Al-`Aqar Healthcare REIT Annual Report 2020

Overview of the Macro Operating Environment The spread of the COVID-19 virus which started in early 2020 has impacted the world and the on-going pandemic has significantly weakened the global growth. After an estimated 3.5% contraction in 2020, the global economy is projected to grow 5.5% in 2021 and 4.2% in 2022. The estimate for 2020 is 0.9 percentage point higher than projected in the October World Economic Outlook (“WEO”) forecast. This reflects the stronger-than-expected recovery on average across regions in the second half of the year. The 2021 growth forecast is revised up by 0.3 percentage point, reflecting additional policy support in a few large economies and expectations of a vaccine-powered strengthening of activity later in the year, which outweigh the drag on near-term momentum due to rising infections. The upgrade is particularly large for the advanced economy group, reflecting additional fiscal support, mostly in the United States and Japan, together with expectations of earlier widespread vaccine availability compared to the emerging market and developing economy group. Against this challenging global economic outlook, Malaysia also experienced its sharpest recession in twenty years as a result of the global and domestic MCO, including travel restrictions taken, to contain the outbreak of the pandemic which started in early quarter of the year 2020. Thus, the Malaysian government is proactively making efforts to mitigate the impact of the economic crisis by implementing a series of economic response packages. The strength and timing of Malaysia’s economic recovery will depend on the timely availability of an effective mass vaccination program, which has begun on 24 February 2021. On the Malaysian healthcare industry, with the impact of COVID-19 and its resultant lockdowns, healthcare spending in Malaysia is projected to decrease by 2% to 3% in 2020. The revenue of the private hospitals has reduced significantly during the MCO 1.0. However, post MCO 1.0, Letter to Stakeholders the financial performance of the private hospitals have bounced back albeit at a lower level compared to pre MCO 1.0. With the implementation of MCO 2.0, it is expected that the healthcare industry will not suffer the same drop in financial performance as in MCO 1.0. Financial Highlights The Group has recorded a gross revenue of RM115.7 million (FY2019: RM106.1 million). Profit for the year was RM12.6 million (FY2019: RM76.1 million) comprising realised profit of RM57.0 million (FY2019: RM63.4 million) and unrealised loss of RM44.4million (FY2019: unrealised gain of RM12.7 million). The unrealised loss mainly relates to the fair value adjustment of Jeta Gardens. TheGroupachievedadistributionperunitof 6.81 sen per unit for the year, as compared to 7.75 sen per unit for FY2019. This translates to a commendable distribution yield of 5.2% per unit and total payout of RM50.1 million. The unfavourable financial performance was mainly attributed by the rental support and loss on Jeta Gardens’ fair value adjustment. DISTRIBUTION PER UNIT 6.81 sen 2019: 7.75 sen GROSS REVENUE RM115.7 million 2019: RM106.1 million TOTAL PAYOUT RM50.1 million (95% of total Al-`Aqar Distributable Income) However, Al-`Aqar does not expect both events to be common in the long term, as the Fund earnings is underpinned by the long-term lease arrangements with KPJ Group. Jeta Gardens Corporate Overview 09