BUILDING STRONG PARTNERSHIP FOR SHARED EXCELLENCE INTEGRATED ANNUAL REPORT 2025
COVER RATIONALE BUILDING STRONG PARTNERSHIP FOR SHARED EXCELLENCE At the core of Al-`Aqar Healthcare REIT’s journey is the understanding that sustainable progress in healthcare infrastructure relies on trusted, longstanding relationships. “Building Strong Partnership for Shared Excellence” reflects its commitment to fostering enduring collaborations that create value throughout its healthcare ecosystem. The hospital assets are depicted in teal and dark blue to symbolise trust, stability, and the strength of strategic alliances, with the complementary colours reinforcing unity in partnership. The abstract converging elements in the background further express the alignment of expertise, capital, and operational excellence, illustrating how collective effort drives resilience, growth, and shared excellence in delivering quality healthcare infrastructure. INSIDE THIS REPORT AL-`AQAR HEALTHCARE REIT 3 Introduction 3 Basis of Preparation 4 Reporting Scope and Boundary 4 Limitations and Exclusions 4 Audit and Assurance 5 Forward-Looking Statements 5 Feedback ABOUT THIS REPORT 01 Page 2 7 2025 Highlights 8 Corporate Profile 9 Trust Structure 10 Organisational Structure 11 Salient Features ABOUT AL-`AQAR 02 Page 6 13 Letter to Stakeholders 17 Business Review 23 Operating Environment BUSINESS OVERVIEW 03 Page 12 INVESTOR RELATIONS REPORT 04 29 Financial Calendar 30 Investor Relations Report Page 28 32 Value Creation Model 34 Financial Capital 34 Five-Year Financial Performance 36 Trading Performance 38 Financial Review 39 Capital Review 40 Portfolio Capital 40 Portfolio Overview 42 Segmental Highlights APPROACH TO VALUE CREATION 05 Page 31
Integrated Annual Report 2025 222 Manager’s Report 229 Statement by the Directors of the Manager 229 Statutory Declaration 230 Independent Auditors’ Report 234 Statements of Comprehensive Income 236 Statements of Financial Position 238 Statements of Changes in Net Asset Value 240 Statements of Cash Flows 242 Notes to the Financial Statements FINANCIAL STATEMENTS 09 Page 221 DIGITAL REPORT AVAILABLE This report can be accessed online via our website: www.alaqar.com.my If you wish to obtain a printed copy of the Integrated Annual Report 2025, kindly email us at jlgrm.investorrelations@jlandgroup.com.my As part of our commitment to environmental stewardship, stakeholders are encouraged to access the digital version where practicable. 71 About this Report 72 Stakeholder Engagement Report 75 Materiality Assessment 79 Sustainability Strategy 84 Sustainability Targets & Performance 86 Risk Management 88 Climate Change & Decarbonisation 95 Governance 101 Economic 107 Value for Employees and Community 123 Environmental 128 Membership and Awards 128 Continuous Improvement 129 Appendices SUSTAINABILITY STATEMENT 06 Page 70 142 Board of Directors 154 Shariah Committee 156 Management Team 158 Corporate Governance Overview Statement 170 Board Audit and Risk Committee Report 176 Board Investment Committee Report 180 Board Nomination and Remuneration Committee Report 184 Board Sustainability Committee Report 187 Statement on Risk Management & Internal Control 212 Additional Compliance Information 214 Shariah Adviser’s Report 215 Trustee’s Report CORPORATE GOVERNANCE REPORT 07 Page 141 217 Risk Assessment & Identification 218 Risk Management RISK MANAGEMENT 08 Page 216 292 Analysis of Unitholdings 295 Corporate Information OTHER INFORMATION 10 Page 291
3 Introduction 3 Basis of Preparation 4 Reporting Scope and Boundary 4 Limitations and Exclusions 4 Audit and Assurance 5 Forward-Looking Statements 5 Feedback ABOUT THIS REPORT 01
3 ABOUT THIS REPORT Integrated Annual Report 2025 ABOUT THIS REPORT Introduction Al-`Aqar Healthcare REIT (“Al-`Aqar” or “the REIT”) presents its inaugural Integrated Annual Report for the financial year ended 31 December 2025 (“IAR2025”). The IAR2025 provides expanded disclosures on the financial, business, and operational performance of Al-`Aqar, including its business model, value creation approach, risks and mitigation measures, and future outlook concerning the REIT’s plans and implementations. Board Statement of Responsibility: The Board of Directors (“Board”) of Al-`Aqar acknowledges its responsibility for ensuring the integrity, accuracy, and completeness of the data and disclosures contained in this IAR2025 document. BASIS OF PREPARATION The IAR2025 is developed in accordance with the Integrated Reporting Framework established by the International Financial Reporting Standards (“IFRS”) International Sustainability Standards Board (“ISSB”). The REIT’s disclosures are aligned with the following core principles: This approach ensures full alignment with the upcoming regulatory mandates of the Securities Commission (“SC”) under the National Sustainability Reporting Framework (“NSRF”), emphasising the following concepts and disclosures: • Strategic focus and future orientation • Connectivity of information • Conciseness • Reliability and completeness • Consistency and comparability • Materiality • Stakeholder relationships • Organisational overview and external environment • Governance • Business model • Risks and opportunities • Strategy and resource allocation • Performance • Outlook • Basis of preparation and presentation Financial Capital Portfolio Capital Intellectual Capital Human Capital Social Capital Natural Capital • Securities Commission Guidelines on Listed Real Estate Investment Trusts (“Listed REIT Guidelines”) • Malaysian Code on Corporate Governance (“MCCG”) • Bursa Malaysia Corporate Governance Guide (4th Edition) • Malaysian Financial Reporting Standards (“MFRS”) • Bursa Malaysia Main Market Listing Requirements (“MMLR”) • Securities Commission Licensing Handbook • Securities Commission Guidelines on Corporate Governance for Capital Market Intermediaries • Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities (Amendment) Act 2025 • Capital Market and Services Act 2007 • Companies Act 2016 • National Sustainability Reporting Framework (“NSRF”) • Bursa Malaysia Sustainability Reporting Guidelines 3rd Edition (“SRG3”) • FTSE4Good Bursa Malaysia Index • Sustainability Accounting Standards Board (“SASB”) Standards • Global Reporting Initiative (“GRI”) Standards • United Nations Sustainable Development Goals (“UN SDGs”) SIX CAPITALS SEVEN GUIDING PRINCIPLES EIGHT CONTENT ELEMENTS
4 SECTION 01 AL-`AQAR HEALTHCARE REIT ABOUT THIS REPORT REPORTING SCOPE AND BOUNDARY The disclosures in this IAR2025 cover Al-`Aqar’s operations across the healthcare sector, including hospital, wellness centre, colleges, and aged care facilities. All data and disclosures presented are derived from operations under the REIT’s direct control, ensuring consistency with its financial statements, sustainability statements, and audited accounts. This includes assets directly managed and operated by the REIT, including common areas in leased facilities. Al-`Aqar extends this operational boundary for greenhouse gas (“GHG”) reporting in strict alignment with the Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (2004). This methodology allows us to categorise emissions as follows: LIMITATIONS AND EXCLUSIONS While Al-`Aqar has enhanced the transparency and the comprehensiveness of its disclosures, the REIT acknowledges that certain data gaps remain. Recognising the importance of these metrics to the REIT’s stakeholders, Al-`Aqar is committed to the continuous refinement of its data collection processes and future disclosures. As part of this commitment, Al-`Aqar conducts rigorous internal reviews and audits to safeguard the accuracy and credibility of all disclosed data. Al-`Aqar approaches reporting through the lens of proportionality. In determining the scope of its disclosures, the REIT evaluates data based on its applicability, relevance, and accessibility at the time of reporting. Focusing on cost-effective and accessible data ensures a sustainable reporting trajectory that will continue to expand in depth and detail in the future. AUDIT AND ASSURANCE The IAR2025 has been audited for all disclosed financial statements and accounts. Selected material non-financial disclosures, particularly those relating to sustainability performance, have also been subject to independent assurance to enhance credibility and data accuracy. Internal review and data validation has been conducted by the relevant data owners, information holders, and the REIT’s Senior Management. As a healthcare REIT, Al-`Aqar operates under a master lease structure, which precludes it from maintaining operational control over its assets. Therefore, most operational data disclosures related to GHG emissions are categorised under Scope 3 emissions. The assessment of the REIT’s sustainability risks extends to entities within the value chain. This includes JLG REIT Managers Sdn Bhd (the “Manager”), tenants, property managers, and third-party vendors, ensuring a comprehensive view of Al-`Aqar’s environmental and social impact. Assets owned and managed by the REIT 100% of operational data and disclosures investment properties under the REIT fund Assets leased by the REIT 100% of operational data and disclosures from leased spaces, including administrative spaces the REIT Manager requires to function Entities and assets in the reporting entity Information considered and included the reporting boundary
5 ABOUT THIS REPORT Integrated Annual Report 2025 ABOUT THIS REPORT FORWARD-LOOKING STATEMENTS The IAR2025 may contain disclosures and statements regarding future estimations, strategic direction, and anticipated financial performance of Al-`Aqar. These projections are created based on reasonable assumptions and information available at the time of reporting. While the REIT strives for the highest degree of precision, external variables may cause expected outcomes to differ from these estimations. Readers are advised to exercise discretion when making decisions based on future-oriented disclosures. Al-`Aqar will not be held liable for any damages or negative impacts resulting from discrepancies between projections and actual outcomes. Furthermore, Al-`Aqar recommends that readers from subsequent periods refer to publications from the corresponding year to obtain verified data and reduce the uncertainty inherent in future projections. Any updates or revisions to the REIT’s strategies and disclosures made in future reports will not be retroactively reflected in this document. Management reserves the right to modify Al-`Aqar’s strategic plans and operational direction as necessary to adapt to an evolving global business environment. NAVIGATION ICONS The inclusion of navigation icons in IAR 2025 serves to enhance readers’ experience by providing a more intuitive approach to explore Al-`Aqar integrated reporting narrative. These icons are designed to highlight key areas of the business, illustrating the interconnectedness and interrelationship of various segments, capitals, strategies and stakeholders across the business. This icon indicates where more detail can be accessed elsewhere in this report. This icon indicates where more detail can be accessed online. Cross References Financial Capital Portfolio Capital Intellectual Capital Human Capital Social Capital Natural Capital Capitals Stakeholders FEEDBACK The Manager welcomes feedback from stakeholders as part of our ongoing efforts to enhance the quality and transparency of our reporting. For any enquiries, comments or suggestions, please contact us at jlgrm.investorrelations@jlandgroup.com.my Investors Regulatory Agencies and Statutory Bodies Employees Property, Services, Maintenance Managers Customers and Communities Service Providers and Suppliers Tenants
7 2025 Highlights 8 Corporate Profile 9 Trust Structure 10 Organisational Structure 11 Salient Features ABOUT AL-`AQAR 02
7 ABOUT AL-'AQAR Integrated Annual Report 2025 2025 HIGHLIGHTS 3% 5% 1% 91% 4% 6% 1% 89% 3% 7% 1% 89% 100% OCCUPANCY RATE 23 NO OF ASSETS RM1.07 billion MARKET CAPITALISATION 7.06 sen DISTRIBUTION PER UNIT 5.52% DISTRIBUTION YIELD 6.0 million sq. ft. GROSS FLOOR AREA Hospital Wellness Centres Colleges Aged Care Facilities RM120.0 million GROSS REVENUE RM1.88 billion PROPERTY VALUE RM104.9 million NET PROPERTY INCOME
8 SECTION 02 AL-`AQAR HEALTHCARE REIT Al-`Aqar’s Strategic Pillars Grow TAV Active Capital Management Achieve Share Price at Par with Net Asset Value More information on the REIT’s strategic pillar and the VENTURE27 strategic framework can be found in the Management Discussion and Analysis (“MD&A”) section. CORPORATE PROFILE Established in 2006, Al-`Aqar operates as the world’s first Islamic healthcare-themed REIT, focusing on a Shariah-compliant portfolio of healthcare properties. The REIT’s core business centres around the ownership and management of 23 assets. 17 3 2 1 More detailed information on the REIT’s assets can be found in the Portfolio Capital section The focus of Al-`Aqar’s business operation revolves around the acquisition, development, and lease of health-centric properties that improve the wellbeing of local communities while attracting residents and visitors, stimulating the local economy. The REIT’s business model is summarised below. Managed by JLG REIT Managers (“the Manager”) and part of the Johor Corporation (“JCorp”), Al-`Aqar pursues a growth strategy centred on acquiring a strategic and diversified asset portfolio that generates stable, sustainable, and long-term rental income, while executing Asset Enhancement Initiatives (“AEI”) to increase the value and income potential of existing properties. As healthcare is an essential service, Al- `Aqar is less susceptible to economic volatility compared to REITs operating in retail or office sectors. A primary driver of this stability is a strong relationship with the REIT’s anchor tenant, KPJ Healthcare Berhad (“KPJ”), coupled with long-term lease structures that provide high visibility for future income. This resilience is evidenced by Al-`Aqar’s 100% occupancy rate and substantial market presence across Malaysia, reinforced by the REIT’s status as the first Islamic healthcare REIT in Malaysia. The REIT’s ongoing operations are guided by three strategic pillars embedded within the overarching VENTURE27 strategic framework: 1 2 3 4 5 Hospitals Wellness Centres Colleges Aged Care Facilities Raise funds through Islamic financing and unitholder capital Acquire specialised healthcare real estate assets Lease back properties to reputable healthcare operators Provide dividends to unitholders based on the share of generated income Reinvest revenue into property modernisation and expansion
9 ABOUT AL-'AQAR Integrated Annual Report 2025 TRUST STRUCTURE TRUSTEE MANAGER Act on behalf of unitholders Management Services Trustee’s fees Management Fees UNITHOLDERS Distributions Holding of units Ownership of Properties REIT PROPERTIES Net Property Income Property/Maintenance & Management Services SHARIAH COMMITTEE Shariah Advisor’s Fees Advise on Shariah related matters Property/ Maintainance & Management fees PROPERTY / MAINTENANCE MANAGER Healthcare Technical Service Sdn Bhd IM Global Property Consultant Sdn Bhd AMANAHRAYA TRUSTEES BERHAD JLG REIT MANAGERS SDN BHD
10 SECTION 02 AL-`AQAR HEALTHCARE REIT ORGANISATIONAL STRUCTURE BOARD OF DIRECTORS For more information of Board of Directors please refer pages 142 to 153. For more information of Management Team please refer page 156 and 157. Our Board Committees: BOARD AUDIT AND RISK COMMITTEE BOARD NOMINATION AND REMUNERATION COMMITTEE BOARD INVESTMENT COMMITTEE BOARD SUSTAINABILITY COMMITTEE For more information, please refer page 170. For more information, please refer page 176. For more information, please refer page 180. For more information, please refer page 184. BARC BIC BSC BNRC CHIEF EXECUTIVE OFFICER HEAD, CEO’S OFFICE, INVESTOR RELATIONS & STRATEGY COMPLIANCE OFFICER COMPANY SECRETARY CHIEF OPERATING OFFICER CHIEF INVESTMENT OFFICER CHIEF FINANCIAL OFFICER HEAD, GOVERNANCE & LEGAL HEAD, CORPORATE SERVICES
11 ABOUT AL-'AQAR Integrated Annual Report 2025 SALIENT FEATURES Name of Fund Al-`Aqar Healthcare REIT Listing Main Market of Bursa Malaysia Securities Berhad Stock Code 5116 Type of Fund Income and growth Listing Date 10 August 2006 Fund Size 839,597,757 Financial Year End 31 December Trustee Fee 0.04% per annum of the Fund’s Net Asset Value Manager’s Fee Up to 0.3% per annum of the Fund’s Total Asset Value Revaluation Policy Annually by independent registered valuer Distribution Policy At least 95% of distributable income Gearing Policy Not exceed 50% of the REIT’s Total Asset Value Category of Fund Islamic healthcare real estate and healthcare related assets Stock Name ALAQAR Initial Public Offering Price Retail Price RM0.95 Institutional Price RM1.00 OPERATING STRATEGY To continuously improve the performance of its properties by improving yields and returns. This is achieved through a combination of strategies, including: Meeting the needs of the tenants; • Maintaining the quality and physical conditions of the properties; • Minimising disruptions to rental income and operational costs; • Implementing enhancement initiatives such as repositioning or repurposing underperforming or underutilised properties CAPITAL MANAGEMENT STRATEGY To optimise its capital structure and minimise the cost of capital while adhering to the financing limits prescribed by REIT Guidelines. Al-`Aqar intends to fund future acquisitions and AEI works through a balanced approach, combining both debt and REIT units to maintain financial flexibility and support long-term growth. INVESTMENT OBJECTIVE To deliver stable and sustainable distributions per unit to unitholders, with the potential for consistent growth in both distributions and NAV per unit over the long term. INVESTMENT POLICY To diversify its Shariah-compliant real estate portfolio, with a strategic emphasis on healthcarerelated properties. The Fund focuses on expanding its holdings across various properties and locations, while continuously seeking opportunities that offer attractive and sustainable returns. INVESTMENT MANAGEMENT STRATEGY To increase cash flow and enhancing unit value through selective acquisitions. Additionally, the Fund aims to preserve and enhance the value of its property portfolio via portfolio diversification and combination of: • Capitalising on acquisition growth opportunities; and • Identifying assets that are approaching or have reached their optimal returns for potential disposal consideration.
13 Letter to Stakeholders 17 Business Review 23 Operating Environment BUSINESS OVERVIEW 03
13 BUSINESS OVERVIEW Integrated Annual Report 2025 Dear Valued Stakeholders, It is my pleasure to present our first Integrated Annual Report for the financial year ended 31 December 2025. Despite rising medical inflation, particularly on the domestic front, Al-`Aqar showed resilient financial and operational performance, achieving a distribution per unit of 7.06 sen. DATUK HASHIM BIN WAHIR Chairman This is a testament to Al-`Aqar’s unique value proposition in providing Unitholders with stable returns throughout economic cycles. Al- `Aqar also marked a major milestone with the acquisitions of KPJ Ampang Puteri’s new building and KPJ Penang Specialist’s new building in October 2025, bringing the REIT’s Investment Property value to RM1.88 billion for Financial Year Ended 31 December 2025 (“FY2025”). With these two acquisitions, the Weighted Average Lease Expiry (“WALE”) stood at 10.57 years, reflecting continued long-term income stability. PERFORMANCE AT A GLANCE LETTER TO STAKEHOLDERS RM120.0 million RM62.0 million RM1.07 billion For more information of Financial Review please refer page 38. Gross Revenue Realised Profit Market Capitalisation
14 SECTION 03 AL-`AQAR HEALTHCARE REIT On the global front, 2025 was a year of global economic uncertainty, burdened by geopolitical tensions and tariff wars. Despite macroeconomic headwinds, healthcare remained a resilient sector poised for robust expansion, particularly in the medical tourism sector. Looking forward to 2026 and beyond, the healthcare sector is expected to maintain its strength even as global geopolitical tensions and shifting tariff policies introduce uncertainty into broader financial markets. Al-`Aqar is poised to benefit from the silver economy and the structural, non-discretionary demand for medical services driven by Malaysia’s ageing population. Furthermore, national initiatives such as the Malaysia Year of Medical Tourism (“MYMT”) 2026, led by the by the Malaysia Healthcare Travel Council (“MHTC”), are expected to act as significant catalysts for our hospital assets in key regional hubs, as patients increasingly seek more affordable, high-quality care across borders, with Asia-Pacific emerging as a key regional hub underpinned by competitive pricing and expanding hospital capacity. While we anticipate continued pressure from medical inflation, our focus on long-term master leases and strategic asset enhancements will ensure that Al- `Aqar remains resilient, providing unitholders with stable, riskadjusted returns throughout future economic cycles. In an era of global economic uncertainty and rising cost pressures, Al-`Aqar’s business resilience remains a cornerstone of our value proposition. Crucially, Al-`Aqar’s business resilience is anchored by our core portfolio of KPJ hospitals, which serve as high-quality underlying assets within the essential healthcare sector. This inherent stability is fortified by our strategic partnership with KPJ through master lease structures with an average minimum tenure of fifteen years and built-in rental escalations, providing us with exceptional income visibility and robust downside protection. By utilising long-term master lease structures and built-in rental escalations, we enjoy high visibility for future income and robust downside protection. Our maintained 100% occupancy rate and consistent distribution performance further underscore the defensive strength of our assets. On the domestic front, the healthcare sector was driven significantly by domestic demand for higher complexity procedures, supported by income growth and an ageing population; while medical tourism is also an emerging driver, particularly in location-specific hospitals such as Klang Valley, Penang and Johor. Looking forward, private healthcare costs are likely to continue facing pressure from rising medical inflation throughout 2026. The cap on increases in medical insurance premiums until end-2026 and the impending rollout of a diagnosis-related group (“DRG”) reimbursement framework also add to margin uncertainty for the healthcare sector. As an asset owner, Al-`Aqar benefits from a strong sponsor and tenant-landlord relationship with KPJ, enjoying downside rental revenue protection from its long leases averaging at a minimum of fifteen (15) years. Al-`Aqar’s growth trajectory is also strongly supported by KPJ’s expansion plans, in line with its targeted growth of more than 2,200 beds from 3,394 beds by 2030. This provides Al-`Aqar with strong visibility of an acquisition pipeline for completed extension buildings of KPJ’s hospitals in prime, mature townships. LETTER TO STAKEHOLDERS HEALTHCARE SECTOR REMAINS RESILIENT WITH SLIGHT COST PRESSURES OVERVIEW OF M-REITS 10.5% 5.9% Al-`Aqar Healthcare REIT’s FY2025 Unit Price Performance vs Benchmark Indices The M-REITs sector recorded solid performance in 2025, underpinned by resilient sector fundamentals and a stable interest rate environment. Market sentiment improved following the 25 basis points reduction in the OPR in July, while growth was led by the retail and hospitality segments on the back of robust consumer spending and a continued recovery in tourism. The imposition of the 8% Sales and Services Tax on rental and leasing activities had a limited impact, as landlords were able to sustain occupancy levels and secure positive rental reversions. 15% -5% -25% -20% -15% -10% 0% 50% 10% Dec 2024 Mar 2025 Jun 2025 Sep 2025 Dec 2025 8% 2% -1% -6% -6% Al-`Aqar Healthcare REIT Al-`Aqar Healthcare REIT Bursa Malaysia Property Index (BM Property) Bursa Malaysia REIT Index (BM REIT) FTSE Bursa Malaysia Top 100 Index (FBM T100) FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) Following the expiry of the concessional 10% withholding tax rate on REIT distributions effective from Year of Assessment (“YA”) 2026, the tax treatment of REIT distributions will revert to prevailing tax rates applicable to different investor categories. This development may have implications for investor demand and market sentiment, particularly among affected investor groups. Nonetheless, the sector’s underlying fundamentals remain intact, with rental income continuing to demonstrate resilience and earnings largely unaffected. Total Return Average Distribution Yield
15 BUSINESS OVERVIEW Integrated Annual Report 2025 LETTER TO STAKEHOLDERS AL-`AQAR UNDERPINNED BY LONG-TERM LEASE STRUCTURE -0.36% 5.52% In FY2025, Al-`Aqar continued to deliver sustained distributions to unitholders, supported by its stable rental income base and long-term lease structure. Despite softer unit price performance amid market volatility, the REIT maintained a competitive distribution yield, reinforcing its income-oriented investment proposition. The consistency of DPU highlights the resilience of Al-`Aqar and its ability to provide stable returns with long-term earnings visibility in a challenging macroeconomic environment. TWO ACQUISITIONS COMPLETED As we reflect on our past year, we are excited to announce the completion of two major acquisitions for Al-`Aqar, bringing the Investment Property value to RM1.88 billion as at 31 December 2025. With the acquisition of KPJ Ampang Puteri’s new extension building and KPJ Penang Specialist’s new extension building in October 2025, Al-`Aqar achieved a Net Property Income (“NPI”) of RM104.9 million for FY2025, an improvement of 3.31% from FY2024. In 2025, we focused on reviewing our portfolio strategy, growth trajectory and laying the groundwork for improved operational efficiency. While we enjoy a strong sponsorcum-tenant relationship with KPJ, the Board recognises the need for tenant diversification as part of Al-`Aqar’s overall portfolio management strategy. This also reduces the pressure of depending solely on KPJ’s pipeline assets as a sole sponsor. Nonetheless, the competition for quality healthcare assets is stiff even amongst owner-operators. Al-`Aqar is focused on expanding its core hospital assets and will conduct a review to reduce exposure to non-core assets such as wellness centres and aged care facilities, according to market conditions. In our commitment to preserve the stability of returns to our Unitholders, Al-`Aqar also placed emphasis on improving operational efficiency and cost-tightening measures through the strengthening of business processes and review of capital expenditure requirements. This is aimed at improving the accuracy of cost forecasting for replacement, repair and maintenance, particularly in older hospitals, providing Al-`Aqar with better control of NPI margins. STEADY ACQUISITION PIPELINE, IMPROVING OPERATIONAL EFFICIENCIES In line with our target to achieve an investment portfolio value of RM2.5 billion by 2028, our medium-term strategy is to expand our portfolio through sponsor-led acquisitions, aligning with KPJ’s expansion plans. Leases entered with KPJ provide us with long-term earnings visibility, providing Unitholders with stable risk-adjusted returns throughout economic cycles. Despite rising cost pressures on the domestic private healthcare industry, we are optimistic that there are still bright spots for the industry, driven by resilient domestic demand for higher complexity cases, resulting in higher revenue per patient in strategic locations, a rise in the ageing population and strong growth in medical tourism to support hospital operator margins, providing security for our lease rentals. We will also continue to reduce our exposure to non-core segments and underperforming assets, aimed at improving our portfolio focus and overall asset quality. In preserving overall portfolio yields, we intend to reduce borrowing costs through active capital management and improve operational efficiency through tighter asset management measures, particularly in capital expenditure (“CAPEX”) spending for older hospital buildings without compromising tenant satisfaction. Complementing our growth strategy, we remain committed to disciplined CAPEX initiatives and AEIs to ensure our assets are maintained in optimal condition. By prioritising preventive maintenance and upgrading ageing infrastructure, we support ongoing portfolio optimisation while ensuring our facilities remain at the forefront of clinical and operational excellence for our tenants. Total Return Distribution Yield
16 SECTION 03 AL-`AQAR HEALTHCARE REIT LETTER TO STAKEHOLDERS 2025 represents a strategic inflection point for Al-`Aqar as we undertake our first Integrated Annual Reporting exercise, reinforcing our commitment to disciplined governance, long-term value creation and sustainable capital stewardship. This marks an important shift in how we articulate performance and moving beyond financial outcomes to a more holistic view that integrates sustainability considerations as a core driver of resilience and growth. In response to the evolving global and national landscape, Al-`Aqar has taken steps to prepare for alignment with the ISSB standards, specifically IFRS S1 and IFRS S2. As the REIT falls within the second phase of Malaysia’s NSRF, our full adoption of these standards is scheduled to commence in the 2026 financial year. We view this preparation not merely as a reporting exercise but as a strategic enabler that strengthens our data quality and demonstrates our commitment to institutional excellence. Sustainability is increasingly central to our business and investment strategy. In this context, we have prioritised the development of a comprehensive ESG framework, aligned with the UN SDGs, to guide our strategic direction. This framework enables a structured approach to identifying material sustainability risks and opportunities, strengthening risk management, informing capital allocation decisions, and supporting the long-term performance of our portfolio. Looking ahead, our sustainability agenda will continue to evolve in tandem with our VENTURE27 strategy, ensuring that ESG considerations are embedded across asset management, investment evaluation, and operational execution. While this first year of integrated reporting establishes a foundational baseline, our focus remains on continuous enhancement by deepening disclosures, strengthening data quality, and translating sustainability commitments into measurable outcomes. Through this approach, we aim to build a resilient REIT and deliver sustainable, long-term value to our unitholders and stakeholders. ACKNOWLEDGEMENTS On behalf of the Board of Directors, I am pleased to welcome Ong Li Lee as our new Independent Non-Executive Director and Abdul Aziz bin Abdul Rasheed as our new Non-Independent Non-Executive Director in August 2025, bringing their extensive knowledge and experience in real estate asset management and governance. I would also like to record our sincere appreciation to Lailatul Azma binti Abdullah for her valuable contributions and dedicated service during her tenure as Independent Non-Executive Director. We also extend our appreciation to Dato’ Haji Mohammed Ridha bin Dato’ Haji Abd Kadir and Shamsul Anuar bin Abdul Majid, both Non-Independent Non-Executive Directors, for their continued guidance and contributions to the Board. We wish them all the very best in their future endeavours. I express my heartfelt appreciation to our valued stakeholders, including unitholders, REIT manager, trustee, shariah advisor, property manager, management teams of various business units, our sponsor, business partners, government agencies, regulators, valued investment community and the media. We sincerely thank you for your unwavering support and trust in the Board of Directors and management team of Al-`Aqar in driving our business performance. Together, we are excited to scale new heights of success towards our next phase of growth. Yours sincerely, Datuk Hashim bin Wahir Chairman JLG REIT Managers Sdn Bhd for and on behalf of Al-`Aqar OPERATIONS ANCHORED IN SUSTAINABILITY
17 BUSINESS OVERVIEW Integrated Annual Report 2025 The REIT introduction of these new extension buildings presents a strategic addition to its key portfolio assets, increasing the number of licensed beds in KPJ Ampang Puteri Specialist Hospital and KPJ Penang Specialist Hospital from 197 to 297, and 193 to 256, respectively. With the completion of these acquisitions, the number of licensed beds in the REIT’s portfolio stands at 3,175. The new buildings will improve the capacity and operational efficiencies of the existing hospitals in Al-`Aqar’s portfolio, KPJ Ampang Puteri Specialist Hospital and KPJ Penang Specialist Hospital, respectively, further safeguarding earnings visibility for the expanded core hospital segment. The acquisitions and leasebacks contributed a total of RM3.5 million in revenue and RM3.4 million in NPI for FY2025. The KPJ Ampang Puteri Specialist’s new extension building is also awaiting Green Building Index (“GBI”) certification, making it a strategic fit in the REIT’s efforts to promote sustainability and advocate for tenant efforts in sustainability. In 2025, Al-`Aqar also renewed lease agreements for five (5) investment properties, ranging from one (1) year to fifteen (15) years with rental escalations. The renewal tenure is in accordance with the REIT’s portfolio management strategy to reduce exposure to non-core assets and strengthen the core hospital segment. Despite macroeconomic headwinds, Al-`Aqar’s earnings resilience and visibility are supported by long-term lease agreements with KPJ for the core hospital segment, providing Unitholders with stable returns. Through these implementations, the REIT maintains an occupancy rate of 100% as at 31 December 2025. BUSINESS REVIEW OPERATIONAL OVERVIEW In 2025, Al-`Aqar successfully completed a landmark acquisition and leaseback of two new buildings from KPJ in October 2025, growing its portfolio value by 13.6% from RM1.7 billion to RM1.9 billion, further solidifying the REIT’s strong tenant relationship with KPJ. This is a key milestone and a significant expansion of the portfolio as it marks the first time since 2011 that the REIT acquired more than RM200 million worth of assets in a year. KPJ Ampang Puteri Specialist Hospital KPJ Penang Specialist Hospital
18 SECTION 03 AL-`AQAR HEALTHCARE REIT BUSINESS REVIEW As assets continue ageing, the REIT takes a proactive approach in establishing a long-term budget to avoid adhoc repair and maintenance, which may introduce higher cost burdens. By maintaining discipline in preventive maintenance, optimising resources, and strategic implementation of renewals and maintenance, the REIT ensures tenant operations can continue with minimal disruptions while preserving long-term asset value. In terms of portfolio management, the REIT continues to strengthen its core hospital segment and reduce exposure to non-core segments, including the Australian portfolio. As the healthcare industry progresses, healthcare asset classes are also adapting to cater to evolving demand, in tandem with the rise of an ageing population. While Al-`Aqar sees expansion in areas such as senior living facilities, specialised care centres and specialised medical centres focusing on medical tourism, the REIT is employing a disciplined approach to its acquisitions, ensuring that the assets are a strategic fit to the overarching portfolio. The REIT actively engages with its sponsor, KPJ, to establish a pipeline of acquisition assets in line with KPJ’s expansion plan. This engagement allows for active coordination with KPJ to exit non-core segments in accordance with market conditions and when opportunities arise. Besides KPJ’s pipeline, the Board and management of Al-`Aqar are placing greater focus on portfolio growth through thirdparty acquisitions to reduce single-sponsor concentration risk in the long term. While Al-`Aqar remains open to thirdparty acquisitions and portfolio diversification, the REIT is maintaining a disciplined approach in its acquisitions in alignment with its gearing limit and with the REIT’s overall strategic direction. On the operational front, Al-`Aqar focused on laying the groundwork with the aim of achieving operational efficiencies from value extraction and tightening capital expenditure (“CAPEX”) spending without compromising on tenant satisfaction. PORTFOLIO EXPANSION IN 2025 CONTRIBUTION FROM NEW ACQUISITION ENHANCING HEALTHCARE CAPACITY 2 ACQUISITIONS COMPLETED IN OCTOBER 2025 PORTFOLIO VALUE RM1.9 2025: billion RM1.7 2024: billion 13.6% NPI RM3.4 million REVENUE RM3.5 million 3,175 2025: 2,602 2024: 22.0% TOTAL LICENSED BED
19 BUSINESS OVERVIEW Integrated Annual Report 2025 BUSINESS REVIEW VENTURE27: BUILDING A RESILIENT PORTFOLIO IN HEALTHCARE ASSETS VENTURE27 Growing our portfolio via acquisitions in our core hospital segment 01 Preserving asset quality and tenant satisfaction 03 Building long-term income resilience through economic cycles through long leases 02 Value extraction to achieve operational efficiencies 04 Under this strategic framework, the REIT has identified key pillars of growth and strategic change, which we will focus on for the coming years to achieve an Investment Portfolio value of RM2.5 billion by 2028. Al-`Aqar’s VENTURE27 strategic framework establishes the REIT’s strategic goals and guides near-term to medium-term goals, translating into long-term value creation for Unitholders. In developing the VENTURE27 strategy, the REIT identified areas in need of change in strategic direction and a sharper focus in operational execution, allowing for the improved identification of opportunities, risks, corresponding mitigation plans, and targets under the Objective and Key Results framework for performance measurement. This strategy also aligns with the six value creation capitals, placing emphasis on improved transparency in business operations, governance, stakeholder engagement and data integrity, in line with the REIT’s efforts to promote investor confidence and stakeholder feedback. Grow TAV • Review of asset class • Establishment of core segments within the healthcare realm • Acquisitions aligning with investment direction and portfolio identity • Reduction of exposure to non-core segments and mature assets TAV Growth • Acquisitions of core, quality assets • Asset preservation through preventative maintenance measures Distribution Per Unit (“DPU”) Growth • Value extraction from repair and maintenance • Asset recycling and yieldaccretive acquisitions Active Capital Management • Reduction of gearing to create headroom for acquisitions • Positioning improvement for speedy acquisitions • Management of borrowing costs in accordance with the timeline of pipeline acquisitions from Sponsorcum-tenant, KPJ Achieve Share Price at Par with NAV • Long-term value creation, DPU growth, TAV growth • Clear portfolio identity and strategic goals • Transparency to investors • Improved share liquidity STRATEGIC PILLARS GROWTH PILLARS
20 SECTION 03 AL-`AQAR HEALTHCARE REIT BUSINESS REVIEW Strategy Grow TAV - Pipeline Acquisitions from KPJ Achieve Share Price at Par with NAV - Renewals of Long Leases Active Capital Management • TAV increased by 13.6% to RM1.88 billion in 2025 from RM1.65 billion in 2024 • Occupancy maintained at 100% Financial Impact • Portfolio value growth • Revenue and NPI improved • DPU slightly decreased by 2.89% to RM7.06 sen in 2025 from RM7.27 sen in 2024 Non-Financial Impact • Expansion of core hospital segment within portfolio in line with portfolio strategy • Leases for the core hospital segment renewed for 15 years, providing earnings visibility • Occupancy maintained at 100% Financial Impact • Revenue and NPI improved • DPU slightly decreased by 2.89% to RM7.06 sen in 2025 from RM7.27 sen in 2024 • Portfolio value preserved Non-Financial Impact • Improved investor confidence in the visibility of earnings and returns to Unitholders • Borrowing costs reduced to 4.80% in 2025 vs 5.04% in 2024 Financial Impact • DPU slightly decreased by 2.89% to RM7.06 sen in 2025 from RM7.27 sen in 2024 Non-Financial Impact • Improved investor confidence • Portfolio is better positioned for future fundraising Capitals Enhanced: Capitals Enhanced: Capitals Enhanced: Results Results Results
21 BUSINESS OVERVIEW Integrated Annual Report 2025 BUSINESS REVIEW Operational - Asset Assessment & Condition Prioritisation • Replacement projects executed based on technical assessment findings (chillers, lifts, etc.) • Improved reliability of key building systems • Prioritisation aligned with asset condition and risk level Financial Impact • Emergency costs reduced due to early identification of asset issues • Asset value protected through timely replacement aligned with assessment findings Non-Financial Impact • Improved safety and operational reliability within hospitals • Stronger readiness for audits and inspections Capitals Enhanced: Operational - Lease Obligations & Compliance Operational - Tenant Coordination & Execution Planning Sustainability - ESG Support & Renewable Energy Participation • Accomplished all lease obligations with tenants • Ensured compliance with statutory requirements • Strengthened procurement documentations for trustee approval • Minimised disruption through increased tenant engagement and project coordination • Improved communication flow between Al-`Aqar, consultants, and hospital engineering teams • Supported planning and site readiness for Photovoltaic Panel Phase Two • Promoted energy efficient equipment in major replacements • Enhanced ESG alignment for long term asset sustainability Financial Impact • Compliance risk exposure reduced • Efficiently utilised fund budget for fulfilling all lessor obligations Financial Impact • Efficient project planning reduced risk of delays and potential added costs Financial Impact • Long term enhancement of asset attractiveness through ESG aligned investments and lower operational costs Non-Financial Impact • Strengthened governance culture through adherence to lease obligations • Reduced statutory risks Non-Financial Impact • Improved tenant relationship and trust through transparent coordination • Ensured smooth project execution with minimal service disruption Non-Financial Impact • Aligned and contributed to national sustainability targets • Improved environmental performance of assets • Supported tenant sustainability credentials and performance Capitals Enhanced: Capitals Enhanced: Capitals Enhanced: Results Results Results Results
22 SECTION 03 AL-`AQAR HEALTHCARE REIT During the year, the REIT implemented a series of targeted asset enhancement initiatives, encompassing chiller replacement, lift replacement , and external repainting works. Ageing chillers and lift systems were upgraded to energy‑efficient models incorporating demand‑responsive cooling technologies and regenerative lift mechanisms, resulting in reduced electricity consumption, lower carbon emissions, and improved maintenance efficiency. In addition, the use of low volatile organic compound (VOC) materials in repainting works contributed to healthier building environments while enhancing façade durability and long‑term asset protection. Collectively, these initiatives enhanced overall building performance, mitigated operational risks, supported sustainability objectives, and reinforced long‑term cost stability through reduced utility demand and extended asset lifecycles. In parallel, Al‑`Aqar supported tenant‑initiated decarbonisation efforts through the Solar Expansion Programme implemented under the Supply Agreement within the Renewable Energy (SARE) framework. While the initiative was driven by tenants, the REIT played a proactive enabling role by facilitating and approving the implementation of solar installations across its assets. Although the resulting energy savings accrue directly to tenants, the REIT’s support reflects its commitment to enabling clean energy adoption, fostering collaborative tenant relationships, and contributing to the broader decarbonisation of hospital operations across its portfolio. Al-`Aqar continues to embed sustainability and ESG principles into its operations through its Green Lease Programme, which has been formally incorporated into the lease agreements for its latest hospital acquisitions, namely KPJ Ampang Puteri and KPJ Penang. These leases reflect a shared commitment between the parties to support environmental stewardship initiatives, including energy efficiency, water conservation, responsible waste management, and decarbonisation efforts, in line with applicable sustainability frameworks and regulatory requirements. Under the agreed lease terms, the REIT upholds disciplined environmental management practices covering waste, water, drainage, chemical usage, and sustainability data transparency. Clear roles and responsibilities are established for the implementation of green initiatives, supported by accurate record‑keeping and collaborative engagement with the Lessor and Manager. These measures demonstrate the REIT’s proactive approach to integrating sustainability into its asset acquisitions and operations, reinforcing long‑term value creation and alignment with national sustainability aspirations. Collectively, these operational sustainability initiatives highlight Al-`Aqar’s role as an active and responsible owner that prioritises environmental performance, supports efficient tenant operations, and creates enduring value for stakeholders, while strengthening the resilience and sustainability of its healthcare assets. OPERATIONAL HIGHLIGHT: ASSET ENHANCEMENT INITIATIVE (AEI) Throughout FY2025, Al-`Aqar strengthened its sustainability performance by integrating ESG considerations directly into day to day operations and asset management practices across its healthcare portfolio. BUSINESS REVIEW The REIT’s approach focused on enhancing operational efficiency, reducing environmental impact and improving the long term resilience of critical hospital infrastructure. These efforts were supported by rigorous technical assessments, robust governance processes and close collaboration with KPJ to ensure responsible and efficient stewardship of essential healthcare assets.
23 BUSINESS OVERVIEW Integrated Annual Report 2025 OPERATING ENVIRONMENT RESILIENT ECONOMIC LANDSCAPE UNDERPINNED 2025 PERFORMANCE Throughout FY2025, Al-`Aqar navigated a shifting macroeconomic landscape characterised by both emerging opportunities and external challenges. Global economic output reached an estimated 3.3% in 2025, rebounding in the second half of the year after a slow start. The International Monetary Fund (“IMF”) projects this growth to hold steady at 3.3% in 2026, with a slight moderation to 3.2% in 2027. Despite this stability, persistent trade tensions remain a primary risk, with the potential to disrupt global supply chains and impact the vibrancy of financial markets. Al- `Aqar remains vigilant, ensuring our strategic planning accounts for this international volatility. Global growth is expected to be driven by emerging economies, with projections holding steady at 4.0% for 2026 and 2027. In contrast, advanced economies are forecast to moderate to 1.8% and 1.7% over the same period. Notably, the US economy is anticipated to expand by 2.4% in 2026, bolstered by lower policy rates, supportive fiscal measures, and sustained momentum from late 2025. Complementing this growth, global headline inflation is projected to gradually retreat from 4.2% in 2025 to 3.8% in 2026 and 3.4% in 2027. Domestically, the Malaysian economy demonstrated exceptional strength, recording a full-year Gross Domestic Product (“GDP”) growth of 5.2% in 2025. This performance significantly exceeded the forecast range of 4.0% to 4.8% set by Bank Negara Malaysia, the IMF, and the World Bank. Key indicators from the Department of Statistics Malaysia (“DOSM”) further reinforce this upward trajectory: the unemployment rate reached an 11-year low of 2.9% by year-end, while headline inflation remained stable at 1.4%. Additionally, the Malaysian Ringgit emerged as the topperforming currency in Southeast Asia, appreciating by approximately 10.3% against the US Dollar by December 2025. Building on the momentum of 2025, Malaysia’s economic growth is projected to remain steady throughout 2026. While a slight moderation is anticipated due to geopolitical tensions and shifting global tariff policies, domestic fundamentals remain resilient. According to the Ministry of Finance’s Outlook 2026, headline inflation is expected to remain well-contained between 1.3% and 2.0%. While global uncertainties present downside risks, the strength of the domestic economy provides a stable environment for Al-`Aqar’s continued operational growth and strategic execution. Ongoing fiscal consolidation and structural policy reforms continue to bolster investor confidence, sustaining strong Foreign Direct Investment (“FDI”) inflows. This momentum is particularly evident in the data centre, technology, and Electrical and Electronics (“E&E”) sectors. Furthermore, Malaysia’s pivotal role in the global E&E value chain remains a cornerstone of export growth, with the sector’s inherent resilience expected to drive national trade performance throughout 2026. MEDICAL AND HEALTHCARE TRENDS IN MALAYSIA Malaysia’s healthcare sector is entering a phase of structural expansion, supported by long-term demand drivers as opposed to short-term economic cycles. Healthcare demand remains inherently non-discretionary, driven by population health needs, epidemiological trends, and public policy priorities. These characteristics position healthcare as a resilient segment of the economy, with direct implications for the stability and utilisation of healthcare real estate assets. Malaysia operates a dual healthcare system comprising a publicly funded healthcare network alongside a welldeveloped private healthcare sector. While public healthcare continues to ensure broad access to essential services, the private healthcare segment has increasingly driven capacity expansion, service differentiation and adoption of advanced medical technologies. This has supported sustained utilisation levels across private hospitals and specialist medical centres, reinforcing demand for modern, purpose-built healthcare facilities. Healthcare expenditure in Malaysia continues to trend upward, supported by rising income levels, increasing health awareness, and greater willingness among patients to seek private healthcare services. At the same time, private healthcare providers have expanded their focus on specialised and higher value-added treatments, strengthening Malaysia’s position as a regional healthcare destination. From a real estate perspective, these developments translate into consistent occupancy, longer operating hours, and sustained relevance of healthcare assets across economic cycles.
RkJQdWJsaXNoZXIy NDgzMzc=