"I am glad to report a very successful year in which the strategies pursued by the Manager have delivered stable and predictable distributions for the Unitholders of A-REIT."

FY2008/09 was challenging with the implosion of the global financial market and its consequent impact on economic activities as aggregate demand rapidly declined in the major developed markets. Singapore, being one of the world's most open economies, was not spared the tumult. However, A-REIT continued to focus on its core competencies and re-calibrated its three-pronged strategies to adapt to the changing market conditions and delivered a commendable set of financial results for the year.

On behalf of the Board, I am pleased to present A-REIT's 7th annual report for the financial year ended 31 Mar 2009. I am glad to report a very successful year in which the strategies pursued by the Manager have delivered stable and predictable distributions for the Unitholders of A-REIT. This achievement is remarkable especially in the light of the global economic turbulence in the second half of the financial year.

A-REIT's distribution per unit (DPU) increased by 7.4% to 15.18 cents as compared to 14.13 cents in the previous financial year after taking its performance fees in cash instead of units. The Manager opted to receive its performance fees in cash in order to close the gap between earnings per unit and DPU, i.e. to avoid paying distribution out of capital and also not to further dilute Unitholders' interest as units are currently trading at a discount to its NAV. The portfolio grew to 89 properties versus 84 properties last year, and total assets were S$4.5bn as at 31 Mar 2009, up from S$4.2bn a year ago, an increase of about 8% despite a devaluation of S$115m on the portfolio upon its regulatory annual revaluation.

A Balanced Portfolio Performance

As at 31 Mar 2009, overall portfolio occupancy stands at a healthy 97.8%, with 95.3% occupancy for multitenanted properties. The portfolio continues to see positive rental reversion in renewal rates across all sub-sectors as a result of active leasing management and the market rental rates being higher than existing rental rates of those leases in A-REIT's portfolio due for renewal. This is particularly true for the Business & Science Parks and Hi- Tech Industrial sectors. However, due to the deteriorating economic situation, market spot rates have been declining and the Manager has shifted its strategic focus to "Maintaining Occupancy, Retaining Customers". As a result, positive rental reversion, if any, for FY 2009/10 is expected to be relatively muted compared to the last financial year.

The Manager's disciplined investment strategy has resulted in enhanced returns per investment dollar from development activities and selective quality acquisition of income producing properties which resulted in a healthy and strong balance sheet. During the financial year, A-REIT completed two acquisitions worth S$271.8m and completed three development projects worth about S$174.5m.

The three development projects: Pioneer Hub, 15 Changi North Way and 3 Changi Business Park Crescent, were completed on schedule and within budget and achieved 100% occupancy on completion. Since commencing its development strategy in 2006, A-REIT has achieved an unrealized capital gain of $109.7m (approximately 35.2% over development cost) on the six development projects undertaken so far.

In addition, A-REIT commenced construction of a 100% precommitted built-to-suit logistics facility at the Airport Logistics Park located in the east of Singapore. A multi-tenanted business park building cum amenity centre is also currently under construction at 3 Changi Business Park Crescent. These projects are expected to be completed in 4Q2009. In May 2009, A-REIT announced a built-to-suit development of a Hi-Tech industrial property for Singapore Telecommunications Limited. This development is expected to be completed in 1Q2010.

A-REIT will continue to pursue quality and sustainable yield accretive acquisitions and, at the same time, engage in development (especially built-to-suit) opportunities for enhanced returns.

Balancing the Finances

We persist in proactive capital and risk management of A-REIT's finances in order to optimize its capital structure. When the market turned abruptly in the second half of the financial year, a healthy capital structure became the focal point of the investing community.

A 3-year S$200 m committed credit facility was secured in October 2008 to increase A-REIT's funding capacity. In Jan 2009, A-REIT launched an equity fund raising exercise and raised approximately S$408 m (at a 7% discount to the adjusted volume weighted adjusted price at the day of the launch) to fund committed development projects, as well as to to reduce borrowings. Aggregate leverage as at 31 Mar 2009 was 35.5% with 90.0% of A-REIT's total debt hedged into fixed rate for the next 3.4 years at an all-in cost of borrowing of 3.67%. However, refinancing cost and cost for new borrowings are expected to be higher over the next 12 months.

To further diversify A-REIT's sources of funding, a medium term note (MTN) programme was established and issuance of a 2-year note for S$150m was completed in Apr and May 2009.

The proactive management of A-REIT's capital structure has enabled us to further enhance our balance sheet. We will continue to balance between certainty in our capital structure and the cost of debt to attain optimal returns for our Unitholders.

Looking Ahead

The outlook for the global economy is uncertain as a result of the synchronized economic slowdown of all major developed markets originating from the collapse of the US financial industry. Barring any unforeseen surprises, the Manager aims to maintain the current level of net property income for A-REIT in the coming financial year.

Building on A-REIT's position as the leader in business space and industrial properties, we will continue to maintain a disciplined investment approach, proactive asset management and prudent capital and risk management strategies to continue to offer stable and predictable distributions through a portfolio of diversified tenants from a broad mix of industries.

In Appreciation

A-REIT's success would not have been possible without the concerted effort of many parties. Firstly, I would like to thank my fellow Board members for their invaluable advice and contributions throughout the year.

I would also like to express my gratitude to our tenants and business partners for their unwavering support. I also would like to extend my appreciation to the A-REIT team for their dedication in pursuing the business strategies that the Manager has set out. Last but not least, I would like to thank you, our Unitholders, for your trust and confidence in us.

With continued focus on our core strategies, I am confident that we will be able to overcome the challenging business environment and continue to deliver another year of stable performance.

DAVID WONG CHEONG FOOK
12 June 2009