECEIVABLES7.

Group Trust

2009$’000

2008$’000

2009$’000

2008$’000

Trade receivables 204 - 204 -

Other receivables 3 104 3 104

Prepayments 286 498 273 487

Deposits 259 259 259 259

Straight-lining of rental income 2,901 1,278 2,901 1,278

Amount due from a subsidiary - - - 988

Net goods and services tax receivable - 1,001 - -

3,653 3,140 3,640 3,116

Amount due from a subsidiary was unsecured, interest free and repayable upon demand.

The ageing of the trade receivables at the reporting date is:

Group and Trust

2009$’000

2008$’000

30 days or less 150 -

Past due 31 - 90 days 54 -

More than 90 days - -

204 -

The Manager believes that no impairment allowance is necessary as at the reporting date as these receivables relate to tenants that have provided suffi cient security deposits.




CASH AND CASH EQUIVALENTS8.

Group Trust

2009$’000

2008$’000

2009$’000

2008$’000

Cash at bank and in hand 3,967 5,107 2,039 3,260

Fixed deposits with fi nancial institutions 6,000 4,500 6,000 4,500

9,967 9,607 8,039 7,760

At 31 March 2008, included in the fi xed deposits with fi nancial institutions was an amount of $500,000 withheld by the Trust from the vendor of the property at 7 Clementi Loop. This amount was released to the vendor in fi nancial year 2009.

The weighted average effective interest rate per annum relating to cash and cash equivalents at the balance sheet date for the Group and the Trust is 0.35% (2008: 0.91%). Interest rates reprice at intervals ranging from weekly to quarterly.

INTEREST-BEARING BORROWINGS9.

Group Trust

2009$’000

2008$’000

2009$’000

2008$’000

Current

Term loans 224,389 - 201,250 -

Less: Unamortised loan transaction costs (576) - (398) -

223,813 - 200,852 -

Non-current

Term loans - 221,960 - 201,250

Less: Unamortised loan transaction costs - (1,461) - (1,105)

- 220,499 - 200,145

The Group and the Trust have the following term loan facilities from fi nancial institutions:

(a) A $220,800,000 term loan facility granted to the Trust and secured on the following:

(i) Mortgage over the investment properties of the Trust in Singapore; and

(ii) Assignment of rights, title and interest in leases, insurances and rental proceeds relating to the investment properties of the Trust located in Singapore.

(b) A ¥1.5 billion term loan facility granted to a subsidiary and secured by a mortgage over the property in Japan.


63

Terms and debt repayment scheduleTerms and conditions of the interest-bearing borrowings are as follows:

Group Trust

Nominalinterest rate

%Maturity

Face value$’000

Carryingamount

$’000

Face value$’000

Carryingamount

$’000

31 March 2009

SGD fl oating rate term loan

SOR + 0.55%

April 2009

201,250 200,852 201,250 200,852

JPY fi xed rate term loan

1.97% December 2009

23,139 22,961 - -

224,389 223,813 201,250 200,852

31 March 2008

SGD fl oating rate term loan

SOR + 0.55%

April 2009

201,250 200,145 201,250 200,145

JPY fi xed rate term loan

1.97% December 2009

20,710 20,354 - -

221,960 220,499 201,250 200,145

The following are the expected contractual undiscounted cash infl ows/(outfl ows) of fi nancial liabilities, including interest payments:


Carrying amount Total

Within1 year

Within1 to 5 years

More than5 years

$’000 $’000 $’000 $’000 $’000

31 March 2009

GROUP

Term loans 223,813 ( 225,290) (225,290) - -

Trade and other payables 5,897 ( 5,897) (5,897) - -

Rental deposits 2,385 (2,385) - (709) (1,676)

232,095 (233,572) (231,187) (709) (1,676)

TRUST

Term loans 200,852 (201,737) (201,737) - -

Trade and other payables 5,847 (5,847) (5,847) - -

Rental deposits 1,869 (1,869) - (193) (1,676)

208,568 (209,453) (207,584) (193) (1,676)




9. INTEREST-BEARING BORROWINGS Continued


Carrying amount Total

Within1 year

Within1 to 5 years

More than5 years

$’000 $’000 $’000 $’000 $’000

31 March 2008

GROUP

Term loans 220,499 (227,345) (4,259) (223,086) -


Rental deposits 2,366 (2,366) - (690) (1,676)

231,178 (238,024) (12,572) (223,776) (1,676)

TRUST

Term loans 200,145 (205,822) (3,819) (202,003) -


Rental deposits 1,904 (1,904) - (228) (1,676)

209,818 (215,495) (11,588) (202,231) (1,676)

Financing arrangementsAt 31 March 2009, the Trust has a term loan amounting to $201.3 million and a subsidiary has a term loan of $23.1 million that are due for repayment on 16 April 2009 and 18 December 2009 respectively. On 31 March 2009, the repayment date of the Trust’s term loan of $201.3 million was extended to 16 June 2009. On 22 May 2009, the repayment date of the Trust’s term loan of S$201.3 million was further extended to 31 December 2009 (Note 26). The term loan facility granted to the Trust will be reduced from $220.8 million to $202.3 million, with effect from 16 June 2009.

The Trust also has a commitment to acquire a property for $91.0 million. This agreement is expected to be settled in the last quarter of 2009 (Note 22(c)).

The Manager is in negotiation with fi nancial institutions to refi nance the term loan facilities as well as to obtain funding to meet the acquisition commitment.

In the event that the refi nancing of the existing term loan facilities are unsuccessful, and the Trust is unable to secure funding to meet the acquisition commitment, the Group and the Trust may not have suffi cient funds to meet these obligations when they fall due. These conditions indicate a material uncertainty that may cast signifi cant doubt on the Group’s and Trust’s ability to continue as a going concern and therefore, the Group and Trust may be unable to realise their assets and discharge their liabilities in the normal course of business.

As the negotiations with fi nancial institutions on the terms of the refi nancing and funding are ongoing, the Manager considers it appropriate to adopt the going concern basis in preparing the fi nancial statements.


65

PROVISION10.

Group and Trust

2009$’000

2008$’000

At beginning of the year - -

Provision made 20,000 -

At end of the year 20,000 -

The Trust entered into a Put and Call Agreement in August 2007 to acquire the property at Plot 4A International Business Park for $91,000,000 (Note 22). Change in market conditions have resulted in a reduction in the fair value of the property below the contracted amount. Consequently, a provision for onerous contract of $20 million has been recognised in the Statement of Total Return.

TRADE AND OTHER PAYABLES11.

Group Trust

2009$’000

2008$’000

2009$’000

2008$’000

Trade payables and accrued expenses 3,592 5,280 3,460 5,012

Amounts due to related parties (trade)

- the Manager 297 470 297 470

- the Property Manager 165 89 165 89

- the Trustee 24 68 24 68

Goods and services tax payable 666 441 581 441

Deferred income 52 896 52 896

Rental received in advance 205 385 24 223

Rental deposits 301 86 301 86

Amount due to subsidiary - - 435 -

Interest payable 595 598 508 484

5,897 8,313 5,847 7,769

The amount due to subsidiary is unsecured, interest-free and repayable on demand.




NET ASSETS ATTRIBUTABLE TO UNITHOLDERS12.

Group Trust

Note2009$’000

2008$’000

2009$’000

2008$’000

Balance at beginning of the year 337,624 - 338,252 -

OPERATIONS

Change in net assets attributable to Unitholders resulting from operations

(51,203) 39,159 (50,784) 40,320

UNITHOLDERS’ TRANSACTIONS

Units issued pursuant to initial public offering - 312,516 - 312,516

Units issued and to be issued:

- Management and performance fees paid/payable in units

1,516 585 1,516 585

Issue expenses 13 96 (15,169) 96 (15,169)

Increase in net assets resulting from Unitholders’ transactions

1,612 297,932 1,612 297,932

FOREIGN CURRENCY TRANSLATION RESERVE

Translation differences relating to fi nancial statements of a foreign subsidiary and net investment in foreign operation

1,041 533 - -

Total (decrease)/increase in net assets attributable to Unitholders

(48,550) 337,624 (49,172) 338,252

Net assets at end of the year 289,074 337,624 289,080 338,252

Units in issue and to be issued (‘000) 14 266,385 260,963 266,385 260,963

Net asset value per Unit ($) 1.09 1.29 1.09 1.30

ISSUE EXPENSES13. Issue expenses comprise professional, underwriting and selling commission, printing and other costs related to issuance of units in the Trust.


67

UNITS IN ISSUE AND TO BE ISSUED14.

Group and Trust

2009‘000

2008‘000

Units in issue at beginning of the year 260,754 -

ISSUE OF NEW UNITS:

Units issued pursuant to initial public offering - 260,430

Units issued as payment of management fees 962 324

Units in issue at end of the period 261,716 260,754

UNITS TO BE ISSUED:

Manager’s management fees 4,669 209

Total Units in issue and to be issued at end of the year 266,385 260,963

During the fi nancial year ended 31 March 2009, 962,094 (2008: 323,751) Units were issued by the Trust at an average price of $0.6548 (2008: $1.1851) per Unit as payment for the Manager’s base fees.

As at 31 March 2009, 4,669,249 Units (2008: 208,979), at $0.2328 per Unit (2008: $ 0.9630 per Unit), are to be issued to the Manager for payment of the Manager’s base and performance fees.

The issue prices for management fees payable in units were determined based on the volume weighted average traded price for all trades done on SGX-ST in the ordinary course of trading for ten business days immediately preceding the last business day of the respective month-end.

Each unit in the Trust represents an undivided interest in the Trust and carries the same voting rights. The rights and interests of Unitholders are contained in the Trust Deed and include the right to:

Receive income and other distributions attributable to the units held;•

Participate in the termination of the Trust by receiving a share of all net cash proceeds derived from the realisation • of the assets of the Trust less any liabilities, in accordance with their proportionate interests in the Trust. However, a Unitholder does not have the right to require that any assets (or part thereof) of the Trust be transferred to him;

Attend all Unitholder meetings. The Trustee or the Manager may (and the Manager shall at the request in writing • of not less than 50 Unitholders representing not less than one-tenth of the issued units of the Trust) at any time convene a meeting of Unitholders in accordance with the provisions of the Trust Deed; and

One vote per unit at meetings of the Trust.•

The restrictions on a Unitholder include the following:

A Unitholder’s right is limited to the right to require due administration of the Trust in accordance with the • provisions of the Trust Deed; and

A Unitholder has no right to request redemption of his units while the units are listed on SGX-ST.•

A Unitholder’s liability is limited to the amount paid or payable for any units in the Trust. The provisions of the Trust Deed provide that no Unitholders will be personally liable to indemnify the Trustee or any creditor of the Trustee in the event that liabilities of the Trust exceed its assets.




GROSS REVENUE15.

Group Trust

2009$’000

2008$’000

2009$’000

2008$’000

Property rental income 39,793 26,517 37,881 26,018

Property expenses recoverable from tenants 11,034 5,697 11,034 5,697

50,827 32,214 48,915 31,715

PROPERTY OPERATING EXPENSES16.

Group Trust

2009$’000

2008$’000

2009$’000

2008$’000

Land rent 4,044 2,303 4,044 2,303

Property and lease management fees 1,319 794 1,122 744

Property tax 3,912 2,114 3,792 2,086

Other operating expenses 4,696 2,179 4,577 2,123

13,971 7,390 13,535 7,256

MANAGER’S MANAGEMENT FEES17.

Group and Trust

2009$’000

2008$’000

Base fees

- Paid and payable in cash 2,405 1,365

- Paid and payable in units 429 585

Performance fee

- Payable in units 1,087 -

3,921 1,950


69

OTHER TRUST EXPENSES18.

Group Trust

2009$’000

2008$’000

2009$’000

2008$’000

Audit fees paid/payable to

- Auditors of the Trust 150 150 145 145

- Other auditors 16 12 - -

Non-audit fees paid/payable to

- Auditors of the Trust 44 40 40 40

Trustee’s fees 136 118 136 118

Professional fees 15 472 15 276

Equity fund raising expenses, net 1 (251) 1,631 (251) 1,631

Provision for onerous contract 20,000 - 20,000 -

Other expenses 750 568 688 250

20,860 2,991 20,773 2,460

1 Included the following non-audit fees paid/payable to

- Auditors of the Trust - 190 - 190

INCOME TAX EXPENSES19. Reconciliation of effective tax rate:

Group Trust

2009$’000

2008$’000

2009 2008$’000

Total return before income tax (27,002) 52,968 (26,569) 54,130

Tax calculated using Singapore tax rate of 17% (2008: 18%)

(4,590) 9,534 (4,517) 9,743

Non-tax chargeable items (276) (6,892) (480) (7,043)

Non-tax deductible items 9,543 829 9,541 829

Tax losses foregone (133) 58 - -

Industrial building allowance (563) - (563) -

Tax transparency (3,981) (3,529) (3,981) (3,529)

- - - -


$’000



DISTRIBUTIONS20.

Group and Trust

DPUCents

2009$’000

2008$’000

Distributions declared and paid for the year

19 April 2007 - 30 June 2007 1.52 - 3,959

1 July 2007 - 30 September 2007 1.86 - 4,845

1 October 2007 - 31 December 2007 1.92 - 5,006

1 January 2008 - 31 March 2008 2.22 5,789 -

1 April 2008 - 30 June 2008 2.35 6,138 -

1 July 2008 - 30 September 2008 2.35 6,138 -

1 October 2008 - 31 December 2008 2.35 6,150 -

24,215 13,810

EARNINGS PER UNIT21. The earnings per unit (“EPU”) is computed using total return after tax and minority interest, before distribution over the weighted average number of units for the fi nancial year.

Group and Trust

2009 2008

Weighted average number of units (‘000) 261,146 187,710

The diluted EPU is the same as the basic EPU as there were no dilutive instruments in issue as at the balance sheet date.

COMMITMENTS22.

(a) Lease commitments The Group and the Trust lease out their investment properties. The future minimum lease payments receivable under non-cancellable operating leases contracted for at the reporting date are as follows:

Group Trust

2009$’000

2008$’000

2009$’000

2008$’000

Within 1 year 36,504 37,404 34,440 35,556

After 1 year but within 5 years 107,585 129,471 103,157 123,659

After 5 years 36,778 54,458 36,778 54,458

180,867 221,333 174,375 213,673


71

(b) Operating lease commitments The Trust is required to pay Jurong Town Corporation (“JTC”), the Housing and Development Board (“HDB”) or Ascendas Land (Singapore) Pte Ltd (“Ascendas”) annual land rent in respect of certain of its investment properties. The annual land rent is based on the market rent in the relevant year of the current lease term and the lease provides that any increase in annual land rent from year to year shall not exceed 5.5% (JTC and HDB) and 7.6% (Ascendas) of the annual land rent for the immediately preceding year. The leases are non-cancellable with the remaining lease term between 28 and 59 years as at 31 March 2009.

At 31 March 2009, the Group and the Trust have commitments for future minimum lease payments under non-cancellable operating leases as follows:

Group and Trust

2009$’000

2008$’000

Within 1 year 3,753 4,069

After 1 year but within 5 years 16,776 16,279

After 5 years 146,847 146,634

167,376 166,982

(c) Capital commitmentsCapital expenditures contracted for at the reporting date but not recognised in the fi nancial statements:

The Trust has a Put and Call Option Agreement to acquire Plot 4A International Business Park for the purchase price of $91,000,000 upon issuance of its temporary occupation permit. The building is under construction as at 31 March 2009 and is expected to be completed in 4th quarter 2009. A provision on onerous contract amounting to $20 million has been recognised (Note 10).

SIGNIFICANT RELATED PARTY TRANSACTIONS23. For the purposes of these fi nancial statements, parties are considered to be related to the Trust if the Trust has the ability, directly or indirectly, to control the party or exercise signifi cant infl uence over the party in making fi nancial and operating decisions, or vice versa, or where the Trust and the party are subject to common signifi cant infl uence. Related parties may be individuals or other entities.

Other than as disclosed elsewhere in the fi nancial statements, there were the following signifi cant related party transactions carried out in the normal course of business on terms agreed between the parties:

Group Trust

2009$’000

2008$’000

2009$’000

2008$’000

THE MANAGER

Manager’s management fees (base fees) 2,834 1,950 2,834 1,950

Manager’s management fees (performance fees) 1,087 - 1,087 -

Acquisition fees relating to the purchase of investment properties

- 1,920 - 1,629




Group Trust

2009$’000

2008$’000

2009$’000

2008$’000

ULTIMATE HOLDING COMPANY OF THE MANAGER

Acquisition fees relating to the purchase of investment properties

- 3,165 - 3,165

Debt arrangement fees - 644 - 644

THE PROPERTY MANAGER

Property management fees 731 490 731 490

Lease management fees 365 245 365 245

Marketing service commission 78 - 78 -

Project management fees 26 9 26 9

THE TRUSTEE

Trustee fees 136 118 136 118

FINANCIAL RISK MANAGEMENT24.

Capital managementThe Board of the Manager reviews the Group’s and the Trust’s debt and capital management and fi nancing policy regularly so as to optimise the Group’s and the Trust’s funding structure. The Board also monitors the Group’s and the Trust’s exposure to various risk elements and externally imposed requirements by closely adhering to clearly established management policies and procedures.

The Trust and its subsidiaries are subject to the aggregate leverage limit as defi ned in the Property Fund Guidelines of the CIS code. The CIS code stipulates that the total borrowings and deferred payments (together the “Aggregate Leverage”) of a property fund should not exceed 35.0% of the fund’s deposited property. The Aggregate Leverage of a property fund may exceed 35.0% of its deposited property (up to a maximum of 60.0%) only if a credit rating of the property fund from Fitch Inc., Moody’s or Standard and Poor’s is obtained and disclosed to the public. The property fund should continue to maintain and disclose a credit rating so long as its Aggregate Leverage exceeds 35.0% of its deposited property.

The Group and the Trust’s corporate rating as at the balance sheet date was “B2” and has complied with the Aggregate Leverage limit during the fi nancial year. There were no changes in the Group’s approach to capital management during the fi nancial year.

Overview of risk management Exposure to credit, interest rate, liquidity and foreign currency risks arises in the normal course of the Group’s business. The Group has a system of controls in place to create an acceptable balance between the cost of risks occurring and the cost of managing the risks. The Manager continually monitors the Group’s risk management process to ensure an appropriate balance between risk and control is achieved. Risk management policies and systems are reviewed regularly to refl ect changes in market conditions and the Group’s activities.

Management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.

23. SIGNIFICANT RELATED PARTY TRANSACTIONS Continued


73

(a) Credit risk Credit risk is the potential fi nancial loss resulting from the failure of a lessee to settle its fi nancial and contractual

obligations to the Group, as and when they fall due.

Credit risk assessments are performed by the Manager prior to signing the lease agreements. Rental deposits as a multiple of monthly rent, are received, either in cash or bank guarantees, to reduce credit risk. The Manager also monitors the amount owing by the lessees on an ongoing basis.

Cash and fi xed deposits are placed with fi nancial institutions which are regulated. Transactions involving derivative fi nancial instruments are allowed only with counterparties who have sound credit ratings.

Concentration of credit risk relating to trade receivables is limited due to the Group’s many tenants in real estate in the industrial sector and credit policy of obtaining security deposits from tenants for leasing the Group’s investment properties.

At the reporting date, there were no signifi cant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying value of each fi nancial asset in the balance sheet.

(b) Interest rate risk The Manager adopts a proactive interest rate management policy to manage the risk associated with adverse

movement in interest rates on the loan facilities while also seeking to ensure that the Group’s cost of debt remains competitive. The policy aims to protect the Group’s earnings from the volatility in interest rates, providing stability to Unitholders’ returns.

As at 31 March 2009, the Group has a 3-year interest rate swap contract to manage its interest rate exposure. The contract is for the period from 11 February 2008 to 11 February 2011 on notional amount of $100 million whereby the Trust pays a fi xed rate of 1.905% per annum and receives a variable rate equal to the Singapore inter-bank swap offer rate on the notional amount.

Sensitivity analysis For the variable rate fi nancial liabilities and the derivative fi nancial instruments, a change of 100 basis points (bps)

in interest rate at the reporting date would increase/(decrease) net assets attributable to Unitholders and total return of the Group and the Trust by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

Group and Trust

Total return Net assets attributable

to Unitholders

100 bpsincrease

$’000

100 bpsdecrease

$’000

100 bpsincrease

$’000

100 bpsdecrease

$’000

31 MARCH 2009

Variable rate fi nancial liabilities (2,013) 2,013 - -

Derivative fi nancial instruments 874 (2,551) - -

(1,139) (538) - -




Group and Trust

Total return Net assets attributable

to Unitholders

100 bpsincrease

$’000

100 bpsdecrease

$’000

100 bpsincrease

$’000

100 bpsdecrease

$’000

31 March 2008

Variable rate fi nancial liabilities (2,013) 2,013 - -

Derivative fi nancial instruments 2,965 (2,930) - -

952 (917) - -

(c) Liquidity risk The Manager monitors and maintains a level of cash and cash equivalents deemed adequate by management to

fi nance the Group’s operations and to mitigate the effect of fl uctuations in cash fl ows. Typically, the Group ensures that it has suffi cient cash on demand to meet expected operational expenses for a reasonable period, including the servicing of fi nancial obligations.

The Group also monitors and observes the Property Funds Guidelines issued by the MAS concerning limits on total borrowings.

(d) Foreign currency risk The Group’s foreign currency risk mainly relates to its Japanese Yen (“JPY”) denominated interest-bearing

borrowings and distributable income from this investment. The Manager monitors the Group’s foreign currency exposure on an on-going basis and adopts currency risk management strategies that include:

• the use of foreign currency denominated borrowings to match the currency of the asset investment;

• the use of foreign exchange derivatives to minimise the foreign exchange risk of the foreign currency income received from the offshore assets back into Singapore dollars; and

• the use of cross currency swaps to reduce the currency exposure of the foreign currency equity investment.

The Trust’s exposures to JPY as at balance sheet date are as follows:

Group Trust

2009$’000

2008$’000

2009$’000

2008$’000

NON-CURRENT

Loan to a subsidiary - - 12,501 11,748

CURRENT

Amount due to a subsidiary - - (435) -

Amount due from a subsidiary - - - 988

Derivatives fi nancial instruments (2,167) (350) (2,167) (350)

(2,167) (350) 9,899 12,386

24. FINANCIAL RISK MANAGEMENT Continued


75

Sensitivity analysis A 10% change in the value of the Singapore Dollar against JPY at the reporting date would increase/(decrease)

net assets attributable to Unitholders and the total return as at 31 March 2009 by the amounts shown below. This analysis assumes that all other variables, in particular, interest rates remain constant and is stated before the impact of hedging instruments.

10% increase in $ against JPY

10% decrease in $ against JPY

Net assets attributable

to Unitholders

$’000Total return

$’000

Net assets attributable

to Unitholders

$’000Total return

$’000

31 March 2009

GROUP

Derivative fi nancial instruments - 1,561 - (1,561)

TRUST

Loan to a subsidiary - (1,250) - 1,250

Amount due to a subsidiary - 43 - (43)


- 354 - (354)

31 March 2008

GROUP


TRUST

Loan to a subsidiary - (1,175) - 1,175

Amount due from subsidiary - (99) - 99


- 289 - (289)




Estimation of fair valuesThe following summarises the signifi cant methods and assumptions used in estimating the fair values of fi nancial instruments of the Group and the Trust:

(a) Financial derivatives The fair values of derivative fi nancial instruments are based on quotes by banks. These quotes are tested for

reasonableness by discounting estimated future cash fl ows based on the terms and maturity of each contract and using market interest rates for similar instruments at the reporting date.

(b) Other fi nancial assets and liabilities The carrying amounts of fi nancial assets and liabilities with a maturity of less than one year (including trade and

other receivables, cash and cash equivalents, trade and other payables, interest bearing borrowings, derivative fi nancial instruments and provision) are assumed to approximate their fair values because of the short period to maturity. All other fi nancial assets and liabilities are discounted to determine their fair values.

Discount rates used in determining fair value Discount rates used to estimate fair values, where applicable, are based on the following rates:

2009%

2008%

SGD fi nancial assets and liabilities 1.93 1.92

JPY fi nancial assets and liabilities 1.62 1.93

The aggregate net fair values of recognised fi nancial liabilities which are not carried at fair value in the balance sheet as at 31 March 2009 are represented in the following table:

2009 2008

Carryingamount

$’000 Fair value

$’000

Carryingamount

$’000 Fair value

$’000

GROUP

Rental deposits 2,385 2,175 2,366 2,122

JPY fi xed rate term loan - - 20,355 21,254

2,385 2,175 22,721 23,376

Unrecognised gain/(loss) 210 (655)

TRUST

Rental deposits 1,869 1,685 1,904 1,695

Unrecognised gain 184 209

24. FINANCIAL RISK MANAGEMENT Continued


77

SEGMENT REPORTING25. Segment information is presented in respect of the Group’s business and geographical segments. The primary format – geographical segments – is based on the Group’s management and internal reporting structure.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one year.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly interest bearing loans and related expenses, tax liabilities and trust assets, liabilities and expenses.

Business segmentsNo business segment information has been prepared as all investment properties are used mainly for industrial (including warehousing) purposes.

Geographical segmentsNo geographical segment information has been prepared as all the investment properties of the Group (except for the property in Japan) are located in Singapore and the contribution from the property in Japan to the Group’s results and net assets is insignifi cant.

SUBSEQUENT EVENTS26. (a) On 31 March 2009, the Manager announced that the term loan facilities granted by National Australia Bank

Limited and Commonwealth Bank of Australia Limited (“Facility”) to the Trust have been extended to 16 June 2009, subject to meeting certain conditions precedent. On 17 April 2009, the Manager announced that all conditions precedent to the extension of the Facility have been satisfi ed. With this extension, the Facility will be due on 16 June 2009.

(b) On 22 May 2009, the Manager further announced that they have achieved credit approval from National Australia Bank Limited and Commonwealth Bank of Australia Limited, for an extension of the Facility to 31 December 2009. The Facility limit will be reduced to $202.3 million upon the extension on 16 June 2009. On 15 June 2009, the Manager announced that all conditions precedent to the extension of the Facility have been satisfi ed. With this extension, the Facility will be due on 31 December 2009.

(c) On 22 May 2009, the Manager announced a distribution of 1.875 cents per Unit in respect of the period 1 January 2009 to 31 March 2009, bringing the distribution for the fi nancial year to 8.925 cents per Unit.

(d) On 3 June 2009, Moody’s Investors Service downgraded the Trust’s corporate family rating to Caa1 from B2.

FINANCIAL RATIOS27.

Group

2009%

2008%

Expenses to weighted average net assets1

- Expense ratio excluding performance related fee 1.03 1.02

- Expense ratio including performance related fee 1.36 1.02

Portfolio turnover rate2 - -

1 The annualised ratios are computed in accordance with the guidelines of Investment Management Association of Singapore. The expenses used in the computation relate to expenses of the Group, excluding property related expenses, borrowing costs and foreign exchange gain/(losses).

2 The annualised ratio is computed based on the lesser of purchases or sales of underlying investment properties of the Group expressed as a percentage of daily average net asset value.



Unitholder InformationStatistics of Unitholdings as at 29 May 2009

Issued and fully paid Units266,385,094 shares outstanding as at 29 May 2009 (Voting rights: 1 vote per Unit)

There is only one class of Units in MacarthurCook Industrial REIT.

Market capitalisation S$101,226,336 (based on market closing price of S$0.38 on 29 May 2009).

Distribution of Unitholdings

Size of UnitholdingsNumber of Unitholders

% of Unitholders No of Units % of Units

1-999 4 0.11% 1,907 0.00%

1,000 - 10,000 3001 79.18% 9,493,755 3.56%

10,001 - 1,000,000 766 20.21% 47,608,105 17.87%

1,000,001 and above 19 0.50% 209,281,327 78.56%

Total 3790 100.00% 266,385,094 100.00%

Top 20 UnitholdersAs shown in the Register of Members and Depository Register as at 29 May 2009.

Ranking NameNumber of

Units% of total

issued Units

1 CITIBANK NOMS S’PORE PTE LTD 52,507,233 19.7%

2 DBS NOMINEES PTE LTD 36,591,000 13.7%

3 HSBC (SINGAPORE) NOMS PTE LTD 35,032,000 13.2%

4 DBSN SERVICES PTE LTD 22,225,000 8.3%

5 OCBC SECURITIES PRIVATE LTD 12,145,000 4.6%

6 DB NOMINEES (S) PTE LTD 10,217,000 3.8%

7 UNITED OVERSEAS BANK NOMINEES 7,323,000 2.7%

8 MACARTHURCOOK LIMITED 6,000,000 2.3%

9 MACARTHURCOOK INVESTMENT MANAGERS (ASIA) LIMITED 5,955,094 2.2%

10 PHILLIP SECURITIES PTE LTD 5,727,000 2.1%

11 UOB KAY HIAN PTE LTD 4,509,000 1.7%

12 DBS VICKERS SECS (S) PTE LTD 1,987,000 0.7%

13 SIN HWA DEE FOODSTUFF 1,541,000 0.6%

14 THAM TOO KAM 1,530,000 0.6%

15 LIM & TAN SECURITIES PTE LTD 1,303,000 0.5%

16 MOHAMED SALLEH SO KADIR 1,230,000 0.5%

17 SOH CHIN KUAN SIMON 1,212,000 0.5%

18 TAN YONG CHIANG OR TAN HUI 1,185,000 0.4%

19 OCBC NOMINEES SINGAPORE 1,062,000 0.4%

20 CHOW WING KIN 1,000,000 0.4%

Total 210,281,327 78.9%


79

Substantial UnitholdersAs at 29 May 2009

Name Direct interestDeemed interest

% of total issued Units

MacarthurCook Limited (“MCK”) 6,000,000 36,912,094 16.11

Free fl oatBased on information available to the Manager as at 29 May 2009, no less than approximately 85.0% of the units in MacarthurCook Industrial REIT were held in the hands of the public. Accordingly, Rule 723 of the Listing Manual of the Singapore Exchange Securities Trading Limited has been complied with.



Investors’ Summary

Unitholder valueThe primary objective of the MacarthurCook Industrial REIT is to provide Unitholders with a stable income distributions on a quarterly basis.

The table on page 84 provides a summary of the Trust’s key fi nancial results.

Below is a table showing FY2008 and FY2009 returns to Unitholders whose units are listed on the SGX-ST:

From 1 April 2008 to 31 March 2009

(%)

Distribution return

6.83

Unit price growth -76.65

Total Unitholder return

-69.82

From 19 April 2007 to 31 March 2008

(%)

Distribution return

4.05

Unit price growth -17.90

Total Unitholder return

-13.86

Unit liquidityDuring the 2009 fi nancial year, approximately 155,899,000 units were traded on the SGX, representing approximately 59.70% of the 261,145,694 weighted average number of units on issue during the year.

Distribution and distribution policyThe distribution for the 2009 fi nancial year was 8.925 cents per unit. The Trust’s distribution policy is to distribute at least 90.0% of its taxable income for the full fi nancial

year. The proportion distributed may be greater than 90.0% of the Trust’s taxable income if the Manager believes it to be appropriate, having regard to the Trust’s funding requirements, other capital management considerations and the overall stability of distributions. The actual proportion of taxable income distributed to Unitholders for the 2009 fi nancial year was 100%.

The Trust will provide Unitholders with distributions for the three months ending 30 June, 30 September, 31 December and 31 March of each year. Under the Trust Deed, the Manager is required to pay distributions within 90 days after the end of each distribution period.

Unitholder enquiriesUnitholders with enquiries are welcome to access information by any of the following methods:

By contact with the share registry: • Boardroom Corporate & Advisory Services Pte. Ltd, 3 Church Street #08-01, Samsung Hub, Singapore 049483

Via the MacarthurCook website: • www.macarthurcook.com.au

By contact with the Manager: • The Investor Relations Manager Telephone: + 65 6309 1050 or

65 6309 1054 Facsimile: + 65 6534 3942 Email:

[email protected]@[email protected]

Exchange listingsMacarthurCook Industrial REIT units are listed on the Singapore Exchange Securities Trading Limited and reported in the daily newspapers under the SGX Code: MacCookIREIT.

Company websitewww.macarthurcook.com.au

The MacarthurCook website offers the following features:

Investor relations page, enabling • Unitholders to access unit price and corporate governance information and browse Trust announcements.

News service providing up to • date information on recent Fund activities and items of interest.

Access to annual and half year • reports. The Annual Report can be downloaded as a PDF electronic fi le.

Feedback service to enhance • communication between the company and its Unitholders.

Financial Calendar12 August 2008 1st quarter FY2009 results announcement

22 September 2008 Payment of 1st quarter distribution to Unitholders

7 November 2008 2nd quarter FY2009 results announcement

19 December 2008 Payment of 2nd quarter distribution to Unitholders

9 February 2009 3rd quarter FY2009 results announcement

20 March 2009 Payment of 3rd quarter distribution to Unitholders

22 May 2009 4th quarter FY2009 results announcement

29 June 2009 Payment of 4th quarter distribution to Unitholders


81

Investor Relations and Corporate Communications

The Manager of MacarthurCook Industrial REIT believes in the importance of timely, accurate and transparent communication with stakeholders. This creates opportunities to address the concerns of the investing community and better manage their expectations.

Through its structured investor relations programme, the Manager hopes to raise awareness and understanding of MacarthurCook Industrial REIT and provide clarity on its performance, business developments and growth strategies.

Communications with the investment communityRegular meetings and teleconferences are held with investors of MacarthurCook Industrial REIT from Singapore and overseas. The Manager also conducts briefi ngs for the media and analysts as and when there are signifi cant corporate announcements. Senior management provide updates and address concerns during these meetings.

During the fi nancial year, the Manager participated in a number of investor presentations and conferences hosted by renowned fi nancial institutions in Singapore, Hong Kong, Japan and Australia.

The Manager also conducts tours of key properties for investors upon request in order to provide them with a fi rst hand view and appreciation of the properties.

Dissemination of information to the publicFinancial results and announcements of signifi cant corporate developments are released to the SGX-ST and updated on the MacarthurCook corporate website: www.macarthurcook.com.au. Direct communication channels via emails and phone lines between investors and the Manager have also been established.

The Manager believes that its transparent communication policy gives the investment community a better understanding of its operations and rationale for key business initiatives.

Since listing in 2007, the following analysts have initiated research coverage on MacarthurCook Industrial REIT:

Historical summary of analyst coverage

Research House

Analyst

UBS Alastair GillespieRegina Lim

HSBC Tricia Song

UOB Kay Hian (unrated)

Singapore Research Team

Merrill Lynch Melinda Baxter

JP Morgan Christopher GeeJoy Wang

Phillip Capital Lee Kok Joo

OCBC (unrated) Winston Liew

BNP Paribas (unrated)

Jonathan Ng



Exchange Announcements

This section summarises the announcements made to the SGX during the period from 1 April 2008 to 31 March 2009. Full details of the announcements are available through the SGX or MacarthurCook websites.

SGX Announcements during FY2009

Mar 31 2009 Miscellaneous: MacarthurCook Industrial REIT granted 60 day extension in relation to its debt refi nance

Mar 16 2009 Notice of a change in the percentage level of a substantial shareholder's interest

Feb 10 2009 Announcement of appointment of executive director

Feb 09 2009 Third quarter fi nancial statement and dividend announcement

Feb 09 2009 Notice of book closure date for distribution

Feb 09 2009 Third quarter ended 31 December 2008 fi nancial statement and dividend announcement

Feb 06 2009 Announcement of appointment of executive director

Feb 06 2009 Miscellaneous: the Manager of MacarthurCook Industrial REIT appoints additional executive director

Feb 05 2009 Miscellaneous: Moody's revises MI-REIT's rating

Jan 30 2009 Miscellaneous: issue of units in MI-REIT to the Manager in payment of management fees

Jan 22 2009 Miscellaneous: date of release of results for third quarter ended 31 December 2008

Jan 19 2009 Miscellaneous: MacarthurCook Limited appoints new chief executive offi cer for Asia

Jan 16 2009 Miscellaneous: MacarthurCook Limited appoints chief fi nancial offi cer

Dec 26 2008 Notice of cessation of substantial shareholding



Dec 26 2008 Notice of a change in the percentage level of a substantial shareholder's interest

Dec 26 2008 Notice of a substantial shareholder's interest




Nov 26 2008 Miscellaneous: Moody's rating

Nov 25 2008 Notice of a change in the percentage level of a substantial shareholder's interest



Nov 19 2008 Miscellaneous: revaluation of eight properties

Nov 19 2008 Miscellaneous: revaluation of eight properties




Nov 07 2008 Notice of book closure date for distribution

Nov 07 2008 Second quarter ended 30 September 2008 fi nancial statement and dividend announcement

Nov 07 2008 Miscellaneous: Macarthurcook Industrial REIT reports 2q2009 distribution per unit of 2.35 cents

Nov 07 2008 Announcement of appointment of chief executive offi cer

Nov 06 2008 Miscellaneous: appointment of MI-REIT CEO

Oct 27 2008 Notice of a change in the percentage level of a substantial shareholder's interest

Oct 22 2008 Miscellaneous: date of release of unaudited fi nancial results for second quarter ended 30 September 2008


83

Oct 22 2008 Miscellaneous: update on MacarthurCook Industrial REIT and Moody's rating




Sep 04 2008 Miscellaneous: revaluation of 7 properties

Aug 29 2008 Miscellaneous: MacarthurCook Limited announces new strategic shareholder

Aug 28 2008 Notice of a change in the percentage level of a substantial shareholder's interest

Aug 27 2008 Miscellaneous: MacarthurCook EGM results - shareholders in support of IOOF strategic alliance







Aug 13 2008 Notice of book closure date for distribution


Aug 12 2008 Miscellaneous: MacarthurCook Industrial REIT announces a 1q 2009 distribution per unit of s$2.35 cents

Aug 12 2008 Notice of book closure date for distribution

Aug 12 2008 Unaudited fi rst quarter 2009 fi nancial statement and dividend announcement




Jul 31 2008 Miscellaneous: date of release of un-audited fi nancial results for fi rst quarter ended 30 June 2008

Jul 31 2008 Miscellaneous: issue of units to the Manager in payment of management fees

Jul 18 2008 Notice of a change in the percentage level of a substantial shareholder's interest



Jun 16 2008 Miscellaneous: MacarthuCook response to AMP Capital Investors

Jun 13 2008 Miscellaneous: MacarthurCook and IOOF form strategic investment management and distribution alliance

Jun 11 2008 Miscellaneous: MacarthurCook Limited notes AMP Capital as a substantial holder

May 22 2008 Notice of a change in the percentage level of a substantial shareholder's interest

May 21 2008 Miscellaneous: MI-REIT announces 4qfy08 results - press release and presentation

May 21 2008 Miscellaneous: notice of books closure and distribution payment date

May 21 2008 Full year fi nancial statement and dividend announcement

May 07 2008 Miscellaneous: date of release of fi nancial results for the 4th quarter ended 31 March 2008



Apr 29 2008 Notice of a change in the percentage level of a substantial shareholder's interest






Financial Performance Summary

Financial result summary (all fi gures in $’000 unless otherwise shown)

Period ended 31 March 2009 2008

Financial performance

Gross revenue 50,827 32,214

Net property income 36,856 24,824

Net change in fair value of investment properties (29,988) 37,010

Total return after income tax and minority interest (26,988) 52,969

Distributions paid and payable 23,421 19,611

Financial position

Total assets 543,961 569,332

Total liabilities 254,887 231,708

Net assets attributable to Unitholders 289,074 337,624

Units in issue and to be issued (‘000) 266,385 260,963

Net asset value per unit ($) 1.09 1.29

Key performance measure

Earnings per unit (cents) - basic and diluted (10.33) 28.22

Distribution per unit (cents) 8.925 7.52

Aggregate leverage ratio (%) 41.3 39.0

Interest coverage ratio (times) 7.4 9.8

Management expense ratio (%) 1.03 1.02

Closing price per Unit ($) 0.23 0.985


Corporate DirectoryMacarthurCook Industrial REIT

The ManagerMacarthurCook Investment Management (Asia) LimitedCompany Registration No. 200615904N1 Raffl es Place, #21-01 OUB Centre Singapore 048616Telephone: (65) 6309 1050Fax: (65) 6534 3942Website: www.macarthurcook.com.au

TrusteeHSBC Institutional Trust Services (Singapore) Limited21 Collyer Quay#14-01 HSBC BuildingSingapore 049320

AuditorsKPMG LLPCertifi ed Public Accountants16 Raffl es Quay#22-00 Hong Leong BuildingSingapore 048581Phone: (65) 6213 3388Fax: (65) 6225 0984(Partner in charge: Leong Kok Keong)

Unit Registrar Boardroom Corporate & Advisory Services Pte. Ltd.3 Church Street #08-01Samsung HubSingapore 049483Phone: (65) 6536 5355Fax: (65) 6536 1360Website: www.boardroomlimited.com

Directors of the ManagerMr Richard Michael Haddock Mr Craig Mathew DunstanMr Lawrence Alan MendelowitzMr Alastair Hugh GurnerMr Lim How TeckMr Tan Kai Seng

Audit CommitteeMr Lim How TeckMr Richard Michael Haddock Mr Tan Kai Seng

Nominating and Remuneration CommitteeMr Richard Michael Haddock Mr Alastair Hugh GurnerMr Tan Kai Seng

Company SecretaryMs Tang Buck Kiau

Designed by motivo creative media


MacarthurCook Investment Managers (Asia) Limited

1 Raffl es Place#21–01 OUB CentreSingapore 048616

Level 4 30 Collins Street Melbourne VIC 3000 Australia

Investor Telephone Enquiries Singapore+65 6309 1050

Australia1300 655 197+61 3 9660 4555

Website www.macarthurcook.com.au

Email [email protected]@macarthurcook.com.au


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