THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

THIS
THIS CIRCULAR
THIS CIRCULAR
CIRCULAR
THIS CIRCULAR IS
IS IMPORTANT
IS IMPORTANT
IMPORTANT
IS IMPORTANT AND
AND REQUIRES
AND REQUIRES
REQUIRES
AND REQUIRES YOUR
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IMMEDIATE IMMEDIATE ATTENTION.
ATTENTION.
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If you are in any doubt as to the course of action you should take, you should consult your stockbroker, bank manager, solicitor, accountant or other
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The SCCircular.
and Bursa Securities take no responsibility for the contents of this Circular, make no representation as to its accuracy or completeness and
Circular.
Circular.
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expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this
Circular.

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DEFINITIONS

Except where the context otherwise requires, the following definitions shall apply throughout this
Circular:

“348 Sentral” or “Vendor” : 348 Sentral Sdn Bhd, a wholly-owned subsidiary of MRCB

“Act” : Companies Act 1965

“Astramina Advisory” : Astramina Advisory Sdn Bhd

“Board” : Board of Directors of the Manager

“Bursa Securities” : Bursa Malaysia Securities Berhad

“CCT” : CapitaCommercial Trust

“Certificate of Proposed : The certificate of proposed strata plan to be issued by Director of

Strata Plan” Survey and Mapping for the Federal Territory pursuant to section 8A
of the Strata Titles Act 1985

“CIMB” : CIMB Investment Bank Berhad

“CMSA” : Capital Markets and Services Act 2007

“Completion Date” : A date no later than 1 month from the day upon which the last
condition precedent as set out in Section 2.1.2(iv), Part A of this
Circular (which has not been waived in writing) has been fulfilled in
accordance with the provision of the SPA

“Deed” : Deed of trust constituting MQREIT dated 9 October 2006, as

amended by the first supplemental deed dated 27 August 2007, the
second supplemental deed dated 28 May 2013 and the third
supplemental deed dated 2 April 2015 entered into between the
Manager and the Trustee

“DPU” : Distribution per Unit

“EPF” : Employees Provident Fund Board

“Existing Charge” : A first-party legal charge bearing presentation number 41546/2009

created by 348 Sentral in favour of CIMB (as security agent for
CIMB Bank Berhad, Hong Leong Bank Berhad and RHB Bank
Berhad) as security for the Term Loan Facility

“Extended Completion : A date which is 45 days from the Completion Date or such later
Date” period(s) thereafter, if any, as 348 Sentral and the Trustee may
mutually agree to in writing

“FYE” : Financial year(s) ended or ending, as the case may be

“Gapurna” : Gapurna Sdn Bhd

“GJSB” : Global Jejaka Sdn Bhd

“Government” : Government of Malaysia

“GST” : Goods and Services Tax

“HLIB” : Hong Leong Investment Bank Berhad

i
i
DEFINITIONS (Cont’d)

“HOA” : Heads of agreement dated 3 December 2015 entered into between

the Trustee and 348 Sentral in relation to the Proposed Acquisition

“IAL” : Independent Advice Letter from AmInvestment Bank to the non-

interested Unitholders in relation to the Proposed Acquisition and
Proposed Placement

“Independent Adviser” or : AmInvestment Bank Berhad

“AmInvestment Bank”

“Interested Directors” : Tan Sri Saw Choo Boon, Dato’ Dr Low Moi Ing J.P., Dato’ Michael
Ong Leng Chun, Dato’ Thanarajasingam Subramaniam, Ann Wan
Tee and Kwan Joon Hoe, collectively

“KLIA” : Kuala Lumpur International Airport

“Last Trading Date” : 29 June 2016, being the market day immediately preceding the
signing of the SPA

“Lease” : A 15-year lease bearing presentation number 3794/2014 created by

348 Sentral in favour of Shell pursuant to the Lease Agreements

“Lease Agreements” : The lease agreement dated 1 November 2013 made between Shell
and 348 Sentral which includes the supplemental lease agreement
dated 30 March 2015, the second supplemental lease agreement
dated 16 December 2015 and any other instrument executed
supplemental thereto or in substitution thereof from time to time

"LEED” : Leadership in Energy and Environmental Design

“LPD” : 2 November 2016, being the latest practicable date prior to the
printing of this Circular

“Management Fee” : A base fee not exceeding 0.4% per annum of the gross asset value
of MQREIT and the performance fee equivalent to a rate of 3% of
the net investment income of MQREIT, before payment of such
management fee, in relation to any financial year

“Manager” : MRCB Quill Management Sdn Bhd, the management company of

MQREIT

“Manager’s Unit(s)” : New Unit(s) to be issued to the Manager pursuant to the Proposed
Authority

“Maybank IB” : Maybank Investment Bank Berhad

“Meeting” : Unitholders’ meeting of MQREIT

“MQREIT” : MRCB-Quill REIT

“MRCB” : Malaysian Resources Corporation Berhad

“MSC Malaysia Status” : A recognition by the Government, through the Malaysia Digital
Economy Corporation, for information communication technology
and information communication technology facilitated businesses
that develop or use multimedia technologies to produce and
enhance products and services

“NAV” : Net asset value

ii
ii
DEFINITIONS (Cont’d)

“NLA” : Net lettable area

“PBO” : Purpose-built office

“Placement Unit(s)” : New Unit(s) to be issued pursuant to the Proposed Placement

“Property” : 33-storey office tower known as Menara Shell together with a 5-

storey podium and a 4-storey basement car park, and all such plant
and equipment, fixtures and fittings attached (excluding fixtures and
fittings belonging to the existing tenants/lessees and third parties,
including those with whom the existing tenants/lessees have
entered into hire purchase and/or leasing agreement in respect of
such fixtures and fittings), collectively

“Proposals” : The Proposed Acquisition, Proposed Placement, Proposed

Placement to MRCB, Proposed Placement to EPF, Proposed
Authority and Proposed Increase in Fund Size, collectively

“Proposed Acquisition” : Proposed acquisition by the Trustee of the Property from 348
Sentral for a purchase consideration of RM640,000,000 to be
satisfied entirely in cash

“Proposed Authority” : Proposed authority to allot and issue up to 31,952,333 Manager’s

Units for the purpose of the payment of Management Fee to the
Manager in the form of new Units

“Proposed Increase in : Proposed increase in the existing approved fund size of MQREIT
Fund Size” from 700,000,000 Units to a maximum of 1,100,000,000 Units

“Proposed Placement” : Proposed placement of up to 406,666,667 Placement Units,

representing up to 38.1% of the enlarged Units in circulation, after
the Proposed Placement, by way of bookbuilding at an issue price to
be determined later

“Proposed Placement to : Proposed placement to EPF of up to 7% of the enlarged Units in

EPF” circulation after the Proposed Placement, representing up to
74,763,336 Units, at an issue price to be determined later, pursuant
to the Proposed Placement

“Proposed Placement to : Proposed placement to MRCB for an amount of no less than

MRCB” RM110,000,000 but up to RM152,000,000 of Placement Units,
representing between 9.0% and 12.4% of the enlarged Units in
circulation, after the Proposed Placement, at an issue price to be
determined later, pursuant to the Proposed Placement

“psf” : Per square foot

“Purchase Consideration” : The purchase price for the Property amounting to RM640,000,000

“QESB” : Quill Estates Sdn Bhd

“QLSB” : Quill Land Sdn Bhd

“QPSB” : Quill Properties Sdn Bhd

“QRHSB” : Quill Resources Holding Sdn Bhd

“Quill Group” : QLSB, QPSB, QESB and QRHSB, collectively

iii
iii
DEFINITIONS (Cont’d)

“Redemption Sum” : The redemption amount required to fully settle and discharge the
relevant outstanding indebtedness and to obtain a full discharge of
the Existing Charge

“REIT(s)” : Real estate investment trust(s)

“REIT Guidelines” : Guidelines on Real Estate Investment Trusts issued by the SC on

21 August 2008 (and updated on 28 December 2012)

“RM” and “sen” : Ringgit Malaysia and sen, respectively

“SC” : Securities Commission Malaysia

“Shell” : Shell People Services Asia Sdn Bhd

“SPA” : The conditional sale and purchase agreement dated 30 June 2016
entered into between the Trustee, acting solely in the capacity as
trustee for and on behalf of MQREIT, and 348 Sentral for the
Proposed Acquisition

“sq ft” : Square foot / feet

“sq m” : Square metre(s)

“Term Loan Facility” : Syndicated term loan facility of up to RM460,000,000 executed

between the Vendor, CIMB Bank Berhad, Hong Leong Bank Berhad
and RHB Bank Berhad, RHB Investment Bank Berhad and CIMB

“Trustee” : Maybank Trustees Berhad, acting solely in the capacity as trustee

for and on behalf of MQREIT

“Unit(s)” : Undivided interest in MQREIT as constituted by the Deed

“Unitholder(s)” : Holder(s) of the Units

“US” : United States of America

“Valuation Report” : Valuation report by CBRE | WTW dated 20 June 2016 in relation to
the valuation of the Property

“Valuer” or “CBRE | WTW” : C H Williams Talhar & Wong Sdn Bhd

“VWAMP” : Volume weighted average market price

All references to “you” and “your” in this Circular are to the Unitholders.

Words importing the singular shall, where applicable, include the plural and vice versa and words
importing the masculine gender shall, where applicable, include the feminine and neuter genders and
vice versa. Any reference to persons shall include corporations, unless otherwise stated.

Any reference in this Circular to any enactment is a reference to that enactment as for the time being
amended or re-enacted.

All references to the time of day in this Circular are references to Malaysian time, unless otherwise
stated.

iv
iv
TABLE OF CONTENTS

PAGE

PART A

EXECUTIVE SUMMARY vii

LETTER FROM THE BOARD TO UNITHOLDERS IN RELATION TO THE

PROPOSALS

1. INTRODUCTION 1

2. DETAILS OF THE PROPOSALS 4

3. RATIONALE FOR AND BENEFITS OF THE PROPOSALS 18

4. OUTLOOK AND PROSPECTS 23

5. RISK FACTORS 26

6. EFFECTS OF THE PROPOSALS 30

7. APPROVALS REQUIRED 34

8. IMPLICATION OF THE RULES ON TAKE-OVERS, MERGERS AND 36

COMPULSORY ACQUISITIONS 2016

9. INTERESTS OF THE DIRECTORS AND MAJOR SHAREHOLDERS OF THE 36

MANAGER, MAJOR UNITHOLDERS OF MQREIT AND/OR PERSONS
CONNECTED WITH THEM

10. RELATED PARTY TRANSACTION 39

11. DIRECTORS’ STATEMENT 39

12. AUDIT COMMITTEE’S STATEMENT 39

13. INDEPENDENT ADVISER 39

14. OTHER CORPORATE EXERCISE/SCHEME ANNOUNCED BUT PENDING 40

COMPLETION

15. HISTORICAL UNIT PRICES 40

16. ESTIMATED TIME FRAME FOR COMPLETION 41

17. MEETING 41

18. FURTHER INFORMATION 41

PART B

INDEPENDENT ADVICE LETTER FROM AMINVESTMENT BANK BERHAD TO 42

THE NON-INTERESTED UNITHOLDERS IN RELATION TO THE PROPOSED
ACQUISITION AND PROPOSED PLACEMENT

APPENDICES

I VALUATION CERTIFICATE FOR THE PROPERTY 91

v
v
TABLE OF CONTENTS (Cont’d)

APPENDICES (Cont’d)

II LOCATION MAP OF THE PROPERTY 100

III PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF 101

MQREIT AS AT 31 DECEMBER 2015 AND THE REPORTING
ACCOUNTANTS’ REPORT THEREON

IV FURTHER INFORMATION 111

NOTICE OF UNITHOLDERS’ MEETING ENCLOSED

PROXY FORM ENCLOSED

vi
vi
 PART A
LETTER FROM THE BOARD TO UNITHOLDERS IN RELATION TO
THE PROPOSALS
EXECUTIVE SUMMARY

The following summary is qualified in its entirety by, and should be read in conjunction with, the full
text of this Circular. Meanings of defined terms may be found in the “Definitions” section on pages (i)
to (iv) of this Circular.

1. OVERVIEW OF THE PROPOSALS

(i) Proposed Acquisition

The Board proposes to acquire the Property, via the Trustee from 348 Sentral for a
purchase consideration of RM640,000,000, which shall be satisfied entirely in cash.

(ii) Proposed Placement

The Board proposes to undertake the Proposed Placement (which includes the
Proposed Placement to MRCB and Proposed Placement to EPF) whereby the
proceeds from the Proposed Placement will be used to partially finance the Proposed
Acquisition and defray expenses relating to the Proposals.

The Proposed Placement shall involve an issuance of up to 406,666,667 Placement

Units, representing up to 61.5% of the total Units in circulation of 661,381,000 Units
as at the LPD and up to 38.1% of the enlarged Units in circulation after the Proposed
Placement, by way of a bookbuilding exercise.

(iii) Proposed Placement to MRCB

MRCB, being a major Unitholder with a unitholding of approximately 31.2% as at the

LPD, has given an undertaking to subscribe for the Placement Units at the issue price
to be determined by way of bookbuilding for an amount of no less than
RM110,000,000 but up to RM152,000,000 in value, representing between 9.0% and
12.4% of the enlarged Units in circulation, after the Proposed Placement, based on
the illustrative issue price of RM1.15 per Placement Unit (based on a discount of
approximately 9.9% to the 5-day VWAMP of the Units up to and including the LPD of
RM1.2764).

(iv) Proposed Placement to EPF

EPF had confirmed its interest to participate in the Proposed Placement for up to 7%
of the enlarged Units in circulation after the Proposed Placement, representing up to
74,763,336 Units, through a bookbuilding exercise, provided that its subscription of
the Placement Units (i) shall be at its preferred price, (ii) will not in any way trigger a
mandatory take-over offer in respect of the remaining Units not owned by EPF and
persons acting in concert with it, and (iii) that MQREIT and/or the Manager will ensure
that EPF’s subscription of the Placement Units shall not in any way trigger a
mandatory take-over offer. EPF also had, via the same letter, committed to participate
in the pricing and bookbuilding exercise together with other interested investors or
subscribers for the Proposed Placement.

(v) Proposed Authority

The Board proposes to seek Unitholders’ approval to empower the Board with the
flexibility to allot and issue up to 31,952,333 new Units for the purpose of partial or full
payment of the Management Fee for the FYEs 31 December 2017 to 31 December
2019.

(vi) Proposed Increase in Fund Size

In order to accommodate the issuance of the Placement Units and the Manager’s
Units, the Board proposes to increase the existing approved fund size of MQREIT
from 700,000,000 Units to a maximum of 1,100,000,000 Units.

vii
vii
EXECUTIVE SUMMARY (Cont’d)

2. THE PROPERTY

MQREIT, via the Trustee will acquire the Property from 348 Sentral for a purchase
consideration of RM640,000,000. The Property is a commercial development consisting of a
33-storey stratified office tower known as Menara Shell together with a 5-storey podium and a
4-storey basement carpark. It is constructed on part of a parcel of freehold land and held
under Geran 40094, Lot 348, Section 72, Town and District of Kuala Lumpur, Wilayah
Persekutuan Kuala Lumpur, Malaysia.

Menara Shell is strategically located in Kuala Lumpur Sentral, a self-contained urban

development comprising an integrated transit hub known as Kuala Lumpur Sentral Station,
corporate office towers and business suites, 5-star international hotels, condominiums and a
shopping mall. It is within walking distance to Kuala Lumpur Sentral Station which consists of
8 major transit lines including a dedicated line to KLIA and the soon to be completed Mass
Rapid Transit Line.

Menara Shell is designed with energy efficiencies and green features, and has been accorded
LEED platinum certification. In addition, it is also accredited with MSC Malaysia Status which
is one of the requirements by many multinational and local corporates.

Menara Shell is tenanted by a pool of established corporations such as Shell and AmGeneral
Insurance Berhad. Based on the tenancy schedule of the Property as at the LPD, Shell and
AmGeneral Insurance Berhad accounted for approximately 54.7% and 25.1% of the total NLA
of the Property respectively.

3. RATIONALE AND BENEFITS TO UNITHOLDERS

3.1 Proposed Acquisition

The Board believes that the Proposed Acquisition will provide Unitholders with the following
key benefits:

(i) DPU yield is expected to be accretive

The Proposed Acquisition is in line with the investment objective of the Manager to
provide long-term and sustainable distribution of income to the Unitholders and to
achieve long-term growth in NAV.

viii
viii
EXECUTIVE SUMMARY (Cont’d)

For the FYE 31 December 2015, the Manager declared and paid approximately
94.3% of the total realised income after taxation or DPU of 8.47 sen. Excluding a one-
off gain on divestment of properties of 0.09 sen per Unit, the normalised DPU for the
FYE 31 December 2015 was 8.38 sen. The pro forma earnings per Unit after the
Proposed Acquisition, Proposed Placement and Proposed Authority is expected to be
7.67 sen (as set out in Section 6.3, Part A of this Circular). The lower pro forma DPU
of 7.67 sen based on a 100% payout ratio as compared to the normalised DPU for
the FYE 31 December 2015 of 8.38 sen is mainly due to the Property only achieving
an occupancy rate of 99.9% in December 2015 from 74% in November 2015,
resulting in lower income contribution for the year. Nevertheless, upon completion of
the Proposed Acquisition, based on an occupancy rate of 99.9%, the Manager
expects the DPU yield to increase moving forward due to, among others, future
increase in net property income from expected rental reversions of current portfolio
and the Property as well as payment of Management Fee in Manager’s Units.

(ii) The Proposed Acquisition represents growth catalyst

MQREIT’s total assets will increase from RM1.63 billion to RM2.27 billion upon
completion of the Proposed Acquisition, thereby elevating MQREIT’s position from 8th
to 6th out of 16 listed REITs (excluding KLCC Stapled Securities) in Malaysia in terms
of total asset size (based on the latest available audited financial statements of the
respective REITs as at the LPD).

The larger asset base will enable MQREIT to enjoy greater operating efficiency
arising through the efficient utilisation of current resources, namely manpower. It will
also enhance its competitive positioning providing MQREIT with greater bargaining
power and thus, enabling it to secure term contracts at more competitive terms.

The pro forma increase in the total

asset value of MQREIT arising
from the Proposed Acquisition.

Abbreviations:

AHT Amanah Harta Tanah PNB CMMT CapitaLand Malaysia Mall Trust
Al-‘Aqar Al-‘Aqar Healthcare REIT Hektar Hektar Real Estate Investment Trust
Al-Salam Al-Salam Real Estate Investment Trust IGB IGB Real Estate Investment Trust
AmanahRaya AmanahRaya Real Estate Investment Pavilion Pavilion Real Estate Investment Trust
Trust Sunway Sunway Real Estate Investment Trust
AmFIRST AmFIRST Real Estate Investment Trust Tower Tower Real Estate Investment Trust
Atrium Atrium Real Estate Investment Trust UOA UOA Real Estate Investment Trust
Axis Axis Real Estate Investment Trust YTL YTL Hospitality REIT

(Source: Latest available audited financial statements of the respective REITs as at the LPD)

ix
ix
EXECUTIVE SUMMARY (Cont’d)
EXECUTIVE SUMMARY (Cont’d)

(iii) Competitive strengths of the Property is expected to fit well into MQREIT’s
(iii) Competitive
clientele strengths enhance
requirements, of the Property its portfoliois expected
profile and to contribute
fit well into MQREIT’s
positively to
clientele requirements,
the performance of MQREIT enhance its portfolio profile and contribute positively to
the performance of MQREIT
(a) The Property currently enjoys almost full occupancy with an occupancy rate
(a) The Property
of 99.9%. currentlywith
Therefore, enjoys almost full
the addition of the occupancy
Propertywith an occupancy
to MQREIT’s rate
portfolio,
of 99.9%. Therefore,
MQREIT’s overall occupancy with the rate addition
wouldofimprove
the Propertyfrom 97%to MQREIT’s
to 98%. portfolio,
MQREIT’s overall occupancy rate would improve from 97% to 98%.
(b) The Property is situated in Kuala Lumpur Sentral, a self-contained
(b) The Property hub
transportation is and
situateda prime in commercial
Kuala Lumpur area Sentral,
within Kuala a self-contained
Lumpur. The
transportation
Proposed Acquisition hub and will a prime commercial
increase MQREIT’s areafootprint
within Kuala in KualaLumpur. The
Lumpur
Proposed Acquisition will increase MQREIT’s
Sentral and would augur well for MQREIT in view that Kuala Lumpur Sentral footprint in Kuala Lumpur
Sentral
is highlyand would
sought augur
after well for MQREIT
by corporate tenants. in view that Kuala Lumpur Sentral
is highly sought after by corporate tenants.
(c) The inclusion of a green building with LEED platinum certification and MSC
(c) The inclusion
Malaysia Status of awill
green building
fit well with LEEDclientele
into MQREIT’s platinumrequirements
certification and for MSC
high-
Malaysia Status willbuildings.
quality specification fit well into MQREIT’s clientele requirements for high-
quality specification buildings.
(d) The tenant mix profile of the Property will provide a good mix of high-quality
(d) The tenant mix
multinational andprofile
largeof local
the Property will provide
conglomerate tenantsa goodfor mix of high-quality
MQREIT’s overall
multinational and large local conglomerate
clientele mix. MQREIT’s tenant base before the Proposed Acquisition tenants for MQREIT’s overallis
clientele mix. MQREIT’s
broadly categorised tenant base
into 8 sectors as depictedbeforeinthe Proposed
Section 3.1(iii),Acquisition
Part A of this is
broadly
Circular.categorised
Subsequentinto 8 sectors
to the Proposed as depicted
Acquisition, in Section 3.1(iii),
the tenant mixPart A of this
is expected
Circular.
to furtherSubsequent
diversify intoto12the Proposed
sectors Acquisition,
as depicted the tenant
in Section mixPart
3.1(iii), is expected
A of this
to further The
Circular. diversify into 12
enlarged sectors
tenant base as depicted
will diversify in Section
MQREIT’s 3.1(iii), Part Astream
income of this
Circular.
across a The widerenlarged
spread oftenant tenants base from willvarious
diversify MQREIT’s
sectors, reducing income stream
the reliance
across
on income a wider spread of
contribution fromtenants
almostfrom all ofvarious
the major sectors,
tradereducing
sectors. the reliance
on income contribution from almost all of the major trade sectors.
3.2 Proposed Placement
3.2 Proposed Placement
The rationale for the Proposed Placement are as follows:
The rationale for the Proposed Placement are as follows:
(i) The Proposed Placement will enable MQREIT to raise equity to partially finance the
(i) The Proposed
Proposed Placement
Acquisition, thuswill enablethe
reducing MQREIT
gearingto raise
level equitytotofunding
relative partially thefinance
Proposed the
Proposed
AcquisitionAcquisition,
entirely viathus debt.reducing
In the event the gearing level relative
the Proposed to funding
Acquisition and the expenses
Proposed
Acquisition
relating to entirely via debt.are
the Proposals In the
fundedevent the Proposed
totally by debt Acquisition
financing, itand the expenses
would raise the
relating to the Proposals are funded totally by
gearing level to approximately 59.1% of MQREIT’s total asset value which debt financing, it would raise the
would
gearing
exceed the level
50% to limit
approximately
stipulated under 59.1%the ofREIT
MQREIT’s
Guidelines. total asset value which would
exceed the 50% limit stipulated under the REIT Guidelines.
(ii) The Proposed Placement will enable MQREIT to raise funds expeditiously as it can
(ii) Theimplemented
be Proposed Placement
immediately willuponenable MQREIT
obtaining to raise funds
Unitholders’ expeditiously as it can
approval.
be implemented immediately upon obtaining Unitholders’ approval.
(iii) The Proposed Placement will involve the issuance of new Units which will increase
(iii) The Proposed
the number Placement
of Units will involve
in circulation and themayissuance
improveofthe new Unitsliquidity
trading which will increase
of MQREIT.
the number of Units in circulation and may improve
The Proposed Placement should also allow MQREIT to attract more local and the trading liquidity of MQREIT.
The Proposed
international Placement
institutional shouldtoalso
investors invest allow MQREITthereby
in MQREIT, to attract more local
potentially and
enlarging
international
its Unitholders institutional
base. investors to invest in MQREIT, thereby potentially enlarging
its Unitholders base.
3.3 Proposed Authority
3.3 Proposed Authority
The Proposed Authority will provide the Manager with more flexibility in the structuring of the
The Proposed
payment Authority willFee.
of Management provide To thethe Manager
extent that with the
more flexibilitychooses
Manager in the structuring
to receive of the
payment of Management Fee. To the extent that the Manager
Management Fee in the form of new Units, the Manager’s interest will be further aligned with chooses to receive the
Management
the Unitholders. FeeIn in the form
addition, anyof cash
new Units,
conserved the Manager’s
for the payment interest of will
the be further aligned
Management Fee with
can
the
be Unitholders.
used by MQREITIn addition,for any
futurecashacquisition,
conserved capitalfor the payment
expenditures of the and/or
Management Fee can
distribution to
be used by MQREIT for future acquisition, capital expenditures and/or distribution to
Unitholders.
Unitholders.
3.4 Proposed Increase in Fund Size
3.4 Proposed Increase in Fund Size
The Proposed Increase in Fund Size will accommodate the issuance of Placement Units and
The Proposed
Manager’s UnitsIncrease
pursuant in to
Fund Size will accommodate
the Proposed Placement and the issuanceAuthority
Proposed of Placement Units and
respectively.
Manager’s Units pursuant to the Proposed Placement and Proposed Authority respectively.
x
x
EXECUTIVE SUMMARY (Cont’d)

4. METHOD OF FINANCING AND USE OF PROCEEDS

The Purchase Consideration of RM640,000,000 shall be satisfied entirely in cash. The

Manager intends to fund the Purchase Consideration and the expenses for the Proposals
through a combination of proceeds from the Proposed Placement and borrowings. The
amount of borrowings to fund the Proposed Acquisition will depend on the eventual proceeds
to be raised from the Proposed Placement, which will in turn depend on, among others,
market conditions, issue price and demand for the Placement Units.

Based on the assumed issue price of RM1.15 per Placement Unit and the maximum
406,666,667 Placement Units, the estimated breakdown of the source of funding is set out
below:

RM million
Gross proceeds to be raised from the Proposed Placement 467.7
Borrowings 188.3
Total 656.0

The gross proceeds to be raised from the Proposed Placement are expected to be used for
the partial settlement of the Purchase Consideration and defraying expenses relating to the
Proposals.

5. RISK FACTORS

Unitholders should consider the following risks inherent in the property market and the risk
factors (which may not be exhaustive) pertaining to the Proposed Acquisition:

5.1 Risks relating to the Proposed Acquisition

(i) Financing risk; and

(ii) Delay in completion of the Proposed Acquisition.

5.2 Risks relating to the Property to be acquired

(i) Loss of tenants;

(ii) Losses from latent building defects;

(iii) Inadequate insurance and potential losses due to uninsured liabilities;

(iv) Risk associated with asset enhancement initiatives;

(v) Devaluation of the Property; and

(vi) Delays in the issuance and transfer of the strata titles of the Property.

5.3 Risks relating to the property market

(i) Increased competition from other properties; and

(ii) Compulsory acquisition by the Government.

xi
xi
EXECUTIVE SUMMARY (Cont’d)

6. EFFECTS OF THE PROPOSALS

For illustrative purposes only, the pro forma effects of the Proposals on the earnings, NAV per
Unit and gearing are set out below based on the following parameters:

Illustrative issue price of the Placement Units : RM1.15

Size of the Proposed Placement : RM467,666,667

Placement Units issued : 406,666,667

Borrowings raised : RM188,333,333

The effects of the Proposed Placement to MRCB and Proposed Placement to EPF are
reflected accordingly in the effects of the Proposed Placement as they form part of the
Proposed Placement.

Pro forma earnings

After the Proposed

Acquisition,
Proposed
Audited for FYE 31 Placement and
December 2015 Proposed Authority
Audited/Pro forma realised net income of 54,021 82,189
MQREIT for the FYE 31 December 2015
(RM ’000)
Earnings per Unit (sen) 9.06 7.67

The Proposed Increase in Fund Size will not have any effect on the earnings and distributable
income of MQREIT.

Please refer to Section 6.3, Part A of this Circular for further details.

Pro forma NAV per unit and gearing

After the Proposed

Acquisition and
Audited as at 31 Proposed
December 2015 Placement
NAV per Unit (RM)
- Before income distribution 1.37 1.28
- After income distribution 1.32 1.25
Gearing (%) 42.4 38.6

Any issuance of new Units pursuant to the Proposed Authority is expected to reduce the NAV
per Unit, the extent of which would depend on the actual number of new Units to be issued
which, in turn, would depend on the actual issue price. Further, any issuance of new Units
pursuant to the Proposed Authority is not expected to have a material effect on the gearing.

The Proposed Increase in Fund Size will not have any effect on the NAV per Unit and gearing
of MQREIT.

Please refer to Section 6.4, Part A of this Circular for further details.

xii
xii
 MRCB Quill Management Sdn Bhd
(Company No.: 737252-X)

Level 35, Menara NU 2

No. 203 Jalan Tun Sambanthan
Kuala Lumpur Sentral
REIT 50470 Kuala Lumpur

Tel: 603 2786 8080 Fax: 603 2780 7988

Website: www.mrcbquillreit.com

Registered office

Level 33A, Menara NU 2

No. 203, Jalan Tun Sambanthan
Kuala Lumpur Sentral
50470 Kuala Lumpur

22 November 2016

Board of Directors

Tan Sri Saw Choo Boon (Non-Independent Non-Executive Chairman)

Dato' Dr Low Moi Ing, J.P. (Non-Independent Non-Executive Director)
Dato' Michael Ong Leng Chun (Non-Independent Non-Executive Director)
Dato’ Thanarajasingam Subramaniam (Non-Independent Non-Executive Director)
Dr. Roslan A. Ghaffar (Independent Non-Executive Director)
Foong Soo Hah (Independent Non-Executive Director)
Ann Wan Tee (Non-Independent Non-Executive Director)
Kwan Joon Hoe (Non-Independent Non-Executive Director)
Aminuddin Mohd Arif (Independent Non-Executive Director)

To: Unitholders of MRCB-Quill REIT

Dear Sir/Madam,

(I) PROPOSED ACQUISITION;

(II) PROPOSED PLACEMENT;
(III) PROPOSED PLACEMENT TO MRCB;
(IV) PROPOSED PLACEMENT TO EPF;
(V) PROPOSED AUTHORITY; AND
(VI) PROPOSED INCREASE IN FUND SIZE

1. INTRODUCTION

On 3 December 2015, the Manager announced that the Trustee had entered into the HOA
with 348 Sentral on the same date for the Proposed Acquisition.

On 3 March 2016, the Manager announced that the parties to the HOA had, via an extension
letter, mutually agreed to extend the cut-off date for the execution of the SPA to 15 April 2016.

1
1
On 12 April 2016, the parties, via a second extension letter, agreed to further extend the said
cut-off date to 30 May 2016 to ensure 348 Sentral is able to submit the application for the
Certificate of Proposed Strata Plan to sub-divide the development consisting of the Property
and another building, both of which are erected on a parcel of land held under a master title of
Geran 40094, Lot 348, Section 72, Town and District of Kuala Lumpur, Wilayah Persekutuan
Kuala Lumpur, Malaysia to the relevant authorities within the stipulated timeline as required
by the Strata Titles Act 1985 upon signing of the SPA. The cut-off date would be automatically
extended further by 30 business days if 348 Sentral was unable to submit the application for
Certificate of Proposed Strata Plan by 30 May 2016, thereby further extending the cut-off date
to 14 July 2016.

On 30 June 2016, CIMB, HLIB and Maybank IB, announced, on behalf of the Board, that the
Trustee had entered into the SPA with 348 Sentral on the same date for the Proposed
Acquisition.

In conjunction with the Proposed Acquisition, the Board also proposed to undertake the
following:

(i) Proposed Placement (which includes the Proposed Placement to MRCB and
Proposed Placement to EPF) to partially fund the Proposed Acquisition and the
expenses relating to the Proposals;

(ii) Proposed Authority to provide the Board with the flexibility in allotting and issuing new
Units to the Manager as payment of the Management Fee; and

(iii) Proposed Increase in Fund Size to accommodate the issuance of the Placement
Units and the Manager’s Units pursuant to the Proposed Placement and Proposed
Authority respectively.

On 4 August 2016, CIMB, HLIB and Maybank IB announced, on behalf of the Board, that the
SC had, via its letter dated 3 August 2016, approved the exemptions from the following:

(i) compliance with Clauses 14.04(a)(i) and (ii) of the REIT Guidelines; and

(ii) submitting to the SC a declaration from the advisers/the Board stating that the
Trustee, on behalf of the Unitholders, will enter into a private caveat to protect its
interest in the Property and to prevent other encumbrances from being entered by
any other party.

On 28 September 2016, CIMB, HLIB and Maybank IB announced, on behalf of the Board,
that the SC had, via its letter dated 27 September 2016, approved the following:

(i) the value of the Property pursuant to Clause 10.12(b) of the REIT Guidelines;

(ii) issuance of:

(a) up to 406,666,667 new Units pursuant to the Proposed Placement; and

(b) up to 31,952,333 new Units pursuant to the Proposed Authority;

(iii) the listing of and quotation for:

(a) up to 406,666,667 new Units pursuant to the Proposed Placement; and

(b) up to 31,952,333 new Units pursuant to the Proposed Authority,

on the Main Market of Bursa Securities.

2
2
On 21 November 2016, CIMB, HLIB and Maybank IB announced, on behalf of the Board, that
Bursa Securities had, via its letter dated 21 November 2016, approved the listing of and
quotation for:

(i) up to 406,666,667 new Units to be issued pursuant to the Proposed Placement; and

(ii) up to 31,952,333 new Units to be issued pursuant to the Proposed Authority

on the Main Market of Bursa Securities.

CIMB, HLIB and Maybank IB were appointed as the Joint Principal Advisers and Joint
Placement Agents for the Proposals on 30 June 2016 to, among others, advise the Board and
Manager in respect of the Proposals and to identify and procure potential investors to
subscribe to the Placement Units in respect of the Proposed Placement.

The Proposed Acquisition is deemed a related party transaction under Clause 9.01 of the
REIT Guidelines in view of the interests of certain Directors of the Manager, major
shareholders of the Manager and major Unitholders as set out in Section 9, Part A of this
Circular.

In view that the Proposed Acquisition is deemed a related party transaction, AmInvestment
Bank was appointed as the Independent Adviser on 30 June 2016 to undertake the following:

(i) comment as to whether the Proposed Acquisition and Proposed Placement are:

(a) fair and reasonable so far as the Unitholders are concerned; and

(b) to the detriment of the non-interested Unitholders,

and set out the reasons for such opinion, the key assumptions made and the factors
taken into consideration in forming that opinion;

(ii) advise the non-interested Unitholders whether they should vote in favour of the
Proposed Acquisition and Proposed Placement; and

(iii) take all reasonable steps to satisfy itself that it has a reasonable basis to make the
comments and advice in relation to items (i) and (ii) above.

Astramina Advisory has been appointed by the Manager as the Transaction Arranger in
respect of the Proposed Acquisition with effect from 4 January 2016 and will be appointed as
the financial adviser for the Proposed Placement. The terms of engagement of Astramina
Advisory as the Transaction Arranger for the Manager are limited to ensuring an expeditious
and accurate flow of information between MQREIT, the Manager and MRCB and the
arrangement and coordination of implementation of the Proposed Acquisition so as to assist
in timely implementation of the Proposed Acquisition. Astramina Advisory’s role as financial
adviser to the Manager for the Proposed Placement is expected to include, amongst others,
assisting in the procurement of investor(s) as well as identifying and resolving issues that may
arise in the course of implementation of the Proposed Placement.

The highest percentage ratio applicable to the Proposed Acquisition pursuant to Paragraph
10.02(g) of the Main Market Listing Requirements of Bursa Securities is approximately 70.8%
based on the audited financial statements of MQREIT for the FYE 31 December 2015.

THE PURPOSE OF THIS CIRCULAR IS TO PROVIDE YOU WITH THE DETAILS OF THE
PROPOSALS TOGETHER WITH THE RECOMMENDATION OF THE BOARD (SAVE FOR
THE INTERESTED DIRECTORS) AND TO SEEK YOUR APPROVAL FOR THE
RESOLUTIONS PERTAINING TO THE PROPOSALS TO BE TABLED AT THE
FORTHCOMING MEETING. THE NOTICE OF MEETING, TOGETHER WITH THE PROXY
FORM, IS SET OUT IN THIS CIRCULAR.

3
3
 YOU ARE ADVISED TO READ THE CONTENTS OF THIS CIRCULAR INCLUDING THE
IAL (AS SET OUT IN PART B OF THIS CIRCULAR) TOGETHER WITH THE APPENDICES
CAREFULLY BEFORE VOTING ON THE RESOLUTIONS PERTAINING TO THE
PROPOSALS TO BE TABLED AT THE FORTHCOMING MEETING.

2. DETAILS OF THE PROPOSALS

2.1 Proposed Acquisition

The Proposed Acquisition entails the acquisition by the Trustee of the Property free from all
encumbrances with legal possession and subject to the existing tenancies/leases for those
parts of the Property that are tenanted and vacant possession for those parts of the Property
that are untenanted, for the Purchase Consideration.

The Purchase Consideration shall be satisfied entirely in cash and is intended to be funded
via proceeds from the Proposed Placement and borrowings.

2.1.1 Information on the Property

MQREIT, via the Trustee will acquire the Property from 348 Sentral for a purchase
consideration of RM640,000,000. The Property is a commercial development consisting of a
33-storey stratified office tower known as Menara Shell together with a 5-storey podium and a
4-storey basement carpark. It is constructed on part of a parcel of freehold land and held
under Geran 40094, Lot 348, Section 72, Town and District of Kuala Lumpur, Wilayah
Persekutuan Kuala Lumpur, Malaysia.

Menara Shell is strategically located in Kuala Lumpur Sentral, a self-contained urban

development comprising an integrated transit hub known as Kuala Lumpur Sentral Station,
corporate office towers and business suites, 5-star international hotels, condominiums and a
shopping mall. It is within walking distance to Kuala Lumpur Sentral Station which consists of
8 major transit lines including a dedicated line to KLIA and the soon to be completed Mass
Rapid Transit Line.

Menara Shell is designed with energy efficiencies and green features, and has been accorded
LEED platinum certification. In addition, it is also accredited with MSC Malaysia Status which
is one of the requirements by many multinational and local corporates.

Menara Shell is tenanted by a pool of established corporations such as Shell and AmGeneral
Insurance Berhad. Based on the tenancy schedule of the Property as at the LPD, Shell and
AmGeneral Insurance Berhad accounted for approximately 54.7% and 25.1% of the total NLA
of the Property respectively.

A summary of the salient information on the Property is as follows:

Postal address : Menara Shell, 211, Jalan Tun Sambanthan, 50470 Kuala
Lumpur
Strata title : Not issued yet
Parent title details : Geran 40094, Lot 348, Section 72, Town and District of Kuala
Lumpur, Wilayah Persekutuan Kuala Lumpur, Malaysia
Tenure : Term in perpetuity (Freehold)
Registered and : 348 Sentral
beneficial owner
Land area of parent : 91,224 sq ft
lot
Property use : 33-storey stratified office tower erected on a 5-storey podium
and a 4-storey basement car park
Age of building : Approximately 2 years old

4
4
Commencement of : 18 February 2014
operations
Number of parking : 915 car park lots and 110 motorcycle lots
bays
Gross built-up area : 820,916.69 sq ft (comprising Menara Shell and a shared podium
based on approved but excluding car park area)(1)
building plan
NLA as per tenancy : 557,053 sq ft
schedule as at 25
March 2016
Occupancy rate : 99.9%
based on NLA as
per tenancy
schedule as at the
LPD
Category of land : Building
use
Restriction in : Nil
interest
Encumbrances as : (i) The Lease; and
per land search
dated 16 February (ii) The Existing Charge(2)
2016
Express conditions : The land shall be used for commercial building for the purpose
as per land search of office and service apartment only
dated 16 February
2016
Market value : RM640,000,000
Date of valuation : 19 May 2016
Independent valuer : CBRE | WTW
Method of valuation : Investment and comparison methods

(Source: Extracted from the Valuation Report)

Gross rental : RM46,355,245

income for the FYE
31 December 2015
Initial net yield : 5.33%(3)
before financing
cost (based on the
financial statement
for the FYE 31
December 2015)
Audited net book : RM428,527,841
value as at 31
December 2015

5
5
 Notes:

(1) MQREIT, via the Trustee will acquire a 33-storey stratified office tower known as Menara Shell
together with a 5-storey podium and a 4-storey basement carpark, based on the Strata
Demarcation (as defined in Section 2.1.2(iii) below).

(2) The Existing Charge will be discharged as soon as practicable after the payment of the
Redemption Sum as part of the settlement of the Purchase Consideration as set out in Section
2.1.2(ii) below.

(3) The initial net yield is computed based on the net property income of the Property for the FYE
31 December 2015 of RM34,127,700 divided by the Purchase Consideration.

2.1.2 Salient terms of the SPA

The salient terms of the SPA include, among others, the following:

(i) Sale and purchase

348 Sentral agrees to sell and the Trustee agrees to purchase the Property and the
benefit and obligations in respect of the existing tenancies at the Purchase
Consideration free from all encumbrances (save and except for the Lease pursuant to
the Lease Agreements and the Existing Charge) together with all rights, title and
interest therein and thereto, subject however to the conditions, category of use and
restrictions of title of the Property expressed or implied in the strata titles to the
Property, upon the terms and conditions of the SPA.

(ii) Purchase Consideration

Subject to the adjustment to the Purchase Consideration provided for in Section

2.1.2(iii) below, the consideration payable for the sale and purchase of the Property
shall be RM640,000,000.

The Purchase Consideration shall be satisfied by the Trustee entirely in cash as

follows:

Consideration
Date of settlement Payment Note (RM ’000)

By the Completion Date or the Redemption Sum (a) 430,000

Extended Completion Date, as the
case may be Balance Purchase (b) 210,000
Consideration

Total 640,000

Notes:

(a) The Redemption Sum shall be paid to the facility agent of the Term Loan Facility
simultaneously with the payment of the balance Purchase Consideration to 348
Sentral. Assuming that the Term Loan Facility will be settled on 31 December 2016,
the Redemption Sum is estimated to be RM430 million, before taking into
consideration a principal settlement of RM25 million, which is due and payable on 16
December 2016. If the actual Redemption Sum is higher or lower than RM430 million,
the difference will be adjusted against the balance Purchase Consideration payable to
348 Sentral.

(b) The balance Purchase Consideration after the deduction of the actual Redemption
Sum (“Final Balance”) shall be paid to 348 Sentral by the Completion Date or the
Extended Completion Date, as the case may be.

6
6
 At any time prior to the Completion Date, 348 Sentral will be entitled to appoint a
nominee, being MRCB and/or a wholly-owned subsidiary of MRCB and/or wholly-
owned subsidiary of 348 Sentral, to receive and accept the Purchase Consideration
in place of 348 Sentral by giving to the Trustee 7 business days’ prior notice in writing
of such nomination together with all particulars of the nominee.

(iii) Adjustment to the Purchase Consideration

In the event that the market value of the Property is varied/adjusted pursuant to
variations/adjustments caused by whatsoever reasons (as mutually agreed by the
Trustee and 348 Sentral) (“Revised Market Value”), the purchase consideration of
RM640,000,000 shall be adjusted upwards or downwards by the same amount of the
variation/adjustments. Accordingly, the Revised Market Value shall be deemed as the
final Purchase Consideration provided that the upward/downward adjustment does
not exceed 3% of the Purchase Consideration.

Notwithstanding the above, if the adjustment shall amount to:

(a) an upward adjustment of 3% or more of the Purchase Consideration, the

Trustee shall be entitled to give notice to 348 Sentral immediately terminating
the SPA; or

(b) a downward adjustment of 3% or more of the Purchase Consideration, 348

Sentral shall be entitled to give notice to the Trustee immediately terminating
the SPA.

The Trustee or 348 Sentral terminating the SPA due to any adjustment of 3% or more
of the Purchase Consideration (as the case may be) will not be liable to pay any
damages whatsoever for such termination.

The Trustee and 348 Sentral agreed and declared that the position of the parcels
within the Property and the measurements, boundaries and estimated areas as
shown in the strata demarcation plan (“Strata Demarcation”) are believed but not
guaranteed to be correct. If the said details, size and/or area as given in the Strata
Demarcation shall be different from the details of the strata titles for the Property
when issued, no such discrepancy shall be the subject of any adjustment to the
Purchase Consideration or give rise to a claim for loss, damages, compensation or
otherwise, provided that:

(a) the NLA of the Property within the boundaries and/or area as shown in the
issued strata titles shall not be less than 557,053 sq ft; and

(b) there are at least 915 car park lots and 110 motorcycle lots within the
boundaries and/or area as shown in the issued strata titles.

The Strata Demarcation consists of the measurement of the gross floor area for the
Property. There will not be any effect to the adjustments to the Purchase
Consideration arising from the issuance of the strata title based on a revised Strata
Demarcation.

(iv) Conditions precedent

The sale and purchase of the Property shall be subject to and conditional upon the
following:

(a) the approval from the shareholder of 348 Sentral, and if required, the
shareholders of its holding company, MRCB for the disposal of the Property
to the Trustee;

(b) the approval of the Unitholders for the Proposals, which is the subject of this
Circular;

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7
(c) the Manager, on behalf of MQREIT, obtaining the approval of the SC (save
for (ee), all of which was obtained via its letter dated 27 September 2016) for:

(aa) the value of the Property;

(bb) the Proposed Placement;

(cc) issuance of new Units pursuant to the Proposed Placement and

Proposed Authority;

(dd) listing of and quotation for the new Units to be issued pursuant to the
Proposed Placement and Proposed Authority on the Main Market of
Bursa Securities;

(ee) exemption from complying with Clauses 14.04(a)(i) and (ii) of the
REIT Guidelines in relation to the Proposed Placement (which was
obtained via its letter dated 3 August 2016); and

(ff) the proposed increase in the approved fund size of MQREIT

pursuant to the issuance of the Placement Units and Manager’s
Units;

(d) the Manager, on behalf of MQREIT, obtaining the approval from Bursa
Securities (which was obtained via its letter dated 21 November 2016) for the
listing of and quotation for the new Units to be issued pursuant to the
Proposed Placement and Proposed Authority on the Main Market of Bursa
Securities;

(e) 348 Sentral, at its own cost and expense, and the Trustee, at the cost and
expense of MQREIT, procuring the undertaking of a valuation exercise on the
Property by the Valuer whereby a written report shall be prepared by the
Valuer (which shall be addressed separately to 348 Sentral and MQREIT) to
determine and confirm the valuation of the Property in such written report.
The Valuation Report has been issued by the Valuer;

(f) 348 Sentral, at its own cost and expense, obtaining written consent from the
facility agent of the Term Loan Facility, being CIMB, in relation to the disposal
of the Property (which was obtained via CIMB’s letter dated 13 September
2016);

(g) a letter of commitment in relation to the financing of the Property being issued
by the financier of the Trustee (“Financier”) (or in the case of debt
instrument, the letter of commitment from the financier(s) of the Trustee to
the arranger of the debt instrument) and accepted by the Trustee or
MQREIT’s special purpose company;

(h) the Trustee, on behalf of MQREIT, having received the proceeds from the
Proposed Placement;

(i) 348 Sentral, at its own cost and expense, obtaining the approval of Shell for
the novation and transfer of all the rights, benefits, interest and obligations of
348 Sentral in the Lease Agreement to the Trustee; and

(j) 348 Sentral providing documentary evidence to the Trustee that 348 Sentral
has submitted an application to the Department of Survey and Mapping for
the Federal Territory Kuala Lumpur or Director of Survey and Mapping for the
Federal Territory Kuala Lumpur for the issuance of the Certificate of
Proposed Strata Plan for the Property in accordance with the Strata
Demarcation (which was submitted on 24 October 2016),

8
8
 all to be obtained within 6 months from the date of the SPA, or such later period(s) as
348 Sentral and the Trustee may mutually agree to in writing. If all other conditions
precedent other than the condition precedent in Section 2.1.2(iv)(h) above are either
fulfilled or waived by then, the period of 6 months above shall be automatically
extended by a further period of 3 months after the expiry of the said period of 6
months.

(v) Completion

The completion of the sale and purchase of the Property shall take place at the office
of 348 Sentral on the Completion Date or the Extended Completion Date, as the case
may be.

(vi) Termination

(a) Default by 348 Sentral

In the event that there is a default by 348 Sentral to complete the sale and
disposal of the Property in accordance with the terms and conditions of the
SPA, or in the event any representation, warranty or undertaking by 348
Sentral is not true or accurate or is not complied with in any material respect,
the Trustee shall give to 348 Sentral a 45 days’ notice to rectify the alleged
breach or default as stipulated in the said notice.

In the event that 348 Sentral fails to rectify the alleged breach or default
within the said 45 days, the Trustee shall be entitled at its sole and absolute
discretion to do either of the following (by notice in writing to 348 Sentral):

(aa) require specific performance of the SPA; or

(bb) terminate the SPA and 348 Sentral shall within 14 business days of
its receipt of the notice of such written termination refund the
aggregate of the Final Balance and the Redemption Sum to:

- the Trustee, if the said amount has already been paid to 348
Sentral; or

- the Financier, to the extent the said amount has been paid by
the Financier,

after the Completion Date or the Extended Completion Date, as the

case may be (if any) interest-free and upon the terms and conditions
of the SPA.

(b) Default by the Trustee

In the event that the Trustee shall fail to satisfy the Purchase Consideration
or any part thereof or to complete the sale and purchase of the Property in
accordance with the terms and conditions of the SPA, or in the event any
representation, warranty or undertaking of the Trustee is not true or accurate
or is not complied with in any material respect, by the Completion Date or the
Extended Completion Date, as the case may be, save for non-payment of the
Purchase Consideration or any part thereof, 348 Sentral shall give to the
Trustee 45 days’ notice to rectify the alleged breach or default as stipulated in
the said notice. In the event that the Trustee fails to rectify the alleged breach
or default within the said 45 days, 348 Sentral shall be entitled at its sole and
absolute discretion to do either of the following (by notice in writing to the
Trustee):

(aa) require specific performance of the SPA; or

(bb) terminate the SPA.

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9
 If the SPA is terminated by 348 Sentral, the Trustee shall redeliver
legal possession of the Property (if delivered earlier) and where
applicable, procure the withdrawal of the private caveat, return
documents belonging to 348 Sentral, execute and deliver the deed of
novation and re-assignment (including payment of stamp duty), and
apply for licences to be re-issued in the name of 348 Sentral.

Upon the lawful termination pursuant to the above events, the SPA
shall become null and void and be of no further effect and neither
party shall have any further claims action or proceedings against the
other in respect of or arising out of the SPA, save and except for
antecedent breach and as provided in the SPA. Thereafter, 348
Sentral shall be at liberty to deal, sell or dispose the Property to any
third party without the necessity of previously tendering or offering to
sell to the Trustee and without having to account to the Trustee for
any profit made on such resale or disposal.

(c) There shall be no right of termination of the SPA for any reason whatsoever
upon the completion of the sale and purchase of the Property.

(vii) Non-registration of transfer or discharge of Existing Charge

If:

(a) upon the issuance of the strata title for each parcel under the Property, the
transfer of each parcel through a valid and registrable memorandum of
transfer in respect of each parcel under the Property (“Transfer”); or

(b) the discharge of the Existing Charge,

cannot be registered for any reason whatsoever other than through any default of the
Trustee or the Financier or any of their solicitors, 348 Sentral and the
Trustee/Financier shall work together to procure the registration of the Transfer and
the discharge of the Existing Charge.

If the matter giving rise to the non-registration cannot be rectified within 6 months of a
notice in writing from the Trustee to 348 Sentral to rectify this, the Trustee shall have
the right to require 348 Sentral to repurchase the Property from the Trustee at the
price to be mutually agreed upon by 348 Sentral and the Trustee (“Repurchase
Price”) provided that the Repurchase Price cannot be lower than the Purchase
Consideration or the redemption amount required to fully settle and discharge the
outstanding purchaser’s financing, whichever is higher. 348 Sentral and the Trustee
further agree that the Repurchase Price shall not contravene Clause 8.191 and
Clause 9.04(b)2 of the REIT Guidelines.

2.1.3 Basis and justification for the Purchase Consideration

The Purchase Consideration was arrived at based on the market value of the Property of
RM640,000,000 as appraised by the Valuer using the investment and comparison methods.
In view that the Proposed Acquisition is deemed a related party transaction involving two
public listed companies, the Purchase Consideration was determined based on the market
value of the Property of RM640,000,000 as ascribed by the Valuer.

1
Clause 8.19 of the REIT Guidelines states that a fund should not dispose of real estates at a price lower than
90% of the value assessed in a valuation report.

2
Clause 9.04(b) of the REIT Guidelines states that a real estate may be transacted at a price other than the price
that is equivalent to the value assessed in the valuation report (for related party transactions), provided that the
disposal price is not less than 90% of the value assessed in the valuation report.

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10
 The Valuer has adopted the investment method as the primary method of valuation in arriving
at the market value of the Property and the comparison method as a check. The market value
of the Property derived from the investment method is RM640,000,000 while that derived from
the comparison method is RM665,000,000. The Valuer considers the market value derived
from investment method to be a fair representation of the market value of the Property in view
that the Property is an income generating property.

The basis of valuation is the market value which is defined as the estimated amount for which
an asset or liability should exchange on the date of valuation between a willing buyer and a
willing seller in an arm’s length transaction after proper marketing wherein the parties had
each acted knowledgeably, prudently and without compulsion.

The Valuer had adopted the investment method in arriving at its opinion of market value for
the Property, which entails determining the net current annual income by deducting the
annual outgoings from the gross annual income and capitalising the net income by a suitable
rate of return consistent with the type and quality of investment to arrive at the market value.

As a check, the Valuer had adopted the comparison method in which recent transactions and
asking prices of similar properties in the larger locality are analysed for comparison purposes,
with adjustments made for differences in location, visibility, age and condition of the building,
design, finishes, specifications, size, strata/individual titles, tenure, density, public amenities,
green building features, MSC Malaysia Status, title restrictions if any, progress payments, and
other relevant characteristics to arrive at the market value.

Further details are set out in the valuation certificate for the Property dated 20 June 2016 as
enclosed in Appendix I of this Circular.

2.1.4 Total funding required

The estimated funding required in undertaking the Proposals is set out in the table below:

Estimated total funding required RM million

Purchase Consideration 640.0
Estimated expenses for the Proposals (1)
16.0
Total 656.0

Note:

(1) The estimated expenses for the Proposals comprise the following:

Details of estimated expenses RM million

Professional fees, placement fees, fees payable to the relevant 9.6
authorities, cost of convening the Meeting and other incidental
expenses
Acquisition fee of 1% of the Purchase Consideration due to the 6.4
Manager
Total 16.0

An additional cost of RM1.3 million to set up the debt funding programme to be incurred
pursuant to the borrowings will be financed via internally generated funds of MQREIT as
MQREIT has sufficient working capital to fund the same.

In addition, GST or any similar tax may also be chargeable on the Purchase Consideration. In
relation to the GST, on 1 August 2016, 348 Sentral had sought clarification from the Royal
Malaysian Customs Department (“RMC”) on the applicability of the GST payment. As at the
LPD, reply from the RMC is pending. Where GST is chargeable on the Purchase
Consideration, MQREIT is liable to bear such GST and it will be financed via borrowings.

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11
2.1.5 Source of funds

The Purchase Consideration and the expenses relating to the Proposals will be funded
through a combination of proceeds from the Proposed Placement and borrowings. The
amount of borrowings to fund the Proposed Acquisition will depend on the eventual proceeds
to be raised from the Proposed Placement, which will in turn depend on, among others,
market conditions, issue price and demand for the Placement Units.

For illustrative purposes only, based on the assumed issue price of RM1.15 per Placement
Unit (based on a discount of approximately 9.9% to the 5-day VWAMP of the Units up to and
including the LPD of RM1.2764), and the maximum 406,666,667 Placement Units, the gross
proceeds that would be raised from the Proposed Placement is RM467.7 million.

The estimated breakdown of the source of funding is set out below:

RM million
Gross proceeds to be raised from the Proposed Placement (1)
467.7
Borrowings 188.3
Total 656.0

Note:

(1) Based on a maximum of 406,666,667 Placement Units that has been approved by the SC. The
maximum number of Placement Units has been arrived at based on an earlier illustrative price
of RM1.05 per Placement Unit and gross proceeds of RM427.0 million as announced on 30
June 2016. The placement price of RM1.05 was at an approximate 8.5% discount to
RM1.1481, the 5-day VWAMP of the Units up to and including the Last Trading Date.

In the event the proceeds raised pursuant to the Proposed Placement is less than the amount
shown above, the difference will be funded via borrowings, subject to the total borrowings of
MQREIT not exceeding 50% of its total asset value. Nevertheless, in the event the proceeds
raised pursuant to the Proposed Placement is higher than the amount shown above, MQREIT
will reduce the amount of borrowings required to settle the Purchase Consideration, which is
expected to reduce the gearing level of MQREIT.

2.1.6 Liabilities to be assumed

MQREIT will not be assuming any liabilities, contingent liabilities or guarantees pursuant to
the Proposed Acquisition.

2.1.7 Additional financial commitment

Save for the financing to be obtained to fund the Proposed Acquisition which will be by way of
the establishment of a medium term notes programme and commercial paper programme
(wherein the Property will form part of the collateral pledged), and capital expenditure to be
incurred for the Property in the normal course of operations, MQREIT does not expect to incur
any other financial commitment arising from the Proposed Acquisition.

2.1.8 Original cost of investment

The original carrying value of the Property at completion of construction on 18 February 2014
is RM447,395,956.

2.1.9 Information on 348 Sentral

348 Sentral was incorporated as a private limited company in Malaysia on 9 October 2006
under the Act. 348 Sentral is a wholly-owned subsidiary of MRCB.

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12
 As at the LPD, the authorised share capital of 348 Sentral is RM100,000,000 comprising
50,000,000 ordinary shares of RM1.00 each and 5,000,000,000 redeemable preference
shares of RM0.01 each. The issued and paid-up capital of 348 Sentral as at the LPD is
RM38,661,791 comprising 38,035,001 ordinary shares of RM1.00 each and 62,679,000
redeemable preference shares of RM0.01 each. 348 Sentral is principally involved in leasing
of office and service residence units and provision of interior design fit out consultancy work
and services.

As at the LPD, the Directors of 348 Sentral are Tan Sri Mohamad Salim Fateh Din, Ann Wan
Tee, Kwan Joon Hoe and Shireen Iqbal Mohamed Iqbal.

(Source: MRCB and extracted from Companies Commission of Malaysia)

2.1.10 Information on MRCB

MRCB was incorporated in Malaysia on 21 August 1968 under the Act as a private limited
company under the name Perak Carbide Corporation Sendirian Berhad. It was converted to a
public company on 28 June 1969 and listed on the Stock Exchange of Malaysia and
Singapore (now known as the Main Market of Bursa Securities) on 22 March 1971. It
subsequently changed its name to Malaysian Resources Corporation Berhad on 12 October
1981.

As at the LPD, the authorised share capital of MRCB is RM5,000,000,000 comprising

5,000,000,000 ordinary shares of RM1.00 each in MRCB of which RM2,080,215,857
comprising 2,080,215,857 ordinary shares of RM1.00 each have been issued and credited as
fully paid-up.

MRCB is principally an investment holding company. MRCB also engages in construction-

related activities, environmental engineering, property development and investment as well as
provision of management services to its subsidiaries. MRCB’s subsidiaries and associates
are principally engaged in property development and property investment, building services,
environmental engineering, infrastructure and engineering as well as construction related
activities.

The particulars of MRCB’s directors and substantial shareholders and their respective
shareholdings in MRCB as at the LPD are as follows:

Direct Indirect
Nationality No. of shares % No. of shares %
Directors
Tan Sri Azlan Malaysian 120,000 * 30,000(1) *
Zainol
Tan Sri Mohamad Malaysian - - 358,322,581(2) 17.2
Salim Fateh Din
Mohd Imran Tan Malaysian - - - -
Sri Mohamad
Salim
Datuk Shahril Malaysian 500,000 * - -
Ridza Ridzuan
Jamaludin Zakaria Malaysian - - - -
Rohaya Malaysian - - - -
Mohammad
Yusof
Chuah Mei Lin Malaysian - - - -
Hasman Yusri Malaysian - - - -
Yusoff

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 Nationality /
Country of Direct Indirect
incorporation No. of shares % No. of shares %
Substantial
shareholders
EPF Malaysia 722,457,897 34.7 - -
Gapurna Malaysia 358,322,581 17.2 - -
Lembaga Tabung Malaysia 181,066,473 8.7 - -
Haji
Bank Kerjasama Malaysia 172,000,000 8.3 - -
Rakyat Malaysia
Berhad
Tan Sri Mohamad Malaysian - - 358,322,581(2) 17.2
Salim Fateh Din

Notes:

* Negligible, less than 0.1%

(1) Deemed interested by virtue of his shareholding in Edenview Projects Sdn Bhd.
(2) Deemed interested by virtue of his shareholding in Gapurna.

(Source: MRCB)

2.2 Proposed Placement

The Manager proposes to undertake the Proposed Placement to partially fund the Proposed
Acquisition and the expenses relating to the Proposals.

The Proposed Placement shall involve the issuance of up to 406,666,667 Placement Units,
representing up to 61.5% of the total Units in circulation as at the LPD and up to 38.1% of the
enlarged Units in circulation after the Proposed Placement, by way of a bookbuilding
exercise. The actual number of Placement Units to be issued will depend on the actual
placement size and the issue price, which shall be determined later after obtaining the
approval of Unitholders and after the close of the bookbuilding exercise.

The basis to determine the actual placement size will be decided based on the optimal debt to
equity ratio taking into consideration the expected DPU yield accretion. Based on the
assumed issue price of RM1.15 per Placement Unit (based on a discount of approximately
9.9% to the 5-day VWAMP up to and including the LPD of RM1.2764) and a maximum of
406,666,667 Placement Units to be issued, the gearing ratio of MQREIT after the Proposed
Acquisition and Proposed Placement will improve from 42.4% to 38.6% as at 31 December
2015. The actual placement size and the issue price will be determined by the chief executive
officer of the Manager pursuant to the authority given by the non-interested Directors of the
Manager.

The issue price for the Placement Units shall be based on the bookbuilding price. The
bookbuilding price range for the Placement Units would be determined based on, among
others:

(i) indicative demand and feedback from the potential investors;

(ii) precedent transactions; and

(iii) market price of the Units.

In any event, the Placement Units will be placed out at not more than 10% discount to the 5-
day VWAMP of the Units immediately prior to the price-fixing date.

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14
 MQREIT had obtained an undertaking letter dated 30 June 2016 from MRCB to subscribe for
the Placement Units at the issue price to be determined by way of a bookbuilding exercise for
an amount of no less than RM110,000,000 but up to RM152,000,000 in value pursuant to the
Proposed Placement. Please refer to Section 2.3 below for further details on the said
undertaking letter from MRCB.

MQREIT had also received a letter from EPF dated 17 October 2016 confirming its interest to
participate in the Proposed Placement for up to 7% of the enlarged Units in circulation after
the Proposed Placement. Please refer to Section 2.4 below for further details on the said
letter from EPF.

It is the intention of MQREIT that an underwriting arrangement for the Proposed Placement in
respect of the remaining amount (excluding the Proposed Placement to MRCB) to be
executed on the day of the bookbuilding exercise. The said underwriting arrangement will be
subject to terms and conditions to be agreed upon between the Manager and the Joint
Placement Agents.

2.2.1 Ranking of the Placement Units

The Placement Units shall, upon allotment and issue, rank equally in all respects with the
then existing Units in issue, save and except that the Placement Units shall not be entitled to
any distributable income, rights, benefits, entitlements and/or any other distributions, unless
the allotment and issue of the Placement Units were made on or prior to the entitlement date
of such distributable income, rights, benefits, entitlements and/or any other distributions.

2.2.2 Listing of and quotation for the Placement Units

Bursa Securities had, via its letter dated 21 November 2016, approved the listing of and
quotation for the Placement Units on the Main Market of Bursa Securities.

2.2.3 Exemption from the REIT Guidelines

Clauses 14.04(a)(i) and (ii) of the REIT Guidelines state that where an issue of units departs
from any of the applicable requirements stipulated in Clause 14.03 of the REIT Guidelines,
the management company must obtain unitholders’ approval by way of an ordinary resolution
for the precise terms and conditions of the issue, in particular on:

(i) the persons to whom the units will be issued; and

(ii) the amount of units to be placed to each of them.

The Proposed Placement departs from Clauses 14.03(a), (b) and (e) of the REIT Guidelines
as:

(i) the number of Placement Units to be issued exceeds 20% of MQREIT’s approved
fund size;

(ii) the number of Placement Units to be placed to MRCB would be more than 10% of
MQREIT’s approved fund size; and

(iii) part of the Placement Units will be placed out to MRCB, an interested person of the
Manager, and to EPF, a person connected to MRCB.

Therefore, MQREIT will be required to comply with the requirements under Clause 14.04(a) of
the REIT Guidelines.

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15
 Save for MRCB and EPF, the other placees together with the exact number of Placement
Units to be placed to each placee as required under Clauses 14.04(a)(i) and (ii) of the REIT
Guidelines respectively, cannot be ascertained at this juncture given that the Proposed
Placement would be carried out by way of a bookbuilding exercise, which will take place only
after obtaining the approvals of the SC (which was obtained via its letter dated 27 September
2016) and the Unitholders. The final list of placees together with the number of Placement
Units to be placed to each placee can only be determined after the close of the bookbuilding
exercise.

Accordingly, on behalf of MQREIT, the Manager had sought an exemption from the SC from
complying with Clauses 14.04(a)(i) and (ii) of the REIT Guidelines to facilitate the
implementation of the Proposed Placement. The exemption was approved by the SC via its
letter dated 3 August 2016.

2.2.4 Use of proceeds

The gross proceeds from the Proposed Placement are expected to be used within 1 month
from the listing of the Placement Units to partially settle the Purchase Consideration and the
expenses relating to the Proposals.

2.3 Proposed Placement to MRCB

To demonstrate its commitment to support the continued growth of MQREIT and its
confidence in the future prospects of MQREIT, MRCB, being a major Unitholder having a
unitholding of approximately 31.2% in MQREIT as at the LPD, has given an undertaking via a
letter dated 30 June 2016 to subscribe for the Placement Units at the issue price to be
determined by way of a bookbuilding exercise for an amount of no less than RM110,000,000
but up to RM152,000,000 in value pursuant to the Proposed Placement, representing
between 9.0% and 12.4% of the enlarged Units in circulation, after the Proposed Placement,
based on the illustrative issue price of RM1.15 per Placement Unit (“Undertaking”).

The Undertaking is subject to the following:

(i) the approval of the Unitholders for the Proposed Placement and Proposed Placement
to MRCB;

(ii) the approval of the shareholders of MRCB for the subscription in the Proposed
Placement;

(iii) the Proposed Placement being implemented in a single tranche;

(iv) MQREIT obtaining the approval from Bursa Securities for the listing of and quotation
for the Placement Units on the Main Market of Bursa Securities;

(v) MRCB and/or persons acting in concert with MRCB in relation to MQREIT will not
trigger a mandatory take-over offer in respect of the remaining Units not owned by
MRCB and persons acting in concert with MRCB due to MRCB’s subscription of the
Placement Units; and

(vi) the subscription for Placement Units in excess of RM110,000,000 in value shall be at
MRCB’s sole discretion.

For the avoidance of doubt, MRCB will not influence the manner in which the book builds for
the Proposed Placement nor the determination of the issue price of the Placement Units.
MRCB, as a price-taker, shall accept the final price for its Placement Units, being the issue
price to be determined after the bookbuilding exercise is closed and shall be duly announced
on Bursa Securities.

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16
2.4 Proposed Placement to EPF

As part of the Proposed Placement, MQREIT had invited EPF to participate in the Proposed
Placement. EPF had via its letter dated 17 October 2016 confirmed its interest to participate
in the Proposed Placement for up to 7%3 of the enlarged Units in circulation after the
Proposed Placement through a bookbuilding exercise, provided that EPF’s subscription of the
Placement Units (i) shall be at its preferred price4, (ii) will not in any way trigger a mandatory
take-over offer in respect of the remaining Units not owned by EPF and persons acting in
concert with it, and (iii) that MQREIT and/or the Manager will ensure that EPF’s subscription
of the Placement Units shall not in any way trigger a mandatory take-over offer5. EPF also
had, via the same letter, committed to participate in the pricing and bookbuilding exercise
together with other interested investors or subscribers for the Proposed Placement.

However, in the event that EPF does not participate in the Proposed Placement, the number
of Placement Units allocated to EPF shall be placed out to other placees by way of a
bookbuilding exercise. The Placement Units to other placees shall thereby increase
accordingly to raise sufficient proceeds to partially fund the Proposed Acquisition and the
expenses relating to the Proposals.

2.5 Proposed Authority

Pursuant to the Deed, the Manager is entitled to receive, among others, the Management
Fee. The Board proposes to progressively allot and issue up to 31,952,333 new Units
(approximately 3% of the total maximum Units in circulation after the Proposed Placement) for
the purpose of payment of the Management Fee to the Manager for the 3-year period from
the FYEs 31 December 2017 to 31 December 2019. The Proposed Authority will empower
the Board with the flexibility to allot and issue new Units to the Manager for partial or full
payment of the Management Fee, provided that the aggregate number of Units to be issued
pursuant to the Proposed Authority does not exceed 31,952,333 new Units.

The issue price of the Manager’s Units will be determined based on the 5-day VWAMP of the
Units of the relevant period in which the Management Fee accrues as stipulated in the Deed.

The Proposed Authority shall be effective from the date of the Unitholders’ approval until:

(i) 31 March 2020, being the last date on which the Management Fee in respect of the
FYE 31 December 2019 shall be paid; or

(ii) all the 31,952,333 Manager’s Units have been issued pursuant to the Proposed
Authority for the purpose of the payment of the Management Fee to the Manager in
respect of the FYEs 31 December 2017 to 31 December 2019,

whichever is earlier. The said authority is deemed to lapse in the event there are any
unissued Manager’s Units upon the expiry of the above period.

2.5.1 Ranking of the Manager’s Units

The Manager’s Units shall, upon allotment and issue, rank equally in all respects with the then
existing Units in issue, save and except that the Manager’s Units shall not be entitled to any
distributable income, rights, benefits, entitlements and/or any other distributions, unless the
allotment and issue of the Manager’s Units were made on or prior to the entitlement date of
such distributable income, rights, benefits, entitlements and/or any other distributions.

3
Represents up to 74,763,336 Units.

4 Refers to the bid price to be submitted by EPF during the bookbuilding process.
5 Based on confirmations by EPF and persons acting in concert with it, of their respective unitholdings in
MQREIT, the Trustee and/or the Manager will take reasonable steps to ensure that the Proposed Placement to
EPF will not trigger a mandatory take-over offer for the remaining Units not owned by EPF and persons acting in
concert with it, during the price fixing and allocation of Placement Units.

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2.5.2 Listing of and quotation for the Manager’s Units

Bursa Securities had, via its letter dated 21 November 2016, approved the listing of and
quotation for the Manager’s Units on the Main Market of Bursa Securities.

2.6 Proposed Increase in Fund Size

In order to accommodate the issuance of the Placement Units and the Manager’s Units to be
issued pursuant to the Proposed Placement and Proposed Authority respectively, the
Manager proposes to increase the existing approved fund size of MQREIT from 700,000,000
Units to a maximum of 1,100,000,000 Units.

3. RATIONALE FOR AND BENEFITS OF THE PROPOSALS

3.1 Proposed Acquisition

The rationale for the Proposed Acquisition include:

(i) DPU yield is expected to be accretive

The Proposed Acquisition is in line with the investment objective of the Manager to
continuously pursue an acquisition strategy to acquire and invest in properties used
or predominantly used for commercial purposes primarily in Malaysia with a view to
provide long-term and sustainable distribution of income to the Unitholders, and
achieve long-term growth in NAV.

For the FYE 31 December 2015, the Manager declared and paid approximately
94.3% of the total realised income after taxation or DPU of 8.47 sen. Excluding a one-
off gain on divestment of properties of 0.09 sen per Unit, the normalised DPU for the
FYE 31 December 2015 was 8.38 sen. The pro forma earnings per Unit after the
Proposed Acquisition, Proposed Placement and Proposed Authority is expected to be
7.67 sen (as set out in Section 6.3 below). The lower pro forma DPU of 7.67 sen
based on a 100% payout ratio as compared to the normalised DPU for the FYE 31
December 2015 of 8.38 sen is mainly due to the Property only achieving an
occupancy rate of 99.9% in December 2015 from 74% in November 2015, resulting in
lower income contribution for the year.

Nevertheless, the Manager expects the DPU yield to increase moving forward based
on the following envisaged broad parameters of the Proposals:

(a) future increase in net property income from expected rental reversions of the
current portfolio and the Property;

(b) a portion of the estimated Management Fee pursuant to the Proposed

Authority is paid in new Units;

(c) distribution of at least 90.0% of the net realised income of MQREIT; and

(d) the Purchase Consideration is funded by an optimal combination of

borrowings and proceeds from the Proposed Placement as set out in Section
2.1.5 above.

(ii) The Proposed Acquisition represents a growth catalyst

The Proposed Acquisition will strengthen MQREIT’s position as a sizeable,

geographically well-diversified office REIT in the Klang Valley. The Proposed
Acquisition will also strengthen MQREIT’s position among the REITs in Malaysia in
terms of total asset size and market capitalisation.

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For illustration purposes only, based on the valuation of RM640 million, MQREIT’s
asset size will increase from RM1.63 billion to RM2.27 billion upon completion of the
Proposed Acquisition and correspondingly elevate MQREIT’s position from 8th to 6th
out of 16 listed REITs (excluding KLCC Stapled Securities) in the Malaysian REIT
industry in terms of total asset size (based on the latest available audited financial
statements of the respective REITs as at the LPD) as follows:

Total Assets(1)
No. Listed REITs in Malaysia (RM million)

1. Sunway Real Estate Investment Trust 6,537

2. IGB Real Estate Investment Trust 5,170
3. Pavilion Real Estate Investment Trust 4,751
4. CapitaLand Malaysia Mall Trust 4,092
5. YTL Hospitality REIT 3,622
MQREIT 2,271
6. Axis Real Estate Investment Trust 2,141
7. AmFIRST Real Estate Investment Trust 1,728
8. MQREIT 1,625
9. Al-‘Aqar Healthcare REIT 1,594
10. UOA Real Estate Investment Trust 1,135
11. Hektar Real Estate Investment Trust 1,116
12. AmanahRaya Real Estate Investment Trust 1,101
13. Al-Salam Real Estate Investment Trust 950
14. Tower Real Estate Investment Trust 568
15. Atrium Real Estate Investment Trust 239
16. Amanah Harta Tanah PNB 227

Note:

(1) Extracted from the latest available audited financial statements of the respective
REITs as at the LPD.

The larger asset base will enable MQREIT to enjoy greater operating efficiency
arising through the efficient utilisation of current resources, namely manpower. It will
also enhance its competitive positioning providing MQREIT with greater bargaining
power and thus, enabling it to secure term contracts at more competitive terms.

In terms of market capitalisation, MQREIT’s market capitalisation will increase from

RM846.57 million based on the closing price of RM1.28 as at the LPD, to RM1.37
billion assuming the issuance of the maximum number of new Units pursuant to the
Proposed Placement. Correspondingly, this will elevate MQREIT’s position from 8th to
7th out of 16 listed REITs (excluding KLCC Stapled Securities) in the Malaysian REIT
industry.

The increase in Units in circulation is expected to provide more liquidity to MQREIT.

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(iii) Competitive strengths of the Property is expected to fit well into MQREIT’s
clientele requirements, enhance its portfolio profile and contribute positively to
the performance of MQREIT

The Property is expected to fit well into MQREIT’s clientele requirements, enhance its
portfolio profile and contribute positively to the performance of MQREIT based on the
following factors:

(a) The Property currently enjoys almost full occupancy with an occupancy rate
of 99.9%. Therefore, with the addition of the Property to MQREIT’s portfolio,
MQREIT’s overall occupancy rate would improve from 97% to 98%.

(b) The Property is situated in Kuala Lumpur Sentral, a self-contained

transportation hub and a prime commercial area within Kuala Lumpur. The
Proposed Acquisition will increase MQREIT’s footprint in Kuala Lumpur
Sentral and would augur well for MQREIT in view that Kuala Lumpur Sentral
is highly sought after by corporate tenants.

(c) The inclusion of a green building with LEED platinum certification and MSC
Malaysia Status will fit well into MQREIT’s clientele requirements for high-
quality specification buildings.

(d) The tenant mix profile of the Property will provide a good mix of high-quality
multinational and large local conglomerate tenants for MQREIT’s overall
clientele mix. MQREIT’s tenant base before the Proposed Acquisition is
broadly categorised into 8 sectors as depicted below:

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 Subsequent to the Proposed Acquisition, the tenant mix is expected to further
diversify into 12 sectors, as follows:

The enlarged tenant base will diversify MQREIT’s income stream across a
wider spread of tenants from various sectors, reducing the reliance on
income contribution from any one or more major trade sectors.

3.2 Proposed Placement

The Board had considered various funding options to fund the Proposed Acquisition taking
into consideration, among others, the prevailing market condition, payment of Management
Fee in new Units, interest rate environment, MQREIT’s capital structure, the expected DPU
accretion and gearing level.

Furthermore, a rights issue will also result in both an EPU and DPU dilution due to the larger
number of Units to be issued. Although the Proposed Placement has a dilutive effect on the
unitholdings of the Unitholders who are unable to participate, their DPU will not be affected
taking into consideration, among others, future increase in net property income from expected
rental reversions of current portfolio and the Property as well as payment of Management Fee
in Manager’s Units.

Taking into consideration all of the above, the Board decided that the Proposed Placement is
the preferred mode of equity funding.

The rationales for the Proposed Placement are as follows:

(i) Clause 8.37 of the REIT Guidelines stipulates that the total borrowings of a fund
(including borrowings through issuance of debt securities) should not exceed 50% of
the total asset value of the fund at the time the borrowings are incurred, unless the
sanction of the Unitholders by way of an ordinary resolution is obtained. The gearing
level of MQREIT was approximately 42.4% of the total asset value as at 31
December 2015. In the event the Purchase Consideration and the estimated
expenses relating to the Proposals are funded totally by debt financing, it will increase
the gearing level to approximately 59.1% of MQREIT’s total asset value which would
exceed the 50% limit stipulated under the REIT Guidelines.

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 The Proposed Placement will enable MQREIT to raise equity to partially finance the
Proposed Acquisition, thus reducing the gearing level, relative to funding the
Proposed Acquisition entirely via debt. The existing gearing level will decrease from
42.4% to 38.6%, assuming gross proceeds of RM467.7 million are raised. Should the
Proposed Placement enable MQREIT to lower its gearing level, it will have sufficient
headroom to undertake future cash acquisitions which is in line with the capital
management and growth strategy of MQREIT.

(ii) The Proposed Placement will allow MQREIT to raise funds expeditiously as it can be
implemented immediately upon obtaining Unitholders’ approval. Unitholders who will
not be able to participate in the Proposed Placement would not be required to
contribute additional capital. Notwithstanding the above, the Manager will determine
the optimal number of Placement Units to achieve an optimal debt to equity ratio as
illustrated in Section 2.2 above.

(iii) The Proposed Placement will involve the issuance of new Units which will increase
the number of Units in circulation and may improve the trading liquidity of MQREIT.
The Proposed Placement should allow MQREIT to attract more local and
international institutional investors to invest in MQREIT, thereby potentially enlarging
its Unitholders base. The Proposed Placement will allow new reputable investors to
invest in MQREIT, which serves as a testament of investors’ confidence in the future
prospects of MQREIT.

3.3 Proposed Placement to MRCB

The Proposed Placement to MRCB demonstrates the commitment of MRCB to support the
Proposed Placement. It will also allow MRCB to maintain its majority stake in the enlarged
unitholders’ capital of MQREIT after the Proposed Placement.

In addition, as MRCB and its subsidiaries have an established track record in property
development with a portfolio of commercial and residential developments in Malaysia,
MQREIT is able to leverage on and benefit from MRCB’s pipeline of future assets that
MQREIT could potentially acquire, if these assets meet MQREIT’s investment criteria.

3.4 Proposed Placement to EPF

EPF is a reputable institutional fund in Malaysia and the inclusion of EPF as a Unitholder will
provide further diversity to MQREIT’s institutional investor base. The Proposed Placement to
EPF would be part of the proceeds raised from the Proposed Placement, which would
facilitate the completion of the Proposed Acquisition and in turn benefit MQREIT as a whole.

3.5 Proposed Authority

The Proposed Authority will provide the Manager with more flexibility in the structuring of the
payment of Management Fee. To the extent that the Manager chooses to receive the
Management Fee in the form of new Units, the Manager’s interest will be further aligned with
those of the Unitholders. In addition, any cash conserved for the payment of the Management
Fee can be used by MQREIT for future acquisition, capital expenditures and/or distribution to
Unitholders.

3.6 Proposed Increase in Fund Size

The Proposed Increase in Fund Size is to accommodate the issuance of Placement Units and
Manager’s Units pursuant to the Proposed Placement and Proposed Authority respectively.

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4. OUTLOOK AND PROSPECTS

MQREIT is a REIT and the investment objective of the Manager is to acquire and invest
primarily in properties used or predominantly used for commercial purpose primarily in
Malaysia with a view to provide Unitholders with long-term and sustainable distribution of
income to the Unitholders, and achieve long-term growth in NAV. MQREIT’s prospects are
inherently linked to the outlook of the Malaysian economy and property industry.

4.1 Malaysian economic overview and outlook

Malaysia’s 4.1% growth in the first half of 2016 (January – June 2015: 5.3%) was mainly
driven by domestic demand, which grew at a steady pace of 5% (January – June 2015: 6.3%)
on account of private sector spending. Private consumption expanded 5.8% (January – June
2015: 7.7%), mainly driven by the stable labour market and income growth. Gross fixed
capital formation increased 3.2% (January – June 2015: 3.9%), mainly led by private
investment activity, which grew 4% (January – June 2015: 7.4%). The surplus in the goods
and services account of the balance of payments narrowed to RM31.8 billion (January – June
2015: RM42.8 billion) following weak global demand and declining commodity prices.

On the supply side, all sectors of the economy recorded positive growth except agriculture.
The services sector grew 5.4% (January – June 2015: 5.7%) spurred by higher activity in the
wholesale and retail trade, information and communication, as well as food and beverages
and accommodation subsectors. The manufacturing sector grew 4.3% (January – June 2015:
4.9%), mainly supported by electrical and electronics and resource-based products
subsectors. The construction sector expanded further by 8.4% (January – June 2015: 7.6%)
underpinned by higher activity in the civil engineering and residential segments. Meanwhile,
the mining sector grew at a moderate pace of 1.4% (January – June 2015: 7.8%) on account
of lower output of crude oil. In contrast, the agriculture sector declined 6% (January – June
2015: 0.3%) due to lower output of crude palm oil and rubber.

Given the nation’s strong economic fundamentals coupled with the 2017 budget strategies
and programmes, the economy is expected to expand between 4% and 5% in 2017. The
expansion translates into gross national income per capital growth of 5% from RM37,812 to
RM39,699. On the demand side, growth will emanate from domestic demand, particularly
private consumption and private investment expenditures which are expected to expand 6.3%
and 5.8%, respectively. In tandem with higher investment activities, the savings-investment
gap is expected to narrow to 0.5% - 1.5% of gross national income (2016: 1% - 1.5%).
Inflation will remain manageable, while the economy continues to operate under full
employment. All sectors of the economy are expected to contribute to growth, with the
services and manufacturing sectors spearheading the expansion. With the government’s
commitment to enhancing revenue and rein in expenditure, the fiscal deficit is expected to
improve further to 3% of gross development product. These developments will strengthen the
economic fundamentals and augurs well for a nation in transition from an upper-middle to a
high-income and advanced nation.

(Source: Economic Report 2016 - 2017, Ministry of Finance Malaysia)

4.2 Overview and prospects of the office property in Klang Valley

The Klang Valley PBO market was insipid during the review period, being the fourth quarter of
2015 (“4Q 2015”), due to a combination of dreary global and domestic economic performance
and falling commodity prices. The PBO sector will continue to remain as tenants’ market with
some 4.5 million sq ft scheduled for completion by end 2016. Vacancy rate is expected to
hover around 15% to 18% in view of anticipated completions over the next 3 years.

Nevertheless, despite concerns about the present market conditions, demand for office space
is expected to remain stable supported by local as well as foreign demand, primarily by the
services sector, due to the weakening ringgit.

Market prices and rentals of PBO buildings, on the other hand, are also anticipated to remain
stagnant where better quality office space will continue to stand out, fetching slightly higher
premiums compared to current rental levels.

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Supply

As at 4Q 2015, the cumulative PBO supply in the Klang Valley stood at 98.6 million sq ft with
Central Kuala Lumpur continuing to be the focus, accounting for 45.3 million sq ft (or 46% of
total Klang Valley supply) followed by Metropolitan Kuala Lumpur at 39.6 million sq ft (or 40%
of total Klang Valley supply) and the remaining 13.7 million sq ft (or 14% of total Klang Valley
supply) from Greater Kuala Lumpur.

In terms of office grading, approximately 61.6 million sq ft (or 62% of total Klang Valley
supply) are contributed by prime office buildings, i.e. Grade Premium A and Grade A while the
remaining are contributed by non-prime space which accounted for some 36.9 million sq ft (or
38% of total Klang Valley supply) during the review period.

In Western Metropolitan Kuala Lumpur where the subject property is located, the total supply
of PBO space stood at 19.1 million sq ft (or 19% of total Klang Valley supply) where prime
office space accounted for 16.3 million sq ft (or 85% of total Western Metropolitan Kuala
Lumpur supply).

In terms of future supply, a total of 15 new PBO buildings or approximately 7.2 million sq ft of
office space are expected to be completed in the Klang Valley by end of 2018 with about 4.1
million sq ft (or 57% of total Klang Valley future supply) located in Metropolitan Kuala Lumpur.

About 3.0 million sq ft, or 74% of the total share of Metropolitan Kuala Lumpur future supply,
are located within Western Metropolitan Kuala Lumpur.

Demand

The overall vacancy of office space in the Klang Valley had improved by 0.9% from 2014 and
registered at 15.3% during the review period. Central Kuala Lumpur and Metropolitan Kuala
Lumpur experienced an increase of 3.5% and 0.3% from 2014 to register a vacancy rate of
13.5% and 20.6% respectively. Greater Kuala Lumpur, on the other hand, had a marginal
improvement of about 0.1% registering at 23.7% during the review period.

The overall vacancy rate in Western Metropolitan Kuala Lumpur observed an improvement of
about 8.1% from 2014, registering at 12.7% during the review period. The improvement in the
vacancy rate was largely due to the closure of Damansara Town Centre.

Rents and capital values

The Valuer’s survey of prime office rentals in Central Kuala Lumpur and Western Metropolitan
Kuala Lumpur revealed that rental growth from 2007 to 2011 was the most apparent in
Western Metropolitan Kuala Lumpur for all categories, with and without MSC Malaysia Status.
The growth of rental levels over the past couple of years could be due to the completion of
new generation of office buildings such as Quill 7 at Kuala Lumpur Sentral, Plaza Sentral, 1
Sentral at Kuala Lumpur Sentral, Menara UOA Bangsar (Towers A and B) in Bangsar,
Gardens North and South Towers and Centrepoint at Mid Valley City.

In general, gross asking rentals have improved since 2008 owing to the newer breed of office
buildings which are mostly of better quality, with MSC Malaysia Status and/or with Green
Building compliance/certification. Prime office space in Central Kuala Lumpur continues to
command top rentals despite being a close match with similar office space with MSC
Malaysia Status situated in Western Metropolitan Kuala Lumpur, particularly those in Kuala
Lumpur Sentral transport hub. This could likely be due to the tenants’ preference for prime
office premises with a Kuala Lumpur address which still ranks high amongst the multinational
companies and financial sector as it exudes prestige, being the capital city.

The office market in Malaysia is not particularly mature to reflect any significant price trends
over the years, however, observation on the transactions of prime office buildings, i.e. Grade
Premium A and Grade A in Kuala Lumpur had noted an upward price trend.

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 Outlook

The Klang Valley office market, as at 4Q 2015, appeared to have been improving moderately
with occupancy rate increase quarter-on-quarter by 1.2% from 83.5% in the fourth quarter of
2014 to 84.7% during the review period albeit lower by 1.7% as compared with the first
quarter of 2015. A slower performance was observed likely due to the sluggish condition of
foreign markets and a very cautious local market.

In terms of future supply, approximately 7.2 million sq ft from 15 PBO buildings are expected
to be released into the Klang Valley market by end 2018. Out of the total, 6 office buildings
totaling 3.0 million sq ft are located within Western Metropolitan Kuala Lumpur. Should all
these office buildings which are currently under various stages of construction complete as
scheduled, it is envisaged that these new completions may exert pressure to the market in
terms of rental and performance.

The outlook for the office sector in the Klang Valley within the next 6 to 12 months shall
nevertheless remain resilient with some indications of further movement of tenants but with no
real growth expected in market rentals. Nevertheless, landlords of quality grade office
buildings are likely to maintain their present rental rates for the remaining vacant office space
in the next 6 to 12 months. Selected newer buildings that are expected to come on stream or
have recently completed are commanding premium rentals as they are mostly provided with
more advanced features like Green Building Index/LEED compliant as well as MSC Malaysia
Status/CyberCentre status.

Market prices of office buildings are expected to generally remain stable in the short term
despite numerous transactions recorded in the last 12 months. However, on the investment
front, interest is very keen and with the weakening of ringgit, transactional activities are
expected to increase in the next 6 to 12 months where prime office buildings with investment
potential are expected to continue to attract investors.

(Source: Extracted from the Valuation Report)

4.3 Prospects of the Property

The Property is strategically located in Kuala Lumpur Sentral, a self-contained urban

development comprising of an integrated transit hub known as Kuala Lumpur Sentral Station,
corporate office towers and business suites, 5-star international hotels, condominiums and a
shopping mall. It is within walking distance to Kuala Lumpur Sentral Station which consists of
8 major transit lines including a dedicated line to KLIA and the soon to be completed Mass
Rapid Transit Line. The Property’s strategic location will benefit its tenants in view of the
excellent connectivity to other urban and suburban residential, commercial and industrial hubs
within Malaysia, KLIA, Putrajaya (the Federal Government Administrative Centre) and
Cyberjaya.

Menara Shell is easily accessible via Jalan Tun Sambanthan and Jalan Travers. It can also
be easily accessed from few major highways and roads like the Federal Highway, the New
Pantai Expressway, Jalan Bangsar, Jalan Tun Sambanthan, Jalan Istana, Jalan Damansara,
Lebuhraya Sultan Iskandar (formerly known as Lebuhraya Mahameru), New Pantai
Expressway and Federal Highway linking the Property to other commercial hubs within Kuala
Lumpur such as Bangsar, Damansara and the Kuala Lumpur central business district as well
as other main locations within Selangor such as Petaling Jaya and Shah Alam.

Other than its prime location, the Property was built with emphasis on energy saving and
environment sustainability. The Property is designed with energy efficiencies and green
features, and has been accorded LEED platinum certification. In addition, the Property is
designed to provide for high levels of natural lighting and is equipped with state of the art
green technology which includes a thermal energy storage system, under floor air
conditioning system, rainwater recycling system and daylight harvesting system. In addition, it
is also accredited with MSC Malaysia Status which is one of the requirements by many
multinational and local corporations.

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 It currently enjoys high committed occupancy rate made up of reputable and established
tenants comprising of multinational and local companies, on the back of more than half of its
total NLA committed under long lease arrangements. The details of the tenants as at the LPD
are as follows:

The prospects of the Property are expected to be positive in view of its strategic location,
good accessibility and high quality specifications that meet the requirements of MQREIT’s
clientele requirements. These property attributes are expected to be able to attract new and
existing tenants’ demands, which in turn will provide a stable income stream to MQREIT.

(Source: The Manager)

5. RISK FACTORS

Unitholders should consider the following risks inherent in the property market and the risk
factors (which may not be exhaustive) pertaining to the Proposed Acquisition.

5.1 Risks relating to the Proposed Acquisition

5.1.1 Financing risk

MQREIT will depend on external financing to part-finance the Proposed Acquisition. The
incurrence of debt to finance the Proposed Acquisition will result in new interest/principal
servicing obligations. In the event that MQREIT undertakes to part finance the Proposed
Acquisition via floating rate debt facilities, any future significant increase in interest rates could
have an adverse effect on MQREIT’s cash flows and profitability which in turn may affect its
ability to make distributions to its Unitholders.

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 In mitigating such risk, MQREIT will actively review its debt portfolio taking into account the
level, structure and nature of borrowings, and will seek to adopt cost effective and optimal mix
of financing options. The Manager believes that its prudent capital management will be able
to address and mitigate MQREIT’s financing and interest rate risk in a volatile market
environment. While efforts will be taken to ensure that no significant adverse effects would
arise from the interest/principal servicing commitments, there is no assurance that it will not
have any material impact on the MQREIT’s future financial performance.

5.1.2 Delay in completion of the Proposed Acquisition

The Purchase Consideration and the estimated expenses relating to the Proposals cannot be
fully funded by debt financing in view that it would result in the gearing level of MQREIT
exceeding the 50% limit stipulated under the REIT Guidelines. Accordingly, the successful
completion of the Proposed Placement is vital in ensuring the completion of the Proposed
Acquisition.

If the indicative demand from investors at the proposed price range pursuant to the Proposed
Placement is insufficient to ensure a successful completion of the placement exercise and/or,
if the price range falls beyond 10% discount to the 5-day VWAMP of the Units, the Manager,
in consultation with the joint bookrunners, may decide to lower the price range, or defer the
bookbuilding exercise until such time when market conditions improve.

It is the intention of MQREIT that an underwriting arrangement for the Proposed Placement
be executed on the day of the bookbuilding exercise to mitigate the risk of non-completion of
the Proposed Placement. Notwithstanding the above, the said underwriting arrangement will
be subject to terms and conditions to be agreed upon between the Manager and the joint
placement agents.

In the event that the bookbuilding exercise is deferred resulting in the non-fulfilment of the
conditions precedent of the SPA which requires the proceeds from the Proposed Placement
to be received by the Trustee (on behalf of MQREIT), the completion of the Proposed
Acquisition will be delayed accordingly.

5.2 Risks relating to the Property to be acquired

5.2.1 Loss of tenants

Based on the tenancy schedule of the Property as at 30 June 2016, the top 2 tenants of the
Property (in terms of NLA occupied) accounted for approximately 80% of the total NLA of the
Property. The ability of the Property to generate revenue may be adversely affected by the
loss of either one of these key tenants should they decide not to renew their tenancies or
request for early termination of their leases.

The sudden loss of key tenants could result in periods of vacancy for the Property as
MQREIT will require time to secure new tenants for sizable vacant office space. In addition,
the terms of new leases with new tenants may be less favourable than those of the existing
leases. Therefore, the gross rental income of the Property may decrease arising from lower
occupancy rates due to non-renewal of expired leases as well as lower rental rates negotiated
for new leases. This could in turn adversely affect the revenue generated from the Property,
the operating results of MQREIT and ultimately the ability of MQREIT to sustain its current
income levels and distribution to its Unitholders.

To mitigate this risk, the Manager intends to put in place active leasing and asset
management strategies which are centred upon building strong tenant relationships with the
existing tenants and ensuring that satisfactory retention rates are achieved.

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5.2.2 Losses from latent building defects

Due diligence on the Property conducted prior to the Proposed Acquisition may not identify all
material defects, breaches of laws and regulations and other deficiencies, which could result
in unpredictable business interruption and additional expenses on repairs and rectifications
being incurred.

The representations, warranties and indemnities made in favour of MQREIT by the Vendor
pursuant to the SPA may not offer sufficient protection for the costs and liabilities arising from
any defect or deficiency, which may have a material adverse effect on MQREIT’s earnings
and cash flows. Further, the Trustee’s rights to claim against the Vendor for breach of such
representations, warranties and indemnities are subject to a maximum aggregate liability in
respect of all claims which shall not exceed RM100,000,000. However, no liability shall be
attached to the Vendor where the amount of any individual claim (or a series of claims arising
from same facts or circumstances) where the liability agreed or determined in respect of any
such claim or series of claims is less than RM100,000. Where the liability agreed or
determined in respect of any such claim exceeds RM100,000, the Vendor shall be liable for
the whole of the amount (and not only the differential) of the claim or series of claims as
agreed or determined.

MQREIT’s right to claim for breach of any warranty given by the Vendor shall expire at the
end of 18 months after the Completion Date or the Extended Completion Date, as the case
may be. No claim may be made for breach of any warranty given by vendor unless a written
notice of the claim is made and submitted to the Vendor with sufficient particulars to identify
the breach and the amount of the claim within the said period of 18 months after the
Completion Date or Extended Completion Date, as the case may be.

5.2.3 Inadequate insurance and potential losses due to uninsured liabilities

The Property may suffer physical damages by fire, flood, earthquake or other causes which
may cause MQREIT to suffer public liability claim thereby resulting in losses (including loss of
rental income) and MQREIT may not be sufficiently compensated/covered by insurance. In
addition, certain types of risks (such as war risk and terrorist acts) may be uninsurable or not
economically insurable.

Should an uninsured loss or a loss in excess of insured limits occur, MQREIT could suffer a
loss of capital invested in the Property as well as anticipated future revenue from the
Property. MQREIT would also remain liable for any debt or other financial obligation related to
the Property. No assurance can be given that material losses in excess of insurance
proceeds (if any) will not occur in the future. In the event that an uninsured loss or a loss in
excess of insured limits occurs, this may adversely affect MQREIT’s financial condition and
results of operations.

The Property is currently insured against risks such as fire, business interruption and public
liability, which the Manager believes is consistent with general industry practice in Malaysia.
The Manager may in the future take up insurance against such other relevant risks as and
when the Manager considers there is a need to do so.

5.2.4 Risks associated with asset enhancement initiatives

The Property may need to undergo renovation or asset enhancement works from time to time
to retain its competitiveness and may also require unforeseen ad hoc maintenance or repairs
in respect of faults or problems that may develop from time to time. The costs of maintaining a
property and the risk of unforeseen maintenance or repair requirements tend to increase over
time as the building ages.

The Manager will work together with the property manager to identify and plan for future asset
enhancement or rectification works in respect of the Property to minimise disruption to the
operations of the Property. While the Manager and the property manager will endeavour to
keep any disruptions caused by such renovation works or maintenance or repairs to a
minimum, the operations of the Property may still suffer some disruption.

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 Further, there is no assurance that the renovation or asset enhancement works will be able to
achieve their intended return or benefit as the Property may still be unable to attract new
tenants or retain existing tenants, and significant costs may have been incurred by MQREIT
in the course of such renovation or asset enhancement works.

5.2.5 Devaluation of the Property

Property valuations (including the valuation conducted by the Valuer in connection with the
Proposed Acquisition) generally include a subjective evaluation of certain factors relating to
the relevant properties, such as their relative market positions, their financial and competitive
strengths and their physical conditions.

General property prices, including that of commercial property, are subject to the volatilities of
the property market and there can be no assurance that MQREIT will not be required to make
downward revaluation of the Property in the future. Any fall in the gross revenue or net
property income derived from the Property may result in its downward revaluation.

MQREIT is required to measure the investment properties at fair value at each reporting date.
The changes in fair value may have an adverse effect on MQREIT’s financial results in the
financial year where there is a significant decrease in the valuation of MQREIT’s investment
properties, which will result in revaluation losses that will be charged to its statement of
comprehensive income. However, this should not have an impact on income available for
distributions to Unitholders.

Upon the completion of the Proposed Acquisition, the Manager will evaluate and where
necessary, put in place asset enhancement initiatives to maintain the condition of the Property
as well as to retain its competitiveness vis-à-vis other office buildings within the vicinity and to
meet the requirements of its tenants. In addition, the Manager intends to put in place a
marketing initiative which will promote and enhance the public profile and visibility of the
Property so as to maximise tenant interest and demand and correspondingly, provide a
sustainable stream of income to the Property with a view to maintain the long-term value of
the Property.

5.2.6 Delays in the issuance and transfer of the strata titles of the Property

Menara Shell is part of an integrated development comprising a 33-storey office building and
1 block of 21-storey serviced apartment erected on a 5-storey podium and a 4-storey
basement car park which are currently held under 1 master title (“Development Properties”).
The Development Properties will be subdivided into 7 separate strata titles in accordance with
the Strata Demarcation. As at the LPD, the strata title in respect of the Property has not been
issued.

In accordance with the terms and conditions of the SPA, the Vendor is required to submit an
application to the Department of Survey and Mapping for the Federal Territory Kuala Lumpur
for the issuance of the Certificate of Proposed Strata Plan for the Development Properties.
Upon obtaining the Certificate of Proposed Strata Plan, the Vendor is required within 1 month
from the issuance the said certificate, to file in its subdivision application for the Development
Properties to the Director of Lands and Mines (and in the case of the Federal Territory, the
Land Administrator) for approval and the issuance of the individual strata titles of the
Development Properties. The Trustee will only become the registered and legal owner of the
Property once the statutory instrument of transfer is presented for registration at the relevant
land office and endorsement of the name of the Trustee as the registered owner on the
respective strata titles to the Property.

Given that the Strata Title (Amendment) Act 2013 has just recently taken effect, it is uncertain
at this juncture the duration required for the subdivision process and transfer of the strata
titles of the Property thereafter. As such, there could be possible delays in completing the
subdivision process and transfer of the strata titles of the Property.

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5.3 Risks relating to the property market

5.3.1 Increased competition from other properties

The Property may be affected by increased competition from other office properties in the
vicinity. The increase in supply of new office space will provide existing and prospective
tenants with a wider choice of available office space to rent and this could potentially exert
downward pressure on rental rates should the supply of office space exceed demand.

The ability of the Property in attracting or retaining tenants depends on factors including the
attractiveness of the building and its surrounding as well as the quality of the building’s
existing tenants. The appeal of the Property may diminish if the Property fails to retain its
competitiveness in light of new office supply in the vicinity with higher quality and building
specifications and/or existing properties that undergo upgrading works. Such competition from
neighbouring properties could adversely affect the revenue derived from the Property, thereby
adversely affecting MQREIT’s cash flow and its ability to make distributions to its Unitholders.
In order to mitigate competition risk in the property market, the Manager will endeavour to
work with the property manager and tenants to provide quality services which meet the
requirements and expectations of the tenants.

5.3.2 Compulsory acquisition by the Government

The Government has the power to compulsorily acquire any land in Malaysia pursuant to the
provisions of the applicable legislation including the Land Acquisition Act 1960 for certain
purposes where the compensation to be awarded is based on the fair market value of a
property assessed on the basis prescribed in the Land Acquisition Act 1960 and other
relevant laws. Compulsory acquisition by the Government could adversely affect the value of
the Property, which could impair MQREIT’s financial condition and results of operations.

Furthermore, if all or any portion of the Property is compulsorily acquired by the Government
at a point in time when the market value of the Property has decreased, the level of
compensation paid to MQREIT may be less than the price which MQREIT paid for the
Property, which may have an adverse effect on MQREIT’s business, financial condition,
results of operations and prospects.

In the event of any compulsory acquisition, MQREIT will seek to minimise any potential losses
from such transaction, including invoking the relevant provisions of the Land Acquisition Act
1960 in relation to its rights to submit an objection in respect of the compensation, where
necessary.

6. EFFECTS OF THE PROPOSALS

For illustrative purposes only, the pro forma effects of the Proposals are set out below based
on the following parameters:

Illustrative issue price of the Placement Units : RM1.15(1)

Size of the Proposed Placement : RM467,666,667

Placement Units issued : 406,666,667

Borrowings raised : RM188,333,333

Note:

(1) Based on a discount of approximately 9.9% to the 5-day VWAMP of the Units up to and
including the LPD of RM1.2764.

The effects of the Proposed Placement to MRCB and Proposed Placement to EPF are
reflected accordingly in the effects of the Proposed Placement as they form part of the
Proposed Placement.

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6.1 Unitholders’ capital

The Proposed Acquisition will not have any effect on the Unitholders’ capital of MQREIT.

The pro forma effects of the Proposed Placement on the Unitholders’ capital of MQREIT,
assuming the issuance of the maximum number of Units under the Proposed Placement are
as follows:

No. of Units
‘000
As at the LPD 661,381
To be issued under the Proposed Placement 406,667
Enlarged Unitholders’ capital 1,068,048

The quantum of the increase in Unitholders’ capital as a result of new Units to be issued
under the Proposed Authority will depend on the quantum of the Management Fee, which will
be satisfied in the form of new Units and the issue price which will be determined in
accordance with the Deed. For illustration purposes only, assuming the maximum 31,952,333
new Units are issued pursuant to the Proposed Authority, the enlarged Unitholder’s capital of
MQREIT after the Proposed Placement and the Proposed Authority would be 1,100,000,000
Units.

The Proposed Increase in Fund Size will not have any effect on the Unitholders’ capital of
MQREIT. However, the quantum of the Proposed Increase in Fund Size will depend on the
number of new Units issued under the Proposed Placement and Proposed Authority.

6.2 Substantial Unitholders’ unitholdings

The Proposed Acquisition will not have any effect on the unitholdings of the substantial
Unitholders.

The pro forma effects of the Proposed Placement on the unitholdings of the substantial
Unitholders based on the Record of Depositors of MQREIT as at the LPD are as follows:

After the Proposed Acquisition and

As at the LPD Proposed Placement
Substantial
Unitholders Direct Indirect Direct Indirect
‘000 % ‘000 % ‘000 % ‘000 %
MRCB 206,250 31.2 - - 338,424 31.7 - -
CCT 117,040 17.7 - - 117,040 11.0 - -
QLSB 48,767 7.4 - - 48,767 4.6 - -
QPSB 45,997 6.9 - - 45,997 4.3 - -
QESB 22,276 3.4 - - 22,276 2.1 - -
CapitaLand Limited - - 117,040(1) 17.7 - - 117,040(1) 11.0
Dato’ Michael Ong 55 * 117,040(2) 17.7 55 * 117,040(2) 11.0
Leng Chun
Dato’ Dr Low Moi 50 * 117,040(2) 17.7 50 * 117,040(2) 11.0
Ing, J.P.
EPF - - 209,246(3) 31.6 74,763 7.0 341,420(3) 32.0
Gapurna - - 206,250(4) 31.2 - - 338,424(4) 31.7
Tan Sri Mohamad - - 206,250(5) 31.2 - - 338,424(5) 31.7
Salim Fateh Din

Notes:

The pro forma effects above have been prepared assuming MRCB subscribes for RM152,000,000 in
value of Placement Units, EPF subscribes for 7% of the enlarged Units in circulation after the Proposed
Placement and CCT, QLSB, QPSB, QESB do not subscribe to the Proposed Placement.

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 * Negligible, less than 0.01%.
(1) Deemed interested pursuant to Section 4 of the CMSA by virtue of its interest in CCT.
(2) Deemed interested pursuant to Section 4 of the CMSA by virtue of his/her interests in QLSB,
QPSB and QESB.
(3) Deemed interested pursuant to Section 4 of the CMSA by virtue of its interest in MRCB and
Units held by one of its discretionary funds.
(4) Deemed interested pursuant to Section 4 of the CMSA by virtue of its interest in MRCB.
(5) Deemed interested pursuant to Section 4 of the CMSA by virtue of his interest in MRCB held
through Gapurna.

Any issuance of new Units under the Proposed Authority will dilute the percentage of direct
unitholdings of the substantial Unitholders. The Proposed Increase in Fund Size will not have
any effect on the unitholdings of the substantial Unitholders. However, the quantum of the
Proposed Increase in Fund Size will depend on the number of new Units issued under the
Proposed Placement and Proposed Authority.

6.3 Earnings and distributable income

Assuming that the Proposed Acquisition, Proposed Placement and Proposed Authority were
completed on 1 January 2015 (being the beginning of the FYE 31 December 2015), the pro
forma effects on the realised net income of MQREIT per Unit for the FYE 31 December 2015
are as set out below. The pro forma financial information is for illustrative purposes only and
is not necessarily indicative of the results of the operations or the financial position that would
have been attained had the Proposed Acquisition, Proposed Placement and Proposed
Authority actually occurred in the relevant period.

After the Proposed

Audited for Acquisition,
FYE 31 Proposed
December Placement and
2015 Proposed Authority
RM ’000 RM ’000
Audited realised net income of MQREIT for the FYE 54,021 54,021
31 December 2015
Add: Incremental realised net income contribution of (2)
28,168
the Property for the FYE December 2015, net
of finance cost for the Proposed Acquisition of
RM9.03 million(1) (assuming borrowings of
RM188.33 million)
Pro forma realised net income of MQREIT for the 82,189
FYE 31 December 2015

Weighted average number of Units in issue (‘000) 595,984 (3)

1,071,359

Earnings per Unit (sen) 9.06 7.67

Notes:

(1) Finance cost of RM9.03 million comprise interest cost of RM8.5 million relating to total
borrowing of RM188.33 million, amortisation cost of RM260,000 and an annual recurring cost
of RM200,000. The amortisation cost of RM260,000 is derived by amortising initial set up debt
cost of RM1.3 million over a period of 5 years.
(2) Assuming RM7.03 million of the Management Fees is paid in new Units, where the base fee
and performance fee are paid quarterly and semi-annually respectively.
(3) After taking into consideration the issuance of 406,666,667 Placement Units and approximately
3,311,000 Manager’s Units (in which the issue prices of the Units were calculated based on the
5-day VWAMP of the Units for the relevant period in which the Management Fee accrues).

Based on the pro forma effects as at FYE 31 December 2015 illustrated above, the Proposed
Placement and Proposed Authority will dilute the earnings per Unit, as a result of the increase
in the number of Units in circulation and lower income contributed from the Property for the
said financial year.

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 Nevertheless, MQREIT expects the Proposed Acquisition to contribute positively to its future
earnings after the completion of the Proposed Acquisition taking into consideration the
improved earnings from future rental increases from the Property.

The Manager intends to distribute at least 90.0% of the distributable income of MQREIT for
each financial year. For the FYE 31 December 2015, the Manager declared and paid total
distribution of RM50,919,471, representing approximately 94.3% of the total realised income
after taxation or DPU of 8.47 sen. Excluding a one-off gain on divestment of properties of 0.09
sen per Unit, the normalised DPU for the FYE 31 December 2015 was 8.38 sen. The pro
forma earnings per Unit after the Proposed Acquisition, Proposed Placement and Proposed
Authority is expected to be 7.67 sen as set out in the table above. The lower pro forma DPU
of 7.67 sen based on a 100% payout ratio as compared to the normalised DPU for the FYE
31 December 2015 of 8.38 sen is mainly due to the Property only achieving an occupancy
rate of 99.9% in December 2015 from 74% in November 2015, resulting in lower income
contribution for the year. Nevertheless, upon completion of the Proposed Acquisition, based
on an occupancy rate of 99.9%, the Manager expects the DPU yield to increase moving
forward due to, among others, future increase in net property income from expected rental
reversions of current portfolio and the Property as well as payment of Management Fee in
Manager’s Units.

The Proposals are not expected to have any material effect on the above distribution policy as
determined by the Board. The decision to declare and pay any distributable income in the
future would depend on, among others, the financial performance, cash flow position,
prevailing market conditions and future financing requirements of MQREIT.

Any issuance of new Units pursuant to the Proposed Placement and Proposed Authority will
dilute the DPU, given the enlarged number of Units in circulation, the quantum of which would
depend on the actual number of new Units to be issued which, in turn, would depend on the
actual issue price. Nevertheless, the Manager expects the DPU yield to increase moving
forward (to the normalised DPU for the FYE 31 December 2015 of 8.38 sen) due to, among
others, the future increase in net property income from expected rental reversions of the
current portfolio and the Property as well as payment of Management Fee in Manager’s Units.

The Proposed Increase in Fund Size will not have any effect on the earnings and distributable
income of MQREIT.

As the Manager expects to complete the Proposed Acquisition and Proposed Placement in
the 4th quarter of 2016, and the Proposed Authority is expected to be implemented
commencing from the FYE 31 December 2017, the Proposals are not expected to have a
material effect on MQREIT’s DPU for the FYE 31 December 2016.

6.4 NAV per Unit and gearing

The pro forma effects of the Proposed Acquisition and Proposed Placement on the NAV per
Unit and gearing of MQREIT based on the audited statement of financial position of MQREIT
as at 31 December 2015 and on the assumption that the Proposed Acquisition and Proposed
Placement had been effected on that date are as follows:

After the Proposed

Audited as at 31 Acquisition and
December 2015 Proposed Placement
RM ’000 RM ’000
Unitholders’ capital 751,276 1,210,443(1)
Undistributed and non-distributable 152,579 152,579
income
NAV 903,855 1,363,022

No. of Units in circulation (‘000) 661,381 1,068,048

NAV per Unit (RM)
- Before income distribution 1.37 1.28

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 After the Proposed
Audited as at 31 Acquisition and
December 2015 Proposed Placement
RM ’000 RM ’000
Total borrowings 689,722 876,737(3)
Total asset value 1,625,240 2,271,421(1)(3)
Gearing (%)(4) 42.4 38.6(5)

Notes:

(1) Out of the total RM16.0 million estimated expenses for the Proposals, approximately RM8.5
million is in relation to the issuance of new Units which will be set-off against the Unitholders’
capital, while the remaining RM7.5 million is in relation to the Proposed Acquisition which will
be capitalised as part of the Property.
(2) After the final income distribution of 4.37 sen per Unit which was paid in February 2016.
(3) After deducting the upfront cost associated with the borrowings to be paid from cash and bank
balances.
(4) Gearing is calculated as total borrowings divided by total asset value.
(5) The assumed gearing level was based on gross placement proceeds raised of RM467.7
million. If the gross placement proceeds had been RM427.0 million as announced on 30 June
2016, the resultant gearing level after the Proposals would have been 40.4%.

Any issuance of new Units pursuant to the Proposed Authority is expected to reduce the NAV
per Unit, the extent of which would depend on the actual number of new Units to be issued
which, in turn, would depend on the actual issue price. Further, any issuance of new Units
pursuant to the Proposed Authority is not expected to have a material effect on the gearing.

The Proposed Increase in Fund Size will not have any effect on the NAV per Unit and gearing
of MQREIT.

7. APPROVALS REQUIRED

The Proposals are subject to the following approvals being obtained:

(i) the SC for the following:

(a) value of the Property;

(b) issuance of new Units pursuant to the Proposed Placement and Proposed
Authority;

(c) listing of and quotation for the new Units to be issued pursuant to the
Proposed Placement and Proposed Authority on the Main Market of Bursa
Securities;

(d) exemption from having to submit to the SC a declaration from the

advisers/directors of the Manager stating that the Trustee, on behalf of the
Unitholders, will enter into a private caveat to protect its interest in the
Property and to prevent other encumbrances from being entered by any other
party; and

(e) exemption from complying with Clauses 14.04(a)(i) and (ii) of the REIT
Guidelines in relation to the Proposed Placement, the details of which are set
out in Section 2.2.3 above.

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 The approval of the SC for items (i)(d) and (e) above was obtained via its letter dated
3 August 2016. The approval of the SC for items (i)(a) to (c) above was obtained via
its letter dated 27 September 2016 and is subject to the following conditions:

Details of conditions imposed Status of compliance

(a) In relation to the Proposed Placement,

- Maybank IB, CIMB, HLIB and the Manager To be complied.
are to inform the SC of the actual number of
new Units issued, the date of the issuance of
the new Units and the date of the listing of
and quotation for such new Units on the Main
Market of Bursa Securities; and
- the issuance and the listing of new Units on Noted.
the Main Market of Bursa Securities must be
completed within 6 months from the date of
the decision letter. The SC’s approval is
deemed to lapse if the Manager fails to do so
within the stipulated timeframe.
(b) In relation to the Proposed Authority, the Manager To be complied.
is to inform the SC of the actual number of new
Units issued, the date of the issuance of the new
Units and the date of the listing of and quotation
for such new Units on the Main Market of Bursa
Securities.

(ii) Bursa Securities for the listing of and quotation for the new Units to be issued
pursuant to the Proposed Placement and Proposed Authority on the Main Market of
Bursa Securities;

The approval of Bursa Securities was obtained via its letter dated 21 November 2016
subject to the following conditions:

Details of conditions imposed Status of compliance

(a) MQREIT, CIMB, HLIB and Maybank IB must fully Noted.
comply with the relevant provisions under the
Main Market Listing Requirements of Bursa
Securities pertaining to the implementation of the
Proposals;

(b) MQREIT, CIMB, HLIB and Maybank IB are to To be complied.

inform Bursa Securities upon the completion of
the Proposals;

(c) MQREIT, CIMB, HLIB and Maybank IB are to To be complied.

furnish a certified true copy of the resolution
passed by Unitholders at the Meeting for the
Proposals; and

(d) MQREIT is to furnish Bursa Securities with a To be complied.

written confirmation of its compliance with the
terms and conditions of Bursa Securities’ approval
once the Proposals are completed.

(iii) the Unitholders at the forthcoming Meeting;

(iv) the shareholders of MRCB at an extraordinary general meeting to be convened by

MRCB for the disposal of the Property and the subscription of the Placement Units for
an amount of no less than RM110,000,000 but up to RM152,000,000 in value;

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 (v) Shell for the novation and transfer of all the rights, benefits, interests and obligations
of 348 Sentral in the Lease Agreement to MQREIT; and

(vi) any other relevant authorities or parties, if required.

Conditionality of the Proposals

The Proposed Acquisition, Proposed Placement, Proposed Placement to MRCB, Proposed

Placement to EPF, Proposed Authority and Proposed Increase in Fund Size are inter-
conditional upon the respective approvals being obtained for each proposal.

Save as disclosed above, the Proposals are not conditional/inter-conditional upon any other
corporate exercise/scheme.

8. IMPLICATION OF THE RULES ON TAKE-OVERS, MERGERS AND COMPULSORY

ACQUISITIONS 2016

MRCB is a major Unitholder, directly holding 206,250,000 Units or approximately 31.2% of

the total Units in circulation based on the Record of Depositors of MQREIT as at the LPD.
EPF is a major shareholder of MRCB, but does not directly hold any Units as at the LPD.
QLSB, QPSB and QESB collectively hold 117,040,000 Units or approximately 17.7% of the
total Units in circulation of MQREIT as at the LPD. The collective unitholdings of MRCB,
QLSB, QPSB and QESB is 48.9% prior to the Proposed Placement.

Assuming that MRCB subscribes for RM152,000,000 in value of Placement Units, EPF
subscribes for 7% of the enlarged Units in circulation after the Proposed Placement and that
QLSB, QPSB and QESB do not subscribe to the Proposed Placement, the direct unitholdings
of MRCB, EPF, and QLSB, QPSB and QESB in MQREIT will be 31.7%, 7.0% and 11.0%
respectively. Based on this, the collective unitholdings of MRCB, EPF, QLSB, QPSB and
QESB will be 49.7%. As the net increase of the collective unitholdings of MRCB, EPF, QLSB,
QPSB and QESB in MQREIT after the Proposed Placement is not expected to exceed 2%,
the subscription by MRCB and EPF of the Placement Units is not expected to trigger a
mandatory take-over offer in respect of the remaining Units not owned by MRCB, EPF and
the Quill Group upon the completion of the Proposed Placement.

Based on the above assumptions, CIMB, HLIB and Maybank IB confirm that the Rules on
Take-Overs, Mergers and Compulsory Acquisitions 2016 will not be triggered following the
Proposed Acquisition and Proposed Placement.

9. INTERESTS OF THE DIRECTORS AND MAJOR SHAREHOLDERS OF THE MANAGER,

MAJOR UNITHOLDERS OF MQREIT AND/OR PERSONS CONNECTED WITH THEM

Save as disclosed below, none of the Directors and major shareholders of the Manager or
major Unitholders and/or persons connected with them have any interest, direct or indirect in
the Proposals:

9.1 Major Unitholders/major shareholders of the Manager

(i) MRCB is a major Unitholder, directly holding 206,250,000 Units or approximately

31.2% of the total Units in circulation based on the Record of Depositors as at the
LPD and a major shareholder of the Manager, holding 410,000 ordinary shares or
approximately 41.0% of the issued and paid-up share capital of the Manager. MRCB
is also the holding company of the Vendor and the party receiving the Placement
Units under the Proposed Placement to MRCB. Therefore, MRCB is deemed
interested in the Proposed Acquisition, Proposed Placement to MRCB and Proposed
Authority.

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 Additionally, MRCB is also deemed to have an interest in the outcome of the
Proposed Placement to EPF as EPF is a major shareholder of MRCB, directly holding
722,457,897 ordinary shares in MRCB or approximately 34.7% of the issued and
paid-up share capital of MRCB as at the LPD and EPF is the party receiving the
Placement Units under the Proposed Placement to EPF.

As the Proposed Acquisition, Proposed Placement, Proposed Placement to MRCB,

Proposed Placement to EPF, Proposed Authority and Proposed Increase in Fund
Size are inter-conditional with each other, MRCB is therefore deemed to have an
interest in the outcome of the Proposals.

(ii) EPF is a Unitholder via its Units held by one of its discretionary funds, which holds
2,995,900 Units or approximately 0.45% of the total Units in circulation based on the
Record of Depositors as at the LPD. It also holds Units indirectly in MQREIT via
MRCB as EPF is a major shareholder of MRCB, directly holding 722,457,897
ordinary shares in MRCB or approximately 34.7% of the issued and paid-up share
capital of MRCB as at the LPD. EPF is also the party receiving the Placement Units
under the Proposed Placement to EPF. As such, EPF is deemed interested in the
Proposed Acquisition, Proposed Placement to MRCB, Proposed Placement to EPF
and Proposed Authority.

As the Proposed Acquisition, Proposed Placement, Proposed Placement to MRCB,

Proposed Placement to EPF, Proposed Authority and Proposed Increase in Fund
Size are inter-conditional with each other, EPF is therefore deemed to have an
interest in the outcome of the Proposals.

(iii) QLSB, QPSB and QESB collectively hold approximately 117,040,000 Units or
approximately 17.7% of the total Units in circulation based on the Record of
Depositors as at the LPD. QRHSB is a major shareholder of the Manager as at the
LPD, holding 390,000 ordinary shares or approximately 39.0% of the issued and
paid-up share capital of the Manager. The Quill Group are jointly owned by Dato’ Dr
Low Moi Ing, J.P. and Dato’ Michael Ong Leng Chun, who are also Directors of the
Quill Group. As such, the Quill Group is deemed interested in the Proposed Authority.
Further to the above, the Quill Group is also persons connected to MRCB. Hence,
they are deemed interested in the Proposed Acquisition.

As the Proposed Acquisition, Proposed Placement, Proposed Placement to MRCB,

Proposed Placement to EPF, Proposed Authority and Proposed Increase in Fund
Size are inter-conditional with each other, the Quill Group is therefore deemed to
have an interest in the outcome of the Proposals.

(iv) GJSB is a major shareholder of the Manager as at the LPD and does not hold any
Units. As a major shareholder of the Manager, it is deemed interested in the
Proposed Authority.

As the Proposed Acquisition, Proposed Placement, Proposed Placement to MRCB,

Proposed Placement to EPF, Proposed Authority and Proposed Increase in Fund
Size are inter-conditional with each other, GJSB is therefore deemed to have an
interest in the outcome of the Proposals.

(v) The Manager does not currently hold any Units. In any event, if the Manager does
eventually hold Units, the Manager will not vote on any of the Proposals as doing so
is prohibited under Clause 15.48 of the REIT Guidelines which states that a
management company must not exercise the voting rights for the units it or its
nominees hold in any unitholders’ meeting, regardless of the party who requested for
the meeting and the matter or matters laid before the meeting.

The parties named above will abstain and have undertaken to ensure that persons connected
with them will also abstain from voting in respect of their direct and/or indirect unitholdings in
MQREIT on the respective resolutions pertaining to the Proposals to be tabled at the
forthcoming Meeting.

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9.2 Directors of the Manager

The Directors of the Manager who are related to MRCB, the Quill Group and GJSB, namely
Tan Sri Saw Choo Boon, Dato’ Dr Low Moi Ing, J.P., Dato’ Michael Ong Leng Chun, Dato’
Thanarajasingam Subramaniam, Ann Wan Tee and Kwan Joon Hoe are deemed to have an
interest in the outcome of the Proposals. Ann Wan Tee and Kwan Joon Hoe are also
Directors of the Vendor.

Accordingly, the Interested Directors have abstained and will continue to abstain from
deliberating and voting on the Proposals at the relevant Board meetings, nor will they make
recommendations on the Proposals. Dato’ Dr Low Moi Ing, J.P. and Dato’ Michael Ong Leng
Chun will also abstain from voting in respect of their direct and/or indirect unitholdings in
MQREIT on the respective resolutions pertaining to the Proposals to be tabled at the
forthcoming Meeting. Further, the Interested Directors have also undertaken to ensure that
persons connected with them will abstain from voting in respect of their direct and/or indirect
unitholdings in MQREIT on the respective resolutions pertaining to the Proposals to be tabled
at the forthcoming Meeting.

The number of Units held by the Interested Directors and interested major shareholders of the
Manager, and interested major Unitholders in MQREIT based on the Record of Depositors as
at the LPD are as follows:

Direct Indirect
No. of Units % No. of Units %
Interested Directors
Tan Sri Saw Choo Boon - - - -
Dato’ Dr Low Moi Ing, J.P. 50,000 * 117,040,000 (1)
17.7
Dato’ Michael Ong Leng Chun 55,000 * 117,040,000(1) 17.7
Dato’ Thanarajasingam - - - -
Subramaniam
Ann Wan Tee - - - -
Kwan Joon Hoe - - - -

Interested major shareholders

of the Manager
MRCB 206,250,000 31.2 - -
QRHSB - - - -
GJSB - - - -

Interested major Unitholders

MRCB 206,250,000 31.2 - -
EPF - - 209,245,900(2) 31.6
Gapurna - - 206,250,000(3) 31.2
Tan Sri Mohamad Salim Fateh - - 206,250,000(4) 31.2
Din
QLSB 48,767,000 7.4 - -
QPSB 45,997,000 6.9 - -
QESB 22,276,000 3.4 - -
Dato’ Dr Low Moi Ing, J.P. 50,000 * 117,040,000(1) 17.7
Dato’ Michael Ong Leng Chun 55,000 * 117,040,000(1) 17.7

Notes:

* Negligible, less than 0.01%.

(1) Deemed interested pursuant to Section 4 of the CMSA by virtue of his/her interest in QLSB,
QPSB and QESB.

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38
 (2) Deemed interested pursuant to Section 4 of the CMSA by virtue of its interest in MRCB and
Units held by one of its discretionary funds.
(3) Deemed interested pursuant to Section 4 of the CMSA by virtue of its interest in MRCB.
(4) Deemed interested pursuant to Section 4 of the CMSA by virtue of his interest in MRCB held
through Gapurna.

10. RELATED PARTY TRANSACTION

With reference to Section 9 above, the Proposed Acquisition is deemed a related party
transaction under Clause 9.01 of the REIT Guidelines.

MQREIT had no other transactions with 348 Sentral in the 12 months preceding the LPD.

11. DIRECTORS’ STATEMENT

The Board (save for the Interested Directors who have abstained from all deliberation on the
Proposals), having considered all aspects of the Proposals (including but not limited to the
rationale, prospects, effects, risk factors, salient terms of the SPA and the Purchase
Consideration) is of the opinion that the Proposals are in the best interest of MQREIT.

Accordingly, the Board (save for the Interested Directors) recommends that you vote in favour
of the proposed resolutions in relation to the Proposals to be tabled at the forthcoming
Meeting.

12. AUDIT COMMITTEE’S STATEMENT

The Audit Committee (save for Dato’ Dr. Low Moi Ing, J.P. and Ann Wan Tee who are
deemed interested in the Proposals), after taking into consideration the Manager’s investment
objectives, and having considered all aspects of the Proposals, including but not limited to the
rationale, prospects, effects, risk factors, salient terms of the SPA and the Purchase
Consideration, is of the opinion that the Proposals are:

(i) in the best interest of MQREIT;

(ii) fair and reasonable and on normal commercial terms; and

(iii) not detrimental to the interests of the non-interested Unitholders.

In arriving at the above view, the Audit Committee (save for Dato’ Dr. Low Moi Ing, J.P. and
Ann Wan Tee who are deemed interested in the Proposals) has taken into consideration,
among others, the evaluation and recommendation by the Independent Adviser as contained
in the IAL, as set out in Part B of this Circular, and has concurred with the views of the
Independent Adviser.

13. INDEPENDENT ADVISER

In view that the Proposed Acquisition is deemed a related party transaction as set out in
Section 10 above, AmInvestment Bank has been appointed on 30 June 2016 to act as the
Independent Adviser to undertake the following:

(i) comment as to whether the Proposed Acquisition and Proposed Placement are:

(a) fair and reasonable so far as the Unitholders are concerned; and

(b) to the detriment of the non-interested Unitholders,

and set out the reasons for such opinion, the key assumptions made and the factors
taken into consideration in forming that opinion;

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39
 (ii) advise the non-interested Unitholders whether they should vote in favour of the
Proposed Acquisition and Proposed Placement; and

(iii) take all reasonable steps to satisfy itself that it has a reasonable basis to make the
comments and advice in relation to items (i) and (ii) above.

Please refer to the IAL as set out in Part B of this Circular. Unitholders are advised to read
and consider carefully the contents of Part A of this Circular and the IAL as set out in Part B of
this Circular before voting on the resolutions pertaining to the Proposals to be tabled at the
forthcoming Meeting.

14. OTHER CORPORATE EXERCISE/SCHEME ANNOUNCED BUT PENDING COMPLETION

Save for the Proposals and the proposed authority to allot and issue up to 18,619,000 new
Units for the purpose of the payment of the Management Fee to the Manager in the form of
Units as set out in the Circular to Unitholders dated 17 February 2015, there is no other
corporate exercise/scheme which has been announced but pending completion as at the
LPD.

15. HISTORICAL UNIT PRICES

The monthly highest and lowest prices of the Units traded on Bursa Securities for the past 12
months from November 2015 to October 2016 are as follows:

High Low
RM RM
2015
November 1.16 1.06
December 1.13 1.05

2016
January 1.10 1.06
February 1.13 1.05
March 1.16 1.11
April 1.17 1.13
May 1.17 1.13
June 1.16 1.14
July 1.23 1.16
August 1.39 1.20
September 1.27 1.24
October 1.28 1.26

The last transacted price of the Units on the Last Trading Date RM1.16

The last transacted price of the Units as at the LPD RM1.28

(Source: Bloomberg)

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16. ESTIMATED TIME FRAME FOR COMPLETION

Barring any unforeseen circumstances, the tentative timetable in relation to the Proposals is
as follows:

Event Tentative date

Convening of the Meeting 7 December 2016

Announcement of the price-fixing date for the Placement Units Mid December 2016
Allotment and issuance of the Placement Units End December 2016
Listing of and quotation for the Placement Units on the Main End December 2016
Market of Bursa Securities
Fulfilment of the conditions precedent of the SPA End December 2016
Completion of the Proposed Acquisition End December 2016

The Proposed Authority is expected to be implemented commencing from the FYE 31

December 2017 up to 31 March 2020 or when all the 31,952,333 Manager’s Units have been
issued for the FYEs 31 December 2017 to 31 December 2019, whichever is earlier.

17. MEETING

The proposed resolutions in respect of the Proposals will be tabled at the Meeting to be held
at Sime Darby Convention Centre, Ballroom 3, Level 1, No 1A, Jalan Bukit Kiara 1, 60000
Kuala Lumpur on Wednesday, 7 December 2016 at 10.30 a.m. or at any adjournment thereof.

The Notice of Meeting, together with the Proxy Form, is enclosed in this Circular. If you are
unable to attend the Meeting in person and wish to appoint other person(s) to be your proxy,
please complete, sign and return the enclosed Proxy Form to the Registered Office of the
Manager at Level 33A, Menara NU 2, No. 203, Jalan Tun Sambanthan, Kuala Lumpur
Sentral, 50470 Kuala Lumpur, so as to arrive not less than 48 hours before the time
appointed for holding of the Meeting or at any adjournment thereof.

The completion and return of the Proxy Form will not preclude you from attending and voting
at the Meeting in person should you subsequently wish to do so. The Proxy Form should be
completed strictly in accordance with the instructions contained therein.

18. FURTHER INFORMATION

You are requested to refer to the appendices for further information.

Yours faithfully
for and on behalf of the Board
MRCB QUILL MANAGEMENT SDN BHD
(as Manager of MRCB-Quill REIT)

Dr. Roslan A. Ghaffar

Independent Non-Executive Director

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 PART B
INDEPENDENT ADVICE LETTER FROM AMINVESTMENT BANK BERHAD TO THE NON-
INTERESTED UNITHOLDERS IN RELATION TO THE PROPOSED ACQUISITION AND
PROPOSED PLACEMENT
EXECUTIVE SUMMARY

All definitions used in this Executive Summary shall have the same meaning as the words and
expressions provided in the “Definitions” section of the Circular, except where the context otherwise
requires or where otherwise defined in this IAL. All references to “we”, “us” or “our” are to AmInvestment
Bank, being the Independent Adviser for the Proposed Acquisition. All references to “you” are to the
Non-Interested Unitholders.

This Executive Summary is intended to provide you with a brief summary of this IAL on our independent
evaluation of the Proposed Acquisition and Proposed Placement and to express our recommendation
thereon.

1. INTRODUCTION

On 3 December 2015, the Manager announced that the Trustee had on even date entered into
the HOA with the Vendor for the Proposed Acquisition.

On 3 March 2016, the Manager announced that the parties to the HOA had, via an extension
letter, mutually agreed to extend the cut-off date for the execution of the SPA to 15 April 2016.
On 12 April 2016, the parties, via a second extension letter, agreed to further extend the said
cut-off date to 30 May 2016 to ensure 348 Sentral is able to submit the application for the
Certificate of Proposed Strata Plan to sub-divide the development consisting of the Property
and another building, both of which are erected on a parcel of land held under a master title of
Geran 40094, Lot 348, Section 72, Town and District of Kuala Lumpur, Wilayah Persekutuan
Kuala Lumpur, Malaysia to the relevant authorities within the stipulated timeline as required by
the Strata Titles Act 1985 upon signing of the SPA. The cut-off date would be automatically
extended further by 30 business days if 348 Sentral was unable to submit the application for
Certificate of Proposed Strata Plan by 30 May 2016, thereby further extending the cut-off date
to 14 July 2016.

On 30 June 2016, CIMB, HLIB and Maybank IB had on behalf of the Board, announced that
the Trustee had on even date entered into the SPA with the Vendor for the Proposed Acquisition
as well as the Proposed Placement.

In view of the interests of certain interested parties as set out in Section 8, Part A of the Circular,
the Proposed Acquisition is deemed to be a related party transaction pursuant to Chapter 9 of
the REIT Guidelines. Accordingly, AmInvestment Bank had been appointed on 30 June 2016
to act as the Independent Adviser in relation to the Proposed Acquisition.

2. EVALUATION OF THE PROPOSED ACQUISITION AND PROPOSED PLACEMENT

(i) Rationale for and benefits of the Proposed Acquisition

The Proposed Acquisition is in line with the investment objective of MQREIT to provide
a long term and sustainable distribution of income to the Unitholders and to achieve
long term growth in the NAV per Unit. It would augur well for MQREIT to undertake the
Proposed Acquisition as the Property is expected to contribute positively to the future
earnings and distributable income of MQREIT which would in turn enhance the
prospective NAV per Unit and DPU yield. Although the DPU yield is expected to be
diluted following the issuance of the Placement Units, such dilution impact can be
mitigated by (i) future increase in net income from the Property, as supported by high
occupancy rate of the Property of 99.9% and the provisions in the Property’s existing
tenancies for future potential upward rental revisions; (ii) payment of a portion of the
Management Fee in new Units to conserve cash for distribution to the Unitholders;
and/or (iii) varying its payout ratio from its existing payout ratio of 94.3% as at 31
December 2015 subject to a distribution of at least 90.0% of the net realised income of
MQREIT.

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1
EXECUTIVE SUMMARY (CONT’D)

Further, the Proposed Acquisition will also strengthen MQREIT’s position as a sizeable,
geographically well-diversified office REIT in the Klang Valley as well as among the
listed REITs in Malaysia in terms of total asset size and market capitalisation, which
will enable MQREIT to enjoy greater operating efficiency, enhance its competitive
positioning and improve the trading liquidity of the Units.

The Property is also expected to fit well into MQREIT’s clientele requirements, enhance
its portfolio profile and contribute positively to the performance of MQREIT in view of
the Property’s high occupancy rate, strategic location, green building features and MSC
Malaysia Status as well as high quality tenancy mix profile. The addition of the Property
would also allow MQREIT to increase its footprint in Kuala Lumpur locations, which is
highly sought after by corporate tenants.

Premised on the above, we are of the view that there is sufficient merit to the rationale
for and benefits of the Proposed Acquisition and it is reasonable and not detrimental to
the interest of the Non-Interested Unitholders.

Please refer to Section 6.1 of this IAL for further details.

(ii) Rationale for and benefits of the Proposed Placement

The Proposed Placement represents a more expeditious manner to raise funds for the
Proposed Acquisition as the Proposed Placement can be implemented immediately
post obtaining Unitholders’ approval. Additionally, the level of discount accorded for a
private placement is typically not as steep as a rights issue, which will result in lesser
number of Units issued in order to raise the same amount of gross proceeds.

Further, the Proposed Placement will reduce MQREIT’s current borrowings from 42.4%
to 38.6% and hence provide headroom for future cash acquisitions, in line with the
MQREIT’s growth strategy. The Proposed Placement to MRCB will also provide no
less than RM110 million to RM152 million, representing up to approximately 33% of the
total equity proceeds raised. This amount may potentially be higher in the event EPF
participates in the Proposed Placement. Given the speed at which the Proposed
Placement can be implemented, the resultant lower gearing and the commitment from
a major Unitholder, the Proposed Placement is expected to augur well for MQREIT.

(iii) Evaluation of the Purchase Consideration

The Purchase Consideration was arrived at based on the market value of the Property
of RM640,000,000 as appraised by the Valuer. The Valuer has adopted the Investment
Method as the principal valuation methodology to arrive at the market value of the
Property in view that it is an income generating property, whilst the Comparison Method
was used to cross check against the market value of the Property derived from the
Investment Method.

Premised on the foregoing, we are of the opinion that the Purchase Consideration is
fair and not detrimental to the interest of the Non-Interested Unitholders.

(iv) Settlement of consideration

The Total Cash Outlay (as defined herein) will be satisfied wholly in cash through a
combination of proceeds from the Proposed Placement and borrowings, the breakdown
of which has yet to be determined and will be dependent upon, amongst others, the
actual size and issue price of the Placement Units.

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2
EXECUTIVE SUMMARY (CONT’D)

Nonetheless, the Indicative Financing Proportion (as defined herein) to finance the
Total Cash Outlay is reasonable in view that it strikes a balance between equity and
debt financing and MQREIT is able to maintain a manageable gearing position with a
healthy debt headroom before reaching the Gearing Limit (as defined herein).

However, the Non-Interested Unitholders should note that in the event the proceeds
raised from the Proposed Placement is less than RM467.7 million, such shortfall will
be funded via borrowings, which would increase the gearing of MQREIT. Nonetheless,
it is the intention of MQREIT that an underwriting arrangement for the Proposed
Placement in respect of the remaining amount (excluding the Proposed Placement to
MRCB) to be executed on the day of the bookbuilding exercise. The said underwriting
arrangement will be subject to terms and conditions to be agreed upon between the
Manager and the Joint Placement Agents.

(v) Issue price of the Placement Units

Based on the Illustrative Issue Prices of RM1.05 to RM1.20, the DPU, P/E Multiple and
P/NAV Multiple of MQREIT are comparable to MQREIT Peers (as defined herein).
Notwithstanding that MQREIT’s DPU yield is below the MQREIT Peers for the Issue
Price range of RM1.05 to RM1.15, it should be noted that the market price of the Units
post entering into the SPA on 30 June 2016 had not traded below RM1.15 and the 5-
day VWAMP of the Units up to and including the LPD is RM1.2764. Additionally, the
DPU yield may also improve in the event of future increase net income from the
Property arising from future potential upward rental revisions, a portion of the
Management Fee may potentially be paid in new Units pursuant to the Proposed
Authority and the Manager may consider varying the payout ratio from its existing
payout ratio of 94.3% as at 31 December 2015 subject to a distribution of at least 90.0%
of the net realised income of MQREIT.

The final impact will still be dependent on the final Issue Price and hence the final
financing proportions of the proceeds from the Proposed Placement and borrowings.
However, based on the current price of the Units, based on the 5-day VWAMP up to
and including the LPD, which is higher at approximately RM1.2764, the illustrative P/E
Multiple and P/NAV Multiple will be lower and the illustrative DPU and DPU yield will
be higher.

Please refer to Section 6.2 of this IAL for further details.

(vi) Salient terms of the SPA

Based on our review of the salient terms of the SPA, the terms and conditions of the
SPA are reasonable and not detrimental to the interest of the Non-Interested
Unitholders.

Please refer to Section 6.3 of this IAL for further details.

(vii) Effects of the Proposed Acquisition and Proposed Placement

The number of Units in circulation would increase from 661.4 million Units as at the
LPD to up to 1,068.0 million Units after the Proposed Placement. Following the
completion of the Proposed Placement, MRCB will remain as the single largest
Unitholder and EPF may emerge as a substantial Unitholder. The ROA of the Property
amounts to 5.27%, whilst the ROA of MQREIT amounts to 5.55% as at 31 December
2015. Nevertheless, the ROA of the Property is expected to improve as the Property
has now achieved occupancy rate of 99.9% as at the LPD and there are provisions in
the Property’s existing tenancies for future potential upward rental revisions. Hence,
the Proposed Acquisition is expected to contribute positively to the future earnings of
MQREIT.

44
3
EXECUTIVE SUMMARY (CONT’D)

Assuming that the Proposed Acquisition and Proposed Placement were effected on 1
January 2015, the pro forma NPI yield will be lower post-Proposed Acquisition and
Proposed Placement, from 5.55% as at 31 December 2015 to 5.48%. Nevertheless,
the NPI and NPI yield of the Property is expected to improve as the Property has now
achieved occupancy rate of 99.9% as at the LPD and there are provisions in the
Property’s existing tenancies for future potential upward rental revisions.

The issuance of new Units pursuant to the Proposed Placement and Proposed
Authority will dilute the EPU as well as DPU, given the enlarged number of Units in
circulation, the quantum of which would depend on the actual number of new Units to
be issued which, in turn, would depend on the issue price of the new Units and the final
proportion of the Purchase Consideration to be financed by equity.

Nevertheless, the Manager intends to continue to distribute at least 90% of the

distributable income of MQREIT for each financial year and the Proposals are still
expected to be DPU yield accretive for Unitholders after taking into consideration the
future increase in net property income from the Property and the additional cash
conserved for distribution to the Unitholders via the issuance of Manager’s Units to the
Manager as payment of Management Fee and/or variation of its payout ratio from its
existing payout ratio of 94.3% as at 31 December 2015 subject to a distribution of at
least 90.0% of the net realised income of MQREIT.

The pro forma NAV per Unit before income distribution as at 31 December 2015 is
expected to decrease from RM1.37 per Unit to a range of between RM1.23 and RM1.30
per Unit assuming the Proposed Acquisition and Proposed Placement were effected
on 31 December 2015, whilst the gearing of MQREIT is expected to decrease from
42.4% to 38.6%, assuming gross proceeds of RM467.7 million is raised from the
Proposed Placement.

Premised on the above, we are of the opinion that the effects of the Proposed
Acquisition and Proposed Placement are reasonable and not detrimental to the interest
of the Non-Interested Unitholders.

Please refer to Section 6.4 of this IAL for further details.

(viii) Industry overview and future prospects

The outlook of the Malaysian economy is expected to remain positive as supported by

a sustained growth in domestic demand, particularly private consumption and private
investment expenditures.

On the other hand, the prospects of the office and retail property in Klang Valley are
expected to remain resilient underpinned by the stable demand for office spaces as
supported by local as well as foreign demand, primarily by the services sector, due to
the weakening of RM. Although the market prices and rentals of office buildings are
anticipated to remain stagnant, better quality office spaces are expected to stand out,
fetching slightly higher premiums as compared to current rental levels.

Further, the prospects of the Property are favourable in view of its prime location in
Kuala Lumpur Sentral coupled with excellent connectivity as well as its green building
features and MSC Malaysia Status. In addition, the Property has a high occupancy rate
of approximately 99.9%, with its anchor tenant (i.e. Shell) having long remaining Lease
period of about 12 years, occupying a total of 17 floors out of the Property’s 33-storey
office tower, pursuant to the Lease Agreements.

Please refer to Section 6.5 of this IAL for further details.

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4
EXECUTIVE SUMMARY (CONT’D)

(ix) Risk factors relating to the Proposed Acquisition and Proposed Placement

Non-Interested Unitholders should also consider the risk that the final Issue Price of
the Proposed Placement has yet to be determined. The final Issue Price is still
uncertain at this juncture and hence, the actual impact of the Proposed Acquisition and
Proposed Placement to the yield and financials of MQREIT cannot be determined.
Depending on the level of discount and hence the final Issue Price, the lower the Issue
Price, the more dilutive the DPU and hence impacting on the overall DPU yield of
MQREIT.

The Proposed Acquisition should not materially expose MQREIT to any new categories
of risks which are not within its current risk profile and the Board will take necessary
measures to mitigate the risks associated with the Proposed Acquisition and Proposed
Placement.

Non-Interested Unitholders should note that the risk factors mentioned above are not
meant to be exhaustive. We wish to highlight that while efforts and measure would be
taken by the Board to mitigate the risks relating to the Proposed Acquisition and
Proposed Placement, no assurance can be given that one or combination of the risk
factors will not occur and give rise to material and adverse impact on the business and
operations, competitiveness, financial performance, financial position or prospects of
MQREIT thereon.

Please refer to Section 6.6 of this IAL for further details.

(x) Other considerations of the Proposed Placement

In view of the interest of MRCB in the Proposed Acquisition, MRCB will not have any
influence on the manner in which the book builds for the Proposed Placement and the
determination of the Issue Price of the Placement Units. MRCB, as a price-taker, shall
accept the final price for its Placement Units, being the issue price to be determined
after the bookbuilding exercise is closed. In addition, the Proposed Placement to MRCB
demonstrates MRCB’s support and confidence to MQREIT’s future prospects as well
as reaffirming its commitment to MQREIT.

Although EPF is deemed as a person connected with MRCB pursuant to the Proposed
Acquisition, we are of the view that the Proposed Placement to EPF is not detrimental
to the interest of the Non-Interested Unitholders in view of the following:

(a) although EPF is a major shareholder of MRCB, it is not involved in the day-to-
day operations of the MRCB Group;

(b) the Proposed Placement is undertaken via a bookbuilding process wherein

investors will be invited to bid for the Placement Units at various prices and the
final outcome of the book will be determined by taking into consideration the
actual bid size and the corresponding bid price for the Placement Units from
each investor who will be participating in the bookbuilding exercise.
Accordingly, there is no assurance that EPF will be allocated with the
Placement Units; and

(c) EPF, as a social security organisation, would need to act in the best interest of
its members in respect of the Proposed Placement to EPF and submit a bid in
the bookbuilding exercise at a price which is not detrimental to the interest of
its members.

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5
EXECUTIVE SUMMARY (CONT’D)

In addition, depending on the result of the bookbuilding exercise, EPF may potentially
emerge as a direct Unitholder with a substantial unitholding in MQREIT. This would
augur well for MQREIT by having a reputable institutional investor as its direct
Unitholder with a substantial unitholding.

Please refer to Section 6.7 of this IAL for further details.

3. CONCLUSION AND RECOMMENDATION

Based on our evaluation and analysis of the Proposed Acquisition and Proposed Placement as
a whole as set out in this IAL, we are of the opinion that the Proposed Acquisition and Proposed
Placement are fair and reasonable and not detrimental to the interest of the Non-Interested
Unitholders.

Accordingly, we recommend that you vote in favour of the ordinary resolutions

pertaining to the Proposed Acquisition and Proposed Placement to be tabled at the
forthcoming Meeting.

YOU ARE ADVISED TO READ BOTH THIS IAL AND PART A OF THE CIRCULAR TOGETHER
WITH THE APPENDICES ENCLOSED THEREON THOROUGHLY FOR MORE INFORMATION AND
NOT TO RELY SOLELY ON THIS EXECUTIVE SUMMARY BEFORE FORMING AN OPINION ON
THE PROPOSED ACQUISITION AND PROPOSED PLACEMENT.

YOU ARE ADVISED TO CONSIDER THE RECOMMENDATIONS CONTAINED HEREIN

CAREFULLY BEFORE VOTING ON THE ORDINARY RESOLUTIONS PERTAINING TO THE
PROPOSED ACQUISITION AND PROPOSED PLACEMENT AT THE FORTHCOMING MEETING.

[The rest of this page is intentionally left blank]

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6
 Registered Office:
22nd Floor
Bangunan AmBank Group
55, Jalan Raja Chulan
50200 Kuala Lumpur

22 November 2016

To: The Non-Interested Unitholders of MRCB-Quill REIT

Dear Sir / Madam,

INDEPENDENT ADVICE LETTER FROM AMINVESTMENT BANK BERHAD TO THE NON-

INTERESTED UNITHOLDERS OF MRCB-QUILL REIT (“MQREIT”) IN RELATION TO THE
PROPOSED ACQUISITION OF A 33-STOREY OFFICE TOWER KNOWN AS MENARA SHELL
TOGETHER WITH A FIVE (5)-STOREY PODIUM AND A FOUR (4)-STOREY BASEMENT CAR
PARK BY MAYBANK TRUSTEES BERHAD, ACTING SOLELY IN THE CAPACITY AS TRUSTEE
FOR AND ON BEHALF OF MQREIT, FOR A PURCHASE CONSIDERATION OF RM640,000,000 TO
BE SATISFIED ENTIRELY IN CASH (“PROPOSED ACQUISITION”)

This Independent Advice Letter (“IAL”) is prepared for inclusion in the circular to the unitholders of
MQREIT dated 22 November 2016 in relation to, amongst others, the Proposed Acquisition and
Proposed Placement (“Circular”) and should be read in conjunction with the same. All definitions used
in this IAL shall have the same meaning as the words and expressions provided in the “Definitions”
section of the Circular, except where the context otherwise requires or where otherwise defined herein.

1. INTRODUCTION

On 3 December 2015, the Manager announced that the Trustee had on even date entered into
the HOA with the Vendor for the Proposed Acquisition.

On 3 March 2016, the Manager announced that the parties to the HOA had, via an extension
letter, mutually agreed to extend the cut-off date for the execution of the SPA to 15 April 2016.
On 12 April 2016, the parties, via a second extension letter, agreed to further extend the said
cut-off date to 30 May 2016 to ensure 348 Sentral is able to submit the application for the
Certificate of Proposed Strata Plan to sub-divide the development consisting of the Property
and another building, both of which are erected on a parcel of land held under a master title of
Geran 40094, Lot 348, Section 72, Town and District of Kuala Lumpur, Wilayah Persekutuan
Kuala Lumpur, Malaysia to the relevant authorities within the stipulated timeline as required by
the Strata Titles Act 1985 upon signing of the SPA. The cut-off date would be automatically
extended further by 30 business days if 348 Sentral was unable to submit the application for
Certificate of Proposed Strata Plan by 30 May 2016, thereby further extending the cut-off date
to 14 July 2016.

7
48
 On 30 June 2016, CIMB, HLIB and Maybank IB had on behalf of the Board, announced that
the Trustee had on even date entered into the SPA with the Vendor for the Proposed Acquisition
(“Announcement”). In conjunction with the Proposed Acquisition, the Board also proposed to
undertake the following:

(i) Proposed Placement (which includes the Proposed Placement to MRCB and Proposed
Placement to EPF) to partially fund the Proposed Acquisition and the expenses relating
to the Proposals;

(ii) Proposed Authority to provide the Board with the flexibility in allotting and issuing
Manager’s Units to the Manager as payment of Management Fee; and

(iii) Proposed Increase in Fund Size to accommodate the issuance of the Placement Units
and Manager’s Units pursuant to the Proposed Placement and Proposed Authority
respectively.

In view of the interests of certain interested parties as set out in Section 8, Part A of the Circular,
the Proposed Acquisition is deemed to be a related party transaction pursuant to Chapter 9 of
the REIT Guidelines. Accordingly, AmInvestment Bank had been appointed on 30 June 2016
to act as the Independent Adviser in relation to the Proposed Acquisition.

The purpose of this IAL is to provide the non-interested Unitholders (“Non-Interested

Unitholders”) with an independent evaluation of the Proposed Acquisition and Proposed
Placement as a whole, together with the recommendations contained herein, subject to the
scope and limitations set out herein. Whilst you are relying on our evaluation and
recommendations, you should nonetheless exercise your own due care and diligence before
making a decision on the course of action to be taken.

THIS IAL IS PREPARED SOLELY FOR THE USE OF THE NON-INTERESTED

UNITHOLDERS FOR THE PURPOSE OF CONSIDERING THE PROPOSED ACQUISITION
AND PROPOSED PLACEMENT AND SHOULD NOT BE USED OR RELIED UPON BY ANY
OTHER PARTY.

YOU ARE ADVISED TO READ BOTH THIS IAL AND PART A OF THE CIRCULAR
TOGETHER WITH THE APPENDICES ENCLOSED THEREON THOROUGHLY, AND TO
CONSIDER CAREFULLY OUR EVALUATION AND RECOMMENDATION CONTAINED
HEREIN BEFORE VOTING ON THE ORDINARY RESOLUTIONS PERTAINING TO THE
PROPOSED ACQUISITION AND PROPOSED PLACEMENT AT THE FORTHCOMING
MEETING.

IF YOU ARE IN DOUBT AS TO THE COURSE OF ACTION TO BE TAKEN, YOU SHOULD

CONSULT YOUR STOCKBROKER, BANK MANAGER, ACCOUNTANT, SOLICITOR OR
OTHER PROFESSIONAL ADVISERS IMMEDIATELY.

2. DETAILS OF THE PROPOSED ACQUISITION AND PROPOSED PLACEMENT

The Proposed Acquisition entails the acquisition by the Trustee of the Property and all such
plant and equipment, fixtures and fittings attached to the Property (excluding fixtures and fittings
belonging to the existing tenants/lessees and third parties, including those with whom the
existing tenants/lessees have entered into hire purchase and/or leasing agreement in respect
of such fixtures and fittings) free from all encumbrances with legal possession and subject to
the existing tenancies/leases for those parts of the Property that are tenanted and vacant
possession for those parts of the Property that are untenanted, for the Purchase Consideration.

The Purchase Consideration shall be satisfied entirely in cash and is intended to be funded via
proceeds from the Proposed Placement, which includes the Proposed Placement to MRCB and
Proposed Placement to EPF, and borrowings. Further details of the Proposed Acquisition and
Proposed Placement are set out in Sections 2.1 and 2.2, Part A of the Circular respectively
which should be read in its entirety by the Non-Interested Unitholders.

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3. INTERESTS OF THE DIRECTORS AND MAJOR SHAREHOLDERS OF THE MANAGER,
MAJOR UNITHOLDERS AND/OR PERSONS CONNECTED WITH THEM IN THE
PROPOSED ACQUISITION AND PROPOSED PLACEMENT

Save as disclosed below, none of the Directors and major shareholders of the Manager or major
Unitholders as well as persons connected with them has any interest, direct or indirect, in the
Proposed Acquisition and Proposed Placement:

(i) MRCB is a major Unitholder, directly holding 206,250,000 Units or approximately

31.2% of the total Units in circulation based on the Record of Depositors (“ROD”) as at
the LPD and a major shareholder of the Manager, holding 410,000 ordinary shares or
approximately 41.0% of the issued and paid-up share capital of the Manager. MRCB
is also the holding company of the Vendor and the party receiving the Placement Units
under the Proposed Placement to MRCB. Additionally, MRCB is also deemed to have
an interest in the outcome of the Proposed Placement to EPF as EPF is a major
shareholder of MRCB, directly holding 722,457,897 ordinary shares in MRCB or
approximately 34.7% of the issued and paid-up share capital of MRCB as at the LPD
and EPF is the party receiving the Placement Units under the Proposed Placement to
EPF. The Proposed Acquisition, Proposed Placement, Proposed Placement to MRCB,
Proposed Placement to EPF are inter-conditional with each other. In view of this,
MRCB is deemed interested in the Proposed Acquisition, Proposed Placement,
Proposed Placement to MRCB and Proposed Placement to EPF;

(ii) EPF is a Unitholder via its Units held by one of its discretionary funds, which holds
2,995,900 Units or approximately 0.45% of the total Units in circulation based on the
ROD as at the LPD. It also holds Units indirectly in MQREIT via MRCB as EPF is a
major shareholder of MRCB, directly holding 722,457,897 ordinary shares or
approximately 34.7% of the issued and paid-up share capital of MRCB as at the LPD.
EPF is also the party receiving the Placement Units under the Proposed Placement to
EPF. The Proposed Acquisition, Proposed Placement, Proposed Placement to MRCB,
Proposed Placement to EPF are inter-conditional with each other. As such, EPF, being
a person connected to MRCB, is deemed interested in the Proposed Acquisition,
Proposed Placement, Proposed Placement to MRCB and Proposed Placement to EPF;

(iii) QLSB, QPSB and QESB collectively hold approximately 117,040,000 Units or
approximately 17.7% of the total Units in circulation based on the ROD as at the LPD.
QRHSB is a major shareholder of the Manager as at the LPD, holding 390,000 ordinary
shares or approximately 39.0% of the issued and paid-up share capital of the Manager.
The Quill Group is jointly owned by Dato’ Dr Low Moi Ing, J.P. and Dato’ Michael Ong
Leng Chun, who are also Directors of the Quill Group. As the Quill Group is persons
connected to MRCB and in view of the conditionality of the Proposals, they are deemed
interested in the Proposed Acquisition, Proposed Placement, Proposed Placement to
MRCB and Proposed Placement to EPF; and

(iv) GJSB is a major shareholder of the Manager as at the LPD and does not hold any
Units. As a major shareholder of the Manager, it is deemed interested in the Proposed
Authority. In view of the conditionality of the Proposals, GJSB is deemed interested in
the Proposed Acquisition, Proposed Placement, Proposed Placement to MRCB and
Proposed Placement to EPF.

In view of the above, the interested major Unitholder, namely MRCB (“Interested Major
Unitholder”) and the interested major shareholders of the Manager, namely MRCB, QRHSB
and GJSB (collectively, the “Interested Major Shareholders of the Manager”) will abstain and
have undertaken to ensure that persons connected with them, including but not limited to the
EPF and the Quill Group, will also abstain from voting in respect of their direct and/or indirect
unitholdings in MQREIT on the ordinary resolutions pertaining to the Proposed Acquisition,
Proposed Placement, Proposed Placement to MRCB and Proposed Placement to EPF to be
tabled at the forthcoming Meeting.

50
In addition, the Directors of the Manager who are related to MRCB, the Quill Group and GJSB,
namely Tan Sri Saw Choo Boon, Dato’ Dr Low Moi Ing, J.P., Dato’ Michael Ong Leng Chun,
Dato’ Thanarajasingam Subramaniam, Ann Wan Tee and Kwan Joon Hoe are deemed to have
an interest in the outcome of the Proposed Acquisition, Proposed Placement, Proposed
Placement to MRCB and Proposed Placement to EPF. Ann Wan Tee and Kwan Joon Hoe are
also Directors of the Vendor. Accordingly, the Interested Directors have abstained and will
continue to abstain from deliberating and voting on the Proposed Acquisition, Proposed
Placement, Proposed Placement to MRCB and Proposed Placement to EPF at the relevant
Board meetings, nor will they make recommendation on the Proposed Acquisition, Proposed
Placement, Proposed Placement to MRCB and Proposed Placement to EPF. Dato’ Dr Low Moi
Ing, J.P. and Dato’ Michael Ong Leng Chun will also abstain from voting in respect of their direct
and/or indirect unitholdings in MQREIT on the ordinary resolutions pertaining to the Proposed
Acquisition Proposed Placement, Proposed Placement to MRCB and Proposed Placement to
EPF to be tabled at the forthcoming Meeting. Further, the Interested Directors have also
undertaken to ensure that persons connected with them will abstain from voting in respect of
their direct and/or indirect unitholdings in MQREIT on the ordinary resolutions pertaining to the
Proposed Acquisition, Proposed Placement, Proposed Placement to MRCB and Proposed
Placement to EPF to be tabled at the forthcoming Meeting.

The unitholdings of the Interested Major Unitholder, the Interested Major Shareholders of the
Manager and the Interested Directors as well as persons connected with them based on the
ROD as at the LPD are as follows:

Direct Indirect
No. of Units % No. of Units %

Interested Major Unitholder and

persons connected

MRCB 206,250,000 31.2 - -

EPF - - 209,245,900(1) 31.6
Gapurna - - 206,250,000(2) 31.2
Tan Sri Mohamad Salim Fateh Din - - 206,250,000(3) 31.2
QLSB 48,767,000 7.4 - -
QPSB 45,997,000 6.9 - -
QESB 22,276,000 3.4 - -
Dato’ Dr Low Moi Ing, J.P. 50,000 * 117,040,000(4) 17.7
Dato’ Michael Ong Leng Chun 55,000 * 117,040,000(4) 17.7

Interested Major Shareholders of

the Manager

MRCB 206,250,000 31.2 - -

QRHSB - - - -
GJSB - - - -

Interested Directors

Tan Sri Saw Choo Boon - - - -

Dato’ Dr Low Moi Ing, J.P. 50,000 * 117,040,000(4) 17.7
Dato’ Michael Ong Leng Chun 55,000 * 117,040,000(4) 17.7
Dato’ Thanarajasingam Subramaniam - - - -
Ann Wan Tee - - - -
Kwan Joon Hoe - - - -

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51
 Notes:
* Negligible, being less than 0.01%.
(1) Deemed interested pursuant to Section 4 of the CMSA by virtue of its interests in MRCB and Units
held by one of its discretionary funds.
(2) Deemed interested pursuant to Section 4 of the CMSA by virtue of its interest in MRCB.
(3) Deemed interested pursuant to Section 4 of the CMSA by virtue of his interest in MRCB held
through Gapurna.
(4) Deemed interested pursuant to Section 4 of the CMSA by virtue of his/her interests in QLSB, QPSB
and QESB.

4. SCOPE, LIMITATIONS AND ASSUMPTIONS TO THE EVALUATION AND OPINION

AmInvestment Bank was not involved in the formulation of or any of the deliberations and
negotiations on the terms and conditions of the Proposed Acquisition, the Proposed Placement
and the SPA. In performing our evaluation, we have relied on the following:

(i) the SPA;

(ii) information contained in Part A of the Circular and the accompanying appendices in the
Circular;

(iii) information contained in the Valuation Report and the valuation certificate prepared by
the Valuer dated 20 June 2016 in relation to the Property;

(iv) other relevant information, documents, confirmation and/or representations provided by

the Board and the Manager, or obtained in or derived from the discussions with the
Manager; and

(v) other publicly available information as we deemed relevant.

We have relied on the accuracy of the information and documents furnished to us by the Board
and the Manager and have not independently verified such information and documents for their
validity, reliability, accuracy and/or completeness.

The Board and the Manager had confirmed that they had read this IAL and collectively and
individually accept full responsibility for the accuracy of the information on MQREIT, the
Property, the Proposed Acquisition and Proposed Placement as disclosed in this IAL and/or
documents provided to us, which are essential to our evaluation, and confirm that after making
all reasonable enquiries, and to the best of their knowledge and belief, there is no omission of
any material fact which would make any information and statement disclosed to us incomplete,
inaccurate, false or misleading.

It is not within our terms of reference to express any opinion on the commercial benefits of the
Proposed Acquisition and Proposed Placement and this remains the responsibility of the Board
and Manager. In preparing this IAL, we have considered various factors which we believe are
important in enabling us to form an opinion on the fairness and reasonableness of the Proposed
Acquisition and Proposed Placement so far as the Non-Interested Unitholders are concerned,
and whether it is to the detriment of the Non-Interested Unitholders. We are not in possession
of information relating to, and have not given any consideration to, separate specific investment
objectives, financial situations and particular needs of any individual Unitholder or any specific
group of Unitholders.

The scope of AmInvestment Bank’s responsibility with regard to its evaluation and
recommendation is based on the considerations set out in the ensuing sections of this IAL, and
where comments or points of consideration are included on matters which may be commercially
oriented, these are incidental to our overall evaluation and concern matters which we may deem
material for disclosure.

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52
 We shall not be liable for any damage or loss of any kind sustained or suffered by any individual
Unitholder or group of Unitholders in reliance on the opinion stated herein for any purpose
whatsoever which is particular to such Unitholder or group of Unitholders.

Our opinions as set out in this IAL are, amongst others, based on prevailing market, economic,
industry and other conditions (if applicable), and the information and/or documents made
available to us as of 2 November 2016, being the LPD. Such conditions may change
significantly over a short period of time. It should be noted that our evaluation and opinions
expressed in this IAL may not take into account the information, events or conditions arising
after the LPD or such other period as specified herein, as the case may be.

5. DECLARATION OF CONFLICT OF INTEREST AND OUR CREDENTIALS, EXPERIENCE

AND EXPERTISE

5.1 CONFLICT OF INTEREST

AmInvestment Bank and/or its related and associated companies (“AmBank Group”) form a
diversified financial group and are engaged in a wide range of transactions relating to amongst
others, investment banking, commercial banking, private banking, brokerage, securities
trading, asset and funds management and credit transaction services businesses. AmBank
Group’s securities business is primarily in the areas of securities underwriting, trading and
brokerage activities, foreign exchange, commodities and derivatives trade.

In the ordinary course of their businesses, any member of the AmBank Group may at any time
extend services to any company as well as hold long or short positions, and trade or otherwise
effect transactions, for its own account or the account of its other clients, in debt or equity
securities or senior loans of any company. Accordingly, there may be situations where parts of
the AmBank Group and/or its clients now have or in the future, may have interests or take
actions that may conflict with the interests of MQREIT.

As at the LPD, the AmBank Group did not extend any credit facilities to MQREIT and/or the
Manager. However, the AmBank Group has in the ordinary course of its banking businesses,
extended credit facilities to MRCB and its group of companies (“MRCB Group”). The
aforementioned credit facilities represent approximately 1.6% of the total borrowings of the
MRCB Group as at 31 March 2016 and approximately 0.3% of the latest audited shareholders’
funds of the AmBank Group as at 31 March 2016. We are of the view that the aforementioned
extension of credit facilities does not result in any conflict of interest situations in respect of our
capacity as the Independent Adviser for the Proposed Acquisition as the aforementioned credit
facilities have been extended by the AmBank Group in the ordinary course of its banking
business, and the terms and conditions of such credit facilities are offered on an arm’s length
basis.

Save for the Proposed Acquisition, which is the subject matter of the Circular, we have not
advised MQREIT in the capacity of principal adviser or independent adviser for any corporate
exercise within the past two (2) years preceding the LPD.

Premised on the above, we confirm that no conflict of interest situation exists or likely to exist
in relation to our role as the Independent Adviser to MQREIT in respect of the Proposed
Acquisition.

5.2 CREDENTIALS, EXPERIENCE AND EXPERTISE

AmInvestment Bank is an approved corporate finance adviser within the meaning of the
Principal Adviser Guidelines issued by the SC. We provide a range of advisory services
including, amongst others, mergers and acquisitions, take-overs/general offers, restructuring,
equity fund raisings, asset and investment valuations as well as initial public offerings.

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53
The credentials and experience of AmInvestment Bank as an independent adviser in the past
two (2) years prior to the date of the SPA include, amongst others, the following:

(i) acquisition by MISC Berhad of the remaining 50% equity interest in Gumusut-Kakap
Semi-Floating Production System (L) Limited from E&P Venture Solutions Co Sdn Bhd,
a wholly-owned subsidiary of PETRONAS Carigali Sdn Bhd, for a cash consideration
of USD445.0 million (approximately RM1,849.0 million), which was announced on 24
February 2016;

(ii) selective capital reduction and repayment exercise of Kulim (Malaysia) Berhad
pursuant to Section 64 of the Act, which was announced on 18 November 2015;

(iii) unconditional mandatory take-over offer by OSK Holdings Berhad (“OSK Holdings”)
through RHB Investment Bank Berhad to acquire all the remaining ordinary shares of
RM1.00 each in OSK Property Holdings Berhad (“OSK Property”) (“OSK Property
Shares”) not already held by OSK Holdings and such number of new OSK Property
Shares that may be issued prior to the close of offer arising from the exercise of the
outstanding five (5)-year warrants 2012/2017 issued by OSK Property (“OSK Property
Warrants”) as well as all the OSK Property Warrants, which was announced on 20 July
2015;

(iv) unconditional mandatory take-over offer by Dayang Enterprise Holdings Bhd

(“Dayang”) through Maybank IB to acquire all the remaining ordinary shares of RM0.50
each in Perdana Petroleum Berhad (“PPB”) (“PPB Shares”) not already owned by
Dayang and such number of new PPB Shares that may be issued pursuant to the
exercise of any outstanding 5-year warrants 2010/2015 issued by PPB (“PPB
Warrants”) prior to the close of offer and all the remaining PPB Warrants not already
owned by Dayang, which was announced on 2 July 2015;

(v) reverse take-over of Symphony House Berhad (“Symphony House”) by Ranhill

Holdings Berhad (“Ranhill Holdings”), disposal by Ranhill Holdings of its entire equity
interest in Symphony House to Stone Equity Sdn Bhd through a management buy-out,
granting of a call option by Ranhill Group Sdn Bhd to Ranhill Holdings for Ranhill
Holdings to purchase its 51% equity interest in Ranhill WorleyParsons Sdn Bhd as well
as the transfer of listing status of Symphony House to Ranhill Holdings and the
admission of Ranhill Holdings to the Official List of Bursa Securities, which was
announced on 20 June 2014; and

(vi) selective capital reduction and repayment exercise of Malaysian Airline System Berhad
pursuant to Sections 60 and 64 of the Act, which was announced on 8 August 2014.

Premised on the foregoing, AmInvestment Bank is capable, competent and have the relevant
experience in carrying out our role and responsibilities as the Independent Adviser to advise
the Non-Interested Unitholders in relation to the Proposed Acquisition.

[The rest of this page is intentionally left blank]

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6. EVALUATION OF THE PROPOSED ACQUISITION AND PROPOSED PLACEMENT

In evaluating the Proposed Acquisition and Proposed Placement, we have considered the
following factors:

(i) rationale for and benefits of the Proposed Acquisition and Proposed Placement;

(ii) evaluation of the Purchase Consideration and issue price of the Placement Units
(“Issue Price”);

(iii) salient terms of the SPA;

(iv) effects of the Proposed Acquisition and Proposed Placement;

(v) industry overview and future prospects;

(vi) risk factors relating to the Proposed Acquisition and Proposed Placement; and

(vii) other considerations of the Proposed Placement.

6.1 RATIONALE FOR AND BENEFITS OF THE PROPOSED ACQUISITION AND PROPOSED
PLACEMENT

We note the rationale for and benefits of the Proposed Acquisition and Proposed Placement as
stated in Section 3.1, Part A of the Circular and wish to highlight the following:

(i) DPU yield is expected to be accretive

We note that the DPU yield is expected to be diluted following the issuance of the
Placement Units. Notwithstanding this, the dilution impact can be mitigated by the
following envisaged broad parameters of the Proposals:

(a) future increase in net income from expected rental revisions of the current
portfolio and the Property. The Property has a stable income with its high
occupancy rate of 99.9%, as supported by the Lease Agreements with Shell
occupying a total of 17 floors out of the Property’s 33-storey office tower, and
there are provisions in the Property’s existing tenancies for future potential
upward rental revisions;

(b) a portion of the Management Fee may potentially be paid in new Units pursuant
to the Proposed Authority. The additional cash conserved can be used for
distribution to the Unitholders; and/or

(c) the Manager can consider varying its payout ratio from its existing payout ratio
of 94.3% as at 31 December 2015 subject to a distribution of at least 90.0% of
the net realised income of MQREIT.

Premised on the above, we are of the view that it would augur well for MQREIT to
undertake the Proposed Acquisition as the Property is expected to contribute positively
to the future earnings and distributable income of MQREIT which would in turn enhance
the prospective NAV per Unit and DPU yield based on the envisaged broad parameters
of the Proposals as mentioned above.

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55
(ii) The Proposed Acquisition represents a growth catalyst

We note that the total asset size of MQREIT is expected to increase from RM1.63 billion
to RM2.27 billion, whilst its market capitalisation will increase from RM846.57 million,
based on the closing price of RM1.28 as at the LPD, to RM1.37 billion upon completion
of the Proposed Acquisition and Proposed Placement. Correspondingly, this will
elevate MQREIT’s competitive positioning from eighth (8th) to sixth (6th) out of 16 listed
REITs in Malaysia (excluding KLCC Stapled Securities) in terms of total asset size
based on the latest available audited financial statements of the respective REITs as
at the LPD.

The increase in MQREIT’s asset size upon completion of the Proposed Acquisition is
expected to enable MQREIT to enjoy greater operating efficiency arising through the
efficient utilisation of current resources, namely manpower. It will also enhance its
competitive positioning providing MQREIT with greater bargaining power and thus,
enabling it to secure term contracts at more competitive terms. On the other hand, the
increase in market capitalisation as well as Units in circulation after the Proposed
Placement is expected to improve the trading liquidity of the Units.

(iii) Competitive strengths of the Property is expected to fit well into MQREIT’s
clientele requirements, enhance its portfolio profile and contribute positively to
the performance of MQREIT

The Property currently enjoys almost full occupancy with an occupancy rate of 99.9%,
and therefore, improving the occupancy rate of MQREIT’s portfolio of properties from
97% to 98% upon completion of the Proposed Acquisition. We note that the high
occupancy rate of the Property is also supported by a 15-year Lease with Shell
pursuant to the Lease Agreements. For information purposes, Shell is currently
occupying a total of 17 floors out of the Property’s 33-storey office tower.

The addition of the Property would also allow MQREIT to increase its footprint in Kuala
Lumpur locations. Following the Proposed Acquisition, based on NLA, MQREIT’s
geographical base would comprise 71% in Kuala Lumpur locations, 17% in Cyberjaya,
5% in Mont’ Kiara and 7% in other locations, as compared to existing geographical
base which comprises 59% in Kuala Lumpur locations, 23% in Cyberjaya, 7% in Mont’
Kiara and 11% in other locations. This is expected to augur well for MQREIT given that
Kuala Lumpur locations, particularly Kuala Lumpur Sentral is highly sought after by
corporate tenants.

We also note that the Property, with its green building features, MSC Malaysia Status
and strategic location has the potential to become a prime office asset which will fit well
into MQREIT’s clientele requirements for high-quality specification buildings.

MQREIT’s existing tenant base is broadly categorised into eight (8) sectors, namely,
oil and gas, government-linked, retail, banking, automotive, logistics, education and
information technology/electronics, of which the retail sector (24%), oil and gas sector
(21%), government-linked sector (18%), logistics sector (15%) and banking sector
(11%) being the larger sectors amongst MQREIT’s portfolios. We note that the
Property, albeit with a heavier weightage towards the oil and gas sector, has a relatively
well-balanced tenancy mix across the industries. Upon completion of the Proposed
Acquisition, MQREIT will continue to have a well-balanced tenancy mix across the
business sectors, with the oil and gas sector (31%), retail sector (19%), banking sector
(16%), government-linked sector (13%) and logistics sector (11%) remaining as the
larger sectors amongst MQREIT’s portfolios. The tenant base of the Property is also
made up by a mix of reputable, high-quality multinational and large local conglomerate
tenants such as Shell, AmGeneral Insurance Berhad and Tradewinds Corporation
Berhad which will enhance MQREIT’s overall clientele mix and portfolio profile.

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56
 (iv) The Proposed Placement is more expeditious, lower gearing and less discount
accorded

The Proposed Placement was determined by the Board after taking into consideration
that it represents a more expeditious manner to raise funds for the Proposed
Acquisition as the Proposed Placement can be implemented immediately post
obtaining Unitholders’ approval. Additionally, the level of discount accorded for a
private placement is typically not as steep as a rights issue, which will result in lesser
number of Units issued in order to raise the same amount of gross proceeds.

Further, considerations were also given to MQREIT’s current debt profile vis-a-vis the
borrowings restrictions of a fund under REIT Guidelines. The Proposed Placement will
reduce MQREIT’s current borrowings from 42.4% to 38.6% and hence provide
headroom for future cash acquisitions, in line with the MQREIT’s growth strategy.

Premised on the above, we are of the view that there is sufficient merit to the rationale for and
benefits of the Proposed Acquisition and Proposed Placement as a whole and it is reasonable
and not detrimental to the interest of the Non-Interested Unitholders.

6.2 EVALUATION OF THE PURCHASE CONSIDERATION AND ISSUE PRICE

As set out in Section 2.1.3, Part A of the Circular, the Purchase Consideration was arrived at
based on the market value of the Property of RM640,000,000 as appraised by the Valuer using
the investment and comparison methods. For information purposes, the estimated expenses
for the Proposals which comprise mainly of acquisition fees due to the Manager and other
acquisition and equity related cost such as professional fees amount to RM16,000,000.

In evaluating the Purchase Consideration, we have considered:

(i) the reasonableness of the market value of the Property as appraised by the Valuer after
taking into consideration, inter-alia:

(a) the applied method of valuation by the Valuer;

(b) the assumptions used by the Valuer in deriving the cash flow projections from
the Property comprising inter-alia:

(aa) rental rates of the Property;

(bb) car park income;
(cc) other income;
(dd) outgoings;
(ee) void, occupancy and capitalisation rates;

(c) comparison against recent transactions of office buildings and car parks as
well as MQREIT’s previous acquisition of an office building in Kuala Lumpur
Sentral known as Platinum Sentral (“Platinum Sentral”), which was completed
on 30 March 2015;

(ii) the satisfication of the Purchase Consideration; and

(iii) the Issue Price.

6.2.1 Market value of the Property as appraised by the Valuer

6.2.1.1 Valuation methods

We noted from the Valuation Report that the valuation of the Property was carried out
based on the investment method of valuation (“Investment Method”) in view that the
Property is an income generating property.

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57
 The Investment Method entails determining the net annual income by deducting the
annual outgoings from the gross annual income and capitalising the net annual income
by a suitable rate of return which is consistent with the type and quality of investment
to arrive at the market value.

As a check against the market value of the Property derived from the Investment
Method, the Valuer has also adopted the comparison method of valuation
(“Comparison Method”). Under the Comparison Method, recent transactions and
asking prices of similar properties in the larger locality are analysed for comparison
purposes with adjustments being made for differences in location, visibility, age and
condition of building, design, finishes, specifications, size, strata or individual title,
tenure, density, public amenities, green building features, MSC Malaysia Status, title
restrictions, if any, progress payments and other relevant characteristics to arrive at the
market value.

COMMENTS

We note that the Valuer has adopted the Investment Method as the principal valuation
methodology to arrive at the market value of the Property, whilst the Comparison
Method was used to cross check against the market value of the Property derived from
the Investment Method. We are of the view that the Investment Method is an
appropriate valuation methodology as the Investment Method takes into consideration:

(i) that the Property is an income generating asset with relatively predictable
income stream based on its existing tenancies and lease agreements; and

(ii) the resultant net income (net of expenses incurred) is capitalised into market
value using a capitalisation rate which reflects the expected return on
investment and commensurate with the risk exposure of the Property.

In addition, the Comparison Method is also an appropriate valuation methodology as a

check against the Investment Method given that it provides a snapshot of the market
demand and supply conditions as well as the perceived value of similar nature
properties which have been recently transacted and there are sufficient office building
transactions in the vicinity of the Property.

Further, given the similarity of the Property with Platinum Sentral, which was acquired
by MQREIT on 30 March 2015, the Non-Interested Unitholders should also note that
the valuation methods adopted by the Valuer for the Property are consistent with those
adopted by the Valuer in its valuation to arrive at the market value of Platinum Sentral
(Source: MQREIT’s circular to Unitholders dated 17 February 2015).

6.2.1.2 Assumptions used by the Valuer in deriving the cash flow projections from the
Property

In summary, the valuation of the Property which was derived by the Valuer using the
Investment Method is based on the following computations:

Explanatory Capitalisation Market Value

Property Notes Rates (RM)

Office/Retail Space
 Term 1(1) (A) 5.50% 28,995,818
 Terms 2 to 5(2) 5.75% to 6.50% 195,542,964
(B)
 Reversionary Term (3) 6.25% 355,070,881
579,609,663

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 Explanatory Capitalisation Market Value
Property Notes Rates (RM)

Car Park
 Term 1(4) (C) 5.50% 1,104,096
 Term 2(5) 5.75% 28,399,365
(D)
 Reversionary Term (6) 6.25% 28,896,858
58,400,319

Other Income (E) 6.25% 3,837,696

Total (7)640,000,000

Notes:
(1) Term 1 for office/retail space refers to the current tenancy term based on the Property’s
existing tenancies, which ranges from two (2) to three (3) years.
(2) Terms 2 to 5 for office/retail space refer to tenancy terms of Shell for a remaining Lease
period of 12 years pursuant to the Lease Agreements up to 31 October 2028 with each
term representing a period of three (3) years.
(3) Reversionary term for office/retail space refers to the future tenancy term upon the
expiry of the Property’s existing tenancies and assuming the respective tenancies are
renewed.
(4) Term 1 for car park refers to the current rental term based on the car park operation
agreement dated 28 October 2014 (“Car Park Agreement”) entered into between the
Vendor and Semasa Parking Sdn Bhd (“Semasa Parking”), the current car park
operator of the Property.
(5) Term 2 for car park refers to the future rental term upon the expiry of the initial term of
the Car Park Agreement on 31 December 2016 until the expiry of the Lease
Agreements.
(6) Reversionary term for car park refers to the future rental term upon the expiry of the Car
Park Agreement and the Lease Agreements.
(7) The market value was rounded down by the Valuer from RM641,847,678.

Explanatory Notes:

(A) Net rental income for Term 1 is based on the gross rental rates of all existing
tenancies until their respective expiry dates, after deducting related outgoings
and capitalising the net rental income by a suitable rate of return of 5.50%.

(B) Net rental income for Terms 2 to 5 as well as Reversionary Term is based on
assumed gross rental rates, after deducting assumed outgoings and
capitalising the net rental income by a suitable rate of return which ranges from
5.75% to 6.50% and 6.25% respectively.

(C) Net car park income for Term 1 is based on the actual monthly car park income,
as derived from the Car Park Agreement, and capitalising the net car park
income by a suitable rate of return of 5.50%.

(D) Net car park income for Term 2 and Reversionary Term is based on assumed
term monthly car park income after the expiry of Car Park Agreement, after
deducting assumed outgoings and capitalising the net rental income by a
suitable rate of return of 5.75% and 6.25% respectively.

(E) Other income comprises net rental income from the Property’s kiosks and
stores, which are based on actual monthly rental income and capitalising the
net rental income by a suitable rate of return of 6.25%.

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(i) Office/Retail Space

In arriving at the market value of the Property’s office/retail space, we note that
the Valuer has adopted the following key parameters:

Gross Monthly Office Space Retail Space

Rental Rates (psf) (psf)
Term 1 RM5.80 to RM7.95 RM2.00 to RM10.00
or or
RM7.40 RM4.02
in average in average
Terms 2 to 5 and RM6.38 to RM9.40 RM2.20 to RM11.00
Reversionary or or
Term RM8.52 RM4.48
in average in average

Monthly Outgoings Office/Retail Space

(psf)
Term 1 RM2.10
Terms 2 to 5 RM2.15
Reversionary Term RM2.15

Void Office/Retail Space

Reversionary Term 5%

Capitalisation Rate Office/Retail Space

Term 1 5.50%
Terms 2 to 5 5.75% to 6.50%
Reversionary Term 6.25%

COMMENTS

 Gross Monthly Rental Rates

We note that:

 the gross monthly rental rates adopted for Term 1 are based on the
Property’s existing tenancy and lease agreements;

 the Valuer has adopted an increment of 5% to the base monthly rental

rates of the office space tenanted by Shell for Terms 2 to 5; and

 the Valuer has considered the asking rentals of similar office buildings
and retail mall within the vicinity (“Similar Buildings”) to arrive at the
gross monthly rental rates for Reversionary Term.

In view that the gross monthly rental rates adopted for Term 1 as stated in
the Valuation Report are based on the Property’s existing tenancy and lease
agreements, we note that the annual gross income derived by the Valuer of
RM48.6 million for Term 1 is comparable to the annual gross rental income
recognised by the Property for the FYE 31 December 2015 amounting to
RM44.4 million.

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We are of the opinion that the gross monthly rental rates adopted by the
Valuer for Terms 1 to 5 and Reversionary Term are reasonable as they are
comparable to the adjusted average rental rates of the Similar Buildings
which range between RM7.84 psf and RM8.46 psf as follows:

Details Similar Buildings

Building name Platinum Integra@The G Tower, Jalan
Sentral, Kuala Intermark, Tun Razak
Lumpur Sentral Jalan Tun
Razak
Lettable Area 17,588 7,000 4,900
(sq ft)
Analysis 9.00 11.00 8.50
(RM psf)
Adjustments Location, age of building, green building features,
density, size (NLA) and negotiation
Adjusted Value 8.10 8.46 7.84
(RM psf)

(Source: Valuation Report)

In addition, the gross monthly rental rates adopted by the Valuer are also
comparable to the asking gross monthly rental of other Grade A office
buildings within Kuala Lumpur Sentral, which ranges from RM6.50 psf to
RM8.00 psf as follows:

Asking gross monthly rental

Building name (RM psf)
Menara CIMB 8.00
The Gardens North and South 7.80
Towers
Menara Allianz Sentral and Nu Tower 6.50
2
Menara BRDB 7.00

(Source: Real Estate Highlights 1st Half of 2016, Knight Frank Research)

We are also of the opinion that the increment of 5% applied to the base
monthly rental rates for Shell’s office space in respect of Terms 2 to 5 is
prudent in view that the Lease Agreements allow an increment of higher
than 5% subject to agreement from the lessee.

In respect of retail space, we note that, save for the higher gross monthly
rental rates of RM10.00 psf and RM11.00 psf for Term 1 and Reversionary
Term respectively which were mainly given to ground floor’s tenants with
better visibility and accessibility, the average gross monthly rental rates for
retail space are generally lower as compared to the average gross monthly
rental rates for office space in view that the Property’s retail space, which
represents only 3% of the Property’s total NLA, mainly serves to supplement
the requirements of the Property’s tenants and to complement the office
rental space.

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 Monthly Outgoings

Based on the Valuation Report, we note that the historical monthly

outgoings of the Property in 2015 is approximately RM1.83 psf, whilst the
Valuer has adopted monthly outgoings of RM2.10 psf for Term 1 and
RM2.15 psf for Terms 2 to 5. Further, the monthly outgoings for the Property
are higher than the range of monthly outgoings of most recent comparable
transactions of office buildings which have been analysed by the Valuer
(“Comparables”) as set out in Section 6.2.1.3(A) of this IAL of between
RM1.50 psf and RM1.80 psf.

We are of the opinion that although the monthly outgoings adopted by the
Valuer for the Property is higher than the Comparables’ range of monthly
outgoings of between RM1.50 psf and RM1.80 psf, this is reasonable in
view of the higher expenses required to meet the service levels required by
Shell as stipulated in the Lease Agreements.

The higher monthly outgoings of RM2.10 psf for Term 1 and RM2.15 psf for
Terms 2 to 5 and Reversionary Term as compared to the actual monthly
outgoings of RM1.83 psf in 2015 is reasonable given that the Property was
only completed in February 2014 and was under defect liability period until
February 2015. Further, some of the scheduled maintenance or operation
only commenced in October 2015.

 Void

We noted that the Valuer has adopted a void rate of 5% for the Reversionary
Term.

This is reasonable after taking into consideration of the Property’s high

occupancy rate of approximately 99.9% as well as the Property’s prime
location coupled with reasonably good accessibility as well as its green
building features and MSC Malaysia Status.

 Capitalisation Rate

We note that the Valuer has adopted a capitalisation rate of 5.50% for Term
1. We are of the opinion that the capitalisation rate adopted for Term 1 is
reasonable as:

(i) it is comparable with the Comparables’ range of net yields of between

4.71% and 5.62% as follows:

Comparables Net yield (%)

Dijaya Plaza 5.47
Nu Tower 1 4.71
Platinum Sentral 5.62

(Source: Valuation Report)

(ii) it is comparable to the current weighted average cost of capital

(“WACC”) of MQREIT of 5.82% (Source: Bloomberg);

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(iii) it is within the range of WACC of REITS which are comparable to
MQREIT (“MQREIT Peers”) which range from 5.40% to 6.20% as
follows:

MQREIT Peers WACC (%)

AmFirst REIT 5.60
UOA REIT 5.40
Tower REIT 6.20

(Source: Bloomberg)

(iv) it is comparable to the range of term capitalisation rate of precedent

transactions of office buildings undertaken by listed REITs in Malaysia
(“Precedent Transactions”) of between 5.75% and 6.00% as follows:

Term
Announcement Capitalisation
Precedent Transactions Date Rate (%)
Disposal by AmanahRaya 23 June 2015 7.00*
REIT (“AmanahRaya”) of
Wisma AmanahRaya
Acquisition by CapitaMalls 26 January 6.00
Malaysia Trust (“CMMT”) of 2015
Tropicana City Mall and
Tropicana City Office Tower
Acquisition by MQREIT of 29 January 5.75
Platinum Sentral 2014

(Source: Circulars to unitholders of AmanahRaya, CMMT and

MQREIT dated 2 September 2015, 10 June 2015 and 17 February
2015 respectively)

Note:
* Deemed not comparable as a higher capitalisation rate was used by the
independent valuer of Wisma AmanahRaya in view that it is a leasehold
property.

We note that the capitalisation rates adopted for Terms 2 to 5 of between

5.75% and 6.50% are higher than the capitalisation rate for Term 1 and
the Comparables’ range of net yields of between 4.71% and 5.62%.

We are of the opinion that the higher capitalisation rates adopted for Term
2 to 5 are reasonable to reflect the risks associated with the projected
gross rental income and tenancy uncertainties for the said future terms.
Notwithstanding the higher rates adopted, the capitalisation rates are still
comparable to the range of WACC of MQREIT Peers of between 5.40%
and 6.20% as well as the capitalisation rates of Precedent Transactions of
between 5.75% and 6.00%.

We also noted that the Valuer adopted a lower capitalisation rate of 6.25%
for Reversionary Term, which is lower than the 6.50% yield applied for
Shell’s tenancy in Term 5. This is reasonable in view that the rate of
increment applied to the gross rental for Reversionary Term is lower than
the rate of increment applied to the gross rental for Shell’s tenancy up to
Term 5.

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(ii) Car Park

In arriving at the market value of the Property’s car park, we note that the Valuer
has adopted the following key parameters:

Monthly Car Park Income

Term 1 RM155,000 per month
Term 2 RM293,138 per month
Reversionary Term RM355,954 per month

Monthly Outgoings
Term 1 -
Term 2 and Reversionary Term 10% of gross monthly rental

Occupancy Rate
Term 2 100% for Shell’s season car park, 95% for
other season car park with fixed lots and
floating lots, 70% for drive-in customers
on weekdays and 30% for drive-in
customers on weekends
Reversionary Term 95% for season car park with fixed lots
and floating lots, 70% for drive-in
customers on weekdays and 30% for
drive-in customers on weekends

Capitalisation Rate
Term 1 5.50%
Term 2 5.75%
Reversionary Term 6.25%

COMMENTS

 Monthly Car Park Income

 The monthly car park income adopted for Term 1 is reasonable as it is

the minimum guaranteed income by Semasa Parking until 31
December 2016 based on the Car Park Agreement. In addition, we
note that the current monthly car park income of the Property is
comparable to Platinum Sentral, a comparable building in Kuala
Lumpur Sentral; and

 We note that the monthly rates adopted for Term 2 and Reversionary
Term to arrive at the monthly car park income are based on the existing
parking rates and current agreed rates for the car park lots which are
reserved for Shell (“Shell Allocated Lots”) and are hence reasonable.

In addition, we also note that the total car park income recognised during
the Reversionary Term is higher as it is assumed that the Shell Allocated
Lots are reallocated for season parking and drive-in customers, which
generally charge higher rate per hour, upon expiry of the Lease
Agreements.

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  Monthly Outgoings

There are no monthly outgoings for Term 1 based on the Car Park
Agreement as the monthly car park income derived for Term 1 is net of
outgoings as stipulated in the Car Park Agreement.

The monthly outgoings of 10% of gross monthly rental adopted for Term 2
and Reversionary Term is reasonable as it is comparable to the average
monthly outgoings incurred by Semasa Parking for the FYE 31 December
2015.

 Occupancy Rate

The occupancy rate of 100% adopted for Shell Allocated Lots and 95% for
other season car park for Term 2 is reasonable in view that the Property
currently has almost full occupancy rate of approximately 99.9% and after
taking into consideration the limited supply of car park space within the
vicinity of the Property in Kuala Lumpur Sentral. Nonetheless, the Valuer
has adopted a lower occupancy rate for the Reversionary Term to reflect
tenancy risk.

In addition, the lower occupancy rate adopted for drive-in customers on

weekends for Term 2 and Reversionary Term as compared to weekdays
is also reasonable given that the Property is an office building and the
surrounding shopping malls and hotels would also have their own parking
spaces.

 Capitalisation Rate

We note that the Valuer has adopted capitalisation rates which are similar
to those adopted for the Property’s office/retail space. This is reasonable
given that the risk profile for the car park are similar to the office space
given that the majority of the car park lots will be rented out to or occupied
by the tenants of the Property.

(iii) Other Income

Other income comprises income from the Property’s kiosks and stores. We note
that the Valuer has adopted actual monthly income as stated in the Property’s
tenancy agreements as well as capitalisation rates and void factor which are
similar to those adopted for the Property’s office/retail space for Reversionary
Term. This is reasonable as it is prudent and reflects the long term nature of
income from the kiosks and stores.

In addition, no outgoings were reflected in the valuation of the Property’s other

income in view that kiosks and stores do not form part of the Property’s NLA
and there are minimal usage of utilities from these kiosks and stores.

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6.2.1.3 Comparison Method

The breakdown of the market value of the Property of RM665,000,000 as appraised by

the Valuer using the Comparison Method is as follows:

Property Description of valuation Explanatory Market Value

methodology Notes

Office The Valuer has considered (A) RM612,758,300

Building transactions of office buildings
within the immediate and
surrounding localities to arrive at
the market value with
adjustments made on location,
size (NLA), density, public
amenities, design/finishes/
specifications, green building
features and MSC Malaysia
Status

Car Park The Valuer has considered (B) RM54,900,000

transactions of car park within
Klang Valley to arrive at the
market value with adjustments
made on location

Total *RM665,000,000

Note:
* The market value was rounded down by the Valuer from RM667,658,300 to
RM665,000,000.

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COMMENTS

(A) Office Building

The details of the Comparables are as follows:

Property Comparable 1 Comparable 2 Comparable 3

Building name Menara Shell Dijaya Plaza Nu Tower 1 Platinum Sentral
Location Kuala Lumpur Sentral Jalan Tun Razak, Kuala Kuala Lumpur Sentral Kuala Lumpur Sentral
Lumpur
Net lettable area 557,053 156,488 259,632 475,857
(sq ft)
Tenure Freehold Freehold Freehold Freehold
Date 19 May 2016 28 January 2016 26 March 2015 10 April 2014
Consideration 612,758,300 140,000,000 283,000,000 695,410,000
(excluding car park) (RM)
RM psf 1,100 771 1,090 1,461
Adjustments made by the Not applicable Upward Upward Upward
Valuer  Building’s  Design/finishes/  Nil
age/condition specifications
 Design/finishes/  Green building
specifications features
 Public amenities
 Green building
features
 MSC Malaysia
Status

Downward Downward Downward

 Size  Size  Strata
 Strata title/individual title
title/individual title  Density
Adjusted RM psf 1,100 1,003 1,145 1,096

(Source: Valuation Report)

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 We note that the adjusted market value of the comparable transactions of office
building ranges from RM1,096 psf to RM1,145 psf. The Valuer has adopted an
adjusted market value of RM1,100 psf for the office building of the Property
based on Comparable 3 as it is the most appropriate comparable in terms of
location, building age/condition, design/finishes/specification, title, tenure,
public amenities, green building features and MSC Malaysia Status.

(B) Car Park

The details of the comparable transactions of car park within Klang Valley
which have been analysed by the Valuer are as follows:

Property Comparable 1 Comparable 2

Building name Menara Shell Pavilion Kuala East Wing of The
Lumpur Icon @ Tun
Razak
Location Kuala Lumpur Jalan Bukit Jalan Tun Razak
Sentral Bintang
No. of car park 915 72 301
lots
Date 19 May 2016 1 July 2015 24 December
2009
Consideration 54,900,000 4,896,000 18,151,000
(RM)
RM per lot 60,000 68,000 60,302
Adjustments Not applicable Upward Nil
made by the  Nil
Valuer

Downward
 Location and
surrounding
Adjusted RM 60,000 61,200 60,302
per lot

(Source: Valuation Report)

We note that the adjusted market value of the comparable transactions of car
park ranges from RM60,302 per lot to RM61,200 per lot. The Valuer has
adopted an adjusted market value of RM60,000 psf for the car park of the
Property based on Comparable 1 as it is the most recent transaction.

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6.2.2 Settlement of the Purchase Consideration

As set out in Section 2.1.5, Part A of the Circular, the Purchase Consideration and expenses
relating to the Proposals amounting to RM656,000,000 (“Total Cash Outlay”) will be funded
through a combination of proceeds from the Proposed Placement and borrowings, the actual
breakdown of which has yet to be determined and will be dependent upon, amongst others, the
actual placement size and Issue Price.

The financing proportion as illustrated in Section 2.1.5, Part A of the Circular will involve an
issuance of 406,666,667 Placement Units, raising gross proceeds of RM467.7 million
(representing 71.3% of the Total Cash Outlay) based on the illustrative Issue Price of RM1.15
per Unit, which represents a discount of approximately 9.9% to the 5-day VWAMP of the Units
up to and including the LPD of RM1.2764, whilst the remaining RM188.3 million of the Total
Cash Outlay will be financed via borrowings (representing 28.7% of the Total Cash Outlay)
(“Indicative Financing Proportion”).

In evaluating the present mode of consideration, we have considered the impact of the
Indicative Financing Proportion on MQREIT’s pro forma WACC, gearing and DPU vis-à-vis the
following alternative modes of consideration:

Alternative : Assuming the Total Cash Outlay is entirely financed via the issuance of
Mode I new Units

Alternative : Assuming the Total Cash Outlay is financed via a combination of

Mode II borrowings of such amount which MQREIT could procure, such that the
total borrowings of MQREIT does not exceed 50% of its total asset value
as allowed under the REIT Guidelines (“Gearing Limit”), and the remaining
via the issuance of new Units

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For illustrative purposes, the impact of the Indicative Financing Proportion on MQREIT’s pro forma WACC, gearing and DPU yield vis-à-vis Alternative
Mode I and Alternative Mode II is as follows:

Alternative Modes of Consideration MQREIT Peers

Audited as at
31 December Indicative Financing Alternative Alternative
2015 Proportion(1)(2) Mode I(2) Mode II(1)(2) Range(3) Average(3)
WACC (%) 5.84 5.95 6.11 5.73 6.00 – 6.50 6.30
Gearing (%) 42.44 38.60 30.35 50.00 33.32 – 46.15 39.74
DPU yield (%)(4) 7.37 5.77 5.60 6.12 5.78 – 6.89 6.49

Notes:
(1) Assuming additional financing costs of RM8.6 million per annum for Indicative Financing Proportion and RM20.3 million for Alternative Mode II in view of the additional borrowings to
be obtained.
(2) Based on illustrative Issue Price of RM1.15 and existing payout ratio of 94.3% as at 31 December 2015 and no Manager’s Units are issued.
(3) Based on MQREIT Peers as extracted from Bloomberg as at the LPD.

PRICE-TO-
PRICE-TO-NAV EARNINGS
MULTIPLE (“P/NAV MULTIPLE (“P/E
MULTIPLE”) MULTIPLE”) DPU YIELD DPU
(TIMES) (TIMES) (%) (sen) WACC (%) Gearing (%)

AmFirst REIT 0.68 15.30 6.80^ 5.10 6.40 46.15

UOA REIT 1.03 15.22 6.89^ 11.02 6.00 33.32

Tower REIT 0.63 18.50 5.78^ 6.93 6.50 0.02

Average 0.78 16.34 6.49 6.02* 6.30 39.74**

Range 0.63 – 1.03 15.22 – 18.50 5.78 – 6.89 5.10 – 6.93* 6.00 – 6.50 33.32 – 46.15**

Sub-notes:
^ Calculated based on the DPU of their respective audited financial statements and their closing market price on the last trading date of their respective financial years.
* Historically, UOA REIT has a high trading market price. Arising therefrom, UOA REIT also has a higher DPU in quantum (sen) to ensure comparable DPU yield to its peers.
Hence, we have excluded UOA REIT which is deemed as an outlier.
** Excluding Tower REIT which is deemed as an outlier due to its low gearing. Tower REIT’s borrowings have decreased substantially from RM116.4 million as at 31 December
2014 to RM0.10 million as at 31 December 2015 following the repayment of borrowings using the proceeds arising from the disposal of its Menara ING.
(4) The denominator is based on the 5-day VWAMP of MQREIT up to and including 30 June 2016, being the date of the Announcement, of approximately RM1.15.

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 Based on the above, we noted the following:

(i) Alternative Mode I involves the financing of the Purchase Consideration entirely in new
Units. This would result in the lowest DPU yield amongst the three (3) modes of
consideration as well as amongst MQREIT Peers notwithstanding the pro forma
gearing of MQREIT would be substantially lower; and

(ii) the pro forma gearing of MQREIT would increase substantially under Alternative Mode
II. Notwithstanding the pro forma WACC of MQREIT would be marginally lower and the
DPU yield is higher, in view that the maximum amount of borrowings are obtained,
MQREIT will be burdened with additional finance costs and leave MQREIT with no
headroom to obtain further borrowings in the future. In addition, MQREIT would be at
high risk of breaching the Gearing Limit in the event of a devaluation of its portfolio of
properties.

Based on the foregoing, we are of the view that the Indicative Financing Proportion is
reasonable in view that it strikes a balance between equity and debt financing and MQREIT is
able to maintain a manageable gearing position with a healthy debt headroom before reaching
the Gearing Limit. However, the Non-Interested Unitholders should note that in the event the
proceeds raised from the Proposed Placement is less than RM467.7 million, such shortfall will
need to be funded via borrowings which would increase the gearing of MQREIT. Nonetheless,
it is the intention of MQREIT that an underwriting arrangement for the Proposed Placement in
respect of the remaining amount (excluding the Proposed Placement to MRCB) to be executed
on the day of the bookbuilding exercise. The said underwriting arrangement will be subject to
terms and conditions to be agreed upon between the Manager and the Joint Placement Agents.

For illustrative purposes, based on the 5-day VWAMP of the Units up to and including the LPD
of RM1.2764 per Unit and applying a discount of approximately 9.9%, the illustrative Issue Price
is RM1.15. In view of the higher illustrative Issue Price of RM1.15 and assuming that the
maximum number of 406,666,667 Placement Units are issued, the proceeds from the Proposed
Placement is expected to be higher, and hence the amount to be financed via borrowings would
be lower resulting in lower gearing level and DPU yield as well as a higher WACC as compared
to the Indicative Financing Proportion scenario. Nonetheless, the final impact will still be
dependent on the final financing proportions of the proceeds from the Proposed Placement and
borrowings.

6.2.3 Issue Price

As set out in Section 2.2, Part A of the Circular, the Issue Price for up to 406,666,667 Placement
Units will be fixed at a date to be determined later by way of a bookbuilding exercise, subject to
the Issue Price being placed out at no more than 10% discount to the 5-day VWAMP of the
Units up to and including the day immediately prior to the price fixing date. Hence, the effect of
the issuance of Placement Units on the DPU and DPU yield of MQREIT is uncertain at this
juncture. Nevertheless, our evaluation on the fairness of the Issue Price will be premised on the
following range of illustrative issue prices (“Illustrative Issue Prices”):

Illustrative Issue Prices 1.20 1.15 1.10 1.05

Premium / (Discount) to the 5-day ~5% 0% ~(5%) ~(10%)
VWAMP of the Units up to and
including 30 June 2016, being the
date of the Announcement

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The following chart illustrates the price movement of the Units for the past three (3) years up to
and including 30 June 2016, being the date of the Announcement:

(Source: Bloomberg)

The Illustrative Issue Prices were adopted in our evaluation as we noted that although the
closing price of the Units as at 30 June 2016 was RM1.16, for a total of 288 days or
approximately 40% of the total number of market days in the three (3) years prior to the
Announcement, the market price of the Units has traded below RM1.16. Out of the 288 days,
the market price of the Units generally traded at around RM1.05 to RM1.15 for up to a total
number of 273 days, or approximately 95% of 288 days. Furthermore, the Units have not traded
below RM1.15 since the date of the Announcement up to the LPD.

In addition, in view that the current market price of the Units based on the 5-day VWAMP up to
and including the LPD is higher at approximately RM1.2764, we have also included the Issue
Price of RM1.20, being a discount of approximately 5% to the said VWAMP, as part of the
Illustrative Issue Prices.

We set out below our analysis on the Illustrative Issue Prices on the DPU, DPU yield, P/E
Multiple and P/NAV Multiple after the Proposed Acquisition and Proposed Placement:

Illustrative
Issue P/E P/NAV
Prices DPU(4) DPU yield(4) Multiple Multiple
Audited as at 8.47 7.37 12.69 0.84
31 December
2015(1)
1.20 6.74 5.86 16.08 0.89
After the
Proposed 1.15 6.63 5.77 16.34 0.90
Acquisition and 1.10 6.52 5.67 16.63 0.92
Proposed
Placement(2) 1.05 6.40 5.57 16.93 0.93

MQREIT 5.10 – 5.78 – 6.89 15.22 – 0.63 – 1.03

Peers’ Range(5) 6.93(3) 18.50

Notes:
(1) Based on the latest audited earnings per Unit (“EPU”) of 9.06 sen, and NAV per Unit of RM1.37 for
the FYE 31 December 2015 and assuming market price of the Units is atRM1.15 per Unit.
(2) Assuming no changes to the Indicative Financing Proportion (71.3% equity and 28.7% debt), the
ratios were calculated using the respective Illustrative Issue Prices, the derived EPU and NAV per
Unit post-Proposed Acquisition and assuming market price of the Units is at RM1.15.

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 (3) Historically, UOA REIT has a high trading market price. Arising therefrom, UOA REIT also has a
higher DPU in quantum (sen) to ensure comparable DPU yield to its peers. Hence, we have
excluded UOA REIT which is deemed as an outlier.
(4) Assuming payout ratio remains at 94.3%, consistent with the existing payout ratio for the FYE 31
December 2015 and no Manager’s Units are issued.
(5) Further details are set out in Note 3 of Section 6.2.2 of this IAL.

Based on the Illustrative Issue Prices of RM1.05 to RM1.20, the DPU, P/E Multiple and P/NAV
Multiple of MQREIT are comparable to MQREIT Peers.

Notwithstanding that MQREIT’s DPU yield is below the MQREIT Peers for the Issue Price range
of RM1.05 to RM1.15, it should be noted that the market price of the Units post entering into
the SPA on 30 June 2016 had not traded below RM1.15 and the 5-day VWAMP of the Units up
to and including the LPD is RM1.2764. Additionally, the DPU yield may also improve in the
event of future increase in net income from the Property arising from future potential upward
rental revisions, a portion of the Management Fee may potentially be paid in new Units pursuant
to the Proposed Authority and the Manager may consider varying the payout ratio from its
existing payout ratio of 94.3% as at 31 December 2015 subject to a distribution of at least 90.0%
of the net realised income of MQREIT.

Further, we also note that the P/E Multiple and P/NAV Multiple of MQREIT fall within range
bound of MQREIT Peers for all Illustrative Issue Prices.

For prudence purposes, we have presented our analysis above based on the lower Illustrative
Issue Prices as at the date of the Announcement. Given that the current price of the Units based
on the 5-day VWAMP up to and including the LPD is higher at approximately RM1.2764 per
Unit, we wish to highlight that a higher Issue Price as compared to the Illustrative Issue Prices
will only result in lower illustrative P/E Multiple and P/NAV Multiple as well as higher illustrative
DPU and DPU yield.

6.3 SALIENT TERMS OF THE SPA

The salient terms of the SPA are set out in Section 2.1.2, Part A of the Circular which should
be read in its entirety by the Non-Interested Unitholders.

COMMENTS

The terms of the SPA are deemed reasonable given that:

(i) Purchase Consideration

We noted that the total Purchase Consideration of RM640.0 million is to be paid entirely
via cash as follows:

(a) the Redemption Sum to be paid directly to the facility agent for the discharge
of the Existing Charge; and

(b) RM640.0 million, less the Redemption Sum, will be paid to the Vendor and/or
its nominees to be appointed,

by the Completion Date or Extended Completion Date, as the case maybe.

This term is fair as the balance Purchase Consideration is only paid when all the
conditions precedent have been met (if not waived) and the completion documents
stipulated in the SPA have been delivered by the Vendor to the Purchaser. The
Redemption Sum can be paid any time after the SPA is unconditional but before the
Completion Date or Extended Completion Date, as the case maybe, which is necessary
to facilitate the discharge of the Existing Charge in order for the Property to be
transferred free of encumbrances (save for the Lease Agreements).

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(ii) Adjustment to the Purchase Consideration

This term is fair as it allows the parties to terminate the SPA in the event the valuation
of the Property is adjusted pursuant to variations/adjustments caused by whatsoever
reasons to the market value of the Property (which will be mutually agreed by the
Purchaser and the Vendor) and such adjusted value is more than the pre-agreed
variation of 3.0% from the original Purchase Consideration.

We also noted that there is no adjustment to the Purchase Consideration if there is a

discrepancy between the details of the size/area as stated in the Strata Demarcation
and the strata titles issued for the Property provided that:

(a) the NLA of the Property within the boundaries and/or area as shown in the
issued strata titles shall not be less than 557,053 sq ft; and

(b) there are at least 915 car park lots and 110 motorcycle lots within the
boundaries and/or area as shown in the issued strata titles.

This term is reasonable in view that the valuation of the Proposed Acquisition was
premised on the NLA of the Property which is backed by the respective tenancy
agreements.

(iii) Conditions precedent

These terms are reasonable as the fulfilment of the conditions precedent is necessary
for the completion of Proposed Acquisition. We have highlighted some of the critical
conditions precedent as follows:

(a) In order to ensure compliance with the requirements of the relevant authorities
and/or the Act, the conditions precedent for the Proposed Acquisition include
approvals from shareholders of MRCB, Unitholders, the SC and Bursa
Securities;

(b) In order to ensure certainty of funding for the Proposed Acquisition, the
conditions precedent of the Proposed Acquisition include the receipts of the
proceeds from the Proposed Placement as well as commitment from the
relevant financiers to finance the debt portion of the Purchase Consideration;

(c) Prior approval from Shell to novate the Lease Agreements.

This is critical in view of the 15-year long term Lease Agreements entered into
between the Vendor and Shell, as well as Shell being the largest tenant of the
Property, taking up a total of 17 floors out of the Property’s 33-storey office
tower.

(d) As the valuation was undertaken on an individual title basis, the Vendor has to
provide documentary evidence to the Purchaser that the application for the
issuance of the Certificate of the Proposed Strata Plan for the Property in
accordance with the Strata Demarcation has been submitted; and

The period of six (6) months (with automatic extension of three (3) months thereafter)
to satisfy the conditions precedent is reasonable given that the approval of several
authorities need to be obtained and the Proposed Placement will need to be completed.

We noted that the Vendor is required to deliver to the Purchaser’s solicitors the duly
executed deed(s) of novation (or the deed of assignment) in respect of the existing
tenancies prior to the completion of the SPA. This term is reasonable as it serves to
protect the interest of the Purchaser by ensuring the continuation of tenancies by
existing tenants.

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(iv) Completion

The Completion Date of no later than one (1) month from the day upon which the last
Condition Precedent (which has not been waived in writing) has been fulfilled in
accordance with the provision of the SPA, provides sufficient time for the Vendor to
hand over the Completion Documents to the Purchaser in exchange for Final Balance
Purchase Price and for the Purchaser to pay the Redemption Sum.

(v) Termination

Default by 348 Sentral

We note that these terms serve as a protection to the Purchaser in the event of non-
satisfaction of any of the terms and conditions of the SPA by the Vendor, or falsification
of any representation, warranty or undertaking of the Vendor. Therefore, these terms
are favourable to the Purchaser and the interest of the Non-Interested Unitholders as
they provide mitigation to the Purchaser in the event of default by the Vendor, either by
requiring specific performance by the Vendor or by termination of the SPA and refund
the amount paid to the Purchaser/Purchaser’s Financier as well as the Redemption
Sum free of interest.

Default by the Trustee

We note that these terms serve as a protection to the Vendor in the event of non-
satisfaction of the purchase consideration by the Purchaser, non-satisfaction of any of
the terms and conditions of the SPA by the Purchaser, or falsification of any
representation, warranty or undertaking of the Purchaser. Therefore, these terms are
justifiable as they provide mitigation to Vendor in the event of default by the Purchaser,
either by requiring the Purchaser to perform in accordance with the SPA or by
termination of the SPA.

(vi) Non-registration of transfer or discharge of the Existing Charge

We noted that in the event the Transfer or the discharge of the Existing Charge cannot
be registered (not at the fault of Purchaser or the financier or any of their solicitors) and
cannot be rectified within six (6) months, from notification by the Purchaser, the
Purchaser has the right to require the Vendor to repurchase the Property from the
Purchaser at a price to be mutually agreed (“Repurchase Price”), provided that the
Repurchase Price cannot be lower than the Purchase Consideration or the redemption
amount required to fully settle and discharge the Purchaser’s outstanding financing,
whichever is higher, as well as at not contravening Paragraphs 8.19 and 9.04(b) of the
REIT Guidelines, which prohibit MQREIT to dispose of the Property at a price lower
than 90% of the market value of the Property (“Statutory Floor Price”).

The Repurchase Price is fair and protects the interest of Unitholders as it ensures that
the Purchaser receives an amount no lower than the price it is paying for the Property
or the redemption amount required to fully settle and discharge of the Purchaser’s
outstanding financing, whichever is higher, as well as no lower than the Statutory Floor
Price, for the repurchase of the Property by the Vendor.

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 (vii) Non-procurement and obtainment of separate strata titles

We noted that there is a provision in the SPA which is reasonable to the Purchaser
wherein, in the event the Vendor fails to procure/obtain the issuance of separate strata
titles for each parcel of the Property within 60 months from the Completion Date, the
Purchaser has the right to require the Vendor to repurchase the Property from the
Purchaser at a price to be mutually agreed, provided that such price cannot be lower
than the Purchase Consideration or the redemption amount required to fully settle and
discharge the Purchaser’s outstanding financing, whichever is higher, as well as at not
contravening Paragraphs 8.19 and 9.04(b) of the REIT Guidelines, which prohibit
MQREIT to dispose of the Property at a price lower than the Statutory Floor Price.

This term protects the interests of the Purchaser as the valuation of the Property was
undertaken on issued individual/separate strata title basis.

(viii) Limitations of liability

We note that notwithstanding the completion of SPA, there are provisions in the SPA
which allows the Purchaser to claim against the Vendor for breach of representations,
warranty/undertaking for a period of 18 months post completion of the SPA. The
maximum limit of Vendor’s aggregate liability under the SPA is RM100 million, which
was arrived at on a negotiated basis.

6.4 EFFECTS OF THE PROPOSED ACQUISITION AND PROPOSED PLACEMENT

In our evaluation, we have also considered the effects arising from the Proposed Acquisition
and Proposed Placement as set out in Section 6, Part A of the Circular.

6.4.1 Unitholders’ capital

The Unitholders’ capital of MQREIT is expected to increase in view that the Purchase
Consideration is financed partially via equity in the form of issuance of Placement Units.

The Proposed Placement will result in the number of Units in circulation increasing from 661.4
million Units as at the LPD up to 1,068.0 million Units after the Proposed Placement.
Nevertheless, the final quantum of increase in Unitholders’ capital is dependent on the Issue
Price as well as the final proportion of the Purchase Consideration to be financed via equity.

6.4.2 Substantial Unitholders’ unitholdings

MRCB has provided an Undertaking to subscribe for Placement Units for an amount of no less
than RM110.0 million but up to RM152.0 million in value. In view that the Issue Price has not
been fixed, the actual quantum of the increase in MRCB’s unitholdings in MQREIT cannot be
determined at this juncture. For illustration purposes, if the Issue Price is fixed between RM1.05
and RM1.20, the unitholdings of MRCB post-Proposed Acquisition will increase from 31.2% up
to approximately 32.9%. In view that there is no exemption sought pursuant to the Rules on
Take-overs, Mergers and Compulsory Acquisitions issued by the SC, MRCB’s unitholding is
not expected to increase above 33%.

Notwithstanding the aforementioned, MRCB will remain as the single largest Unitholder in
MQREIT after the issuance of Placement Units.

EPF may also subscribe for Placement Units amounting up to 7% of the enlarged Units in
circulation after the Proposed Placement. Depending on EPF’s final subscription, they may
emerge as a substantial Unitholder of MQREIT.

The extent of dilution to the other existing Unitholders cannot be determined as the number of
Placement Units to be issued is dependent on the final Issue Price as well as the debt to equity
ratio of the funding structure.

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6.4.3 Earnings and distributable income

6.4.3.1 Return on assets (“ROA”)

The ROA of the Property as compared to the ROA of MQREIT are as follows:

MQREIT’s existing
properties as at 31
December 2015 Property
(RM’000) (RM’000)
Net property income (“NPI”) 90,272 34,128(1)
Asset value 1,625,240 647,500(2)
ROA (times) 5.55 5.27

Notes:
(1) Being the actual net property income of the Property for the FYE 31 December 2015.
(2) Based on the market value of the Property as well as capitalisation and cash payment of expenses
relating to the Proposed Acquisition.

Notwithstanding that the ROA of the Property is lower than the ROA of MQREIT’s existing
properties as at 31 December 2015, this is expected to improve as the Property has now
achieved occupancy rate of 99.9% as at the LPD and there are provisions in the Property’s
existing tenancies for future potential upward rental revisions. Hence, the Proposed Acquisition
is still expected to contribute positively to the future earnings of MQREIT.

6.4.3.2 EPU, NPI yield and DPU yield

Assuming the Proposed Acquisition and Proposed Placement were effected on 1 January 2015,
the effects of the pro forma EPU and NPI yield are as follows:

After the Proposed

Audited as at 31 December Acquisition and Proposed
2015 Placement
(RM’000) (RM’000)
EPU (sen) 9.05 (1)7.04

NPI 90,272 124,400

Total Asset Value 1,625,240 2,271,421
NPI yield (%) 5.55 5.48

Note:
(1) Assuming no Manager’s Units are issued.

The issuance of new Units pursuant to the Proposed Placement and Proposed Authority will
dilute the EPU as well as DPU, given the enlarged number of Units in circulation, the quantum
of which would depend on the actual number of new Units to be issued which, in turn, would
depend on the issue price of the new Units and the final proportion of the Purchase
Consideration to be financed by equity.

Nevertheless, the dilution impact on NPI yield and DPU yield can be mitigated by the following:

(a) future increase in net income from expected rental revision of the current portfolio and
the Property. The Property currently has a high occupancy rate of 99.9% which reflects
the strong demand for the Property’s office spaces. The Property is also expected to
enjoy a stable and reasonably long term sustainable rentals as supported by the Lease
Agreements with Shell occupying a total of 17 floors out of the Property’s 33-storey

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 office tower. Further, there are provisions in the Property’s existing tenancies for future
potential upward rental revisions.

The prospects of the Property are also expected to be positive in view of the Property’s
competitive strengths, namely its strategic location, good accessibility and high quality
specifications that meet the requirements of MQREIT’s clientele requirements. These
property attributes are expected to be able to retain existing tenants and attract new
ones, which in turn will provide a stable income stream to MQREIT;

(b) a portion of the Management Fee may potentially be paid in new Units pursuant to the
Proposed Authority. The additional cash conserved can be used for distribution to the
Unitholders; and/or

(c) the Manager can consider varying its payout ratio from its existing payout ratio of 94.3%
as at 31 December 2015 subject to a distribution of at least 90.0% of the net realised
income of MQREIT.

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6.4.4 NAV per Unit and gearing

Assuming the Proposed Acquisition and Proposed Placement were effected on 31 December 2015, the effects of the pro forma NAV per Unit before
income distribution as at 31 December 2015 at the Illustrative Issue Prices are as follows:

Audited as at 31 Illustrative Issue Illustrative Issue Illustrative Issue Illustrative Issue

December 2015 Price at RM1.05 Price at RM1.10 Price at RM1.15 Price at RM1.20
(RM’000) (RM’000) (RM’000) (RM’000) (RM’000)
NAV 903,855 1,363,022 1,363,022 1,363,022 1,363,022
No. of Units (‘000) 661,381 1,106,778 1,086,533 1,068,048 1,051,103

NAV per Unit(1) (RM) 1.37 1.23 1.25 1.28 1.30

Borrowings 689,722 (2)876,737 (1)876,737 (2)876,737 (2)876,737

Total assets value 1,625,240 2,271,421 2,271,421 2,271,421 2,271,421

Gearing(3) (%) 42.44 38.60 38.60 38.60 38.60

Notes:
(1) Before income distribution.
(2) After deducting the upfront cost associated with the borrowings.
(3) Calculated by dividing borrowings with total assets value.

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 The NAV per Unit will be diluted from approximately RM1.37 per Unit as at 31 December 2015
to a range of between RM1.23 and RM1.30 per Unit after completion of the Proposed
Acquisition. Nonetheless, the NAV of MQREIT is expected to be enhanced as the Proposed
Acquisition is expected to contribute positively to the prospective NAV per Unit arising from the
future earnings to be contributed by the Property owing to the Property’s competitive strengths.

The Property currently has a high occupancy rate of 99.9%, which reflects the strong demand
for the Property’s office spaces. The Property is also expected to enjoy a stable and reasonably
long term sustainable rentals as supported by the Lease Agreements with Shell occupying a
total of 17 floors out of the Property’s 33-storey office tower. Further, there are provisions in the
Property’s existing tenancies for future potential upward rental revisions.

The prospects of the Property are also expected to be positive in view of its strategic location,
good accessibility and high quality specifications that meet the requirements of MQREIT’s
clientele requirements. These property attributes are expected to be able to retain existing
tenants and attract new ones, which in turn will provide a stable income stream to MQREIT.

Gearing is expected to improve from 42.4% to 38.6% after the Proposed Acquisition and
Proposed Placement as 71.3% of the Total Cash Outlay is funded via equity based on the
Indicative Financing Proportion. The gearing after the Proposed Acquisition and Proposed
Placement is also within the range of MQREIT Peers of between 33.3% and 46.2%. Further,
should the Manager be able to place out the Placement Units at a higher Issue Price, the
proceeds from the Proposed Placement is expected to be higher, which will result in a lower
borrowings and gearing level.

Premised on the above, we are of the opinion that the effects of the Proposed Acquisition and
Proposed Placement are reasonable and not detrimental to the interest of the Non-Interested
Unitholders.

6.5 INDUSTRY OVERVIEW AND FUTURE PROSPECTS

6.5.1 Malaysian economic overview and outlook

Malaysia’s 4.1% growth in the first half of 2016 (January – June 2015: 5.3%) was mainly driven
by domestic demand, which grew at a steady pace of 5% (January – June 2015: 6.3%) on
account of private sector spending. Private consumption expanded 5.8% (January – June 2015:
7.7%), mainly driven by the stable labour market and income growth. Gross fixed capital
formation increased 3.2% (January – June 2015: 3.9%), mainly led by private investment
activity, which grew 4% (January – June 2015: 7.4%). The surplus in the goods and services
account of the balance of payments narrowed to RM31.8 billion (January – June 2015: RM42.8
billion) following weak global demand and declining commodity prices.

On the supply side, all sectors of the economy recorded positive growth except agriculture. The
services sector grew 5.4% (January – June 2015: 5.7%) spurred by higher activity in the
wholesale and retail trade, information and communication, as well as food and beverages and
accommodation subsectors. The manufacturing sector grew 4.3% (January – June 2015:
4.9%), mainly supported by electrical and electronics and resource-based products subsectors.
The construction sector expanded further by 8.4% (January – June 2015: 7.6%) underpinned
by higher activity in the civil engineering and residential segments. Meanwhile, the mining
sector grew at a moderate pace of 1.4% (January – June 2015: 7.8%) on account of lower
output of crude oil. In contrast, the agriculture sector declined 6% (January – June 2015: 0.3%)
due to lower output of crude palm oil and rubber.

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 Given the nation’s strong economic fundamentals coupled with the 2017 budget strategies and
programmes, the economy is expected to expand between 4% and 5% in 2017. The expansion
translates into gross national income per capital growth of 5% from RM37,812 to RM39,699.
On the demand side, growth will emanate from domestic demand, particularly private
consumption and private investment expenditures which are expected to expand 6.3% and
5.8%, respectively. In tandem with higher investment activities, the savings-investment gap is
expected to narrow to 0.5% - 1.5% of gross national income (2016: 1% - 1.5%). Inflation will
remain manageable, while the economy continues to operate under full employment. All sectors
of the economy are expected to contribute to growth, with the services and manufacturing
sectors spearheading the expansion. With the government’s commitment to enhancing revenue
and rein in expenditure, the fiscal deficit is expected to improve further to 3% of gross
development product. These developments will strengthen the economic fundamentals and
augurs well for a nation in transition from an upper-middle to a high-income and advanced
nation.

(Source: Economic Report 2016 - 2017, Ministry of Finance Malaysia)

COMMENTS

Based on the above, the outlook of the Malaysian economy is expected to remain positive as
supported by a sustained growth in domestic demand, particularly private consumption and
private investment expenditures.

6.5.2 Overview and prospects of the office and retail property in Klang Valley

The Klang Valley PBO market was insipid during the review period, being the fourth quarter of
2015 (“4Q 2015”), due to a combination of dreary global and domestic economic performance
and falling commodity prices. The PBO sector will continue to remain as tenants’ market with
some 4.5 million sq ft scheduled for completion by end 2016. Vacancy rate is expected to hover
around 15% to 18% in view of anticipated completions over the next 3 years.

Nevertheless, despite concerns about the present market conditions, demand for office space
is expected to remain stable supported by local as well as foreign demand, primarily by the
services sector, due to the weakening ringgit.

Market prices and rentals of PBO buildings, on the other hand, are also anticipated to remain
stagnant where better quality office space will continue to stand out, fetching slightly higher
premiums compared to current rental levels.

Supply

As at 4Q 2015, the cumulative PBO supply in the Klang Valley stood at 98.6 million sq ft with
Central Kuala Lumpur continuing to be the focus, accounting for 45.3 million sq ft (or 46% of
total Klang Valley supply) followed by Metropolitan Kuala Lumpur at 39.6 million sq ft (or 40%
of total Klang Valley supply) and the remaining 13.7 million sq ft (or 14% of total Klang Valley
supply) from Greater Kuala Lumpur.

In terms of office grading, approximately 61.6 million sq ft (or 62% of total Klang Valley supply)
are contributed by prime office buildings, i.e. Grade Premium A and Grade A while the
remaining are contributed by non-prime space which accounted for some 36.9 million sq ft (or
38% of total Klang Valley supply) during the review period.

In Western Metropolitan Kuala Lumpur where the subject property is located, the total supply
of PBO space stood at 19.1 million sq ft (or 19% of total Klang Valley supply) where prime office
space accounted for 16.3 million sq ft (or 85% of total Western Metropolitan Kuala Lumpur
supply).

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In terms of future supply, a total of 15 new PBO buildings or approximately 7.2 million sq ft of
office space are expected to be completed in the Klang Valley by end of 2018 with about 4.1
million sq ft (or 57% of total Klang Valley future supply) located in Metropolitan Kuala Lumpur.

About 3.0 million sq ft, or 74% of the total share of Metropolitan Kuala Lumpur future supply,
are located within Western Metropolitan Kuala Lumpur.

Demand

The overall vacancy of office space in the Klang Valley had improved by 0.9% from 2014 and
registered at 15.3% during the review period. Central Kuala Lumpur and Metropolitan Kuala
Lumpur experienced an increase of 3.5% and 0.3% from 2014 to register a vacancy rate of
13.5% and 20.6% respectively. Greater Kuala Lumpur, on the other hand, had a marginal
improvement of about 0.1% registering at 23.7% during the review period.

The overall vacancy rate in Western Metropolitan Kuala Lumpur observed an improvement of
about 8.1% from 2014, registering at 12.7% during the review period. The improvement in the
vacancy rate was largely due to the closure of Damansara Town Centre.

Rents and capital values

The Valuer’s survey of prime office rentals in Central Kuala Lumpur and Western Metropolitan
Kuala Lumpur revealed that rental growth from 2007 to 2011 was the most apparent in Western
Metropolitan Kuala Lumpur for all categories, with and without MSC Malaysia Status. The
growth of rental levels over the past couple of years could be due to the completion of new
generation of office buildings such as Quill 7 at Kuala Lumpur Sentral, Plaza Sentral, 1 Sentral
at Kuala Lumpur Sentral, Menara UOA Bangsar (Towers A and B) in Bangsar, Gardens North
and South Towers and Centrepoint at Mid Valley City.

In general, gross asking rentals have improved since 2008 owing to the newer breed of office
buildings which are mostly of better quality, with MSC Malaysia Status and/or with Green
Building compliance/certification. Prime office space in Central Kuala Lumpur continues to
command top rentals despite being a close match with similar office space with MSC Malaysia
Status situated in Western Metropolitan Kuala Lumpur, particularly those in Kuala Lumpur
Sentral transport hub. This could likely be due to the tenants’ preference for prime office
premises with a Kuala Lumpur address which still ranks high amongst the multinational
companies and financial sector as it exudes prestige, being the capital city.

The office market in Malaysia is not particularly mature to reflect any significant price trends
over the years, however, observation on the transactions of prime office buildings, i.e. Grade
Premium A and Grade A in Kuala Lumpur had noted an upward price trend.

Outlook

The Klang Valley office market, as at 4Q 2015, appeared to have been improving moderately
with occupancy rate increase quarter-on-quarter by 1.2% from 83.5% in the fourth (4th) quarter
of 2014 to 84.7% during the review period albeit lower by 1.7% as compared with the first
quarter of 2015. A slower performance was observed likely due to the sluggish condition of
foreign markets and a very cautious local market.

In terms of future supply, approximately 7.2 million sq ft from 15 PBO buildings are expected to
be released into the Klang Valley market by end 2018. Out of the total, 6 office buildings totaling
3.0 million sq ft are located within Western Metropolitan Kuala Lumpur. Should all these office
buildings which are currently under various stages of construction complete as scheduled, it is
envisaged that these new completions may exert pressure to the market in terms of rental and
performance.

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 The outlook for the office sector in the Klang Valley within the next 6 to 12 months shall
nevertheless remain resilient with some indications of further movement of tenants but with no
real growth expected in market rentals. Nevertheless, landlords of quality grade office buildings
are likely to maintain their present rental rates for the remaining vacant office space in the next
6 to 12 months. Selected newer buildings that are expected to come on stream or have recently
completed are commanding premium rentals as they are mostly provided with more advanced
features like Green Building Index/LEED compliant as well as MSC Malaysia
Status/CyberCentre status.

Market prices of office buildings are expected to generally remain stable in the short term
despite numerous transactions recorded in the last 12 months. However, on the investment
front, interest is very keen and with the weakening of ringgit, transactional activities are
expected to increase in the next 6 to 12 months where prime office buildings with investment
potential are expected to continue to attract investors.

(Source: Valuation Report)

COMMENTS

Premised on the above, we are of the view that the prospects of the office and retail property
in Klang Valley are expected to remain resilient underpinned by the stable demand for office
spaces as supported by local as well as foreign demand, primarily by the services sector, due
to the weakening RM, despite the significant incoming supply of office space. Although the
market prices and rentals of PBO are anticipated to remain stagnant, office spaces with MSC
Malaysia Status and Green Building compliance/certification located in strategic locations such
as the Property are expected to continue to command top rentals.

Although in the Central and Metropolitan KL areas have experienced increases in vacancies,
the Property is currently 99.9% tenanted with its anchor tenant (i.e. Shell) having a long
remaining Lease period of about 12 years, occupying a total of 17 floors out of the Property’s
33-storey office tower, pursuant to the Lease Agreements.

6.5.3 Prospects of the Property

The Property is strategically located in Kuala Lumpur Sentral, a self-contained urban

development comprising of an integrated transit hub known as Kuala Lumpur Sentral Station,
corporate office towers and business suites, 5-star international hotels, condominiums and a
shopping mall. It is within walking distance to Kuala Lumpur Sentral Station which consists of
8 major transit lines including a dedicated line to KLIA and the soon to be completed Mass
Rapid Transit Line. The Property’s strategic location will benefit its tenants in view of the
excellent connectivity to other urban and suburban residential, commercial and industrial hubs
within Malaysia, KLIA, Putrajaya (the Federal Government Administrative Centre) and
Cyberjaya.

The Property is easily accessible via Jalan Tun Sambanthan and Jalan Travers. It can also be
easily accessed from few major highways and roads like the Federal Highway, the New Pantai
Expressway, Jalan Bangsar, Jalan Tun Sambanthan, Jalan Istana, Jalan Damansara,
Lebuhraya Sultan Iskandar (formerly known as Lebuhraya Mahameru), New Pantai
Expressway and Federal Highway linking the Property to other commercial hubs within Kuala
Lumpur such as Bangsar, Damansara and the Kuala Lumpur Sentral business district as well
as other main locations within Selangor such as Petaling Jaya and Shah Alam.

Other than its prime location, the Property was built with emphasis on energy saving and
environment sustainability. The Property is designed with energy efficiencies and green
features, and has been accorded the LEED platinum certification. In addition, the Property is
designed to provide for high levels of natural lighting and is equipped with state of the art green
technology which includes a thermal energy storage system, under floor air conditioning
system, rainwater recycling system and daylight harvesting system. In addition, it is also
accredited with MSC Malaysia Status which is one of the requirements by many multinational
and local corporations.

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 It currently enjoys high committed occupancy rate made up of reputable and established
tenants comprising of multinational and local companies, on the back of more than half of its
total NLA committed under long lease arrangements.

The prospects of the Property are expected to be positive in view of its strategic location, good
accessibility and high quality specifications that meet the requirements of MQREIT’s clientele
requirements. These property attributes are expected to be able to retain existing tenants and
attract new ones, which in turn will provide a stable income stream to MQREIT.

(Source: The Manager)

COMMENTS

We are of the view that the prospects of the Property are favourable in view of its prime location
in Kuala Lumpur Sentral coupled with excellent connectivity as well as its green building
features and MSC Malaysia Status. These key features of the Property are expected to
contribute to its ability to continue to generate sustainable rental income, supported by its long-
term Lease Agreements with Shell.

6.6 RISK FACTORS RELATING TO THE PROPOSED ACQUISITION AND PROPOSED

PLACEMENT

In evaluating the Proposed Acquisition and Proposed Placement, you should carefully consider
the potential risk factors disclosed under Section 5, Part A of the Circular before voting on the
ordinary resolutions pertaining to the Proposed Acquisition and Proposed Placement at the
forthcoming Meeting.

In addition to the risk factors contained in Section 5, Part A of the Circular, Non-Interested
Unitholders should also consider the risk that the final Issue Price of the Proposed Placement
has yet to be determined. The final Issue Price is still uncertain at this juncture and hence, the
actual impact of the Proposed Acquisition and Proposed Placement to the yield and financials
of MQREIT cannot be determined. Depending on the level of discount and hence the final Issue
Price, the lower the Issue Price, the more dilutive the DPU and hence impacting on the overall
DPU yield of MQREIT.

The Non-Interested Unitholders however should also note that our analysis on the Issue Price
of the Proposed Placement as presented in Section 6.2.3 of this IAL is based on the lower
Illustrative Issue Prices as at the date of the Announcement, which even at the maximum
discount of approximately 10% (i.e. Issue Price of RM1.05), the DPU and DPU yield are still
within the range of MQREIT Peers. Given that the current price of the Units, based on the 5-
day VWAMP up to and including the LPD is higher at approximately RM1.2764 per Unit, this
will only result in higher illustrative DPU and DPU yield.

Further, the Proposed Acquisition should not materially expose MQREIT to any new categories
of risks which are not within its current risk profile, given that MQREIT is already operating in
the Kuala Lumpur Sentral office market and the Manager is experienced in managing office
buildings, including Platinum Sentral, an office building located in KL Sentral.

We further note that the Board had, where possible, taken necessary measures to mitigate
and/or reduce the risks associated with the Proposed Acquisition and Proposed Placement.

Non-Interested Unitholders should note that the risk factors mentioned above are not meant to
be exhaustive. We wish to highlight that while efforts and measure would be taken by the Board
to mitigate the risks as set out in Section 5, Part A of the Circular and this section in this IAL,
no assurance can be given that one or combination of the risk factors will not occur and give
rise to material and adverse impact on the business and operations, competitiveness, financial
performance, financial position or prospects of MQREIT thereon.

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6.7 OTHER CONSIDERATIONS OF THE PROPOSED PLACEMENT

6.7.1 Proposed Placement

We note from Section 2.2, Part A of the Circular that the Proposed Placement, which will involve
an issuance of up to 406,666,667 Placement Units representing up to 38.1% of the enlarged
Units in circulation after the Proposed Placement, is intended to partially fund the Proposed
Acquisition. The Proposed Placement will be undertaken via a bookbuilding exercise and hence
the actual Placement Units as well as the Issue Price can only be determined after the
bookbuilding exercise. We had in Section 6.2.3 of this IAL evaluated the reasonableness of the
possible Issue Prices of the Proposed Placement based on a range of RM1.05 to RM1.20. We
had noted that even at the lower price range of RM1.05 being applied to the Placement Price,
the DPU, P/E Multiple and P/NAV Multiple of MQREIT are comparable to the MQREIT Peers.
Notwithstanding that MQREIT’s DPU yield is below the range of MQREIT Peers for the Issue
Price range of RM1.05 to RM1.15, it should be noted that the market price of the Units post
entering into the SPA on 30 June 2016 had not traded below RM1.15 and the 5-day VWAMP
of the Units up to and including the LPD is RM1.2764. Additionally, the DPU yield may also
improve in the event of future increase in net income from the Property arising from future
potential upward rental revisions.

The Proposed Placement was determined by the Board after taking into consideration that it
represents a more expeditious manner to raise funds for the Proposed Acquisition as the
Proposed Placement can be implemented immediately post obtaining Unitholders’ approval.
Additionally, the level of discount accorded for a private placement is typically not as steep as
a rights issue, which will result in lesser number of Units issued in order to raise the same
amount of gross proceeds. Notwithstanding that the Proposed Placement may have a dilutive
impact to the existing Unitholders (apart from MRCB), considerations were also given that there
is no requirement for them to contribute additional capital.

Further, considerations were also given to MQREIT’s current debt profile vis-a-vis the
borrowings restrictions of a fund under REIT Guidelines. The Proposed Placement will reduce
MQREIT’s current borrowings from 42.4% to 38.6% and hence provide headroom for future
cash acquisitions, in line with the MQREIT’s growth strategy. The Proposed Placement to
MRCB will also provide no less than RM110 million to RM152 million, representing up to
approximately 33% of the total equity proceeds raised. This amount may potentially be higher
in the event EPF participates in the Proposed Placement. Given the speed at which the
Proposed Placement can be implemented, the resultant lower gearing and the commitment
from a major Unitholder, the Proposed Placement is expected to augur well for MQREIT.

6.7.2 Proposed Placement to MRCB

As part of the Proposed Placement, we note that MRCB has undertaken to subscribe for the
Placement Units at the issue price to be determined by way of a bookbuilding exercise for an
amount of no less than RM110.0 million but up to RM152.0 million in value.

We note that MRCB will not participate in the bookbuilding process for the Proposed Placement.
Hence, we deemed this to be not detrimental to the Non-Interested Unitholders in view that
MRCB will not be able to determine the Issue Price. MRCB, as a price-taker, shall accept the
final price for its Placement Units, being the issue price to be determined after the bookbuilding
exercise is closed.

In addition, the Proposed Placement to MRCB demonstrates MRCB’s support and confidence
to MQREIT’s future prospects as well as reaffirming its commitment to MQREIT.

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6.7.3 Proposed Placement to EPF

We note that EPF had confirmed its interest to participate in the Proposed Placement for up to
7% of the enlarged Units in circulation after the Proposed Placement through a bookbuilding
exercise, provided that EPF’s subscription of the Placement Units (i) shall be at its preferred
price (being bid price to be submitted by EPF during the bookbuilding process); (ii) will not in
any way trigger a mandatory take-over offer of the remaining Units not owned by EPF and
persons acting in concert with it and that MQREIT; and/or (iii) the Manager will ensure that
EPF’s subscription of the Placement Units shall not in any way trigger a mandatory take-over
offer.

Although EPF is deemed as a person connected with MRCB pursuant to the Proposed
Acquisition, we are of the view that the Proposed Placement to EPF is not detrimental to the
interest of the Non-Interested Unitholders in view of the following:

(i) although EPF is a major shareholder of MRCB, it is not involved in the day-to-day
operations of the MRCB Group;

(ii) the Proposed Placement is undertaken via a bookbuilding process wherein investors
will be invited to bid for the Placement Units at various prices and the final outcome of
the book will be determined by taking into consideration the actual bid size and the
corresponding bid price for the Placement Units from each investor who will be
participating in the bookbuilding exercise. Accordingly, there is no assurance that EPF
will be allocated with the Placement Units; and

(iii) EPF, as a social security organisation, would need to act in the best interest of its
members in respect of the Proposed Placement to EPF and submit a bid in the
bookbuilding exercise at a price which is not detrimental to the interest of its members.

In addition, depending on the result of the bookbuilding exercise, EPF may potentially emerge
as a direct Unitholder with a substantial unitholding in MQREIT. This would augur well for
MQREIT by having a reputable institutional investor as its direct Unitholder with a substantial
unitholding.

7. CONCLUSION AND RECOMMENDATION

In evaluating the Proposed Acquisition and Proposed Placement, you should carefully consider
the following factors:

(i) Rationale for and benefits of the Proposed Acquisition

The Proposed Acquisition is in line with the investment objective of MQREIT to provide
a long term and sustainable distribution of income to the Unitholders and to achieve
long term growth in the NAV per Unit. It would augur well for MQREIT to undertake the
Proposed Acquisition as the Property is expected to contribute positively to the future
earnings and distributable income of MQREIT which would in turn enhance the
prospective NAV per Unit and DPU yield with (i) the future increase net income from
the Property, as supported by almost full occupancy rate of the Property and the
provisions in the Property’s existing tenancies for future potential upward rental
revisions; (ii) payment of a portion of the Management Fee in new Units to conserve
additional cash for distribution to the Unitholders; and/or (iii) varying its payout ratio
from its existing payout ratio of 94.3% as at 31 December 2015 subject to a distribution
of at least 90.0% of the net realised income of MQREIT.

Further, the Proposed Acquisition will also strengthen MQREIT’s position as a sizeable,
geographically well-diversified office REIT in the Klang Valley as well as among the
listed REITs in Malaysia in terms of total asset size and market capitalisation.

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 The Property is also expected to fit well into MQREIT’s clientele requirements, enhance
its portfolio profile and contribute positively to the performance of MQREIT in view of
the Property’s high occupancy rate, strategic location, green building features and MSC
Malaysia Status as well as high quality tenancy mix profile.

Premised on the above, we are of the view that there is sufficient merit to the rationale
for and benefits of the Proposed Acquisition and Proposed Placement as a whole and
it is reasonable and not detrimental to the interest of the Non-Interested Unitholders.

(ii) Rationale for and benefits of the Proposed Placement

The Proposed Placement represents a more expeditious manner to raise funds for the
Proposed Acquisition as the Proposed Placement can be implemented immediately
post obtaining Unitholders’ approval. Additionally, the level of discount accorded for a
private placement is typically not as steep as a rights issue, which will result in lesser
number of Units issued in order to raise the same amount of gross proceeds.

Further, the Proposed Placement will reduce MQREIT’s current borrowings from 42.4%
to 38.6% and hence provide headroom for future cash acquisitions, in line with the
MQREIT’s growth strategy. The Proposed Placement to MRCB will also provide no
less than RM110 million to RM152 million, representing up to approximately 33% of the
total equity proceeds raised. This amount may potentially be higher in the event EPF
participates in the Proposed Placement. Given the speed at which the Proposed
Placement can be implemented, the resultant lower gearing, the lower discount
accorded to the issue price of the Placement Units and the commitment from a major
Unitholder, the Proposed Placement is expected to augur well for MQREIT.

(iii) Evaluation of the Purchase Consideration

The Purchase Consideration was arrived at based on the market value of the Property
of RM640,000,000 as appraised by the Valuer. The Valuer has adopted the Investment
Method as the principal valuation methodology to arrive at the market value of the
Property in view that it is an income generating property, whilst the Comparison Method
was used to cross check against the market value of the Property derived from the
Investment Method.

Premised on the foregoing, we are of the opinion that the Purchase Consideration is
fair and not detrimental to the interest of the Non-Interested Unitholders.

(iv) Settlement of consideration

The Total Cash Outlay will be satisfied wholly in cash through a combination of
proceeds from the Proposed Placement and borrowings, the breakdown of which has
yet to be determined and will be dependent upon, amongst others, the actual size and
issue price of the Placement Units.

Nonetheless, the Indicative Financing Proportion to finance the Total Cash Outlay is
reasonable in view that it strikes a balance between equity and debt financing and
MQREIT is able to maintain a manageable gearing position with a healthy debt
headroom before reaching the Gearing Limit. However, the Non-Interested Unitholders
should note that in the event the proceeds raised from the Proposed Placement is less
than RM467.7 million, such shortfall will be funded via borrowings which would increase
the gearing of MQREIT. Nonetheless, it is the intention of MQREIT that an underwriting
arrangement for the Proposed Placement in respect of the remaining amount
(excluding the Proposed Placement to MRCB) to be executed on the day of the
bookbuilding exercise. The said underwriting arrangement will be subject to terms and
conditions to be agreed upon between the Manager and the Joint Placement Agents.

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(v) Issue Price of the Placement Units

Based on the Illustrative Issue Prices of RM1.05 to RM1.20, the DPU, P/E Multiple and
P/NAV Multiple of MQREIT are comparable to MQREIT Peers. Notwithstanding that
MQREIT’s DPU yield is below the MQREIT Peers for the Issue Price range of RM1.05
to RM1.15, it should be noted that the market price of the Units post entering into the
SPA on 30 June 2016 had not traded below RM1.15 and the 5-day VWAMP of the
Units up to and including the LPD is RM1.2764. Additionally, the DPU yield may also
improve in the event of future increase in net income from the Property arising from
future potential upward rental revisions, a portion of the Management Fee may
potentially be paid in new Units pursuant to the Proposed Authority and the Manager
may consider varying the payout ratio from its existing payout ratio of 94.3% as at 31
December 2015 subject to a distribution of at least 90.0% of the net realised income of
MQREIT.

The final impact will still be dependent on the final Issue Price and hence the final
financing proportions of the proceeds from the Proposed Placement and borrowings.
However, based on the current price of the Units, based on the 5-day VWAMP up to
and including the LPD, which is higher at approximately RM1.2764 per Unit, the
illustrative P/E Multiple and P/NAV Multiple will be lower and the illustrative DPU and
DPU yield will be higher.

(vi) Salient terms of the SPA

Based on our review of the salient terms of the SPA, the terms and conditions of the
SPA are reasonable and not detrimental to the interest of the Non-Interested
Unitholders.

(vii) Effects of the Proposed Acquisition and Proposed Placement

The number of Units in circulation would increase from 661.4 million Units as at the
LPD to up to 1,068.0 million Units after the Proposed Placement. Following the
completion of the Proposed Placement, MRCB will remain as the single largest
Unitholder and EPF may emerge as a substantial Unitholder.

The ROA of the Property amounts to 5.27% whilst the ROA of MQREIT amounts to
5.55% as at 31 December 2015. Nevertheless, the ROA of the Property is expected to
improve as the Property has now achieved occupancy rate of 99.9% as at the LPD and
there are provisions in the Property’s existing tenancies for future potential upward
rental revisions. Hence, the Proposed Acquisition is expected to contribute positively
to the future earnings of MQREIT.

Assuming that the Proposed Acquisition and Proposed Placement were effected on 1
January 2015, the pro forma NPI yield will be lower post-Proposed Acquisition and
Proposed Placement, from 5.55% as at 31 December 2015 to 5.48%. Nevertheless,
the NPI and NPI yield of the Property is expected to improve as the Property has now
achieved occupancy rate of 99.9% as at the LPD and there are provisions in the
Property’s existing tenancies for future potential upward rental revisions.

[The rest of this page is intentionally left blank]

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 The issuance of new Units pursuant to the Proposed Placement and Proposed
Authority will dilute the EPU as well as DPU, given the enlarged number of Units in
circulation, the quantum of which would depend on the actual number of new Units to
be issued which, in turn, would depend on the issue price of the new Units and the final
proportion of the Purchase Consideration to be financed by equity. Nevertheless, the
Manager intends to continue to distribute at least 90% of the distributable income of
MQREIT for each financial year and the Proposals are still expected to be DPU yield
accretive for Unitholders after taking into consideration the future increase in net
property income from the Property and the additional cash conserved for distribution to
the Unitholders via the issuance of Manager’s Units to the Manager as payment of
Management Fee and/or variation of its payout ratio from its existing payout ratio of
94.3% as at 31 December 2015 subject to a distribution of at least 90.0% of the net
realised income of MQREIT.

The pro forma NAV per Unit before income distribution as at 31 December 2015 is
expected to decrease from RM1.37 per Unit to a range of between RM1.23 and RM1.30
per Unit assuming the Proposed Acquisition and Proposed Placement were effected
on 31 December 2015, whilst the gearing of MQREIT is expected to decrease from
42.4% to 38.6%, assuming gross proceeds of RM467.7 million is raised from the
Proposed Placement.

Premised on the above, we are of the opinion that the effects of the Proposed
Acquisition and Proposed Placement are reasonable and not detrimental to the interest
of the Non-Interested Unitholders.

(viii) Industry overview and future prospects

The outlook of the Malaysian economy is expected to remain positive as supported by

a sustained growth in domestic demand, particularly private consumption and private
investment expenditures.

On the other hand, the prospects of the office and retail property in Klang Valley are
expected to remain resilient underpinned by the stable demand for office spaces as
supported by local as well as foreign demand, primarily by the services sector, due to
the weakening of RM. Although the market prices and rentals of office buildings are
anticipated to remain stagnant, better quality office spaces are expected to stand out,
fetching slightly higher premiums as compared to current rental levels.

Further, the prospects of the Property are favourable in view of its prime location in
Kuala Lumpur Sentral coupled with excellent connectivity as well as its green building
features and MSC Malaysia Status. In addition, the Property has a high occupancy rate
of approximately 99.9%, with its anchor tenant (i.e. Shell) having long remaining Lease
period of about 12 years, occupying a total of 17 floors out of the Property’s 33-storey
office tower, pursuant to the Lease Agreements.

(ix) Risk factors relating to the Proposed Acquisition and Proposed Placement

Non-Interested Unitholders should also consider the risk that the final Issue Price of
the Proposed Placement has yet to be determined. The final Issue Price is still
uncertain at this juncture and hence, the actual impact of the Proposed Acquisition and
Proposed Placement to the yield and financials of MQREIT cannot be determined.
Depending on the level of discount and hence the final Issue Price, the lower the Issue
Price, the more dilutive the DPU and hence impacting on the overall DPU yield of
MQREIT.

The Proposed Acquisition should not materially expose MQREIT to any new categories
of risks which are not within its current risk profile and the Board will take necessary
measures to mitigate the risks associated with the Proposed Acquisition and Proposed
Placement.

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 Nonetheless, the Non-Interested Unitholders should note that the risk factors as set out
in Section 5, Part A of the Circular are not meant to be exhaustive and there can be no
assurance that any of the risk factors will not have a material and adverse effect on the
business and financial position of MQREIT.

(x) Other considerations of the Proposed Placement

In view of the interest of MRCB in the Proposed Acquisition, MRCB will not have any
influence on the manner in which the book builds for the Proposed Placement and the
determination of the issue price of the Placement Units. MRCB, as a price-taker, shall
accept the final price for its Placement Units, being the issue price to be determined
after the bookbuilding exercise is closed. In addition, the Proposed Placement to MRCB
demonstrates MRCB’s support and confidence to MQREIT’s future prospects as well
as reaffirming its commitment to MQREIT.

Although EPF is deemed as a person connected with MRCB pursuant to the Proposed
Acquisition, we are of the view that the Proposed Placement to EPF is not detrimental
to the interest of the Non-Interested Unitholders in view of the following:

(a) although EPF is a major shareholder of MRCB, it is not involved in the day-to-
day operations of the MRCB Group;

(b) the Proposed Placement is undertaken via a bookbuilding process wherein

investors will be invited to bid for the Placement Units at various prices and the
final outcome of the book will be determined by taking into consideration the
actual bid size and the corresponding bid price for the Placement Units from
each investor who will be participating in the bookbuilding exercise.
Accordingly, there is no assurance that EPF will be allocated with the
Placement Units; and

(c) EPF, as a social security organisation, would need to act in the best interest of
its members in respect of the Proposed Placement to EPF and submit a bid in
the bookbuilding exercise at a price which is not detrimental to the interest of
its members.

In addition, depending on the result of the bookbuilding exercise, EPF may potentially
emerge as a direct Unitholder with a substantial unitholding in MQREIT. This would
augur well for MQREIT by having a reputable institutional investor as its direct
Unitholder with a substantial unitholding.

We have evaluated and analysed the Proposed Acquisition and Proposed Placement as a
whole and after taking into consideration the various factors as discussed above, we are of the
view that the Proposed Acquisition and Proposed Placement are fair and reasonable and not
detrimental to the interest of the Non-Interested Unitholders.

Accordingly, we recommend that you vote in favour of the ordinary resolutions

pertaining to the Proposed Acquisition and Proposed Placement to be tabled at the
forthcoming Meeting.

Yours faithfully,
For and on behalf of
AmInvestment Bank Berhad

JEANIE LIM SHARON CHUNG

Senior Vice President Senior Vice President
Corporate Finance Corporate Finance

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 APPENDIX I

VALUATION CERTIFICATE FOR THE PROPERTY

91
42
 APPENDIX I

VALUATION CERTIFICATE FOR THE PROPERTY (Cont’d)

92
43
 APPENDIX I

VALUATION CERTIFICATE FOR THE PROPERTY (Cont’d)

93
43
 APPENDIX I

VALUATION CERTIFICATE FOR THE PROPERTY (Cont’d)

94
43
 APPENDIX I

VALUATION CERTIFICATE FOR THE PROPERTY (Cont’d)

95
43
 APPENDIX I

VALUATION CERTIFICATE FOR THE PROPERTY (Cont’d)

96
43
 APPENDIX I

VALUATION CERTIFICATE FOR THE PROPERTY (Cont’d)

97
43
 APPENDIX I

VALUATION CERTIFICATE FOR THE PROPERTY (Cont’d)

98
43
 APPENDIX I

VALUATION CERTIFICATE FOR THE PROPERTY (Cont’d)

99
43
 APPENDIX II

LOCATION MAP OF THE PROPERTY

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100
44
 APPENDIX III

PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF MQREIT AS AT 31

DECEMBER 2015 AND THE REPORTING ACCOUNTANTS’ REPORT THEREON

101
45
 APPENDIX III

PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF MQREIT AS AT 31

DECEMBER 2015 AND THE REPORTING ACCOUNTANTS’ REPORT THEREON (Cont’d)

102
46
 APPENDIX III

PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF MQREIT AS AT 31

DECEMBER 2015 AND THE REPORTING ACCOUNTANTS’ REPORT THEREON (Cont’d)

103
46
 APPENDIX III

PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF MQREIT AS AT 31

DECEMBER 2015 AND THE REPORTING ACCOUNTANTS’ REPORT THEREON (Cont’d)

104
46
 APPENDIX III

PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF MQREIT AS AT 31

DECEMBER 2015 AND THE REPORTING ACCOUNTANTS’ REPORT THEREON (Cont’d)

105
46
 APPENDIX III

PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF MQREIT AS AT 31

DECEMBER 2015 AND THE REPORTING ACCOUNTANTS’ REPORT THEREON (Cont’d)

106
46
 APPENDIX III

PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF MQREIT AS AT 31

DECEMBER 2015 AND THE REPORTING ACCOUNTANTS’ REPORT THEREON (Cont’d)

107
46
 APPENDIX III

PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF MQREIT AS AT 31

DECEMBER 2015 AND THE REPORTING ACCOUNTANTS’ REPORT THEREON (Cont’d)

108
46
 APPENDIX III

PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF MQREIT AS AT 31

DECEMBER 2015 AND THE REPORTING ACCOUNTANTS’ REPORT THEREON (Cont’d)

109
46
 APPENDIX III

PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF MQREIT AS AT 31

DECEMBER 2015 AND THE REPORTING ACCOUNTANTS’ REPORT THEREON (Cont’d)

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 APPENDIX IV

FURTHER INFORMATION

1. DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors of the Manager have seen and approved this Circular and they, collectively and
individually, accept full responsibility for the accuracy of the information given in this Circular.
They confirm that, after making all reasonable enquiries, to the best of their knowledge and
belief, there are no other facts the omission of which would make any statement in this
Circular false or misleading.

The information on 348 Sentral, MRCB and EPF was obtained from the management of the
respective parties and the responsibility of the Board is limited to ensuring that such
information is accurately reproduced in this Circular.

2. CONSENT AND CONFLICT OF INTEREST

2.1 CIMB

CIMB, being the Joint Principal Adviser for the Proposals, has given and has not subsequently
withdrawn its written consent to the inclusion in this Circular of its name and all references
thereto in the form and context in which they appear in this Circular.

CIMB and its related and associated companies, as well as its holding company, CIMB Group
Holdings Berhad and the subsidiaries and associated companies of its holding company (the
“CIMB Group”) form a diversified financial group and are engaged in a wide range of
investment and commercial banking, brokerage, securities trading, asset and funds
management and credit transaction service businesses. The CIMB Group has engaged and
may in the future, engage in transactions with and perform services for MQREIT and/or the
Manager and/or any of their respective affiliates, in addition to its role as the Joint Principal
Adviser for the Proposals.

In addition, in the ordinary course of business, any member of the CIMB Group may at any
time offer or provide its services to or engage in any transactions (on its own account or
otherwise) with MQREIT and/or the Manager, hold long or short positions in securities issued
by MQREIT and/or the Manager, make investment recommendations and/or publish or
express independent research views on such securities, and may trade or otherwise effect
transactions for its own account or for the account of its other customers in debt or equity
securities or senior loans of MQREIT and/or the Manager. This is a result of the businesses of
the CIMB Group generally acting independent of each other, and accordingly there may be
situations where parts of the CIMB Group and/or its customers now have or in the future, may
have interest in or take actions that may conflict with the interests of MQREIT and/or the
Manager.

As at the LPD, CIMB Group has extended credit facilities to MQREIT. In addition, CIMB Group
is part of the syndicate which granted 348 Sentral the Term Loan Facility which was partially
used for the construction of the Property. The said facility is expected to be fully repaid via the
settlement of the Redemption Sum by the Completion Date or the Extended Completion Date,
as the case may be, as set out in Section 2.1.2(ii), Part A of the Circular. CIMB is of the view
that the abovementioned does not result in a conflict of interest in respect of its capacity as the
Joint Principal Adviser for the Proposals due to the following:

(i) CIMB Group is a licensed commercial bank and the extension of credit facilities to
MQREIT arose in the ordinary course of business of CIMB Group; and

(ii) the total credit facilities granted by the CIMB Group is not material when compared to
the audited net assets of the CIMB Group as at 31 December 2015 of RM41.3 billion.

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 APPENDIX IV

FURTHER INFORMATION (Cont’d)

2.2 HLIB

HLIB, being the Joint Principal Adviser for the Proposals, has given and has not subsequently
withdrawn its written consent to the inclusion in this Circular of its name and all references
thereto in the form and context in which they appear in this Circular.

HLIB and its related companies (“Hong Leong Group”) form a diversified financial group and
are engaged in a wide range of investment and commercial banking, brokerage, securities
trading, asset and funds management and credit transaction service businesses.

The Hong Leong Group has engaged and may, in the future, engage in transactions with and
perform services for MQREIT/the Manager and/or companies in which the shareholders of the
Manager have equity interest, in addition to its role as the Joint Principal Adviser for the
Proposals. In addition, in the ordinary course of business, any member of the Hong Leong
Group may at any time offer or provide its services to or engage in any transactions (on its
own account or otherwise) with MQREIT/the Manager and/or companies in which the
shareholders of the Manager have equity interest, hold long or short positions, and may trade
or otherwise effect transactions for its own account or the account of its other customers in
debt or equity securities or senior loans of MQREIT/the Manager and/or companies in which
the shareholders of the Manager have equity interest.

Hong Leong Group has, in the ordinary course of its business, granted credit facilities to
MQREIT/the Manager and/or companies in which the shareholders of the Manager have
equity interest. In addition, Hong Leong Group is part of the syndicate which granted 348
Sentral the Term Loan Facility. The said facility is expected to be fully repaid via the
settlement of the Redemption Sum by the Completion Date or the Extended Completion Date,
as the case may be, as set out in Section 2.1.2(ii), Part A of the Circular.

HLIB is of the view that the aforementioned extension of credit facilities does not result in
conflict of interest situations as:

(i) the credit facilities are not material when compared to audited net assets of Hong
Leong Group as at 30 June 2016 of RM15.3 billion;

(ii) the extension of credit facilities arose in the ordinary course of business of Hong
Leong Group; and

(iii) the conduct of Hong Leong Group in its banking business is strictly regulated by the
Financial Services Act 2013, Islamic Financial Services Act 2013 and its own internal
control policies and procedures.

2.3 Maybank IB

Maybank IB, being the Joint Principal Adviser for the Proposals, has given and has not
subsequently withdrawn its written consent to the inclusion in this Circular of its name and all
references thereto in the form and context in which they appear in this Circular.

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 APPENDIX IV

FURTHER INFORMATION (Cont’d)

Maybank IB and its related and associated companies (“Maybank Group”) form a diversified
financial group and are engaged in a wide range of investment and commercial banking,
brokerage, securities trading, assets and fund management and credit transaction services
businesses. The Maybank Group has engaged and may in the future, engage in transactions
with and perform services for MQREIT and/or the Manager, in addition to the roles set out in
this Circular. In addition, in the ordinary course of its business, any member of the Maybank
Group may at any time offer or provide its services to or engage in any transaction (on its own
account or otherwise) with MQREIT and/or the Manager, or any other entity or transactions for
its own account or the account of its customers in debt or equity securities or senior loans.
This is a result of the businesses of the Maybank Group generally acting independent of each
other and accordingly, there may be situations where parts of the Maybank Group and/or its
customers now have or in the future, may have interests or take actions that may conflict with
the interests of MQREIT and/or the Manager. Nonetheless, the Maybank Group is required to
comply with applicable laws and regulations issued by the relevant authorities governing its
advisory business which require, among others, segregation between dealing and advisory
activities and Chinese wall between different business divisions.

As at the LPD, MQREIT and/or the Manager does not have any credit facilities with the
Maybank Group.

Maybank IB confirms that as at the LPD, it is not aware of any circumstance that exists or is
likely to exist which would give rise to a possible conflict of interest situation in its capacity as
the Joint Principal Adviser for the Proposals.

2.4 AmInvestment Bank

AmInvestment Bank, being the Independent Adviser to the non-interested Unitholders for the
Proposed Acquisition and Proposed Placement, has given and has not subsequently
withdrawn its written consent to the inclusion in this Circular of its name, letter and all
references to them in the form and context in which they appear in this Circular.

AmInvestment Bank is not aware of any circumstances that exist or are likely to exist which
would give rise to a possible conflict of interest in its capacity as the Independent Adviser in
respect of the Proposed Acquisition and Proposed Placement.

2.5 Astramina Advisory

Astramina Advisory, being the Transaction Arranger for the Proposed Acquisition and the
financial adviser for the Proposed Placement, has given and has not subsequently withdrawn
its written consent to the inclusion in this Circular of its name and all references to it in the
form and context in which they appear in this Circular.

Astramina Advisory has been appointed by the Manager as the Transaction Arranger in
respect of the Proposed Acquisition with effect from 4 January 2016 and will be appointed as
the financial adviser for the Proposed Placement, in relation to which CIMB, HLIB and
Maybank IB were also appointed as the Joint Placement Agents. Astramina Advisory will
derive fees from the Manager in its capacity as the financial adviser for the Proposed
Placement but it does not derive any advisory fees from the Manager in its capacity as the
Transaction Arranger. Astramina Advisory has also been appointed by MRCB as the financial
adviser for the proposed disposal of the Property by 348 Sentral to MQREIT on 16 November
2015.

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 APPENDIX IV

FURTHER INFORMATION (Cont’d)

The various roles undertaken by Astramina Advisory for both the Manager and MRCB in
relation to the Proposed Acquisition and the Proposed Placement may potentially give rise to a
conflict of interest on the part of Astramina Advisory but such conflict of interest is mitigated by
the fact that the terms of engagement of Astramina Advisory as the Transaction Arranger for
the Manager are limited to ensuring an expeditious and accurate flow of information between
MQREIT, the Manager and MRCB and the arrangement and coordination of implementation of
the Proposed Acquisition so as to assist in timely implementation of the Proposed Acquisition.
On the other hand, Astramina Advisory’s role as financial adviser to the Manager for the
Proposed Placement is expected to include, amongst others, assisting in the procurement of
investor(s) as well as identifying and resolving issues that may arise in the course of
implementation of the Proposed Placement. Astramina Advisory has not been appointed as
the principal adviser to the Manager in respect of the Proposed Acquisition. Such potential
conflict of interest is also mitigated by the appointment of various professional advisors by the
Manager, including independent valuer and independent adviser for the Proposed Acquisition.
In appointing Astramina Advisory as the Transaction Arranger for the Proposed Acquisition
and financial adviser for the Proposed Placement to act on behalf of MQREIT, the Board of
the Manager had been duly informed of and had taken cognisance of Astramina Advisory’s
existing appointment as the financial adviser for MRCB.

2.6 CBRE I WTW

CBRE I WTW, being the independent registered valuer in respect of the valuation of the
Property, has given and has not subsequently withdrawn its written consent to the inclusion in
this Circular of its name, its valuation certificate in respect of the Property and all references to
them in the form and context in which they appear in this Circular.

CBRE I WTW is not aware of any circumstances that exist or are likely to exist which would
give rise to a possible conflict of interest in its capacity as the independent registered valuer
for the valuation of the Property.

2.7 Ernst & Young

Messrs Ernst & Young, being the Reporting Accountants in relation to the Proposals, has
given and has not subsequently withdrawn its written consent to the inclusion in this Circular of
its name, the Reporting Accountants’ report on the pro forma consolidated statement of
financial position of MQREIT as at 31 December 2015 and all references to them in the form
and context in which they appear in this Circular.

Messrs Ernst & Young is not aware of any circumstances that exist or are likely to exist which
would give rise to a possible conflict of interest in its capacity as the Reporting Accountants in
relation to the Proposals.

3. MATERIAL COMMITMENTS AND CONTINGENT LIABILITIES

Save as disclosed below, as at the LPD, the Board is not aware of any material commitments
for capital expenditure incurred or known to be incurred by MQREIT which may have a
material impact on the profits or NAV of MQREIT:

RM ’000
Contractual commitments in respect of investment properties:
- Approved and contracted for 4,271

As at the LPD, the Board is not aware of any contingent liabilities which, upon becoming
enforceable, may have a material impact on the profits or NAV of MQREIT.

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 APPENDIX IV

FURTHER INFORMATION (Cont’d)

4. MATERIAL LITIGATION

As at the LPD, there is no material litigation, claim and/or arbitration involving the Property.
Further, as at the LPD, MQREIT is not engaged in any material litigation, claims and/or
arbitration, either as plaintiff or defendant and the Board is not aware of any proceedings,
pending or threatened, against MQREIT or of any facts likely to give rise to any proceedings
which may materially affect the business or financial position of MQREIT.

5. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours
from Mondays to Fridays (except public holidays) at the registered office of the Manager at
Level 33A, Menara NU 2, No. 203, Jalan Tun Sambanthan, Kuala Lumpur Sentral, 50470
Kuala Lumpur from the date of this Circular up to and including the date of the Meeting:

(i) the Deed;

(ii) the HOA and SPA;

(iii) the letters of consents referred to in Section 2 of this Appendix;

(iv) the audited consolidated financial statements of MQREIT for the FYEs 31 December
2014 and 2015;

(v) the unaudited quarterly report of MQREIT for the financial period ended 30 September
2016;

(vi) the valuation certificate dated 20 June 2016 set out in Appendix I of this Circular,
together with the Valuation Report; and

(vii) the pro forma consolidated statement of financial position of MQREIT as at 31

December 2015 together with the Reporting Accountants’ report thereon referred to in
Appendix III of this Circular.

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51
 REIT
MRCB-QUILL REIT
(Established in Malaysia under the Deed of Trust dated 9 October 2006, as amended by the first supplemental deed dated 27 August 2007,
the second supplemental deed dated 28 May 2013 and the third supplemental deed dated 2 April 2015 entered into between MRCB Quill
Management Sdn Bhd, a company incorporated in Malaysia under the Companies Act 1965 and Maybank Trustees Berhad, a company
incorporated in Malaysia under the Companies Ordinances, 1940 to 1946)

NOTICE OF UNITHOLDERS’ MEETING

NOTICE IS HEREBY GIVEN THAT the Unitholders’ Meeting of MRCB-Quill REIT (“MQREIT”) will be
held at Sime Darby Convention Centre, Ballroom 3, Level 1, No 1A, Jalan Bukit Kiara 1, 60000 Kuala
Lumpur on Wednesday, 7 December 2016 at 10.30 a.m. or at any adjournment thereof for the purpose
of considering and, if thought fit, passing the following ordinary resolutions, with or without
modification:

ORDINARY RESOLUTION 1

PROPOSED ACQUISITION BY MAYBANK TRUSTEES BERHAD, ACTING SOLELY IN THE

CAPACITY AS TRUSTEE FOR AND ON BEHALF OF MQREIT, OF A 33-STOREY OFFICE TOWER
KNOWN AS MENARA SHELL TOGETHER WITH A 5-STOREY PODIUM AND A 4-STOREY
BASEMENT CAR PARK, ERECTED ON PART OF A FREEHOLD LAND HELD UNDER GERAN
40094, LOT 348, SECTION 72, TOWN AND DISTRICT OF KUALA LUMPUR, WILAYAH
PERSEKUTUAN KUALA LUMPUR AND ALL SUCH PLANT AND EQUIPMENT, FIXTURES AND
FITTINGS ATTACHED TO THE PROPERTY (COLLECTIVELY, THE “PROPERTY”) FOR A
PURCHASE CONSIDERATION OF RM640,000,000 TO BE SATISFIED ENTIRELY IN CASH
(“PROPOSED ACQUISITION”)

“THAT subject to the passing of Ordinary Resolutions 2, 3, 4, 5 and 6, approval be and is hereby given
to the Directors of MRCB Quill Management Sdn Bhd, as manager of MQREIT (“Manager”), and
Maybank Trustees Berhad, as trustee of MQREIT (“Trustee”), for the proposed acquisition of the
Property upon the terms and conditions set out in the conditional sale and purchase agreement dated
30 June 2016 entered into between the Trustee, acting solely in the capacity as trustee for and on
behalf of MQREIT, and 348 Sentral Sdn Bhd for a purchase consideration of RM640,000,000 to be
satisfied entirely in cash;

THAT the Directors of the Manager and the Trustee be and are hereby authorised to sign and execute
all documents, do all things and acts as may be required to give effect to the Proposed Acquisition with
full power to assent to any conditions, variations, modifications and/or amendments in any manner as
may be required by any relevant authorities and to deal with all matters relating thereto and to take all
such steps and do all acts and things in any manner as they may deem necessary or expedient and in
the best interests of MQREIT to implement, finalise and give full effect to the Proposed Acquisition;

AND THAT all actions taken by Directors and/or officers of the Manager in relation to the Proposed
Acquisition prior to the date of this resolution shall be ratified.”
ORDINARY RESOLUTION 2

PROPOSED PLACEMENT OF UP TO 406,666,667 NEW UNITS IN MQREIT (“UNITS”)

(“PLACEMENT UNITS”), REPRESENTING UP TO 38.1% OF THE ENLARGED UNITS IN
CIRCULATION, AFTER THE PROPOSED PLACEMENT, BY WAY OF BOOKBUILDING EXERCISE
AT AN ISSUE PRICE TO BE DETERMINED LATER (“PROPOSED PLACEMENT”)

“THAT subject to the passing of Ordinary Resolutions 1, 3, 4, 5 and 6, approval be and is hereby
given to the Directors of the Manager and the Trustee to allot and issue up to 406,666,667 Placement
Units at an issue price to be determined by way of bookbuilding exercise to such investors to be
identified later;

THAT the Placement Units shall, upon allotment and issue, rank equally in all respects with the then
existing Units in issue, save and except that the Placement Units shall not be entitled to any
distributable income, rights, benefits, entitlements and/or any other distributions, unless the allotment
and issue of the Placement Units were made on or prior to the entitlement date of such distributable
income, rights, benefits, entitlements and/or any other distributions;

THAT the Directors of the Manager and the Trustee be and are hereby authorised to use the proceeds
to be derived from the Proposed Placement in the manner as set out in Section 2.2.4 of the Circular;

AND THAT the Directors of the Manager and the Trustee be and are hereby authorised to sign and
execute all documents, do all things and acts as may be required to give effect to the Proposed
Placement with full power to assent to any conditions, variations, modifications and/or amendments in
any manner as may be required by any relevant authorities and to deal with all matters relating thereto
and to take all such steps and do all acts and things in any manner as they may deem necessary or
expedient and in the best interests of MQREIT to implement, finalise and give full effect to the
Proposed Placement.”

ORDINARY RESOLUTION 3

PROPOSED ALLOTMENT, ISSUANCE AND PLACEMENT OF SUCH NUMBER OF PLACEMENT

UNITS TO MALAYSIAN RESOURCES CORPORATION BERHAD (“MRCB”), AS PART OF THE
PROPOSED PLACEMENT, FOR AN AMOUNT OF NO LESS THAN RM110,000,000 BUT UP TO
RM152,000,000 IN VALUE, REPRESENTING BETWEEN 9.0% AND 12.4% OF THE ENLARGED
UNITS IN CIRCULATION, AFTER THE PROPOSED PLACEMENT, AT THE SAME ISSUE PRICE
AS THE PLACEMENT UNITS ISSUED TO OTHER INVESTORS UNDER THE PROPOSED
PLACEMENT (“PROPOSED PLACEMENT TO MRCB”)

“THAT subject to the passing of Ordinary Resolutions 1, 2, 4, 5 and 6, approval be and is hereby
given to the Directors of the Manager and the Trustee to allot and issue such number of Placement
Units to MRCB, as part of the Proposed Placement, for an amount of no less than RM110,000,000 but
up to RM152,000,000 in value at the same issue price as the Placement Units issued to other
investors under the Proposed Placement;

THAT the Placement Units shall, upon allotment and issue, rank equally in all respects with the then
existing Units in issue, save and except that the Placement Units shall not be entitled to any
distributable income, rights, benefits, entitlements and/or any other distributions, unless the allotment
and issue of the Placement Units were made on or prior to the entitlement date of such distributable
income, rights, benefits, entitlements and/or any other distributions;

AND THAT the Directors of the Manager and the Trustee be and are hereby authorised to sign and
execute all documents, do all things and acts as may be required to give effect to the Proposed
Placement to MRCB with full power to assent to any conditions, variations, modifications and/or
amendments in any manner as may be required by any relevant authorities and to deal with all matters
relating thereto and to take all such steps and do all acts and things in any manner as they may deem
necessary or expedient and in the best interests of MQREIT to implement, finalise and give full effect
to the Proposed Placement to MRCB.”
ORDINARY RESOLUTION 4

PROPOSED ALLOTMENT, ISSUANCE AND PLACEMENT TO EMPLOYEES PROVIDENT FUND

BOARD (“EPF”), AS PART OF THE PROPOSED PLACEMENT, OF UP TO 7% OF THE
ENLARGED UNITS IN CIRCULATION AFTER THE PROPOSED PLACEMENT, REPRESENTING
UP TO 74,763,336 UNITS, AT THE SAME ISSUE PRICE AS THE PLACEMENT UNITS ISSUED TO
OTHER INVESTORS UNDER THE PROPOSED PLACEMENT (“PROPOSED PLACEMENT TO
EPF”)

“THAT subject to the passing of Ordinary Resolutions 1, 2, 3, 5 and 6, approval be and is hereby
given to the Directors of the Manager and the Trustee to allot and issue such number of Placement
Units to EPF, as part of the Proposed Placement, of up to 7% of the enlarged Units in circulation after
the Proposed Placement at the same issue price as the Placement Units issued to other investors
under the Proposed Placement;

THAT the Placement Units shall, upon allotment and issue, rank equally in all respects with the then
existing Units in issue, save and except that the Placement Units shall not be entitled to any
distributable income, rights, benefits, entitlements and/or any other distributions, unless the allotment
and issue of the Placement Units were made on or prior to the entitlement date of such distributable
income, rights, benefits, entitlements and/or any other distributions;

AND THAT the Directors of the Manager and the Trustee be and are hereby authorised to sign and
execute all documents, do all things and acts as may be required to give effect to the Proposed
Placement to EPF with full power to assent to any conditions, variations, modifications and/or
amendments in any manner as may be required by any relevant authorities and to deal with all matters
relating thereto and to take all such steps and do all acts and things in any manner as they may deem
necessary or expedient and in the best interests of MQREIT to implement, finalise and give full effect
to the Proposed Placement to EPF.”

ORDINARY RESOLUTION 5

PROPOSED AUTHORITY TO ALLOT AND ISSUE UP TO 31,952,333 NEW UNITS FOR THE
PURPOSE OF THE PAYMENT OF MANAGEMENT FEE TO THE MANAGER IN THE FORM OF
NEW UNITS (“MANAGER’S UNITS”) (“PROPOSED AUTHORITY”)

“THAT subject to the passing of Ordinary Resolutions 1, 2, 3, 4 and 6, approval be and is hereby given
to the Directors of the Manager and the Trustee to allot and issue, from time to time, up to 31,952,333
Manager’s Units for the payment of management fee to the Manager in respect of the financial years
ending 31 December 2017 to 31 December 2019 in the form of new Units, at an issue price which
shall be determined in accordance with Clause 19.3 of the deed of trust constituting MQREIT, and to
deal with the same, upon such terms and conditions as the Manager shall deem fit;

THAT the Proposed Authority shall be effective from the date of the Unitholders’ approval until:

(i) 31 March 2020, being the last date on which the management fee in respect of the financial
year ending 31 December 2019 shall be paid; or

(ii) all the 31,952,333 Manager’s Units have been issued pursuant to the Proposed Authority for the
purpose of the payment of the management fee to the Manager in respect of the financial years
ending 31 December 2017 to 31 December 2019,

whichever is earlier;

THAT the Manager’s Units shall, upon allotment and issue, rank equally in all respects with the then
existing Units in issue, save and except that the Manager’s Units shall not be entitled to any
distributable income, rights, benefits, entitlements and/or any other distributions, unless the allotment
and issue of the Manager’s Units were made on or prior to the entitlement date of such distributable
income, rights, benefits, entitlements and/or any other distributions;
AND THAT the Directors of the Manager and the Trustee be and are hereby authorised to sign and
execute all documents, do all things and acts as may be required to give effect to the Proposed
Authority with full power to assent to any conditions, variations, modifications and/or amendments in
any manner as may be required by any relevant authorities and to deal with all matters relating thereto
and to take all such steps and do all acts and things in any manner as they may deem necessary or
expedient and in the best interests of MQREIT to implement, finalise and give full effect to the
Proposed Authority.”

ORDINARY RESOLUTION 6

PROPOSED INCREASE IN THE EXISTING APPROVED FUND SIZE OF MQREIT FROM

700,000,000 UNITS UP TO A MAXIMUM OF 1,100,000,000 UNITS (“PROPOSED INCREASE IN
FUND SIZE”)

“THAT subject to the passing of Ordinary Resolutions 1, 2, 3, 4 and 5, the approved fund size of
MQREIT be and is hereby increased from 700,000,000 Units up to a maximum of 1,100,000,000 Units
by the creation of up to 400,000,000 Units;

AND THAT the Directors of the Manager and the Trustee be and are hereby authorised to sign and
execute all documents, do all things and acts as may be required to give effect to the Proposed
Increase in Fund Size with full power to assent to any conditions, variations, modifications and/or
amendments in any manner as may be required by any relevant authorities and to deal with all matters
relating thereto and to take all such steps and do all acts and things in any manner as they may deem
necessary or expedient and in the best interests of MQREIT to implement, finalise and give full effect
to the Proposed Increase in Fund Size.”

BY ORDER OF THE BOARD

MRCB QUILL MANAGEMENT SDN BHD
(as the Manager of MRCB-Quill REIT)

Mohamed Noor Rahim Yahaya (MAICSA 0866820)

Ho Ngan Chui (MAICSA 7014785)
Company Secretaries

Kuala Lumpur
22 November 2016
Notes:

1. A Unitholder who is entitled to attend and vote at this meeting is entitled to appoint another person to
attend and vote in his stead. A proxy may but need not be a Unitholder.

2. Where a Unitholder appoints 2 proxies, the appointment shall be invalid unless it specifies the proportions
of its holdings to be represented by each proxy.

3. Where a Unitholder is an exempt authorised nominee which holds the units for multiple beneficial owners
in one securities account, there is no limit to the number of proxies which the exempt authorised nominee
may appoint in respect of each omnibus account it holds.

4. The instrument appointing a proxy shall be in writing under the hand of the appointor or of its attorney duly
authorised in writing or if the appointor is a corporation either under its common seal or under the hand of
an officer or attorney so authorised.

5. The instrument appointing a proxy and the power of attorney or other authority (if any) under which it is
signed or a notarially certified copy of such power or authority shall be deposited at the Registered
Address of MRCB Quill Management Sdn Bhd at Level 33A, Menara NU 2, No. 203, Jalan Tun
Sambanthan, Kuala Lumpur Sentral, 50470 Kuala Lumpur not less than 48 hours before the time
appointed for holding the meeting or any adjournment thereof.

6. For the purpose of determining a unitholder who shall be entitled to attend the Unitholders’ Meeting, the
Manager shall be requesting Bursa Malaysia Depository Sdn Bhd to issue a Unitholders’ Meeting Record
of Depositors as at 30 November 2016. Only a unitholder whose name appears therein shall be entitled to
attend the said meeting or appoint a proxy to attend in his or her stead.
 PROXY FORM
(Please see the notes below before completing the form)
REIT
MRCB-QUILL REIT
(Established in Malaysia under the Deed of Trust dated 9 October 2006, as
amended by the first supplemental deed dated 27 August 2007, the second CDS Account No.
supplemental deed dated 28 May 2013 and the third supplemental deed
dated 2 April 2015 entered into between MRCB Quill Management Sdn Bhd, No. of Units held
a company incorporated in Malaysia under the Companies Act 1965 and
Maybank Trustees Berhad, a company incorporated in Malaysia under the
Companies Ordinances, 1940 to 1946)

I/We ........................................................................................................................................................................................
(Full name in capital letters, NRIC No. / Passport No. / Company No.)

of ............................................................................................................................................................................................
(Address)

being a unitholder /unitholders of MRCB-Quill REIT hereby appoint:

First Proxy
Proportion of Unitholdings
Full Name of Proxy (in capital letters) NRIC No. / Passport No. / Company No. Represented
No. of units %
Address

and / or failing *him / her,

Second Proxy
Proportion of Unitholdings
Full Name of Proxy (in capital letters) NRIC No. / Passport No. / Company No. Represented
No. of units %
Address

or failing *him / her, the Chairman of the Unitholders’ Meeting, as *my / our proxy(ies) to vote for *me / us on *my / our
behalf, at the Unitholders’ Meeting to be held at Sime Darby Convention Centre, Ballroom 3, Level 1, No 1A, Jalan Bukit
Kiara 1, 60000 Kuala Lumpur on Wednesday, 7 December 2016 at 10.30 a.m., or at any adjournment thereof.

Please indicate with an ‘X’ in the appropriate space below how you wish your vote to be cast. If this form is returned
without any indication as to how the proxy shall vote, the proxy shall vote or abstain as he / she thinks fit.

ORDINARY RESOLUTION FOR AGAINST

1 - PROPOSED ACQUISITION
2 - PROPOSED PLACEMENT
3 - PROPOSED PLACEMENT TO MRCB
4 - PROPOSED PLACEMENT TO EPF
5 - PROPOSED AUTHORITY
6 - PROPOSED INCREASE IN FUND SIZE

Dated this ................... day of .............................. 20....... ..............………....................................................

Signature of Unitholder(s)

* Delete if not applicable

✄
Notes:

1. A Unitholder who is entitled to attend and vote at this meeting is entitled to appoint another person to attend and
vote in his stead. A proxy may but need not be a Unitholder.

2. Where a Unitholder appoints 2 proxies, the appointment shall be invalid unless it specifies the proportions of its
holdings to be represented by each proxy.

3. Where a Unitholder is an exempt authorised nominee which holds the units for multiple beneficial owners in one
securities account, there is no limit to the number of proxies which the exempt authorised nominee may appoint in
respect of each omnibus account it holds.

4. The instrument appointing a proxy shall be in writing under the hand of the appointor or of its attorney duly
authorised in writing or if the appointor is a corporation either under its common seal or under the hand of an
officer or attorney so authorised.

5. The instrument appointing a proxy and the power of attorney or other authority (if any) under which it is signed or
a notarially certified copy of such power or authority shall be deposited at the Registered Address of MRCB Quill
Management Sdn Bhd at Level 33A, Menara NU 2, No. 203, Jalan Tun Sambanthan, Kuala Lumpur Sentral,
50470 Kuala Lumpur not less than 48 hours before the time appointed for holding the meeting or any adjournment
thereof.

6. For the purpose of determining a unitholder who shall be entitled to attend the Unitholders’ Meeting, the Manager
shall be requesting Bursa Malaysia Depository Sdn Bhd to issue a Unitholders’ Meeting Record of Depositors as
at 30 November 2016. Only a unitholder whose name appears therein shall be entitled to attend the said meeting
or appoint a proxy to attend in his or her stead.
 Fold this flap for sealing

Fold this flap for sealing

Then fold here

Then fold here

AFFIX
STAMP
AFFIX
STAMP

The Company Secretary

MRCB Quill Management Sdn Bhd
The Manager of MRCB-Quill REIT
Level 33A, Menara NU 2
No. 203, Jalan Tun Sambanthan
Kuala Lumpur Sentral
50470 Kuala Lumpur

1st fold here

1st fold here
✄