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
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