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
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