PAVILION REAL ESTATE INVESTMENT TRUST 2017 ANNUAL REPORT

Pavilion REIT Management Sdn. Bhd. Company Number : 939490-H

Level 10, Pavilion , 168 Jalan , 55100 Kuala Lumpur T : +603 2118 8888 F : +603 2118 8889 Email : [email protected] 2017 ANNUAL www.pavilion-reit.com REPORT

PavilionARcov_FINAL.indd 1 22/02/2018 10:56 AM What’s Inside Overview 1 Vision, Mission and Investment Strategies 2 Corporate Information 4 Highlights 6 Message from the Chairman 9 Board of Directors 15 Management Team 19 Salient Features of Pavilion REIT 20 Pavilion REIT Structure Business Review 22 Message from the Chief Executive Officer 24 Management Discussion & Analysis 34 Investors Relation and Fund Management 36 Portfolio Details Corporate Governance Report and Financial Statements 44 Corporate & Sustainability Report 48 Corporate Governance Statement 51 Nominating Committee Report 52 Audit Committee Report 53 Statement of Risk Management and Internal Control 54 Additional Information 56 Financial Statements Others 102 Analysis of Unitholdings 105 Market Overview 123 Glossary 124 Notice of Annual General Meeting Enclosed Proxy Form

Disclaimer : This annual report, prepared by Pavilion REIT Management Sdn Bhd (“the Manager”) may contain certain forward-looking statements and is prepared based on the Manager’s current view of future events that may involve certain assumptions, risks and uncertainties. Unitholders and investors are advised that past performance does not necessarily signify its future performance. The principal investment policy of Pavilion REIT Vision, is investing directly and indirectly, in a diversified portfolio of income producing real estate used solely or Mission and predominantly for retail purposes (including mixed-use developments with a retail component) in and Investment other countries within the Asia-Pacific region as well as Strategies real estate related assets. Vision To be the leading and most sought after REIT in Malaysia.

To provide unitholders with regular and stable distributions as Mission well as to achieve long term growth in net asset value per unit, while maintaining an appropriate capital structure. Strategies

The Manager intends to achieve the vision and mission of Pavilion REIT through the following strategies: (a) Actively pursuing acquisition opportunities in accordance with the authorised investments of Pavilion REIT - acquire yield accretive income-producing properties - explore repositioning opportunities

(b) Pursuing an efficient capital management strategy - diversify sources of debt funding - maintaining a reasonable level of debt service capability - securing favourable terms of funding - managing financial obligations - managing the exposures arising from adverse market interest rates through appropriate hedging strategies - actively managing the range of maturities to reduce refinancing risk and optimise the cost of capital

(c) Proactively managing the properties and implementing asset enhancement strategies - maximise quality shopper traffic, especially at Mall - active management of tenant base in order to increase rental rates and maintain high occupancy rates - continued asset enhancement initiatives to increase net lettable area and rental potential - improving cost efficiency Others Corporate Governance Report And Financial Statements Business Review Overview 2 INFORMATION CORPORATE Dato’ Choo ChuoSiong Dato’ Mohzani binAbdulWahab Independent Non-Executive Director Ooi AhHeong Mohd Abdulrazzaq AAl-Hashmi Ahmed AliHAAl-Hammadi Non-Independent Non-Executive Director Dato’ Lee Tuck Fook Puan Sri Tan Kewi Yong Non-Independent Executive Director Tan SriLimSiewChoon Chairman andNon-IndependentExecutive Director BOARD OFDIRECTORS OF THE MANAGER Pavilion REIT 2017Annual Report Syed Mohd Fareed binShaikhAlhabshi Dato’ Maznah bintiAbdulJalil AhmadMohammedFQAl-Khanji Navid Chamdia 50200 Kuala Lumpur, Malaysia No. 84 Jalan Raja Chulan Menara Goldstone (Holiday Inn Express) 6-2 Level 6 East Wing (Licensed SecretaryNo: LS 02201) Lim Mei Yoong MANAGER COMPANY SECRETARY OF THE Ooi Ah Heong Mohd Abdulrazzaq A A Al-Hashmi Dato’ Choo Chuo Siong Dato’ Mohzani bin Abdul Wahab Dato’ Maznah binti Abdul Jalil (Chairperson) NOMINATING COMMITTEE Navid Chamdia Dato’ Choo ChuoSiong Dato’ Maznah bintiAbdulJalil Dato’ Mohzani binAbdulWahab (Chairman) AUDIT COMMITTEE Facsimile No.:+60321666818 Telephone No.:+60321669818 50200 Kuala Lumpur, Malaysia No. 84JalanRajaChulan Menara Goldstone (Holiday InnExpress) 6-2 Level 6EastWing REGISTERED OFFICE MANAGER’S Website: www.pavilion-reit.com E-mail: [email protected] Facsimile No.:+60321188889 Telephone No.:+60321188888 55100 Kuala Lumpur, Malaysia 168, JalanBukitBintang Level 10,Pavilion Kuala Lumpur (Company Number:939490-H) Pavilion REIT ManagementSdnBhd OF BUSINESS &ITSMANAGER PRINCIPAL PLACE

Pavilion REIT 2017Annual Report

Malayan BankingBerhad Hong LeongBankBerhad CIMB BankBerhad AmBank (M)Berhad Alliance BankMalaysia Berhad Affin BankBerhad PRINCIPAL BANKERS DarulEhsan,Malaysia 47800 8, FirstAvenue, BandarUtama KPMG Tower Accountants Chartered (LLP0010081-LCA &AF-0758) KPMG PLT AUDITOR 50300 Kuala Lumpur, Malaysia Off JalanDangWangi No. 25JalanYap AhShak (Company Number:160636-P) ButcherMalaysiaHenry SdnBhd PROPERTY MANAGER Facsimile No.: +603 7984 9612 Telephone No.:+603 7983 1088 58200 Kuala Lumpur Off JalanKuchai Lama No 2 Jalan 1/127 Pusat Perdagangan Kuchai B-2-9 (2nd Floor) MTrustee Berhad (CompanyNumber: 163032-V) TRUSTEE Facsimile No.:+60327839222 Telephone No.:+60327839299 59200 Kuala Lumpur, Malaysia No 8JalanKerinchi South BusinessSuite,AvenueVertical 3, Unit 32-01,Level 32, Tower A Bhd (CompanyNumber:11324-H) Tricor Investor Sdn &Issuing HouseServices REGISTRAR Public BankBerhad nomto (cont’d) Information Corporate 3

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 4 HIGHLIGHTS 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 100,000 150,000 200,000 250,000 300,000 50,000 (RM’000) Distributable Income (RM’000) Market Capitalisation (RM’000) Investment Properties FY2013 FY2013 FY2013

221,315 3,852,396 4,000,000 133,000 FY2014 FY2014 FY2014

4,400,177 4,300,000 133,000 239,928 FY2015 FY2015 FY2015

4,677,655 4,350,000 133,000 248,885 FY2016 FY2016 FY2016

5,742,798 5,096,000 133,000 248,784 FY2017 FY2017 FY2017

4,878,451 5,135,000 133,000 249,683 Pavilion REIT 2017Annual Report 1,000 2,000 3,000 4,000 5,000 6,000 1.10 1.15 1.20 1.25 1.30 1.35 6.00 6.50 7.00 7.50 8.00 8.50 (RM) Net AssetValue perUnit (sen) Distribution perUnit No ofUnitholders FY2013 FY2013 FY2013

5,960 1.17 7.36 FY2014 FY2014 FY2014 4,992 1.26 7.96 FY2015 FY2015 FY2015 4,836 1.28 8.23 FY2016 FY2016 FY2016 5,095 1.30 8.24 FY2017 FY2017 FY2017 5,242 1.30 8.24 Pavilion REIT 2017Annual Report 5

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 6 THE CHAIRMAN MESSAGE FROM RM4.02:USD1 by year end. of the year at approximately RM4.49:USD1 to strengthenedalso from againstUSD thestart compared to 26.8 millionin2016. The ringgithas higher tourist arrivals for 2018 at 28 million visitors, by year end. Tourism Malaysia has forecasted barrel early2017 andendedatUSD61 perbarrel from USD52 per during the year; which started to 5.50%. This is due to stronger crude oil prices 2018 forecasted ataconservative range of5.00% revised upwards from 5.2% to 5.7% for 2017, with Back in Malaysia, thereal GDP for 2017 has been largely led by increases in export. of annualisedreal termgrowth of1.4% in16 years year. Japanalsoexperiencedthelongest streak the during earlier Keqiang Li Premier by 6.5% of a growth of7% in2017, ascompared to aforecast In theregion, China’s GDPremains ontrack to post than anticipated. Quantitative Easingprogramme inEurope earlier European Central Bank will be reducing their 1.2% per annum. This resulted in talks that the in 2017, compared to a long term forecast of Eurozone GDPgrowth rate reached also 1.8% anticipated in 2018. Funds rates to 1.25% -1.50% andmore hikes are rate hikes duringtheyear, increasing theFederal compared to 1.5% in 2016. This resulted in three 4.9%) and expected GDP growth at 2.2% in 2017, in unemployment rate to 4.3% thisyear (2016 – leading the way, their economy is showing a drop compared to 3.2% in 2016. With United States world economy in 2017, with growth rates at 3.6% There were broad improvements overall for the Economic Review Pavilion REIT 2017Annual Report points on the last trading day of2017. single stock. closed at a high of 1,057.35 market movement thatmightnotbeapparent ina October 2017, whichrepresents theoverall REITs Malaysia launched the Malaysian REIT Index in Bursa year the During 2018. of quarter first by Mall Extension is only expected to be completed Lumpur Kuala Pavilion for acquisition proposed of RM1.87 billionrecorded in theprioryear. The disposals by seven REITs ascompared to atotal 2017 witheightcompletedacquisitionsandtwo transactions value totalled RM1.16 billion in RM46 billion in 2017. During the year, M-REITs the M-REIT grew by 4% from RM44.2 billion to marketthe combined value capitalisation of 2017, February 6 on REIT KIP of listing the With The market has seen M-REIT growth in 2017. Market Review benefit the retail sector. spending for the general economy which will will help boost the consumer and confidence sectors this andits related products. Henceforth, this willallcontributepositively to theconstruction Lumpur – Singapore high - speed railway in 2018, Kuala and ECRL line, MRT3 for construction of With the highly anticipated commencement income tax. with over 261,000 peopleno longerhaving to pay in cumulative by disposal income RM1.5 billion class. themiddle for resultThis will inincrease high cost of living, there will be a personal tax cuts will notbeanyincrease intaxes anddueto the During Budget 2018, itwasannouncedthatthere – Bukit Bintang MRT Station on 17 July 2017, the With the recent opening of Pavilion Kuala Lumpur malls. improve the vibrancy and increase footfall to the an improvement to to itstenantmix further March 2016. These malls are currently undergoing and 86% respectively since the acquisitions in achieved a commendable occupancy rate at 90% area. Both IntermarkMallandDA MENMallhave another 75,997 square feet ofthe net lettable tenants contributed to double digit growth for reversion while relocated tenants and replacement renewed with approximately 4.2% positive rental 208,439 square feet of net lettable areas were office asset. In 2017, Pavilion Kuala Lumpur Mall’s rate for itsretail 95% of its assetsand98% for Pavilion REIT occupancy has maintained a portfolio Despite the challenging economic environment, acquisition is expected to be yieldaccretive. increasing its asset under management, the increasing Pavilion REIT’s growth by portfolio of diversifying theriskofPavilion REIT. Besides Mall is a strategic move to the long term aim Lumpur Kuala Pavilion existing the to extension Pavilion Kuala Lumpur Mall Extension, as a natural The Manager believes that the acquisition of the Extension-Connections for RM580 million. the 10 levels ofretail subway mall, linkageand of consisting Extension”) Mall Lumpur Kuala together withits related assetsandrights(“Pavilion proposed acquisition of the Elite Pavilion Mall In July 2017, Pavilion REIT announced the Investment andAssetPerformance RM1.90 in 2016. REIT’s price closed lower at RM1.61 against (MGS) of 3.9% against the REIT’s yield, Pavilion between the Malaysian Government Securities Given these rates hikes and the wider spread 2018. has increased from 3.0% to 3.25% on 25 January Negara Malaysia (“BNM”) overnight policy rates do soin2018 again.On thedomesticfront, Bank interest rates to in2017andishighlyexpected in 2017 as the US Federal has Reserve raised We are likely to see a consolidation of the M-REITs flow of constructionjobs in thecountry. appreciation of the Ringgit Malaysia and robust revivalelection, consumption, domestic of 1,880 pointsin2018 dueto theupcominggeneral hit to expected is index KLCI FBM The 2016. in to 1,796.81 pointsfrom 1,641.73 pointsrecorded 9.4% of rise a with 2017 ended index KLCI FBM Pavilion REIT 2017Annual Report 5.0% to 5.5%, led by domestic demand; especially 5.0% to 5.5%, ledby domesticdemand;especially of range annual an within increase to projected The targeted real GDP growth in Malaysia is Market Outlook opening in 2007. of 42 international and local retail awards since its total a winning Mall LumpurKuala Pavilion the in commitment to excellence, which have resulted This is a true testimony of the Manager’s • • • • • • additional awards, namely:- 6 won have Mall Lumpur Kuala year,Pavilion the Further, we are proud to announce that during of the station. of thebrand ‘Pavilion BukitBintang’inthenaming benefit with the publicity arising from the inclusion to expect also is It Extension. Mall LumpurKuala Pavilion and Mall Lumpur Kuala Pavilion both to anincrease anticipate Manager inthefootfall to previous twoquarters. as their confidence level have dropped compared Businesses are cautious still of very the outlook the previous year atapproximately 81.2points. of 101.5 points ascompared to same quarter of2017 has improved quarter tofor fourth Research survey, Index theBusiness Condition In the recent Malaysian Institute Economic other hand is expected at 1.2% for 2018. demand strengthens. Japan’s GDP growth on the are set toin 2018, pick up asglobal though exports such asChinaisestimatedto slowdownto 6.5% consumption. Other Asian regional power houses due to infrastructure investment and private

‘Retail Excellence Awards’ – Sin Chew Sin – Awards’ Excellence ‘Retail ‘SCBEA Top 5 (PAT)’ – Sin Chew Business Luxury International In ‘Excellence Opulence, To Rise The – Award ‘Gold ‘Gold Award, Best Experiential Marketing Mall’: Shopping Best – Award ‘Platinum 2017 Asia Pacific Shopping Centre Awards Sales Promotion/ TrafficActivation’: ICSC Malaysia ShoppingMallAssociation PPK Opulence’: To Rise The – 2017 2017 Awards TourismMayor’s Lumpur Kuala Business Excellence Awards 2017 Excellence Awards 2017 Excellence Award’: The Edge 2017 DevelopmentShopping Mall – Property h Chairman(cont’d) The Message from 7

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 8 The Chairman(cont’d) Message from and trust the unitholders have in the Manager and and trust the unitholders have in the Manager and be passed at 99.998%. This shows the confidence The unitholdersvoted fortheabove resolution to way ofbook-building. approximately 7.2% oftotal unitsincirculation by up to 218,000,000 new units representing up to aproposed includes acquisition of placement consideration of RM580 million. This proposed total a for Extension”) Mall KL (“Pavilion rights Pavilion Malltogether withitsrelated assetsand 2018, toJanuary approve the acquisition of Elite Pavilion REIT ever first heldtheir 16 on EGM Extraordinary General Meeting (EGM) RM1.5 billion in economic impacts. international delegates and delivered an estimated exhibitions, hence attracting more than 127,849 meetings, incentive travel conventions and of 341 business events, comprising corporate leading business destinations which saw a total build on Malaysia’s prominence as one the region’s Convention and Exhibition Bureau continues to Meanwhile, for business tourism, Malaysia and heritage, crafts, birding, diving and homestay. to expand the areas of focus to cover culture, arts and initiatives tourism existing review to 2.0 Lab of Tourism andCulture helda Tourism &Culture RM36 million tourist arrivals by 2020, the Ministry Economic Area towards achieving its targeted Key National the of progress the of terms In to 2.2% for the Malaysian retail for 2017. industry annual growth forecast downwards from 3.7% its revised since has Malaysia Group Retail firm, cost of living. Thus, independent retail research trending upbutataslowerpacethantherising others, fear ofpricehikes. This isdespiteincomes are still cautious of the economy, from amongst 100points. of The survey thatpeople indicated earlier is still below the average or desired mark a points year recorded during the same quarter of 2017 at 82.6Index points, of the69.8 last quarter However, compared to the Consumer Sentiment Pavilion REIT 2017Annual Report audited financial statement for the year ended ended year the for statement financial audited 30Marchheld on 2017to lay Pavilion REIT’s Pavilion REIT’s fifth annual general meeting Annual General Meeting (AGM) their support. hence wewouldlike to thank all unitholdersfor 25 January 2018 25 January Chairman TAN SRILIMSIEW CHOON and confidence in Pavilion REIT. stakeholders trust fortheir continuous support, other and partners business financiers, tenants, gratitudeexpress our heartfelt to our unitholders, Fund. Last but not least, the Manager would like to for all their commitment and contribution to the to thank all the management team and employees On behalf of the Board members, we would also like their dedication andinputduringtheyear. I wouldlike to thankallmembersoftheBoard for Acknowledgement expenditure to enhance the value of Pavilion REIT. potential investments, acquisitions and/or capital to theexistingapproved of 20% size fund for for authority to allot andissue new units up be proposing to seek the unitholders approval tabling the 2017 accounts, the Manager will also AGM this year,For the forthcoming other than on smoothly. up to 20% of the existing approved fund size went general mandate forallotment and issuance of 31 December 2016 together withtheapproval for Capital Berhad. He is also an Independent Non-Executive Director of SAM Engineering & Equipment He wasappointedto theBoard oftheManageron29July 2011andadirector ofPavilion REIT Bond 2003. Heresigned from theboard ofMalton Berhadin2009. Executive Director of Malton Berhad and was re-designated as its Managing Director in December From 2002 to 2006, he was Managing Director ofParacorpBerhad. In 2003 he was appointed the of Malaysia Bhdfrom 2001 to 2002. Committee of the board of Peremba-Kentz Ltd. He was the Managing Director of Cement Industries of Renong Overseas Corporation. Between 1994 and 2000, he was the Chairman of the Executive of Samling Group in . He later joined the Renong Berhad group as the Managing Director in 1985 until he left the practice in 1990. From 1990 to 1992, he was appointed the Vice President He began his career with KPMG in 1974 under articleship, was subsequently admitted as a partner degree inBusiness Administration from theInternationalManagement Centre, Buckingham. of Institute Malaysian the of Accountants member and the Malaysian Institute Publicof Accountants.Certified He also holds aa Master is male, Malaysian a 63, age Fook, Tuck Lee Dato’ than traffic offences, ifany. public sanction or penalty imposed by relevant regulatory bodies during the past 10 years, other in the Financial Statements. She has not been convicted ofany offences and is not aware of any She has no conflict of interest with Pavilion REIT save for the related party transactions as disclosed Director ofMalton Berhad.Sheisthespouse of Tan SriLimSiewChoon. She was appointed to the Board of the Manager on 7 April 2011. She is currently an Executive involvement hasextended to cover manyotherindustries. ventures. Her initial involvement was trading and distribution line and over the years, herscopeof resource various insettingup business andhasbeeninstrumental successful management human and finance advertising, marketing, in experience management of years 34 over has She Kingdom specialisinginBusinessandMarketing Studies. Puan Sri Tan Kewi Yong, age 61, a education Malaysianin the United female, pursued her tertiary than traffic offences, ifany. public sanction or penalty imposed by relevant regulatory bodies during the past 10 years, other in the Financial Statements. He has not been convicted ofanyoffences and is not aware ofany He has no conflict of interest with Pavilion REIT save for the related party transactions as disclosed Sri Tan Kewi Yong is a Non-Independent Executive Director and a major unitholder of Pavilion REIT. Berhad and also the Non-Independent Non-Executive of MaltonChairman Puan His Berhad. spouse, Chairman ofthe Manager on11 August 2011. He is also an Executive Chairman of WCT Holdings He was appointed to the Board of the Manager on 7 April 2011 and subsequently appointed the retail design,retail development aswellcorporate management. He has more development, than 35 years ofmanagementconstruction, experience in property degree (majoringinFinance)from theUniversity ofCentral OklahomaintheUnitedStates. AdministrationBusiness of Bachelor a holds male, Malaysian a 57, age Choon, Siew TanLim Sri Non-Independent Executive Director Dato’ Lee Tuck Fook Non-Independent Executive Director Puan Sri Tan Kewi Yong Chairman andNon-IndependentExecutive Director Tan SriLimSiewChoon Pavilion REIT 2017Annual Report DIRECTORS BOARD OF 9

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 10 Directors (cont’d) Board of in anypublicorlistedcompany. He was appointed to the Board of the Manager on 14 June 2016. He does not hold any directorship 2008 to March 2009. September from London in LLP Overy & Allen of team finance project the to seconded was and 2010 – 2006 from Limited Company Operating Qatargas of counsel legal assistant an was He parties. acquisitions and ensure adequate protections and relationshipfor QIA, management with external business units to execute He leads newacquisitions andmonitorsby QIA. the execution ofnew He is currently Head of M&A (Legal) – Qatar Investment AuthorityHe coordinates (QIA). with the in Business Administration from LondonBusiness School,LondonUnitedKingdom. Masters a hold he and Kingdom United Oxford University, Brookes Oxford from honors with (LLB) Law graduatedof male, Qatari Bachelor a 33, with age Al-Khanji, Q F Mohammed Ahmad past 10years, otherthantraffic offences, ifany. is not aware of any public sanction or penalty imposed by relevant regulatory bodies during the and offences any of REIT. Pavilion convicted with interest been of not conflict has no He has He in anypublicorlistedcompany. He was appointed to the Board of the Manager on 14 June 2016. He does not hold any directorship analystfromin theMiddleEastandwasafinancial 2003and2005. reporting and worked on the restructuring and strategy recommendation for several financial firms service asset management business in Qatar. Prior to that, he was an associate with Booz Allen Hamilton was the Vice President – Asset Management of EFG-HermesQatar where he was in charge of the capital program and to initiate the attraction of asset managers to Qatar. From 2008 – 2010, he was responsible to review and recommend the venture investments Hedge Fund for QIA portfolio, He was frompreviously2010 – 2014 and an Associate in the Asset Management Department responsible forfundinvestments inprivate equity, equity, hedgefundsandreal estate. QIA’sis the and investmentsof international majority the represent which investments fund and managed portfolios He oversees including sector the active portfolios, investment portfolios ofQIA. Head ofFund Investments Department He is currently the Head of Active Investments of Qatar Investment He Authorityis also the (QIA). Business Schoolfrom Boston, UnitedStatesofAmerica. in Philadelphia, United States of Americaand Master in Business Administration from Harvard Economics (Finance and Accounting) from University ofPennsylvania – School The Wharton graduated male, aQatari age36, Al-Hammadi, HA Ali inAhmed Science of aBachelor with than traffic offences, ifany. public sanction or penalty imposed by relevant regulatory bodies during the past 10 years, other in the Financial Statements. He has not been convicted ofanyoffences and is not aware ofany He has no conflict of interest with Pavilion REIT save for the related party transactions as disclosed Berhad andsubsequentlyre-designated asGroup ManagingDirector on3April2017. November 2016 he was appointed the Non-Independent Non-Executive Director ofWCT Holdings (M) Berhad, the Independent Non-Executive ChairmanofPesona Metro Holdings Berhad. On 2 Non-Independent Non-Executive Director Ahmad MohammedFQAl-Khanji Non-Independent Non-Executive Director Ahmed AliHAAl-Hammadi Pavilion REIT 2017Annual Report He has over 41 yearsdevelopment of experience in the property business and has years of Ooi AhHeong,aged65,aMalaysian male,graduated from theUniversity ofSingapore in1976. imposed by relevant regulatory bodies during the past 10 years, other than traffic offences, if any. He has not been convicted ofanyoffences and is not aware ofanypublicsanctionpenalty or He has no conflict of interest with Pavilion REIT save for the related party transaction as annexed. public orlistedcompany. of the Audit Committee of the Manager on 28 June 2016. He does not hold any directorship in any to appointed He was theBoard 10August on asamember theManager appointed of 2011.Hewas and estate real global of infrastructure projects. delivery and financing the on advising London in division Finance Young’s& Ernst Project at years 12 spent he 2005, in Authority Investment Qatar joining to Prior Authority. markets. Navid is also responsible realfor estate fund investments made by the Qatar Investment emerging and States United Europe,the in co-investments venturesand joint acquisitions, direct He iscurrently headofreal estateinvestments atQatar Investment Authority, focusingprimarilyon holder.Analyst charter Accountants from England the and Institute Wales.of Chartered Financial He is also a Chartered first class honours degree in Economics. He is a qualified Chartered Accountant and a member of Navid Chamdia, age 44, a male British national, graduated from University College London with a than traffic offences, ifany. public sanction or penalty imposed by relevant regulatory bodies during the past 10 years, other in the Financial Statements. He has not been convicted ofanyoffences and is not aware ofany He has no conflict of interest with Pavilion REIT save for the related party transactions as disclosed any publicorlistedcompany. of the Manager’s Nominating Committee on 28 June 2016. He does not hold any directorship in He was appointed to the Board ofthe Manager on14 June 2016. He was appointed as a member feasibility study, andtechnicalfinancial duediligenceonthetarget asset/company. financial valuation, property including transactions estate real key of acquisition on evaluation co-investments inthereal estatesector inEurope andAmerica.Heisresponsible fortheappraisal, He is currently a Senior Associate at Qatar Investment Authority focusing primarily on direct and 3 candidate. major degree in Finance and minor degree in Marketing. He is a Financial Chartered Analyst level Mohd Abdulrazzaq AAl-Hashmi, age 29, a Qatari male, graduated from Qatar University with a than traffic offences, ifany. public sanction or penalty imposed by relevant regulatory bodies during the past 10 years, other in the Financial Statements. He has not been convicted ofanyoffences and is not aware ofany He has no conflict of interest with Pavilion REIT save for the related party transactions as disclosed Non-Independent Non-Executive Director Navid Chamdia Non-Independent Non-Executive Director Mohd Abdulrazzaq AAl-Hashmi Non-Independent Non-Executive Director Ooi AhHeong Pavilion REIT 2017Annual Report ietr (cont’d) Directors Board of 11

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 12 Directors (cont’d) Board of Asset ManagementSdnBhd. Prestariang Berhad. Sdn She Bhd is and the a DirectorChairman of SCSGlobal Advisory ofOpus Governors of University Malaysia of of ComputerScience & Engineering (UniMy), a subsidiary Currently, she is the Independent Director ofPrestariang Berhad and a member ofthe Board of University, respectively. Degree in Business Administration (Finance)Illinois Universityfrom Northern and Central Michigan Dato’ Maznah binti Abdul Jalil, age 64, a Malaysian female, graduated with a Bachelor and Master past 10years, otherthantraffic offences, ifany. is not aware of any public sanction or penalty imposed by relevant regulatory bodies during the and offences any of REIT. Pavilion convicted with interest been of not conflict has no He has He Audit CommitteeandamemberoftheNominatingCommittee. He was appointed to the Board the of Manager on 29 2011. He July is the the of Manager’sChairman Executive Director. Non- Independent an as Berhad Bank Investment Leong Hong Berhad, Plantations Boustead of Sdn Bhd, TH Alam Management Sdn Bhd and TH Marine Holding (L) Inc and he sits on the board Asia Merchantrade Haji, TabungLembaga of Panel Investment the of Chairman is he Currently loyalty programof amultiparty company, BonuskadLoyalty SdnBhd. PS Pipelineand Terminal, andotherShelldownstream asadirector subsidiaries.Healsoserved on Shell Oman Marketing Plc and the joint venture companies between Petronas and Exxon/Mobil, years and was a board member of Brunei Shell Marketing. His board experience includes serving was a Non-Independent Non-Executive Director of Shell Refining Company (FOM) Berhad for eight in various senior management positions in Shell’s Downstream Oil Products sector. Prior to that, he from 2001 and 2005 respectively until his retirement at the end of 2009. He has years of experience as He the served Managing Director ofShell Malaysia Trading Sdn Bhd and Shell Timur Sdn Bhd Economics from theUniversity ofMalaya, Kuala Lumpur. Dato’ Mohzani bin Abdul Wahab, age 64, a Malaysian male, graduated with a Bachelor degree in past 10years, otherthantraffic offences, ifany. is not aware of any public sanction or penalty imposed by relevant regulatory bodies during the and offences any of REIT. Pavilion convicted with interest been of not conflict has no He has He Nominating Committee.Heiscurrently adirector ofPavilion REIT BondCapitalBerhad. He was appointed to the Board ofthe Manager on 29 July 2011. He is a memberofthe Manager’s market, includingtheKhuanChooGroup.the property HejoinedMalton Berhadin2002. he acted as an adviser to developers variousin on property business development opportunities Development, of Perlis a subsidiary Plantation Bhd, as its General Manager. From 1995 to 2002, General Manager. In 1989, he helped to form Pentadel Sdn Bhd. In 1991, he joined Cheras Heights He joined Tan & Tan Developments as a Project Manager in 1979. He then joined IOI Group as its He began his career with Yong Dan Mohd Faiz, a quantity surveying firm in Kuala Lumpur in 1976. Development ofMalton Berhad. buildings to centres. shopping and entertainment He is currently the Director ofBusiness rangingexperience from tohousing low-cost development high-end condominium and institutional Independent Non-Executive Director Dato’ MaznahbintiAbdulJalil Independent Non-Executive Director Dato’ MohzanibinAbdulWahab Pavilion REIT 2017Annual Report exchange, fintubeandgeneral fabrication. oil for and gas and generationpower industries, support ofpressuremanufacturing vessel, heat He is currently the Chairman of Oilfield Supply Centre (M) Sdn Bhd, a company providing logistics Syed MohdFareed binShaikhAlhabshi,age62, isaMalaysian male. past 10years, otherthantraffic offences, ifany. is not aware of any public sanction or penalty imposed by relevant regulatory bodies during the and offences any of REIT. Pavilion convicted with interest been of not conflict has no He has He Bhd andMemorialVenture Berhad. holdsdirectorshipAudit Healso Committee. andNominating Committee Park Memorial En inXiao He was appointed to the Board of the Manager on 19 June 2012. He is a member ofthe Manager’s from bothcommercial andresidential properties. the fieldof agedcare and has vast experience in the fieldof property development projects ranging from actively involvingApart in the bereavement care he has also ventured services, himself into &Culture (L)Foundation.INXO Arts Research on China – one ASEAN, ofthe council membersofthe Best Wishes Foundation and the from the above, Apart he as serves one of the advisors at the Centre of History & Contemporary chief decisionmaker inthedailyoperations ofthe Group, including corporate masterplanning. moderatesHe supervises, the Group’s daily management and operations personally, and as the providerservice centre inparks,memorial memorial andbereavement care in Malaysia. services He is currently the managing directorof the XiaoEnGroup,a familybusiness specialises as a UK withaBachelorofScienceinEconomics (Honours). Dato’ Choo Chuo Siong, age 52, a Malaysian male, graduated from the London School of Economics, past 10years, otherthantraffic offences, ifany. is not aware of any public sanction or penalty imposed by relevant regulatory bodies during the She has no conflict of interest with Pavilion REIT. She has not been convicted of any offences and Audit CommitteeandtheChairmanofNominatingCommittee. She was appointed to the Board of the Manager on 29 July 2011. She is a member of the Manager’s Sona Petroleum order. Berhad,acompanyintheprocess ofliquidationby court of Universiti Teknologi Mara (Uitm). She was the Executive Director and Chief Financial Officer of Kenanga InvestmentDirectora where BankBerhadformerly also was until 2011.She she served Principal Investment prior to her appointment as Executive Vice President, Investment Banking at she joined Hong Leong Financial Group Berhad as Executive Vice President, Corporate Finance & limited companies under DRB-HICOM as well as on the board of UOB Bank Berhad. Thereafter, Labuan Reinsurance (L) Ltd, Malaysian International Merchant Bankers Berhad and several private Bank Berhad, Gadek (Malaysia) Berhad, HICOM Holdings Berhad, Horsedale Development Berhad, previously onthe Board served ofEdaran Otomobil Nasional Berhad, EON Capital Berhad, EON Chairman of Uni.Asia General Insurance Berhad and Uni.Asia Life Assurance Berhad. She has also President asVice appointed she was Group DRB-HICOMBerhad of formerly Shewas Companies. of Merchant Amanah with she was inCorporate13years. BankBhd, for In1997 andAdvisory Finance She joined Master-Carriage (Malaysia) Sdn Bhd as Director of Corporate Affairs in 1992. Prior to that, Independent Non-Executive Director Dato’ ChooChuoSiong Independent Non-Executive Director Syed MohdFareed binShaikh Alhabshi Pavilion REIT 2017Annual Report ietr (cont’d) Directors Board of 13

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 14 Directors (cont’d) Board of past 10years, otherthantraffic offences, ifany. is not aware of any public sanction or penalty imposed by relevant regulatory bodies during the and offences any of REIT. Pavilion convicted with interest been of not conflict has no He has He of NationalGasBerhadandJalurLebarNasionalSdnBhd. He was appointed to the Board the of Manager on 29 2011. He July is also a director and shareholder to theEastCoastEconomic RegionDevelopment CouncilsinceAugust 2010until2012. to Foundation the Albukhary from 2000 to 2013. He was also a Representative of the Middle East Khalid bin Abdullah bin Abdul Aziz of Saudi Arabia. He was appointed as the Advisor (Middle East) In 1998, he was appointed the Director ofthe International Relations of His Royal Highness Prince He latersoldmajorityofhisinterest to DepaLtd,apubliclistedcompanyinDubai. Bank. In 2002, he started his own interior contracting company, Dragoni International an LLC in started Dubai. he investment holding aSaudiArabian for company 1994, family whichowns80% of National Commercial in Thereafter, Emirates. Arab United the and Kuwait Arabia, Saudi namely his career electronic in 1978He started by goods fromexporting Singapore to Middle East countries, Pavilion REIT 2017Annual Report bodies duringthefinancial year. offences within the past 10 years or any public sanctions or penalty imposed by relevant regulatory for convictions any have not does also she any), REIT.Pavilion (if with offence traffic than Other relationship with any director and / or major unitholder of Pavilion REIT. There is no conflictShe does not hold any directorship of in any public companies and listed issuers nor have any family interest Sdn Bhd. Bhd, Lion Properties Sdn Bhd, MBf Properties Sdn Bhd, Berjaya Ditan Sdn Bhd and CorporationGeneral London, KLP,Co., joining Manufacturing to Gestetner Prior with worked she Shopping Centre Board. AsiaPacific Advisory Chambers of Commerce ofMalaysia and Industry as well as a member ofInternational Council of also currently the Chairman of Malaysia Tourism Committee, a member of the Associated Chinese Besides being a past president and current of Malaysia advisor she is Malls Shopping Association, effectivemaintaining relationships networking regional local, with retailers. andinternational mall operations, leasing, marketing and human resources. Herrole also involves developing and formulate, to is responsibility key and goals prioritise in articulate departmental line with KLP’s KLP, her strategic objectives which included of Retail – Officer Executive Chief as role her In development andassetmanagement. property responsibilities in the areas of development, sales and marketing, leasing of various types of During her 36 years working experience, she has held key positions and handled a variety of inCentre ManagementfromEast LondonPolytechnic, LondonandaCertificate PPKM. (Hons) in fromBusiness Studies North Arts of 2011. She holds a Manager on 1 Bachelor December A Malaysian female, age 60, she was appointed to the position of Asset Manager (Retail) of the Pavilion REIT ManagementSdnBhdand/ormajorunitholderofPavilion REIT. in the analysis of unitholdings. He also does not have any family relationship with any director of He has no conflict of interest with Pavilion REIT, save for the interest in Pavilion REIT as disclosed year, otherthantraffic offences, ifany. financial the during bodies regulatory relevant by imposed penalty or sanction public years, 10 public companiesandlisted issuers, nor doeshe haveoffences anyconvictionfor within the past He was appointed as Chief Executive Officer on 1 December 2011 and has no directorship in other of thePavilion Kuala Lumpur Project in2002. Director of Kuala Lumpur Pavilion Sdn Bhd (KLP) during the development and construction stage Cemerlang Sdn Bhd’s group of companies. Prior to this, he was Chief Operations Urusharta for functions Officer investment property and and operations finance, Finance the in involved also was he Cemerlang Sdn Bhd, where he was involved in the establishment of Pavilion REIT. During this period, Prior to joining Pavilion REIT Management Sdn Bhd, he was the Chief Financial Officer of Urusharta operations development andconstruction. management,property audit, finance, acquisitions, & mergerscorporate planning, in experience of years over29 has He of Technology, Australia. Heiscurrently amemberoftheMalaysian InstituteofAccountants. Institute Chisholm from Accounting in Business of Bachelor a and Kingdom United Strathclyde, Philip Ho, age 51, a Malaysian male, holds a Master of Business Administration from University of Asset Manager(Retail) Dato’ Joyce Yap SohChing Chief Executive Officer Philip HoYew Hong Pavilion REIT 2017Annual Report MANAGEMENT TEAM 15

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 16 Team (cont’d) Management Ann Polytechnic, Singapore. from the University of South Australia, Australia and a Diploma in Building Management from Ngee Management) of the Manager on 1 December 2011. He holds a BachelorofBusiness (Property) A Singaporean male, age 49, he was appointed to the position ofAsset Manager (Facilities bodies duringthefinancial year. offences within the past 10 years or any public sanctions or penalty imposed by relevant regulatory for convictions any have not does also she any), REIT.Pavilion (if with offence traffic than Other relationship with any director and / or major unitholder of Pavilion REIT. There is no conflictShe does not hold any directorship of in any public companies and listed issuers nor have any family interest development asthe Director ofMarketing forMidValley City. the as Megamall Valley grew and toPromotions Manager include in integrated2011. Her portfolio Mid Advertising brand joining before 1996 in Pyramid Sunway at career her started She management andcustomer service. brand elevating with malls experience, sensory customer activation, relationship communications, of Director as Marketing in 2010. She oversees the marketing Pavilionof and concierge services REIT appointed retail being before Marketing Manager, General as 2008 in KLP joined She Universiti Kebangsaan Malaysia. (Hons) in Communications from the Manager on1 December 2011. She holds a BachelorofArts A Malaysian female, age 46, she was appointed to the position of Asset Manager (Marketing) of regulatory bodies duringthefinancial year. for offences within the past 10 years penalty or anysanctions imposed bypublic relevant interest with Pavilion of REIT.conflict no Other is REIT.than TherePavilion traffic of offence unitholder (ifmajor any), heor also/ doesand notdirector haveany anywith convictions relationship He does not hold any directorship in any public companies and listed issuers nor have any family functions fortheLionGroup Parade ofShoppingCentres throughout thecountry. Lion The of Division Group. During Management his tenure Centre with Shopping The Lion Group, the he was with involved in career the overallhis leasing and began marketing He mall. the for for setting the strategic marketing plans and implementing marketing and communication plans Prior to joining KLP, he was the Marketing Manager of Sunway Pyramid Sdn Bhd and was responsible 2017. Director,in Senior Leasing of & appointment Retail and 2010 in Leasing Directorof topromotion He joined KLP in 2002 as Senior Leasing Manager, was promoted to General Manager in 2005 with the required tenantmix. retailers from renowned local brands to brands international luxury and has successfully secured and marketing. In the retail industry, he possesses a wide network ofboth local and international He has over 24 years’ experiences inin theshopping areas mall management particularly of leasing by PPKMandamemberofPPKM. Melbourne Institute of Technology, Melbourne, Australia. He is also a Certified Marketing Manager Manager on 1 December 2011. He holds a Bachelor of Business in Marketing from the Royal the of (Leasing) Manager Asset of position the to appointed was he 49, age male, Malaysian A Asset Manager(Facilities Management) Francis OngHengKhai Asset Manager(Marketing) Kung SuanAi Asset Manager(Leasing) Lovell HoWai Hoong Pavilion REIT 2017Annual Report bodies duringthefinancial year. offences within the past 10 years or any public sanctions or penalty imposed by relevant regulatory for convictions any have not does also she any), REIT.Pavilion (if with offence traffic than Other relationship with any director and / or major unitholder of Pavilion REIT. There is no conflictShe does not hold any directorship of in any public companies and listed issuers nor have any family interest The Nomad Group Berhad with main responsibilities in financial reporting, budgeting and planning. Nomad Group Berhad. She oversaw for the service residencesthe withinfinance department the she was the Finance Manager at of The Nomad Hotel Management Sdn Bhd, a subsidiary The Prior to joining Pavilion REIT Management Sdn Bhd on 1 December 2011 as its Finance Manager, and theMalaysian InstituteofAccountants. Manager on 1 January 2014. She is a member of the Association of Chartered Certified Accountants A Malaysian female, age 42, she was appointed to the position of Senior Manager (Finance) of the bodies duringthefinancial year. offences within the past 10 years or any public sanctions or penalty imposed by relevant regulatory for convictions any have not does also she any), REIT.Pavilion (if with offence traffic than Other relationship with any director and / or major unitholder of Pavilion REIT. There is no conflictShe does not hold any directorship of in any public companies and listed issuers nor have any family interest that wasinvolved insettingupPavilion REIT. team the of part being to prior function treasury and control credit finance, overseeing Finance of Head its Lumpur,as Kuala Pavilion of developer the Bhd, Sdn Cemerlang Urusharta attached was She industries. retail and development construction, manufacturing, service, of finance in Involved in treasury and investor relation functions, she has over 27 years of experience, mainly University, Melbourne,Australia. 2012. She holds a Master of Businessthe Manager on1AdministrationJanuary from Victoria A Malaysian female, age 48, she wasappointed to the position of Head of Corporate Planning of regulatory bodiesduringthefinancial year. for offences within the past 10 years penalty or anysanctions imposed bypublic relevant interest with Pavilion of REIT.conflict no Other is REIT.than TherePavilion traffic of offence unitholder (ifmajor any), heor also/ doesand notdirector haveany anywith convictions relationship He does not hold any directorship in any public companies and listed issuers nor have any family respective mallsthathehadmanaged. of standard operating procedures and was also involved in asset enhancement initiatives of the daily operations preparation ofthemall, oftheoperations budget,implementation andmaintenance for the new mall, pre-opening preparations andpost-opening operations. He was responsible for the with ION Orchard, he was involved in the operations planning and recruitment ofthe facilities team Road. He was seconded to a new development, ION Orchard in 2008 as Head of Facilities. While their shoppingmalls,PlazaSingapura whichissituatedinSingapore’s shoppingbeltalongOrchard Prior to joining KLP, he was with CapitaMall Asia Ltd for close to seven years and managed one of industrial properties. He has over management covering 24 years of experience in residential,property commercial and Head ofCorporate Planning Ong HuiLing Assistant General Manager(Finance) Lim MianNyee Pavilion REIT 2017Annual Report em (cont’d) Team Management 17

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 18 Team (cont’d) Management bodies duringthefinancial year. offences within the past 10 years or any public sanctions or penalty imposed by relevant regulatory for convictions any have not does also she any), REIT.Pavilion (if with offence traffic than Other relationship with any director and / or major unitholder of Pavilion REIT. There is no conflictShe does not hold any directorship of in any public companies and listed issuers nor have any family interest Business ModellingteamofErnst&Young Kuala Lumpur. her career with the Valuationof AmInvestment Bank Berhad. She started Equity and department Private the in Manager Investment was she Bhd, Sdn REITManagement Pavilion joining to Prior management, corporate stakeholder management aswellliquidationanddisposalwork. portfolio analysis, investment modelling, financial valuation, in experience of mixture a has She University oftheWest ofEngland,Bristol. (Hons) in Accounting and Finance fromManager on 1 July 2015. She holds a Bachelor of Arts A Malaysian female, aged 31, she was appointed to the position of Manager (Investment) of the regulatory bodies duringthefinancial year. for offences within the past 10 years penalty or anysanctions imposed bypublic relevant interest with Pavilion of REIT.conflict no Other is REIT.than TherePavilion traffic of offence unitholder (ifmajor any), heor also/ doesand notdirector haveany anywith convictions relationship He does not hold any directorship in any public companies and listed issuers nor have any family the Consumer BankingConference. during 1998 year the for Officer Assistance Customer Best the awarded was and planning and charged off accountsincluding but not limited to implementation of credit policy and budget Prevention and was in charge – Cards of monitoring Department legal action against delinquent He started his career in Standard Chartered Bank Malaysia Berhad in the Legal, Credit Risk & Loss Management Committee of Management Corporation for the year 2015-2016. inthearea mainly specializing andconveyancing. litigation of the of member aformer also Hewas legal and compliance, he was a practising for 16 years lawyer with andM/s. partner J.P. Chong & Co toPavilionPrior joining REIT to2016 December oversee15 on areaBhd the Sdn of Management admitted to theMalaysian Bar in2001. A Malaysian male, age 43, he holds a Bachelor of Laws (Hons) from University of London and was Manager (Investment) Eng HuiYi Senior Manager(LegalandCompliance) Chong Kok Wai Pavilion REIT 2017Annual Report Stock Code Stock Name Price perUnit Initial PublicOffering Board Lot Listing Date Listing Market Financial Year Ending Revaluation Policy Gearing Policy Distribution Policy Investment Objective Approved Fund Size Termination Date Duration ofFund/ Type ofFund ofFundCategory Pavilion REIT 2017Annual Report 100 Unitsperboard lot 7 December2011 Main Market ofBursaMalaysia SecuritiesBerhad 31 December At leastonceevery three years by anindependentregistered valuer Up to 50%ofthe total assetvalue oftheFund financial year 31 December 2017 with at least 90% of distributable income for each subsequent Half yearly distribution of 100% of distributable income for the financial year ended capital structure long-term growth in net asset value anappropriateper Unit, while maintaining To provide unitholders with regular and stable distributions as well as to achieve 3,318,000,000 Units of theDeed • • • The earlierof: Income andgrowth Real EstateInvestment Trust 5212 PAVREIT • • the date on which Pavilion REIT is terminated by the Manager under Clause 26.1(b) The occurrence ofanyevents listedunderClause26.2oftheDeed 999 years falling on17October 3010 Institution –RM0.90 Retail –RM0.88 SALIENT FEATURES OF PAVILION REIT 19

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 20 STRUCTURE PAVILION REIT MTrustee Berhad Trustee Acts onbehalf of Unitholders Trustee Fee

Pavilion Kuala Lumpur Mall, Distributions Henry ButcherMalaysiaHenry SdnBhd Management and otherAuthorised Income Property Manager Property Property Services Intermark Mall, PavilionTower DA MENMall Investments Unitholders

Pavilion REIT 2017Annual Report Pavilion REIT Investment in (vested in Trustee)(vested Deposited Property Ownership of

Management Management Services

Fee Fee Management Property

Management SdnBhd

Pavilion REIT Manager

Pavilion REIT 2017Annual Report ended 31December2017. year financial the for Fund the with you of the performance REIT, are we pleasedto share As the Manager of Pavilion MANAGER’S REPORT 21

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 22 FROM THE CHIEF EXECUTIVE OFFICER MESSAGE such as Laduree, Paul, Giorgio Armani, AX Armani tenantswere new many introduced to themall of thetenantsremixing hasbeencompleted and feet ofthenetlettablearea. At theyear end,all digitgrowth square double 75,997 another for tenants and replacement tenants contributed to 4.2% for208,439 square feet while relocated managed to obtain a positive rental reversion of tenantswere dueforrenewal andtheManager During the year, Pavilion Kuala Lumpur Mall’s 23% 2016. with similar unit, per of8.24cent distribution quarter, the Manager has announced the full year As the Fund in the 4th had a better performance during theyear. and electricalmaintenanceupgrading works improvements,system air conditioning mechanical expenses have also increase due to incurrence of operation overall Mall, Lumpur Kuala Pavilion In 2016 againstfullyear 2017 operation expenses). (both acquired in late two March new properties the year due to operation expenses incurred for the increase in operation cost of RM22.2 million during thegrowthbetween inturnover andNPIisthe as compared to the previous year. The difference increase of RM8.1 million, approximately 2.6% up million to RM322.9 million in 2017 representing an income increased fromNet property RM314.8 RM30.3 million. to RM490.0 million this year, with an increase of has achieved an increase of 6.6% in gross revenue Manager is pleased to announce that the Fund resilient to the economic situation and the Pavilion hasagainshownthattheFund ismore Financial performance Pavilion REIT 2017Annual Report • were implemented: During the year the following asset enhancements Asset Enhancement Initiatives Lumpur Mall Extension. upon completion of the acquisition, Pavilion Kuala increase by approximately RM589.0millionor10% that in 2018, the asset under management will asatyearcompleted end.However, itisanticipated have which acquisition announced newly yet to be to RM5.7 billion during the year, excluding the Asset undermanagementhasincreased slightly and 80% with floating rates. rates interest fixed with is 20% which of 25.87% during the year resulted in a debt to asset ratio of Prudent debt management of the Fund’s borrowing and Lanvin. Exchange, Victor Jeans, Armani Armani, Alexander

There were some notable enhancements (ii) (i) to Pavilion Kuala Lumpur Mallsuchas:

upgrading of the drop off at Couture upgrading ofthe iconic façade Pavilion entrance 2018 quarter and expected to complete by 1st entrance, which is currently ongoing at the Jalan Bukit Bintang main favour. Proposed voted 99.998% with Acquisition in approvedThe unitholders theresolution for the held to approve the above mentioned acquisition. 2018, Ona unitholders 16meeting was January fundthe Proposed Acquisition. partly total units in circulation, by way ofbook-building to Pavilion REIT, representing upto about7.2% ofthe of up placement to 218,000,000 new unitsin the Board proposes the proposed to undertake Acquisition, Proposed the with conjunction In (iii) (ii) (i) entering into: of RM580.0 million (“Proposed Acquisition”) by Mall Extension”) for a total cash consideration KL (“Pavilion rights and assets related the with proposed Pavilion ofElite acquisition Malltogether Pavilion REIT has announced on 27 July 2017 the New Acquisition • •

At DA MEN Mall, enhancement was enhancement Mall, MEN DA At to enhancement Mall, Intermark the At conditional sale and conditional purchase agreement vesting agreement Urusharta with sale and conditional purchase agreement Agreements”). (collectively, the“Proposed Acquisition Car Park Bays (“Car Park Disposal SPA”) with UCSB for the disposal of the Disposed Connections (“Vesting Agreement”); and Extension- the of vesting the for UCKL Cemerlang Sdn Bhd (“UCSB”) and Pavilion (“EliteSPA”); Elite of acquisition the (“UCKL”)for Bhd Sdn (KL) Cemerlang Urusharta with ofcustomers. ground forthecomfort and improvements to the surau at lower main entrance, increasing seating places tofountain customers welcome atthe which includes landscaping, a newwater made to internal and external perimeter security. of panic buttons for the improvement of as upgrading of the CCTV and installation introduction oftwo new kiosks as well the Food by completed Hallwas the (iv) (iii)

enhancement to entrances to installation of a Ethylene aEthylene of installation Tetra buffer atConnectionLevel 3. Fluoro Ethylene canopy and rain mitigate lossofaircondition of new glazing and sliding door to Dining Loft at Level 7 by installation Pavilion REIT 2017Annual Report unitholders. and provideproperties sustainable DPU to our be evaluated to grow theFund withyieldaccretive year. continuously will Investment opportunities during the coming new investment opportunities the government, to continue will theManager seek with the development order freeze announced by Regardless in this challenging retail landscape thereafter distributable incomefor the year. lead to an increase income and in net property will which 2018, of quarter first the by Extension Mall KL Pavilion of acquisition the complete In line with our expected timeline, we hope to feedback.industry relaxed subsequently was the considering after above. However, we understand that this freeze said to be in the price range of RM1 million and of each unitis which condominiums, (ii) luxury shopping mallsandcommercial complexes and means (i) a temporary stop to thedevelopment of BankNegarafollowing Malaysia’s study. The freeze developments was announced by the government an indefinite freeze on approvals for luxury property than the previous year. Effective 1 November 2017, No doubt2018 willindeedbemore challenging Outlook of2018 25 January 2018 25 January Chief Executive Officer PHILIP HO YEWHONG from theChiefExecutive Officer(cont’d) Message 23

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview Financial Review Financial Highlights 24 & ANALYSIS MANAGEMENT DISCUSSION Total – Office Pavilion Tower Retail DA MENMall Intermark Mall Lumpur Mall Pavilion Kuala By Segment Portfolio Turnover Ratio(times) Gearing Ratio(%) NAV perUnit(RM) Net AssetValue (“NAV”) (RM’000) Total Asset Value (“TAV”) (RM’000) (RM’000) Investment Properties Management ExpenseRatio(“MER”)(%) – – Distribution Yield(%):- Distribution perUnit(DPU)(sen) Earnings perUnit(sen) Distributable Income(RM’000) Income(“NPI”)(RM’000) Net Property Gross Revenue (RM’000) Key Indicators Performance Financial Resultsand based onmarket price as at 31 based onretail IPOpriceof RM0.88 December 459,701 447,139 398,952 RM’000 12,562 32,026 16,161 FY 2016 100.00 Gross Revenue 97.27 86.79 2.73 6.97 3.51 % 3,522,516 4,355,353 4,133,000 FY 2013 490,001 477,544 412,854 221,315 263,125 375,509 RM’000 12,457 39,937 24,753 10.88 16.22 5.75 8.36 7.36 0.00 1.17 0.67 FY 2017 3,811,016 4,649,931 4,433,000 Pavilion REIT 2017Annual Report FY 2014 239,928 282,739 402,092 100.00 97.46 84.26 16.94 15.22 2.54 8.15 5.05 5.45 9.05 7.96 0.00 1.26 0.66 % 3,851,607 4,750,753 4,483,000 FY 2015 314,774 305,911 283,598 248,885 291,535 413,932 RM’000 15,827 15.88 8,863 6,486 5.31 9.35 8.23 9.36 0.00 1.28 0.64 FY 2016 3,920,849 5,592,418 5,229,000 Net Property Income Net Property FY 2016 248,784 314,774 459,701 100.00 97.18 90.09 10.33 25.25 2.82 5.03 2.06 4.34 9.36 8.24 0.08 1.30 0.69 % 3,940,277 5,653,164 5,268,000 FY 2017 322,913 314,907 286,169 249,683 322,913 490,001 RM’000 16,769 11,969 25.87 8,006 5.12 9.36 8.24 8.24 0.00 1.30 0.72 FY 2017 (20.23)% FY 2016 FY 2017 Change 17.97% 100.00 0.36% 2.59% 6.59% 2.46% 0.50% 1.09% 0.75% 4.35% 97.52 88.62 2.48 5.19 3.71 (%) vs % - - - -

properties reflect the current market value and in compliance to Malaysian Financial Reporting Standards 140. This re- This valuation resulted ingainofRM17.0million. 140. Standards investment Reporting Financial its Malaysian that to compliance ensure in to and year value market financial current the the reflect of properties end the at as re-valued been had properties investment Fund’s The capital strategy andcontinue to implementimprovements to itsexistinginvestment properties. The Manager will continue to put their best effort forward to identify future potential investment, negotiate the most efficient has conditionprecedent to meet. Target of2018. completionofthisacquisitionisstillduringthefirstquarter 2018 approvedJanuary the Elite Pavilion Mall acquisition, its unconditional date has yet to be determined as vendor still purchase agreement was signed for the acquisition of Elite Pavilion Mall. Although Pavilion REIT unitholders had on 16 The Manager has been actively During the pursuing year,and evaluating acquisition opportunities. a conditional sale and During theyear, there were nochangesto duringthelistinginDecember2011. theinvestment objectives setforth Investment andValuation Properties MEN Mallforbalancepurchase consideration whichisduewhenstrata isissued. title for theproperty gearing ratio of 25.9% against previous year end of 25.3%. High payables is primarily dueto amountowingto vendor ofDA million. Pavilion REIT’s borrowings of RM1,462.7 million is similar to 2016 borrowings of RM1,412.3 million, resulting in With regards to its financial position, there is minimal increase of 1.1% in its total assets from 5,592.4 million to RM5,653.2 Statement ofFinancialPosition –AssetsandLiabilities of 2017isto bepaid on28February 2018resulting inNAV perunitofRM1.30forboth2016 and 2017. 3.96 sen, earned for 1st half of 2017 was paid on 6 September 2017 with the final distribution of 4.28 sen earned in 2nd half 7,568,336 Unitsto 3,030,093,605Unitsasat31December2017. Total DPU for2017 remains the same as 2016 DPU at 8.24 sen, despite the addition of Units in circulation increasing by Distribution perUnit(“DPU”) malls to choosefrom andshoppersremain cautiousintheirspending. reversion for 2018 with tenants having more options / selections with bargaining power given that there are more retail rental in increase modest a expects Manager the efficiency. Hencewith, optimise to monitored being cost operating with REIT Pavilion living, of cost higher to malls intends to be cautious in its spending to create experiential and differentiation to attract due and retain shoppers’ loyalty spending vigilant more with low remains confidence consumer as However, NPI margin of65.9%and64.3%respectively. a achieving office and retail with 65.9% of margin NPI achieved portfolio REIT Pavilion Overall, income. property net and continues to contribute toRetail property approximately 97.5% of Pavilion REIT’s in terms of gross revenuetotal portfolio andworkingcapitalpurposes. MEN Mallinvestment properties million. Higher borrowing costwasincurred due to drawdownof additional borrowingsprogressive for payment of the DA in fair value of RM17.0 million against of investmentthe immediate preceding properties year fairvalue gain of RM76.9 Income before taxation for the year decreased by 20.1% to RM249.4 million, mainly due to lower recognition in change year ofRM314.8million. gross revenue. This resulted in NPI increasing to RM322.9 million or 2.6% higher as compared to the immediate preceding Intermark and DA MEN Malls, acquired on 26 March 2016, are contributing 8.9% of the overall NPI against 13.2% of total contribution from Pavilion Kuala Lumpur Mallisdueto completionofitstenantrepositioning exercise. Gross revenue achieved in 2017 is RM490.0 million or 6.6% higher when compare to the immediate preceding year. Higher Pavilion REIT 2017Annual Report Management Discussion & Analysis (cont’d) 25

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 26 & Analysis (cont’d) Management Discussion With only 23% of net lettable area due for renewal in 2017, Pavilion Kuala Lumpur Mall continued with its repositioning its with exercise during the year to better enhance the continued mall. This resulted in suitable areas available to 1st accommodate storeMall in Lumpur Kuala Pavilion 2017, in renewal for due area lettable net of 23% only With Operations Review lots andcreation ofadditionalfoodandbeverages kiosksattheIntermarkMall. enhancement at Jalan Bukit Bintang, new rain screen at Jalan Raja Chulan connection area with improvements of tenancy upgrading works, installation of way finding system, upgrading of drop off entrance and canopy at Couture Pavilion, façade being utilised for asset enhancement exercise in its properties, primarily in Pavilion Kuala Lumpur Mall for continuous toilet Main usage of total cash for investing activities were RM58.0 million as deposit for Elite Pavilion Mall with RM22.5 million equivalent ofRM234.4millionasattheendyear. cash and cash with million RM43.0 of decrease net in resulted This activities. financing for used being million RM263.6 Of the net cash available from operating activities of RM294.9 million, RM74.2 million was used for investing activities with Statement ofCashFlows in thefuture. due when facilities credit existing any re-finance to or acquisitions future for ready options additional have to it enable to options financing available best the explore to continue will Manager the cost, funding increasing potential the of view In or REIT Guidelinesofupto thepermitted50%of Total AssetValue. With average interest cost of 4.6%, Pavilion REIT’s gearing of 25.9% is below the market norm ofapproximately 30% to 40% Capital Management Property Fair Value Gain Add Disposal Less CapitalExpenditure Total Portfolio Pavilion Tower DA MENMall Intermark Mall Pavilion Kuala Lumpur Mall OFFICE RETAIL 20% MTN Sources ofFunding 80% FI 50% Yr 2021 Value @31 5,268,000 5,135,000 4,550,000 Debt Expiry ProfileDebt Expiry Dec 2017 133,000 416,000 169,000 RM'000 Market Pavilion REIT 2017Annual Report Value @31 5,229,000 5,096,000 4,450,000 Dec 2016 133,000 483,000 163,000 RM'000 Market 50% Yr 2019 Change in (22,540) (67,000) 100,000 RM'000 17,028 39,000 39,000 6,000 Value 568 Coupon /Interest RateProfile - 80% Floating Rate Property Property 2017 Yield 6% 4% 7% 6% % Property Property 20% Fixed Rate 2016 Yield 7% 4% 5% 6% % to caterforimprovements to mall facilitiesorarchitectural related. For 2018, besides setting up oflandlord provision to caterfortenant requirements, capital expenditures are being planned tenant aswellbesidescreation ofadditionalfoodandbeverage kiosks attheIntermarkMall. way finding system. Improvements were also expendedof to someinstallation tenancy lotsand to accommodatearea requirementsconnection of someChulan new Raja Jalan at screen rain new entrance, Bintang Bukit Jalan at enhancement enhancement to itsas corridor well common as upgrading the drop offentrance and canopy at Couture Pavilion, façade review,and upgradingtoiletunder works continuous period with the mall During its enhanced PavilionLumpurKualaMall Asset EnhancementExercises will bethestrategy forthecoming years with continuousupkeep ofthebuildingfortenantretention. tenants by providing more incentives or lowering rent to compete. Goodtenant retention with no negative rental reversion more new office spaces targeted for completion in the next few years and older office buildingstrying to retainPavilion Tower’s or capture occupancy remains above 90% for current year new although office market remains soft and challenging with malls aswellsponsorshipof2017SeaGames. MEN Mall. Non recoverable debts were written off with higher marketing cost incurred to create awareness and promote and escalator parts and improvement of light fittings at Intermark Mall, tenancy costs incurred for landlord provisions at DA rewinding,replacement escalatorof handrails, brokensteps and Pavilionat combs Kuala Lumpur replacementMall, lift of 2016 and higher maintenance cost incurred such as air conditioning system improvement and upgrading work, air chillers was mainly due to the routine operating expenses incurred for Intermark and DA MEN Malls that were acquired from 25 March Total operating property expenses incurred were higher as compared to the preceding year ended 31 December 2016. This as consumerculture iscritical. space of use relevant more for times with up keeping hence – Angeles Los of suburb Outlets, Citadel in VaultMadaLuxe in Pavilion Kuala Lumpur and Bangsar Village. Madaluxe, an online luxury fashion retail has just opened its first store called players such as Amazon that opened its first brick andmortar outlet inSeattle’s University Village, Fashion ValetDespite the increasingwith shift towards online shopping, physical stores are outlets still relevant as evidenced by many e-commerce leaving store purchases. carrying in sales in physical store as well as accelerate their e-commerce sales as some shoppers want customer experience without relations, provide a showroom as well as hoping to draw traffic to its website. Some of these merchants have seen increase by search engines, some e-commerce retailers are opening physical store to increase awareness, forge closercustomer as the offline venue for product collection. With e-commerce environment being more competitive and costly as constrained feature the mall’s first O2O collaboration, ie Taiwan Festive Market which uses the online platform to sell and DA MEN Mall One of the concept being explored for DA MEN Mall is the online to offline (“O2O”) opportunity. This Chinese New Year will activities willcontinueto beheldto raise awareness ofDA MENMallbeingopened. Monster byParkson, DIY,Mr Outfitters andAl-Hannancaters which banquetingand to events. More nicheandcommunity mark. Hencewith, tenant revamp will still be on-going with new tenants introduced during the year being Brands Outlet, Little Despite continuous activities to promote the mall with high tenant occupancy, visitation to DA MENMall is still not up to income yieldfromproperty 5.2%to 7.1%. net its in improvement in resulted has Bar.This Kenshin The and Starbucks McDonalds, Bait, as such secured Intermark Mall’s occupancyhasimproved to 90.0% as at31 December2017 from 76.5% as atlast year endwithnewtenants tenants achieving average midteenreversion againsttheprevious tenancy. Woaco. rental 4.2% reversion achieved was current for year renewals square 208,439 of feet replacement with andrelocated and Sek Hou Tree,Thai Olive The Miyake, Issey by Please Pleats Piaget, Shojikiya, Chicken, Spiced Korean Omaya Paris, Nereides Les LemongrassHouse, Lanvin, LeCoultre, Jaeger Puff, Hokkaido Noodle, Cart Boy HK bSpace, 1TCM,Arzu, are trading commenced that tenants Alexander.notable Viktor Other and Nirav Modi Barton, and Betjeman as such Malaysia Pavilion REIT 2017Annual Report Management Discussion & Analysis (cont’d) 27

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 28 occupying themostspacesinofficesector.consultancy services Fashion & and food beverages remains largest trade by net lettable area category its forretail and sectorwith property WALE forretail andofficebeing1.57 1.39 years respectively. The weighted average lease expiry (“WALE”) as at year end has been reduced to 1.56 years against 2016 of 1.78 years, with years each. Anchorandspecialityanchortenantsgenerally have option forrenewal ofupto five terms. three of term another for extend to option an with each years three of term a REIT’sPavilionfor of are Majority tenancies rental. Intermark Mall’s new tenants occupying 8,098 square feet contributed to 28.5% increase in rental against expired tenancy replacement tenants contributed to double digit growth for another 75,997 square feet of the net lettable area. Similarly, and tenants relocated while feet square 208,439 for achieved was 4.2% of reversionrental Mall LumpurKuala Pavilion In Tenancy Profiles to 13.3%ofgross year. rental incomeforthereporting Pavilion REIT has a total combined tenancies list from the retail and office of 833 leases. Its ten largest tenants contributed Top10 Tenants Summary Portfolio & Analysis (cont’d) Management Discussion Net LettableArea (square feet) Appraised Value 2017(RMmillion) asat31 December Type Legendary FashionLegendary Trading SdnBhd Royal SelangorMarketing SdnBhd Richmont Luxury (Malaysia) SdnBhd Ralph Lauren (Malaysia) SdnBhd Corporation SdnBhd Padini Dot ComSdnBhd Golden Screen CinemasSdnBhd Gagan (Malaysia) SdnBhd Esprit deCorp(Malaysia) SdnBhd Apex Excellent SdnBhd Tenant’s Name Jewellery, Timepiece &Writing Instrument Pavilion REIT 2017Annual Report 1,987,098 Food andBeverage Gift andSouvenir Retail 5,135 Urban Leisure Trade Sector Fashion Fashion Fashion Fashion Fashion Fashion 163,844 Office Expiry Period Expiry 133 2019 Q3 2019 Q4 2019 Q4 2019 Q3 2019 Q3 2019 Q3 2019 Q3 2020 2019 Q3 2019 Q3 2,150,942 5,268 Total Personal Care, and Elect, IT Digital, 3% Jewellery,Timep instruments, 3% Products, 4% Shoes, Bags and Leather Beauty & ieces and 6% Writing Office, 3% Urban Leisure, Trade by NetLettableArea Category -Retail 5 %

Furnishings, 2% Decorations Home and B e v e F r ood a Gifts &Toys,3% g e Edutainment, , &

2

4 % & Services,4% Fitness, Optical Pavilion REIT 2017Annual Report Supermarket, Department Fashion ,24% Store / 17% Service Office Trade by NetLettableArea Category -Office 12% Property 57% Management Discussion Construction & Analysis (cont’d) 4% Personal Care Beauty & 2% Consultancy Services Fashion Financial 14% 2% Investment 4% Holding 5% 29

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview Inti Collegeto ushertheyear ofrooster exhibition featuring withcalligraphy 68pieces of 5-feet art highrooster. by over 20 troupes from Malaysia. For Chinese New Year 30 Community engagement commenced the year with print media, radio station and paper community continues to promote the mall via activities and new tenants opening. The neighbourhood ofthepersonalized mallengagementpositioning. Christmasmedleysperformed aspart also students Hill Primrose Replicas’. Landmark International Build to used Beverages of Number ‘Most the for Records of Book Malaysia the into entered was it and Al-Khalifa Burj Coliseum, The Pisa, of Tower,TowerEiffel Leaning as such Intermark Mall of in Christmas REIT’sfirst Pavilion Songket.Terengganu Royal of textile heritage rich and elegance the showcased which Besides the monthly themed promotions, festivals andpromotions. value propositions within the mall with aggressive line-up of campaignsand cross marketing precincts capitalize on events, technology and connectivity was adopted toexperiential createwith new product exhibitions, smart launches and luxury value and discounts but on quality goods and conveniences in a rapid and fast changing world. Besides keeping the mall by Euromonitor International 2017, continues to keep up with consumer trends for 2017 which sees consumers seeking PavilionKuala Lumpur Mall Highlights ofMallsMarketing Activities & Analysis (cont’d) Management Discussion

In August 2017, the mall receivedmall 2017 the AugustKL 2017, the In Torchthe of part as In 2017, there were many international celebrity collaborations which took place in the mall. The lead cast of the The signature ‘ These ‘must have’ yearly festival event featured latest decorations and ideas similar to someofthe global shopping Sports Minister Khairy Jamaluddinlaunchedthemainthemesongfor29thSEAGames,‘BangkitBersama’. MinisterKhairy Sports Games. The SEA and 29th Youth 2017 the Kuala Lumpur of partner mall shopping official and sponsor silver the as life insurance invitedtheformerfootballsuperstar, David Beckhamto themall. promote their latest war action flick to came Jung-min Hwang and Ji-sub So Joong-ki, Song actors Korean South award-winning The song. Apple-Pen including Japanese comedian Pikotaro,performances, whocausedaworldwidesensation with his Pen-Pineapple- the mall’s Tokyo Street and the 60th ofJapan-Malaysia anniversary diplomatic relations. It was aline-up of exciting film. The the premiereof local the for much talked-about movie viral, inlinewiththemall’s strategy to adoptsocialmediaasaplatformto inspire andinfluence. wanting to enter the fashion realm. Fashion blogs, videostreaming, celebrity endorsement news went regional and socialites in town. brands, took place at the end of September 2017 with large gathering of local celebrities, key fashion influencers and to all. Creative Technology.of University Limkokwing with collaboration in design kolam largest and creative most the with one as united are and of Diwali’ Bricks’ feat, Records of Book Malaysia showcased mall The LEGO. with partnership in Hari Raya opulence and good fortune. ‘Largest Phoenix Replica’ measuring 40 feet in length, 52 feet in width and 12 feet in height bestowing shoppers with centres. For the Grand Celebrations National Events Celebrities andCollaborations Fashion Events made up of over 87,000 pieces of LEGO bricks, measuring 8 metres in length and 3 metres in width. was Deepavali’s theme which reflects on the true essence of Deepavali which embodies these symbols these embodies which Deepavali of essence true the on reflects which Deepavali’stheme was ‘Joy to the World’ DA MEN Mall Pavilion Pit Stop’ Chinese New Year ‘The Rise to Opulence’ ‘KL Fashion Week Ready to Wear’ , located in Bukit Bintang Kuala Lumpur, one of the top 10 most visited city in the world, ranked ‘Christmas inthe Air’ ‘Baby Driver’ , targeting the greater SubangandSunway area via socialmediaplatforms,comprehensive with first time collaboration with Coca Cola and Jaya Grocer featured seven world icons , hosted for the 9th year running showcased fashion highlights from international Intermark Mall ‘The Battleship Island’ ‘JapanExpoMalaysia 2017’ , Ansel Elgort and Lily James, together with director Edgar Wright were in town ‘Let’s Go Raya’ ‘World LionandDragon Dance Extravaganza’ showcasedgolden hot air balloons rising high, sprinkling festive cheer in August 2017 featured local designers, students and enthusiasts celebrated the cultural diversity of festivals with ‘Spring into Prosperity’ Pavilion REIT 2017Annual Report was a radiant celebration inspired by the joy of the festival, the of joy the by inspired celebration radiant a was , the mall showcased Malaysia Book of Records feat, the . In conjunction with the coincides withthecelebration6th anniversary of ‘KL 2017 Torch Run’ , there was an exclusive collaboration with ‘Biggest Mosaic Madeof ‘LEGO®’ ‘AIA Vitality Witness Festival’ , celebrating its commitment , showcasing performances ‘Anggun Aidilfitri’ ‘Flavours , the

top 10 most visited city in the world. Therefore, retail malls in good location and with good management are expected to KualaBintang, tourismBukit with Lumpurdestination rankedbeing byEuromonitor the of one being as 2017 International growing fastest 10 top the in listed is Lumpur Kuala 2017, November in review TourismCouncil TravelWorldand per As worldwide especiallyforexpatriates, foreign students andlongtermresidents underMalaysia MySecondHome. and the TourismDevelopment Infrastructure Fund, ‘eVisa Regional Hub’ will be expanded to facilitate visa applications tourism infrastructure to help revitalise the tourism sector, ie target tourist arrivals of 28 million, soft loan to tour operators 2018 Budget has also declared 2020 Visit Malaysia Year and extended several measures to promote tourism and enhance sales growth of 6.0%for2018. oil, returnprice ofcrude offoreign interest in Malaysian equities and debt papers, Retail Group Malaysia has forecast retail steady infrastructure, in spending exporters, commodity in growth Ringgit, of strengthening the with However, inflation. still likely to becautiousin spending due to rising and prices ofmaterials,foodas higher well transportation as fuel previous quarter. Despite 2018 Budget allowing incometax for cutand will special consumer allowances civilservants, for Sentiment Index (surveyed by Malaysian Institute of Economic of 2017) Research) from 80.7 of77.1 in (for 3rdthe quarter of 2017 which contractedin thirdperformance by quarter 1.1%. This is in line with the slight decline in the Consumer Retail Group Malaysia had estimated retail sales growth rate of 2.2% for 2017 due to worse than expected retail sales opened physicalstores asshowcaseandto tap onto widermarket. introducing online facilities as an alternative distribution channel their for customers.e-commerceSome players have also tenants. Despite the growth retailers of e-commerce will continue retailing,to as they survive brick and mortar are already operational cost, other challenges for landlord include lower consumer traffic, reducing retail sales and pre-termination by will continue towell but may perform facethe challenge of lowerpacein rental growth and occupancies. Besides higher it will be toughany newmalls forto reachsecure or the same level as those of established malls. Well-established malls In general, opportunities. the newer malls would be more affected as competition would be more intense to lure tenants and be ready for trading in 2018, retailers would have more options to be selective on whichmall would provide them with better With about 4.5 million square feet of retail mall opened in Klang Valley in 2017 and another 6.0 million square feet targeted to with unemployment averaging 3.3%. and high household debt obligations. inflation, employmentFor 2017, inflation is estimated opportunities to average 4.1% GDP growth for 2018 is forecasted to be lower than 2017, ranging between 5.0% and 5.5% due to concernsover higher growth factor together with increase in foreign direct investments and the continued large scale infrastructure spending, For 2017, Malaysia’s GDP growth was expected to range between 5.2% and 5.7%. Despite domestic demand being the driving Market Review Pavilion Kuala Lumpur Mallhasachieved 42accoladesto datewiththecurrent year additionsbeingthefollowings:- Awards involvement withcarolling atthemall. andperformances and Hanbok experiences. The Christmas celebration, themed K-popdancers screenings, movieKorean I-Flix K-Funwith mart, Food Mi Sun Shin KoreanK-Food with stampings, art nail K-Wave Festival was successfully organized with K-Fashion featuring Shoopen and SPAO pop-up stores, K-Beauty with free Youngestthe Recordfor of Book Fashionshow, collection girl. Designer yearsold 10 a by won was September 16 on held going through a series of workshopwith the mall’s selected tenants. The event kicked off with an on-ground recruitment in the mall in April followed by a video shoot of the top 20 contestants DA MENMall, collaborated with Mina magazine (Cite Publishing) as venue sponsor for

‘Retail Excellence Awards’ ‘SCBEA Top 5(PAT)’ ‘Excellence Development InInternationalShoppingMall–Property Luxury Excellence Award’ 2017 ‘Gold Award – The Rise To Opulence, Sales Promotion/ Traffic Activation’ ‘Platinum Award –BestShopping Mall’ ‘Gold Award, BestExperiental Marketing 2017– The Riseto Opulence’ : SinChew BusinessExcellence Awards 2017 :Sin ChewBusinessExcellence Awards 2017 Pavilion REIT 2017Annual Report :Kuala Lumpur Mayor’s Tourism Awards 2017 “TheRhythms of Christmas” ‘Made inMalaysia Fashion Showcase’ : PPKMalaysia : ICSC Asia Pacific Shopping Centre Awards Management Discussion ‘The Asia Muse Search‘The AsiaMuse 2017’ aptly reflect on the community’s & Analysis (cont’d) : The Edge 2017 , a Malaysia . The 31

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 32 e) d) c) b) a) Main riskfactors are asfollows:- to ensure thatrisksare identifiedandmitigatedinachieving Pavilion REIT’s objective. processes are embedded into each and every key activities and business processesas well as the Fund in all its properties andparcel a businessenvironment. of theBoard, Hencewith, to iscommitted management establishingrisk part Risk forms Risk Management closely monitored to to try reduce itscostas80%ofPavilion REIT’s borrowings are currently onfloating rate. be will environment efficiency. Interest rate optimise to monitored be will cost Operating malls. retail to loyalty shoppers’ retain and attractto experience shopping build to focus current the is times with evolving and experiential malls Keeping Distribution policy for2018 is expected to be maintained as per 2017 with continuous look-out for yield accretive assets. 2018 is to to try retain good tenants with continuous upkeep to of property maintain and enhance the standard of its facilities. still be relevant place for people to integrate as it as serves an important for business and work. Therefore, the strategy for an annual rate of 3.1% over the past 5 years to 2.6% over the next 5 years in the Asia-Pacific. However, corporate office will working arrangements is expected to reduce office space requirements. Office basedjob growth isforecast to weaken from Despite service office and co-working space being the current popular and cost efficient models, job automation and mobile in three to fouryears’ time. empty be Klang will Valley the in buildings office three in one ie 2021, by 32% of high all-time an reachtoprojected rate is first the in 20.9% from steadily increased has rate of 2015 to in 2017 against regional23.6% in the corresponding quarter vacancy quarter average of 6.6%. vacancy This vacancy office This glut. a intensify could 2025 and 2017 between office feet square million 38 about of Valley Klang in supply office incoming Bulletin, Q3 2017 Negara Bank to According cater to needsofcustomer /consumer. uptoperforming standard bearingin mind ‘experiential requirement’ and latest customerculture, ie moving with times to be resilient despite possibility of slowergrowth. Niche market or differentiation has to be considered for malls that are not & Analysis (cont’d) Management Discussion

Financing risk refers to risk of notbeing able to obtain fresh facilities renewor its facilities when due,either from Credit are risk and liquidity risk ofnon-payment mitigated by by credit its tenants or counterparties evaluation prior to Valuation risk refers to may risk that valuation not be sustainable, hence affecting of property the Fund’s asset value, Acquisition and investment riskrefers to risk of assets / investments not being yield accretive, affecting the overall Tenant concentration risk of relying on onlyahandful of tenants are mitigated as the top ten tenants’ contribution December 2017. is 13% ofthe Fund’s gross revenue with the main tenant contributing only 5% of the Fund’s gross revenue as at 31 requirements ofPavilion REIT’s operations anddistributionofincometo unitholders. exposure is monitored via stringent collection policy. This is to ensure that there are adequate resources to fulfil the entering into letter of offer oragreement with constant monitoring of outstanding balances to ensure minimum credit standards egprovision offirstaid room andconcierges orcustomer service representatives are allfirstaiders. to tenant mix, enhancements and streamlining some ofthis operational practises such as ensuring priority to safety However, asageneral willneed timeto guide,newlyacquired stabilize properties as theManagermakes improvement improvement,relationship cost for further management and prudent spending with relevant marketing activities. mitigated with appropriate strategies such as tenant mix / concept,continuousengagement with tenant to build The Manager will closely monitorthese factors in each ofthe Fund’s to ensure property they are notcompromised/ cost. operational as well as rate occupancy rate, rental are valuation for parameters Main gearing. and profitability acquisition beingdriven by theAudit Committee. relevant Board members of the Manager will declare their interest and abstain from voting, with such related party legal and technical aspects) toprior recommending to the Boardapproval. for transactions, Forrelated the party performance of the Fund. The Manager is very cautious in its proposed investments and evaluate them (from financial, and 2021respectively. holders to determine the best options in the future. Currently, about half of the Funds borrowings are each due in 2019 bond potential as well as institution financial various with engage to continue also will Manager the time, same the At rate. floating or fixed either on be to and unrated or rated be either can which 2016, March 25 from years 20 of financial institution or debt capital market. The Manager has established a RM8.0 billion medium term note programme Pavilion REIT 2017Annual Report k) j) i) h) g) f)

Staff resources risk of not being able to attract and retain capable staff are mitigated via staff engagement, periodic outside located properties any have not does REITPavilion as Fund the to applicable not currently is risk Currency Legal and regulatory compliance. The Manager has a compliance officer, reporting directly to the CEO, who is responsible byOperational ismitigated having standard atproperty risk operating procedures thatare andbeing adopted Interest rate risk refers to the potential unfavourable movement in floating interest rate that will affect income before Disaster recovery planning. As management information technologyrole, plays the Manageran important has arranged staff dialogues, annual review and training with a planned remuneration package that practice.is in line with industry Malaysia, withallcollections,payments andborrowings denominatedinRinggitMalaysia. the event ofoccurrence ofdisaster. were also held toeach property ensure occupantsare kept updated on routes to use and procedures to adhere to in adopted for the newly acquired properties with variations where required. Annual firebeing drills involving all occupantsalso in are plans these plans, management crisis and response emergency own its having Mall Lumpur Kuala daily for back-upofinformationto behousedexternally to facilitate recovery in the event of adisaster. With Pavilion to provide guidanceto ensure thatallregulatory andcompliancemattersare adhered to. vi) v) iv) iii) ii) i) procedures. are :- Someexamplesofreports undertheFundcontinuously reviewed operational comprises which foralltheproperties guide,control andmonitoring total borrowings. of 80% or billion RM1,2 is floating rate on Borrowing appropriate. exercised when be institutions to financial certain by extended being also has line swap appropriate, deemed is timing when fixed rate to them to convert possibly to interest rate monitoring closely Besides rate. floating on based funding the up take to rate. made was decision floating a Hence, for movement favourable potential with high rather was rate interest fixed for offered rates the that felt Manager the then, market volatile the with 2016, in refinancing or facility of drawdown of time the At taxation. staff training andrecruitment billing, payment, collection andrefund sourcing, negotiatingwith potential /existingtenants,tenancyadministration rental ofpromotional space, visualmerchandising inventory control andpurchasing procedure management ofcallcentre, preventive maintenance,managementofincidents Pavilion REIT 2017Annual Report Management Discussion & Analysis (cont’d) 33

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 34 FUND MANAGEMENT INVESTORS RELATION AND Pavilion REIT’s againstFBMKLCI Unit PricePerformance Pavilion REIT’s Monthly Trading Performance ofPavilionupdated ontheperformance REIT forthefinancial year ended31December2016. Pavilion REIT’s annual general meeting was held on 30 March 2017 whereby its unitholders were and investors, besidesattendinginvestors’ roadshows andseminarsaslistedbelow. During the year, the Manager’s management teamhave continuously met analysts, fund managers

Citi Asia Pacific Conference, Hong Kong Citi C-SuiteInvestorsASEAN Conference, Singapore Daiwa REIT Day, Singapore Half yearly analystbriefing 31/01/2017 31/01/2017

28/02/2017 28/02/2017

31/03/2017 31/03/2017

30/04/2017 30/04/2017

31/05/2017 31/05/2017 Pavilion REIT 2017Annual Report

30/06/2017 30/06/2017

31/07/2017 31/07/2017

31/08/2017 31/08/2017

30/09/2017 30/09/2017

31/10/2017 31/10/2017

30/11/2017 30/11/2017

31/12/2017 31/12/2017 2 for therelevant financial year. 1 Annualtotal return refers to total ofcapitalappreciation and distribution yield. Capitalappreciation/(depreciation) is calculated based on the difference between opening and closing price Market capitalisation (RM’000) Units incirculation (‘000) Average total return over 5years (%) Average total return over 3years (%) Annual total return (%) (%) Capital appreciation /(depreciation) (RM) Lowest traded priceduringtheyear (RM) Highest traded priceduringtheyear December Closing unitprice(RM)asat31 Net AssetValue perUnit(RM) 1 -Highest duringtheyear -Lowest duringtheyear -As at31December Trading Summary 2 Pavilion REIT 2017Annual Report 3,852,396 3,009,684 FY 2013 (2.16) (7.91) 20.02 1.20 1.67 1.28 1.17 1.12 1.17 - 4,400,177 3,013,819 FY 2014 14.06 16.60 19.51 1.23 1.53 1.46 1.26 1.15 1.26 - 4,677,655 3,017,842 FY 2015 11.47 6.16 1.39 1.63 1.55 1.28 1.24 1.28 9.61 - 5,742,798 3,022,525 FY 2016 22.58 17.64 19.30 26.92 1.52 1.90 1.90 1.30 1.25 1.30 ud Management(cont’d) Fund 4,878,451 3,030,094 Investors Relationand FY 2017 (15.26) (10.14) 1.61 1.93 1.61 1.30 1.27 1.30 9.12 9.42 35

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 36 (A) DETAILS PORTFOLIO RETAIL Tenancy Profile Expiry CemerlangSdnBhdforRM880,000wascompletedon30November 2017. Urusharta *Net ofdisposal ofgross floorarea ofapproximately 2,324square feet, whichincludes10 carparkbays, sold to Total FY2020 andthereafter FY2019 FY2018 Monthly Period TenLargest Tenants Income Net Property Gross Revenue Reversionary Capitalisation Rate– Independent Valuer Date ofLatestValuation Appraised Value Acquisition Price Date ofAcquisition December 2017 Occupancy Rateasat31 Number ofCarPark Bays Net LettableArea Gross FloorArea Tenure Encumbrances Title Age ofBuilding Year ofCompletion Description Address Cartier, Food Republic, Forever 21, Golden Screen Cinema, Hermes, Mercato, RM286 million RM413 million 6.50% C HWilliams Talhar &Wong SdnBhd 31 December2017 RM4,550 million RM3,190 million 7 December2011 98.9% 2,391* 1,333,131 square feet 2,250,684 square feet 99-year leaseexpiringon26October 2109 Investment BankBerhad Private caveats have beenlodgedinfavour MTrustee of andAlliance Berhad Wilayah Persekutuan KL HS(D) 120091, PT 80 Sekysen 63, Town and District of Kuala Lumpur, Negeri 10 years 2007 connectionblock)and3levelsretail/entertainment ofbasementcarparks 4-storey a with annexed and atop sited block office retail 3-storey a with 7-storey shopping mall (including 4 split-levels of carparking bays together 168 JalanBukitBintang,55100Kuala Lumpur, Malaysia Pavilion Kuala Lumpur Mall Padini ConceptStore, Parkson Elite,Royal Selangor, Zara % ofOccupiedNLA Pavilion REIT 2017Annual Report 100 21 64 14 1 % ofGross Rental 100 24 60 16 0 J Personal Car Trade Sector AnalysisbasedonNetLettableArea Trade Sector Analysis Urban Leisur instrument ewellery,Tim Offi Elect, ITand Digita pieces and Beauty & Writing Product ce Shoes, Bags 7% 5% 5% and Leather

, l , 4% 3% s

e e, ,

s e , ,

2% Beverage

Food & Furnishings Decorations , Home 22% and 1%

,

Souvenirs Gifts and Pavilion REIT 2017Annual Report Other , 1% s , 3% Supermarket Fa Department sh Store / 20% io n , 27

% ,

Jewellery,Timep Personal Car Elect, ITand Digita instrument Product Beauty & Shoes, Bags ieces and Urban Leisur and Leather Writing Office 10% 7% l, 2 3% % s , , s 1% e, 4% ,

e ,

Furnishings Decorations and Trade Sector Analysis based on Gross Rental Bevera Home Food &

g , 1% e , 21% Souvenirs Gifts and , eal (cont’d) Details 2% Other s, Supermarket, 4 Department % Store / Portfolio 8% Fashion

, 37 37 %

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 38 (A) Details (cont’d) Portfolio RETAIL Tenancy Profile Expiry Total FY2020 andthereafter FY2019 FY2018 Monthly Period TenLargest Tenants Income Net Property Gross Revenue Reversionary Capitalisation Rate– Independent Valuer Date ofLatestValuation Appraised Value Acquisition Price Date ofAcquisition December 2017 Occupancy Rateasat31 Number ofCarPark Bays Net LettableArea Gross FloorArea Tenure Encumbrances Title Age ofBuilding Year ofCompletion Description Address RM12 million RM25 million 6.75% Knight Frank Malaysia SdnBhd 31 December2017 RM169 million RM160 million 25 March 2016 90.0% 367 222,433 square feet 337,427 square feet Interest inperpetuity Nil Persekutuan Wilayah Negeri Lumpur, Kuala Bandar 43, Seksyen 20000 Lot parent of Geran 75638/M1/B3/2, Parcel No 2, Storey No B3, Building No M1 on part 5 years Refurbished in2012 parking bays 6-storey retail podium with a roof pavilion together with 367 designated car 348 Jalan Tun Razak,50400Kuala Lumpur, Malaysia Intermark Mall Learning, Savini, SpaceFurniture, SportsDirect.com Bait, Hanare, Hua Wei, InColonial,Jaya Grocer, MST Primrose Golf, HillActive % ofOccupiedNLA Pavilion REIT 2017Annual Report 100 32 48 20 0 % ofGross Rental 100 35 41 24 0 Trade Sector AnalysisbasedonNetLettableArea Trade Sector Analysis Furnishings Personal Car Decorations Beauty & Home 10%

and Digita Elect IT& Fitness 9% Health & instrument

Jewellery,Timep l , , Edutainment ieces and e, 8% , Writing 3%

8% s , 1% , Services, 5% Ot Pavilion REIT 2017Annual Report he rs Fashion , 1%

Beverage , 11% Food & Supermarket , 28% 16%

, Furnishing Personal Care Decorations Digital Beauty & Elect IT& Home 9% Edutainmen and Fitness instruments Health & Jewellery,Timep ,

s 6% , 6%

ieces and 8%

Writing

, Trade Sector Analysis based on Gross Rental , 2% t,

, 2%

Services , 6% eal (cont’d) Details Others , Fashion 0% Portfolio Beverage Supermarket , 9% Food & 6% , 46% 39 ,

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 40 (A) Details (cont’d) Portfolio RETAIL Tenancy Profile Expiry Total FY2020 andthereafter FY2019 FY2018 Monthly Period Top Ten Tenants Income Net Property Gross Revenue Reversionary Capitalisation Rate– Independent Valuer Date ofLatestValuation Appraised Value Acquisition Price Date ofAcquisition December 2017 Occupancy Rateasat31 Number ofCarPark Bays Net LettableArea Gross FloorArea Tenure Encumbrances Title Age ofBuilding Year ofCompletion Description Address RM17 million RM40 million 6.75 % Knight Frank Malaysia SdnBhd 31 December2017 RM416 million RM487 million 25 March 2016 86.3% 1,638 431,534 square feet 705,128 square feet Interest inperpetuity Bank Berhad Private caveats have been lodged in favour ofMTrustee Berhad and Public Charged to UnitedOverseas Bank(Malaysia) Bhd Selangor DarulEhsan Master GeranTitle No. Pekan 320023, Jaya, Subang Petaling, of District 2 years 2015 basement carparks of levels two and floor ground lower a with together mall retail storey Five Darul Ehsan Selangor Jaya, Subang 47600 1, USJ Kewajipan, Persiaran 1, USJ Da:men DA MENMall Urban LivingRepublic Store, Concept YFS Canteen, The Blues, The Gallery, SHP Morganfield’s, Al Hannan Events, Grand Restaurant,Harbour House of Teak, Jaya Grocer, % ofOccupiedNLA Pavilion REIT 2017Annual Report 100 12 23 51 14 % ofGross Rental 100 15 54 26 5 Furnishings Product Trade Sector AnalysisbasedonNetLettableArea Trade Sector Analysis Toys/Hobbies. Decorations Shoes, Bags and Leather Elect, ITand Digita Home hild 10% and Personal Car , s, Beauty &

l, 4%

1

10% 8% , %

C Fi e, He tnes

al Services th s, 3 & %

, 6% Other Pavilion REIT 2017Annual Report s, 2 % Fashion Beverage Food & , 21% , Supermarket 28% 7%

, Personal Car Fu Elect, ITand Product S and Leather Digita Decorations Beauty & rn hoe Toys/Hobbies. Fi 11% is Ho He t hi and nes s, hild l , ng me al B s, 2% th ag s, , s, 2 e

2 & 2% 9 s %

, %

% C

Trade Sector Analysis based on Gross Rental Services , 4% Be Other ve eal (cont’d) Details F ra s ood & ge , 1 % , 39

% Fa Portfolio sh io n S , upe 25 % rm 3% ar 41 ke t,

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 42 (B) Details (cont’d) Portfolio Tenancy Profile Expiry OFFICE Total FY2020 andthereafter FY2019 FY2018 Monthly Period Top Ten Tenants Income Net Property Gross Revenue Reversionary Capitalisation Rate– Independent Valuer Date ofLatestValuation Appraised Value Acquisition Price Date ofAcquisition December 2017 Occupancy Rateasat31 Net LettableArea Gross FloorArea Tenure Encumbrances Title Age ofBuilding Year ofCompletion Description Address Sdn Bhd (KL) Cemerlang Urusharta Bhd, Sdn Haven Pioneer Bhd, Sdn Management Property Pan-Asia MRails TramBhd, Bhd, Sdn Sdn (Melaka) Metro KL Bhd, Sdn Studio Design Pavilion KL Bhd, Sdn Development Choo Khuan Bhd, Clever Eagle Sdn Bhd, Gapadu Development Sdn Bhd, Impian Ekspresi Sdn RM8 million RM13 million 6.50% C HWilliams Talhar &Wong SdnBhd 31 December2017 RM133 million RM123 million 7 December2011 98.5% 163,844 square feet 243,288 square feet 99-year leaseexpiringon26October 2109 Investment BankBerhad Private caveats have beenlodgedinfavour MTrustee of andAlliance Berhad Wilayah Persekutuan KL HS(D) 120091, PT 80 Sekysen 63, Town and District of Kuala Lumpur, Negeri 10 years 2007 20-storey officebuilding together with6mechanical/electricallevels 75 JalanRajaChulan,50200Kuala Lumpur, Malaysia PavilionTower % ofOccupiedNLA Pavilion REIT 2017Annual Report 100 24 33 37 6 % ofGross Rental 100 24 32 38 6 S Trade Sector AnalysisbasedonNetLettableArea Trade Sector Analysis ervice Office ervice 12% Property 57% Construction 4% Pavilion REIT 2017Annual Report Personal Care Beauty & 2% Consultancy Services Fashion Financial 14% 2% Investment 4% Holding 5%

Service Office 12%

Trade Sector Analysis based on Gross Rental Property 56% Construction 4% eal (cont’d) Details Personal Care Beauty & Portfolio 2% Consultancy Services Financial Fashio Investment

15% 2% 5% Ho 4% ld n in g

43

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 44 SUSTAINABILITY REPORT CORPORATE & to build,alleviate andsustaintheirlives. marginalised, discriminated, under-privileged and under-represented groups, whoneed assistance financial literacy and entrepreneurship to create an economic sustainability among the vulnerable, 2017 Bursa BullCharge the studentcommunity. first the sponsored Design where they were given the to opportunity showcase their final year projects. DA MEN Mall also held a graduation show for their students from the faculty of Communicationand Creative in June to showcase their handmade products, activities and workshop. SEGIDamansara College bazaar exhibition of upcycling in May day and a student art art talent, Inti College promoted earth Academy,Besides collaboration with Da Vinci Art kids USJforto showcasetheir creative colouring Back to ShelterHome the Penan tribe toheld to earn regular support incomefrom their crafted handmade bags with the Jaya. Subang Perbandaranwith Majlis fromMesra representatives of Sri presence Jagaan Pusat Kebajikan Pertubuhan of citizens senior the with celebrated DA MENMall’s Hari Raya festivity with Moroccan-inspired theme, graduates anddesignsindustry. to andgenerate localfashions,arts support awareness month and for Intermark Mall continued with its support during festive occasionsto andmanymore. pamperingservices offering members with leisure experiences, special celebrations, from and services; workshops be held, this membership programme is targeted at Malaysians who are 55 years old and above, Pavilion Kuala Lumpur Mall pioneered the the 2017UCI Track Cycling World ChampionshipinHongKong. to Awang En. Azizulhasni for his recent accomplishment in winning the men’s keirin gold medal in Pole111km skiing with expeditionthe Malaysianto Seven the North Continents Exploration Club, the completing in accomplishments their for Abdullah Yusoff Irwan Muhammad and Abdullah in various industries as they put Malaysia on the world map,to Qobin Mokhtarrudim, Shahrom fundsfor also presented 2017 raised for responsibility social ‘Charity at Heart’ corporate first Mall’s Lumpur Kuala Pavilion New Year, Hari Raya, Deepavali andChristmas. Breast Cancer Awareness month, besides celebrating annual cultural diversity such as Chinese colleges / universities to promote various causesDayand create and awareness such as Earth to collaboratecontinue in its effort with non-governmental and charity organisations as well as of the mall culture, PavilionWith campaignsbecomingabig community part REIT malls will render. employment as well as usage of localproducts they without use of child labour in the services laws and practises in Malaysia, adherence to safety requirements at all times, priority to local should give fair wagesaccording to practice industry and conditions with compliance ofrelevant Pavilion REIT encourages fair play and does not approve of monopolyamongvendors. Vendors Economic are currently ledby theCEO, directly to whoreports theBoard. structure,materiality scope, matrix,quantitative work measurements etc, sustainability initiatives waste management. Pending formalization of detailed sustainability matrix such as governance generation needs will be metwithoutcompromising current needs with priorityto energy and Pavilion REIT of sustainability actions hastoalways recognised ensure the importance the future ‘Heroes at Heart’ to jointly benefit children’s homes and single mothers association. The mall The association. mothers single and homes children’s benefit jointly to JOM Usahawan Amal Merdeka encouraging communityto donatenecessities purchased from tenants. Raffles Graduation Exhibition Graduation Raffles participation on 14 September 2017 aims to support the promotion on 14 September 2017 of aims to support participation , a new initiative to celebrate the achievements of Malaysians Pavilion REIT 2017Annual Report PavilionSilver Societe Makna Pink OctoberMakna Pink organized Institute to by MARA connectwith as a platformto create exposure for young this year. With more activities to PenanWomen Project in recognition of cancer Jwl o Aidilfitri’ of ‘Jewels was was Gift vendor to sort recyclevendor to materials. sort disposal waste its with collaborating been has mall the mall, LumpurKuala Pavilion in locations Besides placement of recycling bins (per set of 3 for paper, plastic and can & bottles) at selected been introduced into Pavilion Kuala Lumpur malltoilets. to reduce deforestation of the effort and havepaper pollution,hand dryers progressivelyAs part also beingcarriedoutintenants’lot. ensure hygiene standard is maintained at all times, proper hygiene & pest control inspections are Besides pest controls being regularly carriedoutin all of Pavilion REIT to properties common to identifyareas ofimprovement to reduce energy cost. in toilets to reduce wastages and continuous evaluation of potential automation system in order sensor to manual from dispenser paper and soap flushing, WC taps, basin water of replacement emission from vehicle as well as to reduce fuel wastages in looking for carparking usage, instead of sending by mail,installation park guidancesystem of carto reducemonoxide carbon creative recycling of annual festival ornaments, reduction in paper usage by e-mailing information these green initiatives to reduce environmental waste has and will continue to be implemented by initiatives such asrain that water harvesting requires space to housestorage facility. However, weather climate. Space constraint to existing assets owned may also limit some proposed due to changes in tenant level,mix, tenant occupancy ofpatrons number using facilities and Some of the green initiatives implemented may not be easily quantifiable or seen to be beneficial Environment 10000 20000 30000 40000 100% Pavilion KualaLum 50% 0% 0 of RecycleHandTowels(Rolls 162,050 38,185 2015 2015 3,400 Pavilion REIT 2017Annual Report Pavilion KualaLumpurMall: 5,800 Recycle Materials(Kg) 127,750 2016 4,900 5,800 29,604 2016 pur Mall:Usage 132,300 2017 6,330 4,650 27,026 2017 )

Paper Plasti Meta

l c Sustainability Report (cont’d)Sustainability Report Corporate & 45

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 46 (cont’d)Sustainability Report Corporate & also available to theirjobgrowth enablestaffto anddevelopment. chart staff dialogues are also being held to facilitate feedback. Employee development career plan is Besides providing training and having regular interaction with staff, annual appraisals and periodic are alsoheldto lookinto allaspectsofsafety relating to workplace&theproperties. as first aider environmental,to assist health if and needed. safety Quarterly committee meetings retail malls, all concierges and customer representativesservice are also trainedin the properties with escape routes in the event of any emergency. Besides having first aid rooms available in all its encouraged to participate in fire drills in the respective buildings to ensure its occupiers are annually, tenants are etc, all extinguishers fire of familiar use courses, aid first as such courses safety in a priority.occupiers of its property Hencewith, besides encouraging feedback and participation PavilionAs landlord of REITproperties, has always placed safety of its guests, tenants and Social charging stationisalsobeingexplored. efficient operation as well as to reduce consumption without compromising Electric comfort. car For 2018, energy conservation continues to be Pavilion REIT’s priority to explore ways for more has resulted in savings of93,000kWhorRM33,000perannum. Pavilion Tower’s change of its common area lighting from fluorescent tube or metal halide to LED maintenance cost. has durable, longer life span, produces less heat with zero UVradiations and is eco-friendly,more thus reducing are LED energy, less consuming Besides RM115,000. about to equivalent resulted in electricity savings of 898 kWh per day or 327,700 kWh annually, which is currently has level) concourse lower for (except Mall Intermark the of area common the in LED of Usage andmaintenance. minimal steelsupport 100% recyclable, cost effective with 1% weight of glass and planned for heavy wind and rain, with handling unit to maintain pressure. was selected because it allows for 80% light ETFE penetration, air an monitored air,by and with controlled filled is that cushion a forming layers two comprises foils, ETFE a using fluorine basedconstructed incrediblyis strongyear plastic.this Ethylene Chulan TetraRaja FluoroJalan Ethylene (“ETFE”)Connection canopyat roof installed screen rain The reduce to system energy consumption. air-conditioning its of operation in efficiency its for monitored be also will It monitoring. time real accurate more provide to year the of end the at completed been just has can also serve as a platform to nurture potential can asalso staff serve a forcareerplatform to growth nurture and succession planning. variesfrom work about attitudes from andwhose stylesvary co-workers work own. their whose This exposure to staff from different cultures and backgrounds wherebyjust is also important staff can learn than more offers that workplace diverse a Providing gender. or ethnicity to regard without The Manager believes in equal employment opportunity, based on competencies and skill sets for reuse being approximately 4,380 – 8,780 m stored into storage tank and reused at cooling towers with annual recoverable condensate water to recycle of the effort water,As part coldairhandling unit condensate water are being collected, Pavilion REIT 2017Annual Report 3 . Pavilion Kuala Lumpur’s chiller plant automation 10 20 30 40 10 20 30 40 0 0 2015 2015 Executiv Chines Employee Ethnicit Employee Categor e e 2016 2016 Non-Executiv 2017 2017 Ma y la y y Pavilion REIT 2017Annual Report e 10 20 30 40 20 30 40 10 0 0 < 3 0 2015 2015 Femal 30 -39 Employee Gende Employee byAgeGrou e 2016 2016 Sustainability Report (cont’d)Sustainability Report 40 -49 2017 2017 50 -59 Male r p > 59 Corporate & 47

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 48 arranged withindependentparties. transactionsrelated areparty to be established under normalcommercial terms that are no less favourable than those compliance with Securities Commission REITs Guidelines, the Trust Deed and the Main Market Listing Requirements. Any The Manager has established internal control procedures to transactions ensure that related in are party undertaken any new directorships and the notification shall provide for an indication of time that will be spent on the new appointment. obtain this commitment from its members at the time of appointment. Directors shall notify the Chairman before accepting PavilionREIT.interestof best the in responsibilities. will their Board out The carry to time devoteDirectorssufficient shall associate ofadirector as aspouse orotherfamilymembers,thedirector involved shallmake fulldisclosure andacthonestly director, a corporate and related a or interest an of or perceivedconflict or potential actual, an be theretherefrom. Should in deliberationshis / her interest and not and participate shall abstain from casting his / hervotes in any matter arising Any director that has any interest, whether directly or indirectly, in a contract or proposed contract would have to declare Guidelines forRelatedParty Transaction andConflictofInterest operations, andmanagementofPavilion supervision REIT. of strategic plan and policies established by the Board to manage the daily conduct ofits business to ensure the smooth The CEO, whose position is held separately by a different person, is responsible to ensure the effective implementation with theCEO. and integrity of the governance process besides guiding and mediating the Board’s and action maintaining regular dialogues role aleadership out theBoard of carries The Chairman intheconduct responsible andisprimarily theadequacy ensuring for unitholders. Allotherrecommended bestpractices proposed by CodeofCorporate Governance 2012have beenadopted. the Board believes that the Chairman, who has significant interest in Pavilion REITwill act in the best interestAlthough the Chairman is an executive directorof with only one third of its Board being independent non-executive directors,Pavilion REIT non-executive directors andfourindependentnon-executive directors. Members of Board consists of twelve members, of which three are non-independent executive directors, five non-independent Secretary andare entitledto obtainindependentprofessional adviceindischarging theirduties. time to review themattersunderconsideration. AllmembersoftheBoard have accessto ofCompany theadviceandservices Notices, agenda and meeting papers are circulated to directors in a timely manner to ensure that the directors have sufficient andadvocatingfinancial performance ethicalstandards through acodeofconduct. reviewsincluding performance and promoting business sustainability, setting the risk appetite, acquisitions and disposals, and focuses onprincipal matters such as strategicThe Board meets at least once every quarter issues and planning, Board on1November 2012. high standards of transparency, accountability and integrity. was formally approvedThe Board Charter and adopted by the thedischargefacilitate theManager’s of responsibilities to aview with value unitholders enhance andinterest andmaintaining as listed in the REITs Guidelines and good corporate governance, all of whichis to steward Pavilion REIT’s business and The Board members, with their wide, varied range skills and experiences of expertise, have adoptedresponsibilities the primary Board GuidelinesandResponsibilities in thereal estateinvestment industry. business practices efficacious and acceptable with proper, manner with efficient Deed and the diligent providedunder as and business planning, marketindividual analysis communications, asset and performance other activities performance toincluding butnotlimited overall strategy, strategy, riskmanagement anddisposalanalysis,marketing newacquisition and The Manager shall, in managing Pavilion REIT, management primary activities undertake in relation to Pavilion REIT, Objective forthemanagementofPavilionnecessary REIT anditsbusiness. administer Pavilion REIT. The Manager shall, subject to the provisions outall activities, as it may of the Deed, carry deem Pavilion REIT Management Sdn Bhd, the Manager of Pavilion Real Estate Investment Trust, was set-up to manage and STATEMENT CORPORATE GOVERNANCE Pavilion REIT 2017Annual Report The Board met five timesduringthefinancialyear ended31December2017withdetailsofattendanceasstated below: Board Meetings section fordetailsofroadshows orseminarsattended. its website, www.pavilion-reit.com is also regularly being updated. Please refer to Investors Relation and Fund Performance investors and managers fund analysts, meeting besides attending investors’ roadshows and seminars. Besides timely announcements and disclosures to actively Bursa Malaysia, been has Fund, the for spokesperson official the as CEO, The reviewed, enhancedandupdatedinlinewithchangestheoperating environment. REIT’s as well as acquisitions and divestments properties of investments procedures are available and will be continuously Policies and standard operating procedures for level of authority for transactions, maintenance and operations of Pavilion details. their respective enclosedforfurther reports to the Further establishment of Audit Committee, a Nominating Committee was formed on 24 April 2013. Please refer to 2) 1) In respect transactions, ofnon-real estate related theManagerhasadoptedfollowingparameter. party Syed Mohd Fareed bin Shaikh Alhabshi Dato’ ChooChuoSiong Dato’ MaznahbintiAbdulJalil Dato’ MohzanibinAbdulWahab Ooi AhHeong Navid Chamdia Mohd Abdulrazzaq AAl-Hashmi Ahmad MohammedFQAl-Khanji Ahmed AliHAAl-Hammadi Dato’ Lee Tuck Fook Puan Sri Tan Kewi Yong Tan SriLimSiewChoon Name ofDirectors

Transactions below the threshold of 0.5%percentage ratio as stated under Paragraph 10.08(1) of BursaMalaysia Transactions above thethreshold percentage of 0.5% of ratio are which related not to contract subsistingfrom on BursaSecuritiesMalaysia Berhadwith Trustee to beinformedimmediatelywithrelevant details. precedingimmediate year isto bereviewed by theAudit andrecommended Committee to theBoard announcement for Securities BerhadListingRequirements, forpresentation to theAudit Committeeforratification Pavilion REIT 2017Annual Report Chairman andNon-IndependentExecutive Director Non-Independent Non-Executive Director Non-Independent Non-Executive Director Non-Independent Non-Executive Director Non-Independent Non-Executive Director Non-Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Non-Independent Executive Director Non-Independent Executive Director Designation Corporate Governance ttmn (cont’d) Statement Number ofmeetings attended 5/5 5/5 5/5 5/5 5/5 4/5 4/5 3/5 3/5 5/5 5/5 5/5 49

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 50 The CEOalsoregularly meetswithanalystandfundmanagersto provide themwithupdatesoruponrequest. andthecorporateSecurities, itsannualreport website,www.pavilion-reit.com. Information forunitholders and investors are readily available via the various disclosures and announcements on Bursa Communication withUnitholdersandInvestors will ensure compliance withtheDeedandanyotherregulatory guidelines. The Audit Committee is responsible to review any related party transactions or conflictof interest situations and the Manager his orhervote. involved shall make in deliberations full disclosure and act honestly and shall and not shall participate abstain from casting Should there be any actual, potential or perceived conflict of interest or related party transaction, the relevant party / director Dealings withConflictofInterest /Related Party Transactions The remuneration orfees dueto itsDirectors are paidby theManagerandnotPavilion REIT. Directors’ Remuneration         Training programmes, seminarandconferences attendedby theDirectors duringthefinancial year were : as knowledgewell as toand expertise keep abreast with the relevant changes in law, regulations and business environment. their enhance programmes to and conferences various review, attended under had Directors year the financial the During Directors’ training Statement (cont’d) Corporate Governance

2018 BudgetandItsImpact onCapitalMarket Economics andCapitalMarket 1:Forces ShapingGlobalCapitalMrkets Corporate Governance Breakfast Series-LeadingChange@ The Brain Tan SriPanglima Andrew Shengtitled“Implications of Trump ontheAsianSupplyChainandInvestment Environment” Maybank KimEng’s Invest ASEANMalaysia 2017 Companies Act2016–Key InsightsandImplicationforDirectors, Auditors/Accounts &CompanySecretaries Companies Act2016:Changes andImplicationsto CompanyDirectors Affin HwangCapitalConference AmidstGeopoliticalShifts Series2017:Opportunities Pavilion REIT 2017Annual Report serving astheindependentdirectors.serving the Directors. The IndependentNon-Executive Directors have andare independence their maintained to competent continue The Nominating Committee is satisfied with the performance of the Board, Board Committees and contribution of each of (v) (iv) (iii) (ii) (i) During the financial year ended 31 December 2017, the Nominating Committee had assessed and reviewed the following : revised from timeto timeto meettheneedsofManager. The Board has not specified any gender policies in its evaluation of candidacy. However, the evaluation will be reviewed and new appointmentofdirector considered during thefinancial year ended31December2017. The Nominating Committee is also tasked with assessing and recommending the candidature ofdirectors. There were no and abilitiesto discharge theirresponsibilities andfunctionswithobjective judgement. business decisions and recommendations. For the independent directors, they are assessed based on their independence Nominating Committee focuses onthe skills, experience, competence and integrity to enable the Board to make effective efficiently. The and effectively functioning are Committees Board and Board the that ensure to Directors the of qualities Board Committees and the existing directors on an on-going basis, review the required mix of skills, experience and other The Nominating Committee is responsible for identifying, nominating and orientating new directors, assessing the Board, with amajorityofwhomare independentdirectors. Non-Executive five Directorscomprising currently and 2013 April 24 on established been has Committee Nominating The Mohd Abdulrazzaq AAl-Hashmi Ooi AhHeong Dato’ ChooChuoSiong Dato’ MohzanibinAbdulWahab Dato’ MaznahbintiAbdulJalil(Chairperson) Name ofDirectors to recommend those Directors retiring be nominated for re-election/re-appointment having regard to the individual’s of Audit Committeeand each ofitsmembers;and the termofoffice,performance the independenceoftheIndependent Non-Executive Directors; the contributionofeach theDirectors; oftheBoardthe performance andBoard Committees; experience, contributionsandperformance. Pavilion REIT 2017Annual Report Non-Independent Non-Executive Director Non-Independent Non-Executive Director Independent Non–Executive Director Independent Non-Executive Director Independent Non-Executive Director Designation NOMINATING COMMITTEE Number ofMeetings Attended REPORT 1/1 1/1 1/1 1/1 1/1 51

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 52 (h) (g) (f) (e) (d) (c) (b) (a) during theyear underreview isaslisted below:- For the current year, BDO has been engaged to internal perform audit review for Pavilion REIT. of its work Summary undertaken (i) (h) (g) (f) (e) (d) (c) (b) (a) by Audit Committeeduringtheyear ofworkundertaken underreviewSummary isaslistedbelow:- ^ of interesttransactions. situationsandrelated party control environment, oversee financial reporting, evaluate the internal and external audit process aswell as to review conflict The Audit Committee, formed on 24 October 2012 comprising of4 members has been entrusted to assess the risks and REPORT AUDIT COMMITTEE Navid Chamdia^ Dato’ ChooChuoSiong Dato’ MaznahbintiAbdulJalil Dato’ MohzanibinAbdulWahab (Chairman) Name ofDirectors

presented findingsofinternal audit review to Audit Committeemembers to followupreviewconducted previous onstatus of implementation of management plan pertaining year internal overallperformed compliance of GST returns with sampling check on transactions, reconciliation and accuracy / aGSTconducted review ofpoliciesandprocedures andtheadherence to them reviewed andidentifiedpotential areas forimprovement intheeffectiveness andefficiencyofthe processes assessed compliancewith policiesandprocedures andrecommend bestbusinesspractices reviewed theadequacyand testtheintegrityofsysteminternalcontrols presented its work scopeand timeframe covering key business processes of procurement to payment of property evaluated theapproach andfees ofexternalauditor andrecommended fortheirengagementthefollowingyear evaluated the scope,approachwork and fees to outsourced internal auditor and recommended fortheir engagement reviewed and statement of risk management and internal control and commented onthe audit committee report for 2018, the AuditOn 25 January Committee were briefed privately by KPMG PLT (without presence of the Manager’s areas risk methodology,significant PLTauditor,audit KPMG external its with understanding plan by audit reviewed reviewed the internal control plan prepared by BDO Governance Sdn Bhd (“BDO”) and its availabilityAdvisory of staff reviewed transactionsto determine whether there list of related every has been any materialchange party quarter reviewed and deliberated with the Manager’s management the quarterly financial results to recommend to the Board Mr Navid Chamdia did not attend the meetings held toon 24 May the 2017 acquisition and 25 July 2017 pertaining On 27 July2017, ameetingwasheldby Audit CommitteewithBDO to assess theinternalcontrol reviewprepared report control review logical checksofGST entries and divestment aswellfundmanagementactivities ofinvestment properties operating enhancementexpenditure, expenditure tenancymanagementto andproperty collectionofrentals, acquisition inclusion into theannualreport management) onstatusofitsaudit personnel leadingtheauditandsufficiencyof resources and accountingpolicies / disclosures and timing. KPMG PLT were also asked ofits succession planning of its key responses, whichwere notedby theAudit Committee Manager’s corresponding and recommendations proposed review, of findings on explanation gave BDO them. by terms thatare nolessfavourable thanthosearranged withindependentparties as compared to and whether the transactions the previous have quarter been established under normalcommercial withcloseattentiongivenresults to ofeachproperties updateunder“Prospects’ financial understand to Committee Audit by given was Consideration Malaysia. Bursa to release and approval for of ElitePavilion Malltogether withtherelated assetsandrightsasheisaninterested director intheacquisition. Non-Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Pavilion REIT 2017Annual Report Designation Number ofMeetings Attended 2/6 6/6 6/6 6/6 against materialmisstatementofmanagementandfinancial informationoragainstfinanciallossesandfr all risks of failure to achieve business objectives. Established controls can only provide realistic and nottotal assurance Due to inherent restrictions, the controls which are employed are intended to copewith and are not expected to eliminate and effective. itwillalways Nevertheless, beimproved andupdatedinlinewithchangestheoperating environment. The Board is of the view that the risk management and internal control system in place the for year underreview is adequate and effectively, inallmaterialaspects. The Board has received assurance from the CEO that the risk management and internal control system is operating sufficiently operating environment. to document procedures in accordance with good practices will be revised, BDO improved and updated in line with changes in the by made Recommendations year. the during BDO by presented findings the reviewed has Committee Audit The    A process life cycle approach allowsBDOto: Pavilion REIT intheevent ofcontrol failures. to impact significant have will which or concern, highest the of are that processes or functions on audit prioritise to BDO The execution strategy that BDO adopts is one that is risk-based and process life cycle Risk-based approach focused. allows iv) iii) ii) i) control review ofthefollowingareas:- BDO Governance SdnBhd (“BDO”) has been appointed as internal Advisory auditor whereby theyinternal had performed guide, control andmonitoring procedures /reports. Standard Operating Procedures formanagement of Pavilion REIT have properties beenadopted,which comprise operational risks identified by themanagementandthereafter, updatethe Audit Committeeas required. and risksrelevant /sector. industry to theproperty regularly themanagement The CEOmeets to review, monitor andmanage acquisition or disposal of investment property, which would be evaluated from the aspect of economic, environment, financial auditor and external auditor and acts accordingly, where deemed appropriate. Board’s approval is required anyproposedfor REIT Pavilion of performance financial the against the review approved to budget. The quarter Board every also reviews once the least business risk at of Pavilion meet REIT,Board and where identifiedCommittee byAudit the CEO,The internal to operationspertaining and maintenance of Pavilion REIT’s as well as acquisitions and divestments properties of property. toThere the level is a policy in place pertaining of authority required for transactions and standard operating procedures for thepastyears underreview, includingupto thedateofapproval ofthisstatementforinclusionintheannualreport. and has attended to this under the Pavilion REIT Operation Manual approved by the Board.process Such has been in place The Manager realises the significance of establishing a sufficient and effective risk management and internal control system,

GST Review Fund ManagementActivities; and Tenancy Management to Collection ofRentals; Procurement to Operating Payment Enhancements; ofProperty ExpensesandProperty of process improvement opportunities life cycle; Consider the effectiveness and efficiency of processes and controls, ie not just in terms on integrity but also in terms Identify control, inadequacieswithintheprocesses andrecommend practical solution;and Understand and evaluate business processes and related business controls froma risk perspective alongthe entire Pavilion REIT 2017Annual Report STATEMENT OFRISKMANAGEMENT AND INTERNAL CONTROL aud. 53

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 54 REIT Units.Where approval cannotbeobtained,thefees shallbereceivable incash. Fund management fees in units are receivable upon approval fromthe authorityforlisting of andquotationPavilion ii) i) Fund managementfees incashare receivable withinseven (7)days ofthefollowing events: Pavilion REIT oracombinationthereof atthesolediscretion oftheManager. The Incentive Fee isreceivable inUnitsonly. The Base Fee,Fee, Performance AcquisitionFee and Divestment Fee shall be receivable in the ofcash,newUnits form of v) iv) iii) ii) i) Pursuant to theDeed,Managerisentitledto receive thefollowingfrom theFund :- Manager’s Fee of the Manager to acquire benefits by means of acquisition of Units or debentures of the Fund or any other body corporate. There were no arrangements during and at the end of the twelve months period which had the object of enabling Directors or with a company in which the Director has substantial financial interest except as disclosed in the Financial Statements. reason of a contract made by the Fund or a related corporation with the Director or with a For firmthe which year theended Director31 December is2017, ano Directormember, of the Manager has received or become entitled to receive any benefit by Directors’ Benefit There isnomateriallitigationpendingsincetheissuanceoflatestfinancial report. Material Litigation There wasnosoftcommissionreceived by theManagerduringfinancialyear ended31December2017. Soft Commission amounted to RM185,000andRM10,000respectively. the for REIT Pavilion of auditor external the to payable fees non-audit and Audit Audit andNon-Audit Fees regulatory bodiesduringthefinancialyear ended31December2017. There is no public sanction and/or penalty imposed on Pavilion REIT, the Manager or Directors of the Manager by the relevant Sanctions and/orPenalties INFORMATION ADDITIONAL in respect oftheAcquisition Fee andDivestment Fee, thecompletionofrelevant acquisition/divestment. in respect oftheBaseFee and PerformanceFee, theannouncementofrelevant financial reports; quarterly a divestment fee (“Divestment Fee”) of 0.5% of transaction value in relation to disposal of anyreal estate and real an acquisition fee (“Acquisition Fee”) of 1.0% of transaction value in relation to an acquisition of any real estate and an incentive fee (“Incentive Fee”) receivable as follows effective from the second full financial year in which Pavilion feea performance (“PerformanceFee”) incomeofPavilion ofupto 5.0%perannumofnetproperty REIT. a base fee (“Base Fee”) of up to 1.0% per annum of the total asset value of Pavilion REIT (excluding cash and bank estate related assets directly orindirectly soldordivested. real estaterelated assetsdirectly orindirectly acquired. obtained). REIT has been established and in operation (subject to the relevant approval by Pavilion REIT’s unitholders being balances whichare heldinnon-interest bearingaccounts). Up to 0.20% Up to 0.15% Up to 0.10% Pavilion REIT) Fee Receivable (% per annum of the total asset value of Pavilion REIT 2017Annual Report Exceeds 12.5% Exceeds 10.0%andupto 12.5% Exceeds 7.5%andupto 10.0% for Incentive Fee inthatFinancial Year): income inaFinancialYear (calculatedbefore accounting Criteria –Provided thatannualgrowth inthedistributable nancial year ended 31 December 2017 December 31 ended year financial 25 January 2018 25 January Kuala Lumpur Chairman TAN SRILIMSIEWCHOON For andonbehalfofPavilion REIT ManagementSdnBhd The auditors, MessrsKPMGPLT, have indicatedtheirwillingnessto acceptre-appointment. Auditor item, transaction orevent occurred intheinterval betweentheendofthatfinancial year andthedateofthis report. have notbeen substantially affected by anyitem, transaction eventor of amaterial and unusualnature norhas any such 2017 December 31 ended year financial the REITfor Pavilion of performance financial Manager,the the of opinion the In affect theabilityofPavilion REIT to meetits obligationsasandwhenthey falldue. the period of twelve months after the end of the financial year which, in the opinion of the Manager, will or may substantially No contingent liability or otherliability of Pavilion REIT hasenforceable,become oris likely toenforceable become within ii) i) thereAt doesnotexist: thedateofthisreport, iv) iii) ii) i) theManagerisnotawareAt thedateofthisreport, ofanycircumstances: ii) i) were madeout,theManagertook that: reasonable stepsto ascertain Before the statement of profit or loss and other comprehensive income and statement of financial position of Pavilion REIT Other Information any contingentliabilityinrespect ofPavilion REIT thathasarisensincetheendoffinancial year. the secures which and year financial the of end the since arisen has REITthat Pavilion of assets the on charge any not otherwise dealt with in this report or the financial statements, that would render any amount stated in the financial which have arisen which render adherence to the existing method ofvaluation of assets or liabilities of Pavilion REIT REIT misleading, Pavilion of statements financial the in assets current the to attributed value the render would that thatrender would bad debts,the thewrittenfororamountof amount off provision doubtfuldebts for in Pavilion any current assets which were unlikely to berealised in the ordinaryofbusiness course have been written down to all knownbaddebtshave been writtenoffandadequateprovision madefordoubtfuldebts,and liabilities ofanyotherperson,or statements ofPavilion REIT misleading. misleading orinappropriate, or or REIT inadequateto anysubstantialextent,or an amountwhichthey mightbeexpectedsoto realise. Pavilion REIT 2017Annual Report Non-Independent Executive Director DATO’ LEE TUCK FOOK nomto (cont’d) Information Additional 55

Others Corporate Governance Report And Financial Statements Business Review Overview Financial Statements 57 Statement of Financial Position 58 Statement of Profit or Loss and Other Comprehensive Income 59 Statement of Changes in Net Asset Value 60 Statement of Cash Flows 62 Notes to the Financial Statements 96 Statement by the Manager 96 Statutory Declaration 97 Trustee’s Report 98 Independent Auditors’ Report The notesonpages 62to 95are of thesefinancialstatements. anintegral part NAV perunit(RM) Number ofunitsincirculation (’000units) Net assetvalue (“NAV”) Total unitholders’fund Accumulated income Unitholders’ capital Unitholders’ fund Financed by Net assetvalue Total liabilities Total current liability Payables andaccruals Total non-current liabilities Payables andaccruals Borrowings Liabilities Total assets Total current assets Cash andbankbalances Trade andotherreceivables Inventories Total non-current assets Other non-current assets Investment properties Plant andequipment Assets

Pavilion REIT 2017Annual Report

RM’000 177,099 1,712,887 1,535,788

3,940,277 325,035

5,653,164 5,328,129 3,940,277 3,940,277

FINANCIAL POSITION FINANCIAL Note 2017 11 10 10 11 9 8 7 6 5 4

as at31December2017 STATEMENT OF 1,462,681 5,268,000 1,026,428 2,913,849 3,030,094 275,383 177,099 1.3004 48,098 58,000 73,107 2,129 1,554 1,412,351 5,229,000 1,020,141 2,900,708 1,671,569 1,477,749 3,920,849 3,022,525 5,592,418 5,230,958 3,920,849 3,920,849 317,071 193,820 193,820 361,460 1.2972 43,074 65,398 1,958 1,315 2016 57 –

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 58 The notesonpages 62to 95are of thesefinancialstatements. anintegral part Manager’s managementfees payable inunits Fair value gainofinvestment properties Depreciation oftransaction costs Amortisation Distribution adjustmentscomprise: Note A Distribution perunit(sen)-final Distribution perunit(sen)-interim Distributable Distribution adjustments Total comprehensive income income Basic/Diluted earningsperunit(sen) Unrealised Realised Income aftertaxationismadeupasfollows: income attributableto unitholders Income aftertaxation/Total comprehensive Tax Income before taxation Borrowing costs Other trustexpenses Valuation Trustee’s fees Manager’s managementfees Net investment income Gain ondisposalofinvestment property Interest Fair value gainoninvestment properties income Net property Other operating expenses Property Maintenance Utilities Gross revenue Other Rental income income for theyear ended31December2017 AND OTHER COMPREHENSIVEINCOME STATEMENT OFPROFIT ORLOSS expense income taxes fee

249,447

348,380 322,913 249,683 249,447 232,419 8,165 397,368 RM’000 490,001 249,447

Pavilion REIT 2017Annual Report

Note 2017 12 13 12 15 14 A 1(c) 4

249,447 (17,028) (70,734) (26,651) (46,555) (49,781) (57,959) (12,793) 17,028 17,028 92,633 13,325 3,435 (470) (530) (548) 8.24 3.96 4.28 274 236 236 504 – 312,143 400,361 314,774 312,143 248,784 312,143 235,271 388,481 459,701 312,143 (76,872) (61,047) (25,735) (37,436) (39,444) (56,037) (63,359) (12,010) (63,359) 76,872 76,872 71,220 10.33 3,096 8,715 9,761 2016 (460) (492) (484) 4.16 4.08 656 – The notesonpages 62to 95are of thesefinancialstatements. anintegral part Net assetsat31December2017 from unitholders’transactions Increase/(Decrease) innetassetsresulting Distribution to unitholders Issue ofnewunits Contributions by anddistributionsto unitholders Unitholders’ transactions income fortheyear attributableto unitholders Income aftertaxation/Total comprehensive 2017 1 January Net assetsat31December2016/ from unitholders’transactions Increase/(Decrease) innetassetsresulting Distribution to unitholders Issue ofnewunits Contributions by anddistributionsto unitholders Unitholders’ transactions income fortheyear attributableto unitholders Income aftertaxation/Total comprehensive At 2016 1January

2,913,849 Pavilion REIT 2017Annual Report

2,893,046

2,900,708 Note RM’000 16 16 Unitholders’

STATEMENT OFCHANGES for theyear ended31December2017 Note 11 IN NET ASSET VALUE capital 13,141 13,141 7,662 7,662 – – – – Accumulated 1,026,428 1,020,141 (243,160) (243,160) (250,563) (250,563) income/ 249,447 312,143 958,561 (deficit) – – 3,851,607 3,940,277 3,920,849 (230,019) (243,160) (242,901) (250,563) 249,447 312,143 13,141 funds 7,662 Total 59

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 60 Cash andcashequivalents at31December Cash andcashequivalents at1January Net (decrease)/increase incashandequivalents Repayment ofborrowings Proceed from borrowings Payment offinancing expenses Interest paid Distribution to unitholders Cash flowsfrom financingactivities Purchase ofplantandequipment Proceeds from disposalofplantandequipment Proceeds from disposalofinvestment property Pledged deposit Payment forenhancementofinvestment properties Interest received Deposit foracquisitionofinvestment properties Acquisition ofinvestment properties Cash flowsfrom investing activities Changes intenants’deposits Changes inpayables Changes inreceivables Changes ininventories Plant andequipmentwrittenoff (Gain)/Loss ondisposalofplantandequipment Interest income Gain ondisposalofinvestment property Fair value gainoninvestment properties Depreciation Borrowing costs Income before taxation Cash flowsfrom operating activities for theyear ended31December2017 CASH FLOWS STATEMENT OF Adjustments for: Net cash(usedin)/from financing activities Net cashusedininvesting activities Impairment losson/(Reversal trade of) receivables Net cashfrom operating activities Operating incomebefore changesinworkingcapital

294,851

RM’000

Pavilion REIT 2017Annual Report

Note 2017 13 (i) 4

(243,160) (263,564) 296,690 277,353 249,447 234,395 (42,958) (67,299) (22,540) (58,000) (17,028) (74,245) 47,171 70,734 (1,270) (5,691) (8,165) 8,165 2,186 1,905 1,459 (276) (689) (239) (274) 504 88 14 (1) – – 1 (556,474) (100,000) (529,051) (250,563) 766,587 112,623 322,689 288,096 164,730 312,143 277,353 346,408 (57,951) (20,442) (14,421) (26,540) (76,872) (11,665) 20,464 40,747 61,047 (1,276) (8,715) 8,715 2016 (184) 656 (78) 18 – – – 1 3 The notesonpages 62to 95are of thesefinancialstatements. anintegral part (i) Note to Statementofcashflows Cash and cash equivalents included in the statement of cash flows comprise the following statement of financial of statement following the comprise flows cash of statement the in included equivalents cash and Cash Cash andcashequivalents Less: Pledgeddeposits Deposits placedwithlicensedbanks Cash andbankbalances position amounts: Pavilion REIT 2017Annual Report 234,395 275,383 RM’000 for theyear ended31December2017(cont’d)

Note 2017 8 8 8 256,677 (40,988) 18,706 Statement of Cash Flows 298,133 277,353 317,071 (39,718) 18,938 2016 61

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 62 1. STATEMENTSFINANCIAL NOTES TO THE General Pavilion REIT entered into several agreements service in relation to the management of Pavilion REIT and its property Pavilion REIT wasformallyadmittedto theMainMarket ofBursaMalaysia SecuritiesBerhadon7December2011. Pavilion REIT is to invest, directly and indirectly of income producing in a diversifiedreal portfolio estate used solely and REIT Pavilion the comprise 2017 December 31 ended year financial the for and at as statements financial The Pavilion RealEstateInvestment Trust (“Pavilion REIT”) isaMalaysia-domiciled real estateinvestment trustconstituted (b) (a) operations. The fee structure isasfollows: oftheseservices while maintaininganappropriate capitalstructure. distributions and achieve long-term growth in net assets value (“NAV”) (being the total unitholders’ fund) per unit, or predominantly retailfor objective topurposes with the primary provide the unitholders with regular and stable of Pavilion REIT. behalf on and for financing raise to are activity principal the which of Malaysia, in incorporated companies Berhad, its wholly-owned special purpose companies, Pavilion REIT Venture Capital Sdn. Bhd. and Pavilion REIT Bond Capital 50200 Kuala Lumpur No.84, JalanRajaChulan (Holiday InnExpress) Menara Goldstone 6-2, Level 6,EastWing Registered office Deed. The addresses oftheManager’s registered officeandprincipalplaceofbusinessare asfollows: until such time as determined by the Trustee and the Manager as provided under the provisions of Clause 26 of the Securities Berhad, the Rules of the Depository and taxation laws and rulings. Pavilion REIT will continue its operations Securities Commission’s Guidelines on Real Estate Investment Trusts, the Listing Requirements of Bursa Malaysia and MTrusteeManager”) Berhad (“the Trustee”). The Deed is regulated by the Securities Commission Act 1993, the pursuant to a trust deed dated 13 October 2011 (“the Deed”) between Pavilion REIT Management Sdn. Bhd. (“the (iii) (ii) (i) Pursuant to the Deed, theManager isentitledto receive thefollowing fees from Pavilion REIT: Manager’s managementfees Manager,The Property Butcher Henry Malaysia Sdn. Bhd., is entitled to management feeproperty of RM380,000 managementfeesProperty Permitted Expensespayable to providers. itsservice and remuneration of on-site staff provided) (“Permitted Expenses”) as well as fees and reimbursements for heldby Pavilionmarketing ofthe properties REIT (includingbutnot limitedto thecost relating to theemployment entitled to fullreimbursement of costs and expenses incurred in the operation, maintenance, management and also is Manager Property the addition, In tax). services and goods (excluding annum per RM380,000) (2016: an incentive fee (“Incentive Fee”) payable as follows effective from the second full financial year in which feea performance (“PerformanceFee”) Income. ofupto 5.0%perannumofNetProperty a base fee (“Base Fee”) of upto 1.0% per annum ofthe Total Asset Value of Pavilion REIT (excluding cash obtained). Pavilion REIT has been established and in operation (subject to the relevant approval by unitholders being and bankbalanceswhichare heldinnon-interest bearingaccounts). Up to 0.20% Up to 0.15% Up to 0.10% of Pavilion REIT) Fee Payable ofthe perannum (% Total AssetValue 55100 Kuala Lumpur 168, JalanBukitBintang Pavilion Kuala Lumpur .00.00,Level 10 Principal placeofbusiness Pavilion REIT 2017Annual Report Exceeds 12.5% Exceeds 10.0%andupto12.5% Exceeds 7.5%andupto 10.0% Financial Year): before accounting forIncentive Fee in that Year inaFinancial Income Distributable (calculated Provided – Criteria growth thatannual inthe 1. General (cont’d) (b)

(c) (v) (iv) (iii) (iii) (ii) (i) For this purpose, “Market Price” means the volume weighted average market price of the Units for the last 5 The payment theManager’s of fee management beinaccordance will units new of thefollowing with intheform The Manager shall be paid the Base Fee, Performance Fee, Acquisition Fee and Divestment Fee in the form of Manager’s managementfees (cont’d) (each a“ The financialstatements were approved by theBoard ofDirectors 2018. oftheManageron25January In accordance to the Deed, an annual trusteeship fee of up to 0.05% per annum of NAV, but limited to RM470,000 Trustee’s fees The Managerwill make animmediate announcement to BursaSecurities disclosing the ofnewunits number With reference to any book closing date, where the Trigger Event is before but the issuance of the new Units for thecurrent financial year, is to bepaid to Trustee. under theMalaysian Codeon Take-Overs andMergers 2016. spread requirements stated in the Main Market Listing Requirements and there being no adverse implications Payment of the Management Fees in units shall also be subjected to Pavilion REIT complying with the public to beissued and the issue price ofthe new units when newunits are issued as paymentManagement forFee. the entitlementrelating to suchbookclosingdate. relating to such Trigger Event adjusted for is after the said book closing date, the Market Price will be further Market Days preceding thefollowingevents: management fee of the Management Company’s New Units to be issued as payment formula: is payable inunitsonly. cash, new units or a combination thereof at the election of the Manager in its sole discretion. The Incentive Fee

a divestment fee (“Divestment Fee”) of 0.5% of transaction value in relation to disposal of any real estate an acquisition fee (“Acquisition Fee”) of 1.0% of transaction value in relation to an acquisition of any real in respect Fee theAcquisition of andDivestment Fee, oftherelevant thecompletion acquisition/divestment, in respect ofthe Incentive Fee, theannouncementofannualfinancialstatements;or financial quarterly relevant the of announcement the Fee, Performance and Fee Base the of respect in and real estaterelated assetsdirectly orindirectly soldordivested. estate andreal estate related assetsdirectly orindirectly acquired. reports; reports; Trigger Event ”). Pavilion REIT 2017Annual Report = Management Company’s managementfee payable inUnits Financial Statements(cont’d) Market Price Notes to the 63

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 64 2. Financial Statements(cont’d) Notes to the Basis ofpreparation (a) • • MFRSs, Interpretations andamendmentseffective 2021 forannualperiodsbeginningonorafter1January • • • • • • • • MFRSs, Interpretations andamendmentseffective 2019 forannualperiodsbeginningonorafter1January • • • • • • • • • MFRSs, Interpretations andamendmentseffective 2018 forannualperiodsbeginningonorafter1January The followingare accountingstandards, amendmentsandinterpretations thathave beenissuedby theMalaysian Deed, the of provisions the with accordance in prepared been REIT have Pavilion of statements financial The Statement ofcompliance confirmed InterpretationsMFRSs, andamendmentseffective forbeginningonorafter annual periodsa date yet to be Accounting Standards Board buthave (“MASB”) notbeenadoptedby Pavilion REIT: Standards. Standards (“MFRSs”)andInternationalFinancialReporting Malaysian FinancialReporting

Amendments to10, Amendments MFRS MFRS 17, 128, MFRS to Amendments Amendments to MFRS 123, toAmendments MFRS112, Amendments to MFRS 11, toAmendments MFRS9, 3, MFRS to Amendments IC Interpretation 23, MFRS 16, toAmendments MFRS140, Amendments to MFRS 128, 4, MFRS to Amendments Amendments to MFRS 2, 1, MFRS to Amendments IC Interpretation 22, Clarifications to MFRS 15, MFRS 15, MFRS 9, and Joint Ventures – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture Associates andJointVentures Cycle) Standards 2014-2016Cycle) Insurance Contracts Transactions Improvements to MFRSStandards 2014-2016Cycle) Financial Instruments Insurance Contracts Leases Revenue from Contracts withCustomers Uncertainty over Income Uncertainty Tax Treatments Foreign Currency Transactions and Advance Consideration Share-based Payment Financial Instruments–Prepayment Features withNegative Compensation Business Combinations (Annual Improvements to MFRS Standards 2015-2017 Standards MFRS toImprovements (Annual Combinations Business Joint Arrangements (Annual Improvements to MFRS Standards 2015-2017 Cycle) Revenue from Contracts withCustomers Insurance Contracts – Applying MFRS 9 Financial Instruments with MFRS 4 MFRS with Instruments Financial 9 MFRS Applying – Contracts Insurance Consolidated Financial Statements and MFRS 128, Investments in Associates Investmentsin 128, MFRS and Statements Financial Consolidated Investments in Associates and Joint Ventures (Annual Improvements to MFRS Borrowing Costs (Annual Improvements to MFRS Standards 2015-2017 Cycle) First-time Adoption of Malaysian Financial Reporting Standards (Annual Standards Reporting Financial Malaysian of Adoption First-time Income Taxes (AnnualImprovements to MFRSStandards 2015-2017Cycle) – Investment Property Transfers ofInvestment Property Investments in Associates and Joint Ventures – Long-term Interests in Interests Long-term – Ventures Joint and Associates in Investments (2014) Pavilion REIT 2017Annual Report – Classification and Measurement of Share-based Payment 2. Basis ofpreparation (cont’d) (a) (ii) (i) • • • The initialapplicationoftheaccountingstandards, amendmentsorinterpretations are notexpected to have any Pavilion REIT plans to apply the abovementioned accounting standards, amendments and interpretations, where (cont’d)Statement ofcompliance as mentionedbelow: REIT except Pavilion of statements financial period prior and period current the to impacts financial material applicable: Pavilion REIT has assessed the estimated impact that the initial application of ECL modelwill have on In respect of impairment of financial assets, MFRS 9 replaces the “incurred loss” model in MFRS 139 with There are no change in measurement of financial assets of Pavilion REIT based on assessment undertaken MFRS 9 replaces the guidance in MFRS 139, MFRS 9, In the implementation of MFRS 15, Pavilion REIT has preliminary assessed the implementation of MFRS MFRS 15 replaces the guidance in MFRS 111, MFRS 15, periods annual for effective is that Contracts Insurance 17, MFRS apply to plan not does REITPavilion or amendments standards, accounting those for 2019 January 1 on beginning period annual the from or amendments standards, accounting those for 2018 January 1 on beginning period annual the from does notexpecttheimpactto bematerial. the financial statement as at 1 January 2018 and based on assessment undertaken to date, Pavilion REIT income, butnotto investments inequityinstruments. cost,contract assets anddebtinvestmentsamortised measured atfairvalue through othercomprehensive an “expected credit loss” (ECL) model. The new impairment model applies to financial assetsmeasured at to date. classification andmeasurement offinancialassetsandliabilities,onhedgeaccounting. 15 anditsimpactisnotexpectedto bematerial. Transactions Services Involving Advertising IC Interpretation 18, 13, 2021asitisnotapplicabletobeginning on1January Pavilion REIT. amendments to MFRS11and128whichare notapplicableto Pavilion REIT. interpretations that are effective for annual 2019, periods beginning excepton or after 1 January for amendments to MFRS1,2,4and128whichare notapplicableto Pavilion REIT. interpretations that are effective for annual 2018, periods beginning excepton or after 1 January for Customer Loyalty Programmes Loyalty Customer Financial Instruments Revenue from Contracts withCustomers Pavilion REIT 2017Annual Report Transfers of Assets from Customers from Assets of Transfers , ICInterpretation 15, . Construction Contracts Financial Instruments: Recognition and Measurement Financial Statements(cont’d) Agreements for Construction of Real Estate Real of Construction for Agreements and IC Interpretation 131, , MFRS 118, Revenue Notes to the Revenue - Barter Barter - Revenue , IC Interpretation on the 65 ,

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 66 2. Financial Statements(cont’d) Notes to the Basis ofpreparation (cont’d) (d) (c) (b) (a) (iii) There are no significant areas of estimation and uncertainty critical judgments in applying accounting policies Estimates and underlying assumptions are reviewed onan ongoing basis. Revisions to accountingestimates The preparation of the financial statements in conformity with MFRSs requires management to make judgements, Use ofestimatesandjudgements These financial statements are presented in Ringgit Malaysia (“RM”), which is the functional currency of Pavilion Functional andpresentation currency The financialstatements have beenprepared onthehistorical costbasisotherthanasdisclosedinNote3. Basis ofmeasurement (cont’d)Statement ofcompliance in Note 5 – investment properties andNote9–borrowings.in Note5–investment properties that have significant effect on the amounts recognised in the financial statements other than those disclosed are recognised intheyear inwhichtheestimatesare revised andinanyfuture years affected. assets, liabilities,incomeandexpenses.Actualresults may differ from theseestimates. estimates and assumptions that affect amounts of the application of accounting policies and the reported stated. REIT. All financial information is presented in RM and has been rounded to the nearest thousand,unless otherwise Pavilion REIT iscurrently assessing thefinancialimpactthatmay arisefrom theadoptionofMFRS16. MFRS 16 introduces asingle, on-balance sheet lease accounting model forlessees. A lessee recognises MFRS 16 replaces the guidance in MFRS 117, MFRS 16, classified asfinanceoroperating lease. of low-value items. Lessor accounting remains similar to the current standard whichcontinues to be obligations to make lease payments. There are leases and leases recognition exemptions short-term for a right-of-use asset representing its right to use the underlying asset and a lease liability representing its 127, Arrangement contains a Lease Evaluating theSubstanceof Transactions Involving theLegalForm ofaLease Leases , IC Interpretation 115, Pavilion REIT 2017Annual Report Leases Operating Leases – Incentives , ICInterpretation 4, Determining whether an whether Determining . and IC Interpretation 3. Significant accounting policies Significant accounting The accounting policies set out below have been applied consistently to the years presented in these financial these in presented years the to consistently applied been have below out set policies accounting The (a) statements by Pavilion REIT, stated. unlessotherwise (iii) (ii) (i) Subsidiaries Basis ofconsolidation Upon the loss of control of a subsidiary, Pavilion REIT derecognises the assets and liabilities of the Loss ofcontrol Transaction costs, other than those associated with the issue of debt or equity securities, that Pavilion For each business combination, Pavilion REIT elects whether it measures the non-controlling interests in When theexcess isnegative, a bargain purchase gainisrecognised immediately inprofit orloss. For newacquisitions,Pavilion REIT measures thecostofgoodwillatacquisitiondateas: Business combinations are accounted forusing the acquisition method from the acquisition date, which Business combinations cost at position financial of REIT’sstatement Pavilion the in measured are subsidiaries in Investments Pavilion REIT also considers it has de facto powerover an investee when, despite not having the majority Pavilion REIT controls an entity when it is exposed, or has rights, to variable returns from its involvement Subsidiaries are entities, including structured entities, controlled by Pavilion REIT. The financial statements influence retained. level of the on depending asset available-for-salefinancial an as or investee accounted equity an as for then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted loss of control is recognised the in profit on or loss. arising If Pavilion deficit REIT or retains any surplus interest Any in the former position. subsidiary, financial of statement consolidated the from subsidiary subsidiary,former anynon-controlling interests and the other componentsofequityrelated to the former REIT incursinconnectionwithabusinesscombinationare expensed asincurred. the acquisitiondate. acquiree’sthe at of share assets net proportionate identifiable the at or value fair at either acquiree the is thedateonwhichcontrol istransferred to Pavilion REIT. of investment includestransaction costs. less any impairment losses, unless the investment is classified as held for sale or distribution. The cost investee’s return. of voting rights, it has the current ability to direct the activities of the investee that significantly affect the rights are considered whenassessing control onlywhensuchrightsare substantive. with the entity and has the ability to affect those returns through its overpower the entity. Potential voting until thedatethatcontrol ceases. of subsidiaries are included in the consolidated financial statementsfrom the date thatcontrol commences • • • • the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities and acquired assets identifiable the of value) fair (generally amount recognised net the in interest equity existing the of value fair the stages, in achieved is combination business the if the recognised amountof any non-controlling interests intheacquiree; plus the fairvalue oftheconsideration transferred; plus assumed. the acquiree; less Pavilion REIT 2017Annual Report

Financial Statements(cont’d) Notes to the 67

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 68 3. Financial Statements(cont’d) Notes to the Significant accounting policies (cont’d)Significant accounting (b) (a) (iii) Derecognition (ii) (i) (iv) Financial instruments Basis ofconsolidation(cont’d) A financial liability or a part of it is derecognised when, and only when, the obligation specified in the in specified obligation the when, only and when, derecognised is it of part a or liability financial A cash the to rights contractual the when, only and when, derecognised is it of part or asset financial A All financialliabilitiesare cost. subsequently measured atamortised Financial assetsare subject to review forimpairment(seeNote3(h)(i)). Financial assets categorised as loans and receivables cost are subsequently measured at amortised Loans andreceivables comprisesdebtinstrumentsthatare category notquotedinanactive market. Pavilion REIT categorisesfinancial instrumentsasfollows: Financial instrumentcategoriesandsubsequentmeasurement directly are that costs transaction plus value fair its at initially, recognised is instrument financial A A financial asset or a financial liability is recognised in the statement of financial position when, and only Initial recognition andmeasurement Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group Transactions consolidation eliminatedon profit orloss. the consideration paid, including anynon-cash assets transferred orliabilities assumed, is recognised in and party another to transferred or extinguished liability financial difference the the of liability, amount carrying financial the between a of derecognition On expires. or cancelled discharged, is contract had beenrecognised inequityisrecognised inprofit orloss. (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that received consideration the of sum the and amount carrying the between difference the asset, financial a of derecognition On party. another transferred are to asset financial the of ownership of rewards and flows from the financial asset expire or control of the asset is not retained or substantially all of the risks liabilities Financial using theeffective interest method. Loans andreceivables assets Financial attributable to theacquisitionorissueoffinancialinstrument. when, Pavilion REIT to thecontractual becomesaparty provisions oftheinstrument. transactions, are eliminatedinpreparing thesefinancialstatements. Pavilion REIT 2017Annual Report 3. Significant accounting policies (cont’d)Significant accounting (d) (c)

(iii) Depreciation (ii) (i) Investment properties are properties which are are Investmentowned orheld under aleasehold interestproperties properties to earn rental income Investment property Plant andequipment Investment properties areInvestment measured properties initially at cost and subsequently at fair value with any changetherein value, withcorresponding increase inequity. under equity-settled share-based payment transactions, arethe investment initially measuredproperties at fair acquired properties investment For arise. they which in year financial the for loss or profit the in recognised orforadministrativeor supplyofgoodsservices purposes. or forcapital appreciation or forboth,but not for sale in the ordinary courseofbusiness, use in the production Investment value carriedatfair property Depreciation methods, useful lives and residual values are reviewed at end of the financial year, and year, financial the of end at reviewed are values residual and lives useful methods, Depreciation The estimatedusefullives forthecurrent andcomparative year are asfollows: Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each Depreciation is based on the cost of an asset less its residual value. Significant components of individual The of cost replacing ofisrecognised aanitem plantand component equipment inthe carrying Subsequent costs The gain or loss on disposal of an item of plant and equipment is determined bythe comparingproceeds Cost includes expenditures that are directly attributable to the acquisition of the asset and any other are plantandequipment of Items measureddepreciation lessanyaccumulated atcost andany Recognition andmeasurement adjusted asappropriate. component ofanitemplantandequipment. asset, thenthatcomponentisdepreciated separately. assets are assessed,has andifacomponent usefullife that is different fromthe remainder ofthat in profit orloss asincurred. derecognised to profit or loss. The costs of the day-to-day servicing of plant and equipment are recognised to Pavilion REIT, and its cost can be measured reliably. amount of the replacedThe carrying component is flow will part the within embodied benefits futureeconomic the probable that is it if item the of amount and “other expenses”respectively inprofit orloss. ofplantandequipment andisrecognised amount from “other netwithin thecarrying disposalwith income” costs are capitalisedinaccordance withtheaccountingpolicyonborrowing costs. constructed assets also includes the cost of materials and direct labour. For qualifying assets, borrowing of dismantling and removing the items and restoring the site on which they are located. The cost of self- costs directly attributable to bringing the asset to workingconditionits for intended use, and the costs accumulated impairmentlosses. Tools andofficeequipment Renovation Motor vehicles IT equipmentandsoftware Furniture andfittings Pavilion REIT 2017Annual Report Financial Statements(cont’d) 10 years 10 years 5 years 5 years 3 years Notes to the 69

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 70 3. Financial Statements(cont’d) Notes to the Significant accounting policies (cont’d)Significant accounting (h) (g) Inventories(f) (e) (d) (i) Impairment Cash and cash equivalents consist ofcash on hand, balances and deposits with banks and highly liquid Cash andcashequivalents in incurred expenditure includes and basis, first-in-first-out on based measured is inventories of cost The Inventories are measured at thelowerofcostandnet realisable value. Inventories represent general suppliesusedinthedailyoperations ofPavilion REIT. A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments, Leases recent and qualifications professional recognised appropriate having firm(s), valuation independent External, is derecognisedAn investment on its property disposal, or when it is permanently withdrawn from use and no Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of Investment carriedatfairvalue property (cont’d) Investment (cont’d) property overdrafts andpledgeddeposits. bank of arepresented equivalents net cash and cash flows, cash of statement the of purpose Forthe less. or months three of maturities original with value fair in changes of risk insignificant an have which investments acquiring theinventories andothercostsincurred inbringingthemto theirexistinglocationandcondition. accounting policyapplicableto thatasset. minimum lease payments. Subsequent to initial recognition, the asset is accounted forin accordance with the the leased asset is measured at an amount equalto the lower ofits fair value and the present value of the recognition, initial Upon leases. finance as classified are ownership of rewards and risks the all substantially the right to use an asset foran agreed period oftime. Leases in terms ofwhich Pavilion REIT assumes every year.portfolio being valued, values ofproperty experience Pavilionin the location and category REIT’s investment properties amountisrecognisedand thecarrying inprofit orlossinthefinancial yearinwhichtheitemisderecognised. proceeds disposal net the between difference The disposal. its from expected are benefits economic future borrowing costs. attributable to to bringing the investment a working condition for their intended property use and capitalised includes the cost ofmaterials and directself-constructed investment labour, property anyothercosts directly An impairment loss in respect of loans and receivables is recognised in profit or loss and is measured is and loss or profit in recognised is receivables and loans of respect in loss impairment An of evidence objective any is there whether date reporting each at assessed are assets financial All Financial assets through theuseofanallowanceaccount. flows discounted at the asset’s original effective interest rate. The carrying amount of the asset is reduced as the difference between the asset’s amount and the present carrying value of estimated future cash asset. Lossesexpectedasaresult offuture events, nomatterhowlikely, are notrecognised. impairment as a result of one or more events having an impact on the estimated future cash flows of the Pavilion REIT 2017Annual Report 3. Significant accounting policies (cont’d)Significant accounting (k) (j) (i) (h) (ii) (i) (ii) Revenue andother income Costs directly attributable to issue of instruments classified as equity are recognised as a deduction from equity. Instruments classified as equity are measured at cost on initial recognition and are not remeasured subsequently. Equity instruments on expenditure their pending borrowings specific of investment temporary the on earned income Investment of the cost ofa qualifying asset when commences expenditureThe capitalisation of borrowing costs as part Borrowing costs directly attributable to the acquisition, construction orproduction ofqualifying assets, which Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying Borrowing costs Impairment (cont’d) qualifying assetsisdeductedfrom theborrowing costseligibleforcapitalisation. interrupted orcompleted. when substantially all tothe activities necessary prepare the qualifying asset for its intended use or sale are the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases for the asset is being incurred, borrowing costs are being incurred and activities that are to necessary prepare ofcostthoseassets. capitalised aspart are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are asset are recognised inprofit orlossusingtheeffective interest method. Interest income is recognised as it accrues using the effective interest method in profit or loss except for Interest income Rental income from investment properties is recognised in profit or loss on a straight-line basis over the Rental income An impairment loss is recognised amount ofan asset or its related if the carrying cash-generating unit The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair For the purpose of impairment testing, assets are grouped together into the smallest group of assets amountsThe carrying of other assets (except for inventories and investment that are properties measured Other assets costs. obtaining a qualifying asset which is accounted for in accordance with the accounting policy on borrowing of purpose the for specifically taken borrowings of investment temporary from arising income interest term ofthelease. exceeds itsestimated recoverable amount.Impairmentlossesare recognised inprofit orloss. value ofmoney and the risksspecific to theassetorcash-generating unit. to their present value using a pre-tax discount rate that reflects current market assessments of the time discounted are flows cash future estimated the use, in value assessing In disposal. of costs less value assets orcash-generating unit. that generates cash inflows from continuing use that are largely independent of the cash inflows of other of impairment.Ifanysuchindicationexists,thentheasset’s recoverable amountisestimated. indication any there is whether determine year to financial each of end the arereviewedvalue)at fair at Pavilion REIT 2017Annual Report Financial Statements(cont’d) Notes to the 71

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 72 3. Financial Statements(cont’d) Notes to the Significant accounting policies (cont’d)Significant accounting (m) (l) Expenses (k)

(iii) (ii) (i) (iii) Where are investment carried at their fair valueproperties in accordance with the accounting policyset out in Deferred tax is recognised using the liability method, providing for temporary differences between the carrying Current tax is the expected tax payable or receivable on the taxable income orloss for the year, using tax rates profitdeferredarerecognisedin and deferredtax Currenttax currentand tax. comprises expense tax Income Income tax Revenue andotherincome (cont’d) A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available be will profits taxable future that probable is it that extent the to recognised is asset tax deferred A financial year and are reduced to the extent that it is no longer probable that the related tax benefit will be will benefit tax related the realised. that probable longer no is it that extent the to reduced are and year financial against which the temporary difference can be utilised. Deferred tax assets are reviewed at the end of each date.Deferredor substantively enactedatthereporting taxassetsandliabilitiesare notdiscounted. manner ofrealisation amount ofthe assets and liabilities, or settlement using of the tax carrying rates enacted than through sale. Inall other cases,the amount ofdeferred tax recognised is measured based on the expected the objective to consume substantially all of the economic benefits embodied in the property over time, rather is depreciable date and unlessis held the with property valueof those assets at their at carrying the reporting Note 3(d), the amount of deferred tax recognised is measured using the tax rates that would apply on the sale of thefinancial year. differences when they reverse, based on the laws that have been enacted or substantively enacted by the end nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to apply to the temporary of assets or liabilities in a transaction that is not a business combination and that affects neither accounting recognised for the following temporary differences: the initial recognition of goodwill, and the initial recognition theirtaxbases.Deferredfinancial positionand assetsliabilities andthestatementof of in amounts taxisnot of previous financial years. enacted or substantively enacted by the end of the financial year, and any adjustment to tax payable in respect other comprehensive income. or loss except to the extent that it relates to a business combination or items recognised directly in equity or Trustee’s fees are recognised onanaccrualbasisusingtheapplicableformula,stipulatedinNote1(c). Trustee’s fees Manager’s management fees are recognised basis on anaccrual using the applicable stipulated formula, Manager’s managementfees managementfees areProperty recognised onanaccrualbasis. management fees, expenses consist quit of property rents Property and assessment, and other property expenses Property Other income consists of carparkincome,utilities charges billed to turnover tenants, events, advertising, Other income in Note1(b). outgoings in relation to investment where properties such expenses are the responsibility of Pavilion REIT. rent andothermiscellaneousincome,isrecognised intheprofit orlossonanaccrualbasis. Pavilion REIT 2017Annual Report 3. Significant accounting policies (cont’d)Significant accounting (p) (o) (n) Level 3: Level 2: Level 1: Pavilion REIT recognises transfers betweenlevels ofthe fair value hierarchy as of the date of the event orchange When measuring the fair value of an asset or a liability, Pavilion REIT uses marketobservable data as far as For non-financial asset, the fair value measurement takes into account a market participant’s ability to generate Fair value of an asset or aliability, exceptshare-based for payment and lease transactions, is determined as Fair value measurement An operating segment is a component ofPavilion REIT that engages in business activities from which it may Operating segments Diluted EPU is determined by adjusting the profit or loss attributable to unitholders against the weighted average Basic EPU is calculated by dividing the profit or loss attributable to unitholders of Pavilion REIT by the weighted Pavilion REIT’s earningsper unit(“EPU”)ispresented basedonbasicanddilutedformat. Earnings perunit in circumstances thatcausedthetransfers. valuation techniqueasfollows: possible. Fair value are categorised into different levels in a fair value hierarchy based on the input used in the that wouldusetheassetinitshighestandbestuse. participant market another to it selling by or use best and highest its in asset the using by benefits economic most advantageous market. or transfer the liability takes place either in the principal market or in the absence of aprincipal market, in the at the measurement date. market participants The measurement assumes that the transaction to sell the asset the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between segmental financialinformationis available. make REIT, to Pavilion of Manager the aboutresourcesdecisions to to beallocated discrete andforwhich andto thesegment assessitsperformance, of Officer Executive Chief the is case this in which maker, decision the Pavilion REIT’s other components. Operating segment results are reviewed regularly by the chief operating earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of number ofunitsoutstandingadjustedfortheeffects ofalldilutive potentialunits. average numberofunitsoutstandingduringtheyear. unobservable inputsforunobservable theassetorliability. liability,or asset the for observable are that Level1 within included prices quoted than other inputs quoted prices (unadjusted) in active markets for identical assets or liabilities that Pavilion REIT can either directly or indirectly. access atthemeasurement date. Pavilion REIT 2017Annual Report Financial Statements(cont’d) Notes to the 73

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 74 4. Financial Statements(cont’d) Notes to the Plant andequipment At 31December2017 2017 1 January At 31December2016/ At 2016 1January amounts Carrying At 31December2017 Write off Disposal Depreciation fortheyear 2017 1 January At 31December2016/ Write off Disposal Depreciation fortheyear At 2016 1January Accumulated depreciation At 31December2017 Write off Disposal Addition 2017 1 January At 31December2016/ Write off Disposal Addition At 2016 1January Cost

Furniture RM’000 fittings 1,470 1,469 1,269 681 825 755 789 147 644 136 514 214 and (12) (2) (1) (5) (3) (2) – – 4

equipment software 238 361 744 164 589 106 490 982 950 369 588 and (22) 98 54 (9) (7) (7) Pavilion REIT 2017Annual Report IT – – – –

vehicles RM’000 Motor 100 81 12 19 14 10 78 22 22 – – – – – – – – – 8 5 4

Renovation RM’000 411 415 369 415 415 46 42 – – – – – – – – – – – – 4 4

equipment Tools and office 2,863 2,328 2,103 1,651 2,146 1,975 406 353 760 495 553 278 146 (87) (10) (75) (10) (8) (8) (7) (9) RM’000 5,830 5,184 1,958 3,701 2,665 4,025 3,226 2,129 1,360 1,276 Total 656 689 504 (99) (21) (15) (80) (18) (35) (8) (8) 5. Investment properties Divestment fee paid to the Manager relating to disposal of investment property based on 0.5% (2016: nil) of transaction (2016: 2017 in property investment of acquisition the to relating Manager the to paid fee acquisition no was There Investment properties areDetails oftheinvestment asfollows: properties value. 1.0% ofpurchase consideration forDA MENandIntermarkMallincludedintheadditionto investment properties). areInvestment charged properties assecuritiesforbankborrowings asdisclosedinNote9. At 31December Change infairvalues recognised inprofit orloss Disposal ofinvestment property Addition to investment properties Enhancements/Capital At 1January expenditure * Intermark Mall DA MEN Mall Pavilion Pavilion Kuala Lumpur Mall Tower Investment properties Intermark Mall DA MEN Mall Pavilion Pavilion Kuala Lumpur Mall Tower The leasehasaperiodof99 years expiringin2109.

acquisition acquisition 25.3.2016 25.3.2016 7.12.2011 7.12.2011 25.3.2016 25.3.2016 7.12.2011 7.12.2011 Date of Date of Pavilion REIT 2017Annual Report

31.12.2016 31.12.2016 31.12.2016 31.12.2016 31.12.2017 31.12.2017 31.12.2017 31.12.2017 valuation valuation Date of Date of

RM’000 2017 Kuala Lumpur Kuala Kuala Lumpur Lumpur Kuala Lumpur Kuala Kuala Lumpur Lumpur Subang Jaya Subang Jaya Location Location

Interest in perpetuity Interest in perpetuity Interest in perpetuity Interest in perpetuity

Leasehold* Leasehold* Leasehold* Leasehold* Tenure Tenure Financial Statements(cont’d)

31.12.2016 31.12.2017 Occupancy Occupancy rates asat rates asat

76 94 96 90 98 99 87 86 % %

31.12.2016 31.12.2017 value asat value asat 5,229,000 4,450,000 4,550,000 5,268,000 5,268,000 5,229,000 163,000 133,000 169,000 133,000 483,000 416,000 RM’000 RM’000 17,028 22,540 Fair Fair (568)

– 31.12.2016 31.12.2017 Notes to the Cost asat Cost asat Cost 4,284,298 3,498,583 3,515,591 4,306,270 162,555 128,000 164,198 128,000 495,160 498,481 RM’000 RM’000

5,229,000 4,483,000 654,707 of fairvalue of fairvalue 31.12.2016 31.12.2017 Percentage Percentage 76,872 14,421 2016 to NAV to NAV as at as at 113 115 75 – 12 11 % % 4 3 4 3

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 76 5. Financial Statements(cont’d) Notes to the Investment (cont’d) properties 5.1

The fair value of investment properties is determined by external, independent property valuers, having isdeterminedbyThe fairvalue appropriate external, independentproperty ofinvestment properties Valuation processes by applied theManagerforLevel 3fairvalue The landtitleinrespect of the IntermarkMallhadbeentransferred infavour ofthe Trustee on25April2016. The transfer ofthe land title in respect of Pavilion Kuala LumpurMall, Pavilion Towerand DA MENMall in favour Individual strata titles in respect of the Pavilion Kuala LumpurMall, Pavilion Tower and DA MENMall have not The following table shows the valuation techniques used in the determination of fair values within Level 3, as areAll investment categorisedasLevel properties 3fairvalue. Fair value information Pavilion REIT’s investment properties are currently three retail malls and an office building. The properties on properties building. The office an and malls retailthree currentlyREIT’s Pavilion are properties investment lunch hours. during especially mall, retail the to traffic human bringing by mall retail the complements also building office been refurbished in recent years, thus it is not cost effective it to to aretail convert mall at has the moment. The building office The office. shop and residential of consist which development mix a within is mall retail their own is the highest and best use, as two ofthe retail malls are on prime land in the city centre. The other Highest and bestuse the valuation methods andestimatesare reflective ofcurrent market conditions. that satisfied is and judgment its exercised has Manager the reports, valuation the on relying In valued. being property of category and location the in experience recent and qualifications professional recognised of the Trustee ispending theissuanceofstrata titleby thepublicauthorities. interest expiring inyear 2109. the respective strata floor areas and Pavilion Kuala Lumpur Mall and Pavilion Tower will convey and when issued, will be free are from forthcoming all encumbrancesproperties 99-year and restrictive condition over leasehold been issued. The valuation is on the basis/assumption that individual strata titles in respect of the subject Level 3fairvalue probable value figure level ofriskleads to the most return commensurate with a given stream which produces the highest substitution holds that the income or both.In general, the principle of measures of return on investment), (reflecting rates discount or yield rates), ascapitalisation (known may consider direct relationships into a value estimate. This process amount anincome by converting figure) and a defined value type relates income (usually a net income capitalisation process. Capitalisation and estimates value through a being valuedto the subject property income and expense data relating The investment method considers valuation technique Description of well asthesignificantunobservable inputsusedinthe valuation models. • inputs Significant unobservable •

ikajse term Risk-adjusted ikajse reversion Risk-adjusted MEN Mall. for Intermark Mall and DA 7.00% (2016: 6.25% to 6.75%) Pavilion Tower and 6.50% to Kuala Lumpur Mall and to5.50% Pavilion for 6.70%) (2016: 6.70% to 5.50% from capitalisation rates ranging Mall andDA MENMall. Intermark for 6.50%) (2016: Pavilion Tower and 6.75% Kuala Lumpur Mall and Pavilion for 6.00%) (2016: capitalisation rate of 6.00% Pavilion REIT 2017Annual Report • • increase (decrease) if: The estimated fair value would and fairvalue measurement inputs unobservable significant Inter-relationship between

ikajse reversion risk-adjusted term risk-adjusted (higher). capitalisation rates were lower (higher). capitalisation rates were lower 9. 8. 7. 6. Borrowings Cash andbankbalances Trade andotherreceivables Other non-current assets Included in the deposits placed with licensed banks is an amount of RM40,988,000 (2016: RM39,718,000) which is which RM39,718,000) (2016: RM40,988,000 of amount an is banks licensed with placed deposits the in Included Included in othernon-current assets were depositsthe placed forproposed (see acquisition of Investment Property Less: Unamortised transaction costs Less: Unamortised Unrated mediumtermnotes Secured termloan Secured syndicatedtermloan Non-current banking facilitiesgranted to Pavilion REIT (Note9). Accountswith Reserve licensed banks maintained toin Debt Service cover a minimum ofsix months interest for Deposits placedwithlicensedbanks Cash andbankbalances Prepayments Deposits Other Non-trade Less: Impairmentlosses Trade Trade Current receivables Note 25). Average interest rate ofborrowings receivables

Pavilion REIT 2017Annual Report

RM’000 275,383 RM’000 2017 6,482 2,165 RM’000 2017 8,984 1,462,681

Financial Statements(cont’d) Note 2017 9.3 9.2 9.1

300,000 433,159 735,900 256,677 18,706 48,098 17,631 30,467 32,169 (1,702) (6,378) 4.6% Notes to the 1,412,351 300,000 415,988 705,900 317,071 298,133 18,938 43,074 13,437 29,637 32,501 (2,864) (9,537) 3,388 1,140 8,909 2016 2016 2016 4.1% 77

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 78 9. Financial Statements(cont’d) Notes to the Borrowings (cont’d) 9.2 9.1 (iii) (ii) (i) (iii) (ii) (i) Pavilion REIT entered into a facility agreement letter of offerand its supplementary dated 22 March 2016 and Secured ofRM486.8million termloanfacilities The revolving credit borrowings are secured over Pavilion Kuala Lumpur MallandPavilion Tower in asdisclosed 2016 December 7 from years five another to extended been had facilities credit syndicated the of tenure The Pavilion REIT entered into facilityagreement agreement afacility dated3November anditssupplementary 2011 Secured syndicatedcredit facilitiesofRM815.9million licensed bank(the“Bank”)comprisingtermloan,revolving credit facilitiesandbankguarantee asfollows: 23 March 2016 respectively through its Trustee (“Borrower”) for credit facilities of upto RM486.8 million with AccountswithlicensedbanksasdisclosedinNote8. Reserve RM19,893,000) maintainedinDebtService Note 5 with a fair value of RM4,683,000,000 (2016: RM4,583,000,000) and an amount of RM20,498,000 (2016: at theirsolediscretion andsubjectto theconsentofallLenders. up to a maturity date of 7 December 2021. The Lenders have the option to convert RTL1 to a fixed interest rate licensed banks(“Lenders”)comprisingrevolving termloanfacilitiesandbankguarantee asfollows: Venture Capital Sdn. Bhd. (“Borrower”) for syndicated credit facilities (“Facilities”) of up to RM815.9 million with and 23 November 2011 respectively (“Facility Agreements”) through its wholly ownedsubsidiary, Pavilion REIT

RC - a revolving credit (“RC”) facility of up to RM25.0 million to part finance its working capital requirements; The secured term loan facilities are secured over DA MEN Mall as disclosed in Note 5 with a fair value of BG -abank guarantee facility of upto theaggregatemaximum principal amount ofRM3.0 million subject the for consideration purchase the finance part to million RM461.8 of (“TL”)facility loan term a - TL BG/RTL3 - a bank guarantee (“BG”) of up to RM10.0 bonds, million bank for the issuance of performance RTL2 - a revolving term loan facility of up to RM100.0 million to finance general working capital of Pavilion of acquisition the finance part to million RM705.9 to (“RTL”)up loan of term facility revolving a - RTL1 in Debt Service Reserve AccountswithlicensedbanksasdisclosedinNote8. Reserve in DebtService RM416,000,000 (2016: RM483,000,000) and an amount of RM12,690,000 (2016: RM12,284,000) maintained of theDA MENMall. always to the RC/BG combined limit for the issuance of and performance financial guarantee in respect and acquisition oftheDA MENMall; under bankguarantee. bonds, bank guarantees, issued amounts paid out under the performance indemnities or undertakings guarantees, and a revolving indemnities orundertakings term loan facility forthe conversion ofany REIT (includingacquisitionofassets);and andfutureinvestment acquisitionsby properties Pavilion REIT; Pavilion REIT 2017Annual Report 10. 9. Payables andaccruals Borrowings (cont’d) Other payables andaccruedexpenses Non-trade Tenants’ Trade Trade Current deposits payables Tenants’ Trade Non-current deposits 9.4 9.3

transaction costs Less: Unamortised Unrated mediumtermnotes Secured termloan Secured syndicatedtermloan Reconciliations ofmovement ofliabilitiesto cashflowsarisingfrom financingactivities notes are term The medium secured over Pavilion Kuala Lumpur Mall andPavilion Tower in asdisclosed As atthedateoffinancial statements,RM300.0millionof MTNs have beenissued. On 24 June 2015, the Securities Commission Malaysia had approved and authorised the establishment of a Medium termnotesofRM8.0billion RM7,541,000) maintained in Debt Service Reserve Accounts withlicensedbanksasdisclosedinNote8. Reserve RM7,541,000) maintainedinDebtService (2016: RM7,800,000 of amount an and RM4,583,000,000) (2016: RM4,683,000,000 of value fair a with 5 Note may decide. Programme. An issuance of MTNs under the MTN Programme may either be rated or unrated, as the Issuer MTN Programme shall have a tenure of twenty years from the date of the first issuance of MTNs by Pavilion underbe undertaken REIT a companywholly Bond owned Capital byBerhad (“Issuer”), Pavilion the REIT. MTN The proposedterm notes medium(“MTNs”) programmeof RM8.0 billion in nominal value (“MTN Programme”) to

Pavilion REIT 2017Annual Report 1,412,351 RM’000 RM’000 250,206 177,099 January 300,000 705,900 415,988 (9,537) 2017 At 1

cash flows financing Financial Statements(cont’d) changes 46,895 30,000 17,171 Note 2017 from (276) 10.1 10.1 10.2 Net – changes 113,347 63,752 43,473 20,279 73,107 Other 3,435 3,435 – – – Notes to the

December 1,462,681 122,552 300,000 259,218 193,820 735,900 433,159 71,268 48,996 22,272 65,398 (6,378) At 31 2017 2016 79

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 80 11. 10. Financial Statements(cont’d) Notes to the Total unitholders’funds Payables andaccruals(cont’d) 11.1 10.2 Includedinotherpayables andaccruedexpensesare thefollowingamountsdueto: 10.1

At 31December Manager’s managementfees paidinunits At 1January At 31December Manager’s managementfees paidinunits At 1January Issued andfullypaidup: At 31December Approved fundsize: Sdn.Bhd. Equine Resort Park Country Trustee The Tenants’ deposits are in respect ofrefundable deposits received from tenants fortenancy ormarketing Unitholders’ capital Sdn. Bhd. (“Vendor”) Amount due to Equineis the balance of purchase Resort Park price for theCountry duetoAmounts theManager and Trustee are unsecured, interest-free andpayable monthlyinarrears. titles by theVendor oftheaforesaid property. acquisition of DA MENMall and it is interest free. Itis payable by instalments ofthe upon thestratadelivery and interest free. agreements. Tenancy agreements tenure are periodbetween for oneto three years. The amount is unsecured Manager

RM’000 Number ’000 2017 RM’000 40 2017 Pavilion REIT 2017Annual Report

2,913,849 2,900,708 3,030,094 3,022,525 3,318,000 of units 13,141 48,685 59,581 10,856 7,569 2017

2,900,708 2,893,046 3,022,525 3,017,842 3,100,000 Number of units 60,856 69,819 7,662 4,683 8,880 2016 2016 2016 83 11. Total (cont’d) unitholders’funds 11.2

Dato’ MaznahBintiAbdulJalil Dato’ MohzaniBinAbdulWahab Ooi AhHeong Navid Chamdia Dato’ Lee Tuck Fook Puan Sri Tan Kewi Yong Tan SriLimSiewChoon direct unitholdings in The Manager’s Directors’ in Pavilion REIT The Manager’s direct unitholdings Employees Provident Fund Board Puan Sri Tan Kewi Yong Tan SriLimSiewChoon Qatar HoldingLLC unitholders’ direct Pavilion REIT’s substantial Total Manager’s fees paidinunits entitlement to acquisitionanddisposalfee Issued atRM1.7102andRM1.5446perunitfor for the6monthsended30June2016 Issued atRM1.7503perunitforentitlement for the6monthsended31December2015 Issued atRM1.4970perunitforentitlement 2016 Total Manager’s fees paidinunits for the6monthsended30June2017 Issued atRM1.7024perunitforentitlement for the6monthsended31December2016 Issued atRM1.7707perunitforentitlement 2017 Pavilion REIT’s substantial unitholders, the Manager and the Manager’s Directors’ direct unitholdings in Pavilion The Manager was issued units in Pavilion REIT settlement of Manager’s as part management fees, details of unitholders,theManagerandManager’sUnitholdings ofsubstantial Directors The market value of the units was computed based on the closing market price as at 31 December 2017 of Notes: RM1.61 (2016: RM1.90). REIT are asfollows: which are asfollows: Pavilion REIT: unitholdings inPavilion REIT:

9,725 Pavilion REIT 2017Annual Report

Number

1,082,900 281,875 845,425 130,703 281,875 845,425 of units ’000 RM’000 100 100 100 100 100

2017 1,361,134 1,361,134 1,743,469 Financial Statements(cont’d) 453,819 210,432 453,819 Market Number 15,657 value 161 161 161 161 161

1,082,900 Number 281,875 845,425 199,119 281,875 845,425 of of units 4,683 1,774 7,569 3,810 4,234 1,963 3,759 units ’000 ’000 RM’000 100 100 100 100 100 946 Notes to the 2016 1,606,308 1,606,308 2,057,510 535,562 378,327 535,562 Amount RM’000 Market 13,141 7,662 1,617 3,106 6,485 8,044 2,939 6,656 value 190 190 190 190 190 81

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 82 14. 13. 12. Financial Statements(cont’d) Notes to the Tax expense Borrowing costs Manager’s management fees Manager’s management fees payable in units amounts to RM13,325,000 (2016: RM11,378,000). 50% (2016: 25%) (2016: 50% RM11,378,000). (2016: RM13,325,000 to amounts units in payable fees management Manager’s No acquisition fee incurred during the year (2016: 1.0% of transaction value in relation to the acquisition of DA MEN the of annum per Asset Value 0.3%) Total (2016: 0.3% of year,financial fee base the a received During Manager the Non-taxable Non-deductible Income taxusingMalaysian taxrate of24%(2016:24%) Income before taxation Reconciliation oftaxexpense oftransaction costs Amortisation Interest expense management fees willbepaidinthefollowingyear. the of 50%) total Manager’s (2016: management fees for the second half of 2017 would be payable in units. 50% The balance of Manager’s and units in paid been had 2017 of half first the for fees management Manager’s total of 5). of theas disclosed acquisition in cost Note of investment properties Mall and Intermark Mall was capitalised as part 0.5% (2016:Nil)oftransaction value inrelation to disposalofreal estaterelated assets. of Pavilion REIT, a performance fee of 3.0% (2016: 3.0%) per annum of Net Income Property and a divestment fee of Acquisition Divestment Performance Base fee Effect ofincomeexempted from tax

fee fee income fee 3,737 expenses RM’000 RM’000 9,688 RM’000 – Pavilion REIT 2017Annual Report

249,447 (59,517) 70,734 67,299 26,651 16,959 59,867 (4,087) 3,435 2017 2017 2017 – 4

312,143 (18,449) (59,067) 61,047 57,951 25,735 16,292 74,914 9,443 6,468 3,096 2,602 2016 2016 2016 – 16. 15. 14. Distribution to unitholders Earnings perunit–basic anddiluted Tax expense(cont’d) The calculation of earnings per unit is based on income after taxation attributable to unitholders for the year of As Pavilion REIT proposed to distribute 100% of its distributable income to its unitholders for financial year ended 31 Pursuant to Section 61A of the Malaysian Income Tax Act, 1967 (“Act”), income of Pavilion REIT will be exempted Net distributionperunit**(sen) Final distributionperunit(sen) Interim distributionperunit(sen) Distribution to unitholders Distributable Distribution income Less: Total expenses Gain ondisposalofinvestment property Interest Fair value gainoninvestment properties Other Rental income income Distribution to unitholdersisfrom thefollowingsources: year of3,027,333,368 (2016:3,020,648,551). the during circulation in units of number average weighted the by divided RM312,143,000) (2016: RM249,447,000 December 2017,noprovision fortaxationhasbeenmadethecurrent year. have taxcredits attachedwhensubsequentlydistributedto unitholders. income tax at the prevailing tax rate on its total income. Incomewhich has been taxed at the Pavilion REIT level will to subject be will REIT Pavilion assessment, of year a for period basis the forms which year financial REITPavilion distribution condition is not complied with or the 90% distribution is not made within two months after the close of period of Pavilion REIT for that year of assessment within two months after the close of the financial year. If the 90% from tax provided that at least 90% of its total income (as defined in the Act) is distributed to the investors in the basis

income adjustments Pavilion REIT 2017Annual Report 2017 249,683 249,447 515,468 8,165 397,368 RM’000

Financial Statements(cont’d)

(266,021) 243,160 92,633 17,028 2017 8.24 4.28 3.96 274 236 Notes to the

* (233,145) 250,563 248,784 312,143 545,288 388,481 (63,359) 71,220 76,872 8,715 2016 2016 4.08 8.24 4.16 – 83

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 84 18. 17. 16. Financial Statements(cont’d) Notes to the Management expenseratio turnover ratioPortfolio Distribution to unitholders(cont’d) Comparison of the MER of Pavilion REIT with other real estate investment trusts which uses different basis of The calculation of the MER is based on the total fees of Pavilion REIT incurred duringthe year, including manager’s Since the basis of calculating PTR can amongrealvary estate investment trusts, there is no sound basis for providing During the year, Pavilion REIT haddisposed an area measuring2,324 square Cemerlang Sdn.Bhd. feet to Urusharta The calculation of PTR is based on the average of total acquisitions and disposals of investments in Pavilion REIT Included intheamountis0.0002 times. calculation may notbeanaccurate comparison. management fees, trustee’s fees, valuation fee andothertrustexpenses,to thenetassetvalue asatyear end. Management expenseratio (“MER”) (%) an accurate comparisonofPavilion REIT’s PTRagainstotherreal estateinvestment trusts. respectively). Mall and Intermark Mall on the 25 March 2016 for purchase consideration of RM486,844,000 and RM160,000,000 was no new completed acquisitions during the year (2016: Pavilion REIT had completed its acquisitions for DA MEN insignificant.purchaseis yeartoconsiderationa PTR the RM880,000. Therefor during of disposal effectthe The of for theyear to theaverage netassetvalue duringtheyear. Portfolio Turnover Ratio(“PTR”)(times) ** * ^ Non-resident Non-resident Non-resident Resident Resident Withholding taxwillbededucted fordistributionsmadeto thefollowingcategoriesofunitholders unit per sen 4.28 be proposed to is 2017 December 31 ended months 6 the for income distributable final The or RM129,688,000payable on28February 2018. to taxatprevailing rate N/A^ non-corporate corporate institutional corporate individual 2017 2017 2017 Pavilion REIT 2017Annual Report

0.72 Withholding taxrate 10% 24% 10% 10% -* 2016 2016 2016 0.08 0.69 10% 24% 10% 10% 19. Operating segments The total ofsegment assets/liability is measured based on all assets/liabilities of asegment, as included in internal incomeasmanagement believesis measuredPerformance based on segment net that property such informationis Pavilion REIT has two reportable segments, Retail and Office. For each of the segment, the Manager of Pavilion REIT’s Segment liabilities Segment Segment assetsandliabilities At 31December 2016 assets Property Gross Included inthemeasure ofsegmentprofit are: expenses revenue Segment profit For theyear ended31December2016 Fair value gainto non-current assets Additions to non-current assets assets andliabilitiesare: Included inthemeasure ofsegment For theyear ended31December2017 Segment liabilities Segment Segment assetsandliabilities At 31December2017 assets Property Gross Included inthemeasure ofsegmentprofit are: expenses revenue Segment profit For theyear ended31December2017 thatare reviewedmanagement reports by theManagerofPavilion REIT’s ChiefExecutive Officer. the mostrelevant inevaluating theresults ofthesegments. Chief Executive Officer reviewsregularly. internalmanagement reports Fair value gainto non-current assets Additions to non-current assets assets andliabilitiesare: Included inthemeasure ofsegment For theyear ended31December2016

Pavilion REIT 2017Annual Report

5,430,936 141,228 447,139 1,678,700 5,491,305 162,637 477,544 RM’000 305,911 314,907

(1,641,094) Financial Statements(cont’d) 604,328 17,028 79,972 76,872 Retail 134,019 133,561 (30,210) 12,562 30,251 12,457 Office 3,699 4,451 8,863 8,006 – – – – Notes to the (1,671,304) 5,564,955 5,624,866 1,708,951 459,701 490,001 144,927 167,088 604,328 314,774 322,913 17,028 79,972 76,872 Total 85

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 86 19. Financial Statements(cont’d) Notes to the Operating segments(cont’d) No geographical segment information has been prepared of Pavilion as all theinvestment properties REIT are located in Malaysia. Geographical information Total Other non-allocatedassets/(liabilities) Total segments reportable 2016 Total Other non-allocatedassets/(liabilities) Total segments reportable 2017 segmentassetsandliabilities Reconciliation ofreportable Income aftertaxation Taxation Income before taxation Borrowing Trust Other non–allocatedincome Interest Gain ondisposalofinvestment property Fair value gainoninvestment properties Total segments profit for reportable segmentprofitReconciliation ofreportable assets/(liabilities) assets/(liabilities) expenses

income costs RM’000 Segment – 7,330 RM’000 Pavilion REIT 2017Annual Report

5,592,418 5,653,164 5,564,955 5,624,866 249,447 249,447 322,913 (70,734) (28,199) 27,463 28,298 17,028 assets 2017 835 274 (1,671,569) (1,712,887) (1,671,304) (1,708,951) liabilities Segment 312,143 312,143 314,774 (61,047) (27,171) 76,872 (3,936)

7,925 2016 (265) 790 – 20. Financial instruments 20.3 20.2 20.1 • • • Pavilion REIT hasexposure to thefollowing risksfrom its useoffinancialinstruments: Borrowings Loans andreceivables Borrowings Payables Financial liabilities and accruals Cash andbankbalances Receivables Financial assets and deposits Financial risksmanagement fromNet gainsandlossesarising financialinstruments The table below provides an analysis of financial instruments categorised as loans and receivables and financial Categories offinancialinstruments liabilities measured at amortised cost. liabilities measured atamortised Market risk Liquidity risk Credit risk

Pavilion REIT 2017Annual Report 2017 1,712,887 1,462,681 RM’000 2017 Financial 316,999 RM’000 2017 amounts amounts receivables Carrying Carrying Carrying 250,026 275,383 41,616

amortised cost amortised measured at Loans and 1,712,887 1,462,681 Financial Statements(cont’d) liabilities 250,026 275,383 316,999 41,616 2017 2017

Financial 1,671,569 1,412,351 amounts amounts receivables Carrying Carrying 259,218 317,071 356,757 RM’000 (64,028) (70,734) 39,686 6,706 2016 2016 Notes to the

amortised cost amortised measured at Loans and 1,671,569 1,412,351 liabilities 259,218 317,071 356,757 RM’000 (52,148) (61,047) 39,686 8,899 2016 2016 2016 87

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 88 20. Financial Statements(cont’d) Notes to the Financial instruments(cont’d) 20.4 Past duemore than90days Past due31-90days Past due0-30days Not pastdue 2016 Past due more than90days Past due 31-90days Past due 0-30days Not pastdue 2017 Pavilion REIT maintains an ageing analysis in respect of trade receivables only. The ageing of trade receivables Management has taken reasonable steps to ensure that receivables that are neither past due norimpaired are Exposure to credit riskand credit quality Management hasacredit policy inplaceandtheexposure to credit riskismonitored onanongoingbasis. Risk managementobjectives, policiesandprocesses formanagingtherisk At the end of the financial year, themaximum exposure tocredit risk arising from financial assets are represented Credit risk is the risk of a financial loss to Pavilion REIT if the tenants orto counterparty a financial instrument Credit risk as attheendoffinancial year was: Impairment losses credit riskexposure. granted together with constant tomonitoring counterparties ofanyoutstanding balances to ensure minimum and good credit creditstanding before worthiness tenancy agreements are entered into with tenants or credit ensure to process verification credit using risk credit REITmanages Pavilion values. realisable their at stated Receivables amountoffinancialassetsinthestatement offinancialposition. by thecarrying tenants andgenerally doesnotrequire collateral otherthantenants’deposits. and other receivables and cash andequivalents. Pavilion REITongoing credit performs evaluation of its fails to meetits contractual obligations. Pavilion REIT’s exposure to credit risk arises principally fromtrade

RM’000 Pavilion REIT 2017Annual Report

32,501 32,169 11,773 12,354 11,784 Gross 9,278 9,176 1,693 8,018 594 Impairment (2,864) (1,702) (2,864) (1,693) loss (9) – – – – – 11,764 29,637 30,467 10,091 9,278 9,176 1,693 8,018 9,490 594 Net 20. Financial instruments(cont’d) 20.5 20.4 At 31December Impairment lossreversal At 1January The Manager maintains a level of cash and cash equivalents and bank facilities deemed adequate to finance to adequate deemed facilities bank and equivalents cash and cash of level a maintains Manager The due. fall they as obligations financial its meet to able be not will REIT Pavilion that risk the is risk Liquidity Liquidity risk As at the end of the financial year, there was no indication that cash and cash equivalents were not recoverable. As at the end of the financial year, themaximum exposure tocredit risk is represented by theircarrying amounts Cash andcashequivalents are placedwithlicensedfinancialinstitutions. Pavilion REIT’s short term deposits are placed at fixed rate investments and upon which management endeavours Risk managementobjectives, policiesandprocesses formanagingtherisk The allowance account in respect of trade receivables is used to record impairment losses. Unless Pavilion The movements intheallowance forimpairmentlossesofreceivables duringthefinancial year were: Credit risk(cont’d) Real EstateInvestment Trust concerninglimitsontotal borrowings financing. Commission’s on Securities Guidelines the observes and monitors also Manager the addition, In flows. cash in fluctuations of effects the mitigate to and unitholders, to income distribute to operations,REIT’s Pavilion Pavilion REIT’s exposure to liquidity riskarisesprincipallyfrom itsvarious payables andborrowings. Impairment losses in thestatementoffinancialposition. Exposure to credit riskand credit quality to obtainthebest rate available inthemarket. Cash andcashequivalents against thereceivable directly. off written is irrecoverable considered amount the possible, is amount the of recovery that satisfied is REIT

Pavilion REIT 2017Annual Report RM’000

Financial Statements(cont’d)

(1,162) 1,702 2,864 2017 Notes to the

2,864 3,048 2016 (184) 89

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 90 20. Financial Statements(cont’d) Notes to the Financial instruments(cont’d) 20.6 20.5 Payable andaccruals Borrowings Financial liabilities 2016 Payable andaccruals Borrowings Financial liabilities 2017 Market risk is the risk that changes in market prices such as interest rates will affect Pavilion REIT’sPavilionaffect rates interestwill as such financial prices market in changes that risk the is risk Market Market risk the of end the at as liabilities financial REIT’s Pavilion of profile maturity the summarises below table The Liquidity risk(cont’d) position orcashflows. financial year basedonundiscountedcontractual payments. Maturity analysis 20.6.1 REIT depositsandborrowings. isinrespect ofshort-term the market interest rates on its financial position and cash flows. Interest rate risk exposure to Pavilion the extentto whichnetinterest expensecouldbeaffected by adverse movements ininterest rates. assets andinterest-bearing financialliabilities. The interest rate risks are uncertainties resulting from the effects of fluctuations in the prevailing level of Interest rate risk is objectivemanaged by theoflimiting Manager onanon-going basis with the primary Risk managementobjectives, policiesandprocesses formanagingtherisk financial interest-earning to principally relates rates interest in changes to exposure REIT’s Pavilion Interest rate risk

1,671,569 1,412,351 1,712,887 1,462,681 Carrying 259,218 250,206 RM’000 amount Contractual 4.85 -5.02 4.48 -4.85 interest Pavilion REIT 2017Annual Report rate% – –

Contractual 1,668,746 1,639,085 1,927,964 1,889,291 cash flow 259,218 250,206 RM’000 Less than 193,820 177,099 262,807 241,533 RM’000 68,987 64,434 1 year 775,109 826,713 68,987 20,034 51,604 89,021 years 1 -2 1,530,772 1,576,136 799,542 821,045 RM’000 45,364 21,503 years 2 -5 20. Financial instruments(cont’d) 20.7 20.6 Borrowings Tenants’ Financial liabilities 2016 deposits Borrowings Tenants’ Financial liabilities 2017 deposits The table below analyses financial instruments not carried at fair value, together with their fair values and values fair their with together value, fair at carried not instruments financial analyses below table The amountsThe of carrying cash and bank balances, receivables and deposits, payables and accruals approximate Fair value information Market risk(cont’d) carrying amountsshowninthestatementoffinancialposition. carrying their fairvalues dueto termnature therelatively ofthesefinancialinstruments. short 20.6.1

(b) (a) Interest rate risksensitivity analysis rateFloating instruments amountsattheendoffinancial carrying year was: Financial liabilities-Borrowings Financial liabilities-Borrowings licensed banks Financial asset-Deposits placedwith Fixed rate instrument on based instruments, financial REIT’s interest-bearing Pavilion significant of profile rate interest The Exposure to interest rate risk Interest rate risk(cont’d) analysis isnotpresented. change ininterest rates attheendoffinancial year wouldnot affect profit orlossequity. Cash flow risk arising from variable rate instruments is not material to Pavilion REIT. Hence, sensitivity Cash flowsensitivityanalysis for variable rate instruments a Therefore, value. fair at instruments financial rate fixed any for account not does REITPavilion Fair value sensitivityanalysis forfixed rate instruments Pavilion REIT 2017Annual Report RM’000 Level 1 Fair value offinancialinstruments – – – – – – RM’000 not carriedatfairvalue RM’000 Level 2 – – – – – –

(1,430,330) (1,545,303) (1,434,359) (1,550,535) Financial Statements(cont’d) (120,205) (110,944) Level 3

(1,430,330) (1,545,303) (1,434,359) (1,162,681) (1,550,535) (120,205) (110,944) (300,000) 256,677 (43,323) value 2017 Total fair Notes to the

(1,412,351) (1,579,261) (1,462,681) (1,112,351) (1,526,745) (114,394) (116,580) (300,000) Carrying 298,133 amount (1,867) 2016 91

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 92 22. 21. 20. Financial Statements(cont’d) Notes to the Operating leases Capital management Financial instruments(cont’d) Pavilion REIT operating 5)under (Note itsinvestment leasesout leases. properties The future leasereceivable minimum The Deed provides that the Manager shall, with the approval of the Trustee, for each distribution period, distribute all As at 31 December 2017, Pavilion REIT recorded a gearing ratio of 25.87% (2016: 25.25%) and interest coverage ratio capital The position. financial of statement the in fund unitholders’ its by represented is capital REIT’s Pavilion Pavilion REIT’s objectives when managing capital is to provide unitholders with regular and stable distributions and under non-cancellableleasesare asfollows: Leases aslessor half-yearly basis(orsuchotherinterval asdeterminedby theManageratitsabsolutediscretion). income. It is the intention of the Manager to distribute at least 90.0% of Pavilion REIT’s distributable income on a (or suchother percentage as determined by the Manager at its absolute discretion) of Pavilion REIT’s distributable Distribution Policy breached thefinancialcovenants. not has REIT Pavilion Agreements. Facility the in stated definition the on based is ratiocoverage interest and ratio in excess of the minimum requirement (2016: in excess of the minimum requirement). The calculation of the gearing equity ratio thatalsocomplieswithregulatory requirements. of the Manager will monitor andare determined to maintain an optimal gearing ratio that will provide an ideal debt Directors The Agreements. Facility the in stated as institutions financial by prescribed covenants financial the with the minimum interest coverage ratio which is an effective indicator of its financial strengths in addition to complying requirements imposed onPavilion REIT is to ensure it maintains a healthy gearing ratio50% ofmaximumandmeets achieve long-termgrowth inNAV perunit,whilemaintaininganappropriate capitalstructure. 20.7 Between oneandfive years Less thanoneyear The followingtableshowsthevaluation techniquesusedinthedeterminationoffairvalues withinLevel 3. Level 3fairvalue borrowings Tenants’ deposits, Type The discount rates used above have incorporated credit risk of Pavilion REIT and liquidity risk of the instruments. Fair value information(cont’d) to. The inputs for these risks are because unobservable there are no identical or similar instruments to benchmark Financial instrumentsnotcarried atfairvalue Pavilion REIT date. atthereporting Discounted cashflowsusinga rate basedonthecurrent market rate ofborrowing of Description ofvaluation techniqueandinputsused RM’000 705,608 Pavilion REIT 2017Annual Report

351,191 354,417 2017 432,302 316,870 749,172

2016 24. 23. Significant related party transactionsSignificant related party Capital commitments The above transactions have been entered into in the normal course ofbusiness and have been established based Significant related party transactions, other than those disclosed elsewhere in the financial statements, are as follows: Related parties also include key management personnel defined as those persons having authority and responsibility are considered be to related to parties Pavilion statements, REITfinancial these of Forpurposes the if Pavilion REIT (KL) SdnBhd∆ Cemerlang Urusharta Pavilion Sdn.Bhd. ^ Kuala Lumpur Sdn. Bhd.◊ Impian Ekspresi Sdn. Bhd.∞ Lumayan Indah (Malaysia) Sdn.Bhd.# Crabtree &Evelyn Group * Malton Berhad Management Sdn.Bhd. Pavilion REIT to theManager Companies related of seniormanagementPavilion REIT ManagementSdn.Bhd.andMTrustee Berhad. all include the personnel Directors of Pavilion REIT Bhd. Management Sdn. and MTrustee members and Berhad, certain for planning, directing and controlling the activities of Pavilion REIT either directly or indirectly. The key management may beindividualsorotherentities. common control. Relatedparties to subject are party the REIT and Pavilion where or versa, vice or decisions, operating and financial making in party the over influence significant exercise or party the control jointly or control to indirectly, or directly ability, the has - Withinoneyear Authorised andcontracted for: Investment properties Capital expenditure commitments Capital expenditure inrespect ofthefollowinghasnotbeenprovided forinthefinancialstatements: on negotiatedtermsandconditions. Sdn. Bhd.α Cemerlang Urusharta

Rental incomeanditsrelated Purchase of product charges Rental incomeanditsrelated charges Rental incomeanditsrelated charges Rental incomeanditsrelated transactions Nature of Kuala Lumpur Mall area inPavilionDisposal ofpart to ElitePavilion Mall Reimbursement of electricity supply charges Rental incomeanditsrelated rights fee anditsrelated charges Expenses ofMRT stationnaming charges Rental incomeanditsrelated charges Pavilion REIT 2017Annual Report

RM’000

Transaction value RM’000 (1,575) Financial Statements(cont’d) 6,086 3,086 (283) 2017 880 776 765 118 843 455

RM’000 1,218 3,062 2016 (70) 774 654 463 – – – 3 522,000 2017 Balance outstanding RM’000 1,214 Notes to the 2017 792 64 – – – – – 1 8 RM’000

2016 2016 196 191 (6) 12 93 – – – – – 3 4

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 94 25. 24. Financial Statements(cont’d) Notes to the Significant events duringthefinancial year transactionsSignificant (cont’d)related party On 27 July 2017, the Board of Directors ofthe Manager, CIMB Investment Bank Berhad and Maybank Investment a) agreements in relation to the“Proposed Acquisition”: Bank Berhad announced that MTrustee Berhad, as trustee of Pavilion REIT (“Trustee”), had entered into the following α ∆ ^ ◊ ∞ # * areThe above deemedrelated asfollows: parties

iii. ii. i. Conditional sale and purchase agreement with Urusharta Conditional Cemerlang (KL) Sdn Bhd sale (“UCKL”)and purchase agreement with Urusharta the for acquisition Ahmad MohammedF Q Al-Khanji and Mohd Abdulrazzaq A Al-Hashmi are also directors ofawhich company Tan SriLimSiewChoonandPuan Tan Kewi Yong are deemedinterested in UCSB through their interest in Ahmad Al-Hammadi, A H Ali Ahmed Fook, TuckLee Dato’Yong, KewiTan Sri Puan Choon, Siew Lim Sri Tan Ahmad MohammedF Q Al-Khanji and Mohd Abdulrazzaq A Al-Hashmi are also directors ofa substantial Tan Sri LimSiewChoon is deemed interested in UCKL through his interest in the ultimate holding and company Tan Sri Lim Siew Choon, Ahmad Mohammed F Q Al-Khanji, Mohd Abdulrazzaq A A Al-Hashmi and Navid Chamdia Tan SriLimSiewChoon,Puan Tan Kewi Yong andDato’ Lee Tuck Fook are directors ofKuala Lumpur Pavilion Choon’s Siew Lim Sri Tan of virtue by Manager the to related party deemed is Bhd. Sdn. Ekspresi Impian the of directorsare Chamdia Navid and Al-Hashmi A A Abdulrazzaq Mohd Al-Khanji, Q F Mohammed Ahmad Crabtree & Evelyn related of (Malaysia) to Sdn. Bhd. is the deemed party Manager byTan virtue Sri Lim Siew Malton related Berhad Group of the directorship to are the deemed Manager parties by and interest virtue of SPA”): of Elite Pavilion Mall comprising theatotalfollowings, for purchase consideration of RM580,000,000 (“Elite is asubstantialshareholder ofUCSB. the ultimateholdingcompany. CemerlangSdn.Bhd.(“UCSB”). and Urusharta Mohammed F Q Al-Khanji, Mohd Abdulrazzaq A Al-Hashmi and Navid Chamdia are directors ofthe Manager shareholder of theholdingcompanyofUCKL. Puan Sri Tan Kewi Yong ishisspouse. are Cemerlang(KL)Sdn.Bhd.(“UCKL”). directors oftheManagerandUrusharta of Kuala Lumpur Pavilion Sdn.Bhd. Sdn. Bhd. Tan Sri LimSiewChoonand Puan Sri Tan Kewi Yong hold the entire issued and paid up share capital directorship anddeemedinterest inImpianEkspresi SdnBhdandhisspouse,PuanSri Tan Kewi Yong. Manager andLumayan IndahSdn.Bhd. Choon’s interest inCrabtree &Evelyn (Malaysia) Sdn.Bhd.andhisspouse,PuanSri Tan Kewi Yong. Tan SriLimSiewChoonandPuan Tan Kewi Yong, hisspouse,inMalton Berhad.

The transfer ElitePavilion within of tenancies MallandtheSubway thetransfer Linkageunder agreements The assignment of all benefits, rights and entitlements to an underground pedestrian tunnel with strata with tunnel underground pedestrian an entitlements to and rights benefits, all of assignment The Level B3, Level B2, Level B1, Level 1 – Level 10 (inclusive), Level 10M, Level 10MM, Level 11 (including (“Transferred Agreements”). Lumpur (“Subway Linkage”); interconnects Elite Pavilion Mall with shopping mall across Jalan Bukit Bintang, Kuala other approximatelyrelevant that area and square of spaces outlets 8,697 floor with retail feet together building. The strata floorarea isapproximately 437,585square feet; stratified parcels comprising, amongst others, 50 car park bays located at Level B3 to Level 2 within the and Levelroof) 52 (including the external façade ofLevel 52 up to rooflevel) of the building, and the Pavilion REIT 2017Annual Report 25. Significant events duringthefinancial year(cont'd) In the Unitholders’ Meeting convened 2018, the on unitholders 16 approvedJanuary the Proposed Acquisition. The On 30 November 2017, Bursa Securities had approved the listing and quotation of up to 218,000,000 new Units to be On 17 October 2017, Securities Commission had approved the issuance of upto 218,000,000 new Units under the In conjunction with the Proposed Acquisition, The Board proposes the Proposed to Placement of upto undertake The EliteSPA andVesting Agreement are inter-conditionaluponeachotherandare to becompletedconcurrently. Board ofDirectors oftheManagerexpectsProposed of2018. Acquisitionto becompleted by firstquarter issued pursuantto theProposed PlacementontheMainMarket ofBursaSecurities. Main Market ofBursaSecurities. Proposed Placement, listing and quotationofupto 218,000,000 new Units under the Proposed Placement on the the Proposed Acquisitionandalsodefray theexpensesrelating to theProposals. 218,000,000 new units in Pavilion REIT (“Unit”) of the total units in circulation, by fund way of bookbuilding to partly b) An agreement with Urusharta CemerlangSdnBhd (“UCSB”) UCSBtoand UCKLfor vestAn agreement to with Urusharta the Trustee of all rights, benefits and entitlement to the on-going tenancies on these areas to the Trustee (“Vesting Agreement”). with Pavilion KL Mall (with strata floor area of approximately 18,407 square feet) togetherwith the transfer ofon Levels all 4 to 7 with seating and/or retail areas located on Levels 4 to 10 that interconnect Elite Pavilion Mall rights, title, interest, benefits, and entitlement to and ownership of amongst others, the pedestrian link bridges Pavilion REIT 2017Annual Report Financial Statements(cont’d) Notes to the 95

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 96 Commissioner forOaths Before me: Dato’ Lee Tuck Fook ...... 2018. 25 January Subscribed and solemnly declared by the abovenamed Dato’ Lee Tuck Fook, I/C No 540601-04-5333, at Kuala Lumpuron oftheprovisionsthe sameto betrue,andbyoftheStatutory Declarations virtue Act,1960. 57 to 95 are, to the best of myknowledge and belief, correct and I make this solemn declaration conscientiously believing of Pavilion Real Estate Investment Trust, do solemnly and sincerely declare that the financial statements set out on pages I, Dato’ Lee Tuck Fook, the Director of Pavilion REIT Management Sdn. Bhd. primarily responsible for the financial management DECLARATION STATUTORY 2018 Date: 25January Kuala Lumpur, Director Dato’ Lee Tuck Fook ...... Director Tan SriLimSiewChoon ...... Signed inaccordance witharesolution oftheDirectors oftheManager: Pavilion REIT ManagementSdn.Bhd., For andonbehalfoftheManager, andcashflowsforthe performance year endedonthatdate. financial their of and 2017 December 31 at as Investment Trust Estate Real Pavilion of position financial the of view fair Standards, Standards so as to and Internationalwith Malaysian Financial giveReporting Financial a true Reporting and In the opinion of the Directors of the Manager, the financial statements set out on pages 57 to 95 are drawn up in accordance THE MANAGER STATEMENT BY Pavilion REIT 2017Annual Report Date: 25 January 2018 Date: 25January Selangor, Chief Executive Officer Nurizan BintiJalil ...... MTrustee Berhad For andonbehalfofthe Trustee, 1) December 2017asfollows: 31 ended REIT. year Pavilion financial of the objectives for the declared of reflective been have are distributions and Final with line in 2017 are December 31 ended year financial the declaredduring distributions income the that confirm Wealso adequate andthatsuchvaluation/pricing iscarriedoutinaccordance withtheDeedand otherregulatory requirements. We have ensured the procedures and processes employed by the Manager to value and price the units of Pavilion REIT are securities lawsandotherapplicableduringthefinancial year thenended. the Deed dated 13 October 2011, the Securities Commission’s Guidelines on Real Estate Investment Trusts, applicable Pavilion REIT in accordance with the limitations imposed onthe investment ofthe powers Managerandthe Trustee under 2017. In our opinion and to the best of our knowledge, Pavilion REIT has Management managed Sdn. Bhd. (“the Manager”) We have acted as Trustee of Pavilion Real Estate Investment Trust (“Pavilion REIT”) for the financial year ended 31 December Final incomedistributionof 4.28senperunitpayable on28February 2018. Pavilion REIT 2017Annual Report to theUnitholdersofPavilion RealEstate Investment Trust (Established inMalaysia) TRUSTEE’S REPORT 97

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 98 from us. This is a key audit matter because some of the key assumptions are unobservable and hence, required significant judgement a smallchangeintheassumptionscanhave asignificantimpact to the valuation. in estimating the underlying assumptions to be applied. The valuations are highly sensitive to key assumptions applied i.e. The valuation process involves significant judgement in determining the appropriate valuation methodology to be used, and areThese investment statedattheirfairvalues properties basedonindependentexternalvaluations. representInvestment properties thesinglelargest ofassetsonthestatementfinancialposition. category Pavilion REIT owns a portfolio of investment properties comprising 3 shopping malls and an office block located in Malaysia. Valuation ofinvestment properties this matter. financial the of audit our of context the statements of Pavilion REIT as a whole, and in forming ouropinion thereon, and we donot providein a separate opinion on addressed was matter financial This year. the current of the audit in our REIT in Pavilion significance of most statements of was judgement, professional our in that, matter a is matter audit Key Key Audit Matter with theBy-LawsandIESBACode. Accountants Professional for Ethics Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards BoardAccountants’ for We are independent of Pavilion REIT in accordance with the By-Laws Independence andOtherEthicalResponsibilities and appropriate to provide abasisforouropinion. sufficient haveis evidencewe obtained Weaudit believethe that auditors’ report. our of section Statements Financial the Auditing. Our responsibilities under described those in standardsthe Auditors’ are Responsibilities further for the Audit of We conducted ouraudit in accordance with approved standards on auditing in Malaysia and International Standards on Basis forOpinion Standards. Standards andInternationalFinancialReporting Malaysian FinancialReporting with accordance in ended then year the for flows cash their and performance financial their of and 2017, December 31 at In our opinion, the accompanying financial statements give a true and fair view of the financial position of Pavilion REIT as ofsignificantaccountingpolicies,assetoutonpages57 statements, includingasummary to 95. notes financial and the ended, to then the year for flows cash of statements and equity in changes of statements income, comprehensive other and loss or profit of statements the and 2017, December 31 at as position financial of statements the comprise which REIT”), (“Pavilion Investment Trust Estate Real Pavilion of statements financial the audited have We Opinion ontheAudit oftheFinancialStatements Report (Established inMalaysia) to theUnitholdersofPavilion RealEstate Investment Trust AUDITORS’ REPORT INDEPENDENT (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance in responsibilities ethical other our fulfilled have we and Code”), (“IESBA Pavilion REIT 2017Annual Report (on Professional(on Practice)and Conduct Ethics, Code of Code of the alternative butto doso. basis of accounting unless the Manager either intends to liquidate Pavilion REIT to cease operations, has or norealistic to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern In preparing the financial statements of Pavilion REIT, the Manager is responsible for assessing the ability of Pavilion REIT statements ofPavilion REIT thatare free from material misstatement,whetherdueto fraud orerror. financial preparationthe of enable to necessary is determine Manager the as control internal such for responsible also is in Standards. Standardsaccordance and International Financial with view MalaysianReporting The Manager Financial Reporting fair and true a give that REIT Pavilion of statements financial of preparation the for responsible is Manager The Responsibilities oftheManagerforFinancialStatementsPavilion REIT have inthisregard. nothingto report wearewe concludethat there requiredperformed, is a material misstatement of the Annual that Report, fact. We to report appears toknowledge obtained our in or theotherwise audit, or bematerially misstated. If, based on thewehavework REIT Pavilion of statements financial the with inconsistent materially is Report Annual the whether consider so, doing in In connection with our audit of the financial statements of Pavilion REIT, our responsibility is to read the Annual Report and, of assurance conclusionthereon. Our opinion on the financial statements of Pavilion REIT does not cover the Annual Reportand we do not express any form of statements financial the Pavilion REITinclude thereon. andourauditors’ report not does but Report, Annual the in included information the comprises information Pavilion REIT Management ofPavilionSdn. Bhd. (“The Manager”) REIT is responsible for the other information. The other Information OtherthantheFinancialStatementsandAuditors’ Report Thereon • • • • • • We thefollowingauditprocedures, performed amongothers: How thematterwasaddressed inouraudit Key Audit Matter

We also considered the adequacy of the disclosures in the financial statements, in describing the inherent degree inherent the describing in statements, financial the in disclosures the of adequacy the considered also We We challenged the capitalisation rates used in the valuation by comparing them against historical rates and available We tested the integrity of rental income data applied in the projected cash flows used in the valuation by comparing We assessed the valuation methodologies used by the Manager against those applied by external valuers for similar qualifications, expert's the vis-à-vis valuers external the of competence and qualifications the considered We of scope the of determination the valuers, external the of selection the for processesManager’s the assessed We inputs andfairvalues, inconveying theuncertainties. of subjectivity and key assumptions in the estimates. This includes the relationships between the key unobservable with thevaluers. proceduresrange, to further understand the effect we undertook discussions of additional factors and, held further data,taking intoindustry consideration comparability and market factors. Where the rates were outside the expected them withleaseagreements. types.Weproperty alsoconsidered theotheralternative valuation methodscommonlyusedby externalvaluers. membership ofaprofessional association,andlicenseto bodyorindustry practice. work ofthevaluers, by andassessedthevaluations theexternalvaluers. reported (cont'd) Pavilion REIT 2017Annual Report to theUnitholdersofPavilion RealEstate Investment Trust (Established inMalaysia) (cont’d) Auditors’ Report Report Auditors’ Independent 99

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 100 consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. rare circumstances, wedeterminebecausethe adversethat a mattershould not be inauditors’communicated our report unless law orregulationmatter inauditors’ our precludes report public disclosure about the matter orwhen,in extremely the in significance most of audit of the were financial statementsthat of Pavilion REITmatters for thethose current year anddetermine is thereforewe theManager, key audit matter.the Wewith describe this communicated matters the From on ourindependence,andwhere applicable,related safeguards. independence, and to with communicate them all relationships and other matters that may reasonably be thought to bear We also provide the Manager with a statement that we have complied with relevant ethical requirements regarding audit findings,includinganysignificantdeficienciesininternal contr We communicate with the Manager regarding, among other matters, the planned scope and timing of the audit and significant vi) v) iv) iii) ii) i) we exercise professional judgementandmaintainprofessional scepticismthroughout theaudit.We also: of an audit in accordance with approvedAs part standards on auditing in Malaysia and International Standards on Auditing, could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when assuranceReasonable isahighlevel assurance, of aguarantee isnot but inaccordance conducted approved thatanaudit with free from material misstatement, whether due to fraud or error, and to that issue includes an auditors’our opinion. report Our objectives are to obtain reasonable assurance about whether the financial statements of Pavilion REIT as a whole are Auditors’ ResponsibilitiesfortheAudit oftheFinancialStatements (Established inMalaysia) (cont’d) to theUnitholdersofPavilion RealEstate Investment Trust Auditors’ Report Independent

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities business or appropriate entities sufficient the Obtain audit evidence of regarding information financial the the REIT, including Pavilion of statements financial the of content and structure presentation, overall the Evaluate Conclude onthe appropriateness of the Manager’s use of thebasis going concernofaccountingand,based on the Evaluate theappropriateness ofaccountingpoliciesusedandthereasonableness ofaccountingestimatesandrelated Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate due REIT, whether Pavilion of statements financial the of misstatement material of risks the assess and Identify direction, supervision and performance ofthegroupdirection, andperformance audit.We supervision remain solelyresponsible forourauditopinion. the for REIT.responsible are Pavilion We of statements financial the on opinion an express to REIT Pavilion within in amannerthatgives atrueandfairview. disclosures, and whether the financial statements of Pavilion REIT represent the underlying transactions and events to continueas agoingconcern. obtained up to However, the date of ourauditors’ report. future events or conditions may causePavilion REIT to cease REIT or, if such disclosures are inadequate, to modifyouropinion. Our conclusions are based on the audit evidence we are required to draw attention in our auditors’ report to the related disclosures in the financial statementsdoubt on the ability of Pavilion REIT exists, to of continue as a going concern. If we conclude that a material uncertainty Pavilion audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant disclosures madeby theManager. Pavilion REIT. in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the internal control of misrepresentations, ortheoverride ofinternalcontrol. from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting to fraud or error, audit procedures design and perform responsive to those risks, and obtain audit evidence that is Pavilion REIT 2017Annual Report ol thatweidentifyduringouraudit. Date: 25 January 2018 Date: 25January Petaling Jaya Accountants Chartered (LLP0010081-LCA &AF0758) KPMG PLT other purpose.We donotassumeresponsibility to anyotherpersonforthecontentofthisreport. is made solely toThis the unitholders report of Pavilion REIT in accordance with the trust deed of Pavilion REIT andno for Other Matter

Pavilion REIT 2017Annual Report to theUnitholdersofPavilion RealEstate Investment Trust Chartered Accountant Chartered Approval Number:2055/06/18(J) Chan KamChiew (Established inMalaysia) (cont’d) Auditors’ Report Report Auditors’ Independent 101

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 102 largest unitholdersasperrecordThirty ofdepositors asat31December2017 Distribution ofUnitholdingsasat31December2017 UNITHOLDINGS ANALYSIS OF 15. 14. 13. 12. 11. 10. 9. 8. 7. 6. 5. 4. 3. 2. 1. No Total 5% andabove ofissuedunits 100,001 to lessthan5% ofissued units 10,001 -100,000 1,001 -10,000 100 -1,000 Less than100 Size ofUnitholdings Maybank Trustees BerhadforPublicRegularSavings Fund (N14011940100) Malaysia Nominees(Tempatan) SdnBhd Great EasternLife Assurance (Malaysia) Berhad (Par 3) Malaysia Nominees(Tempatan) SendirianBerhad Great Eastern Life Assurance (Malaysia) Berhad(LSF) Malaysia Nominees(Tempatan) SendirianBerhad Exempt anforStateStreet Bank & Trust Company(West CLT OD67) Nominees(Asing)SdnBhd Cartaban Amanah SahamWawasan 2020 Amanahraya TrusteesBerhad BBH andCoBoston forAsiaREIT MasterFund HSBC Nominees(Asing)SdnBhd Valuecap SdnBhd Exempt Bhd anfor AIA Citigroup Nominees(Tempatan) SdnBhd BNYM SA/NVforNewton AsianIncomeFund DB (Malaysia) Nominee(Asing)SdnBhd Kumpulan Wang Persaraan (Diperbadankan) Employees Provident Fund Board Citigroup Nominees(Tempatan) SdnBhd Amanah SahamBumiputera Amanahraya TrusteesBerhad Pledged SecuritiesAccountfor Tan Kewi Yong (129118) Maybank Nominees(Tempatan) SdnBhd Pledged SecuritiesAccountforLimSiewChoon(432218) Maybank Nominees(Tempatan) SdnBhd CS (Switz)forQatarHoldingLLC HSBC Nominees(Asing)SdnBhd Name ofUnitholders Unitholders

No. of 5,242 2,938 1,056 205 999 41 3 Pavilion REIT 2017Annual Report Unitholders 100.00 19.06 56.05 20.14 0.06 3.91 0.78 % of

3,030,093,605 2,210,000000 771,283,451 33,622,400 14,413,500 773,500 No. of Units 1,082,900,000 754 114,434,003 125,343,200 281,775,000 845,325,000 No. ofUnits 10,388,500 13,000,000 13,169,700 14,533,300 20,000,000 29,560,700 39,301,800 46,663,000 54,169,900 57,335,300 Unitholdings 100.00 35.74 27.90 72.94 25.45 0.34 0.43 0.43 0.48 0.66 0.98 1.30 1.54 1.79 1.89 3.78 4.14 9.30 1.11 0.48 0.02 0.00 % of % Thirty largest unitholdersasperrecordThirty ofdepositors asat31December2017(Cont’d) 30. 29. 28. 27. 26. 25. 24. 23. 22. 21. 20. 19. 18. 17. 16. No HSBC Nominees(Tempatan) SdnBhd Employees Provident Fund Board (CIMBPRIN) Citigroup Nominees(Tempatan) SdnBhd forVanguardJPMCB NA Total InternationalStock IndexFund HSBC Nominees(Asing)SdnBhd Name ofUnitholders As Amanah TrusteesBerhad Kumpulan Wang Persaraan (Diperbadankan)(CIMBEquities) Citigroup Nominees(Tempatan) SdnBhd Employees Provident Fund Board (Amundi) Citigroup Nominees(Tempatan) SdnBhd forJupiterEmergingJPMCB NA andFrontier Income Trust PLC HSBC Nominees(Asing)SdnBhd HSBC (M) Trustee BhdforZurich Insurance Malaysia Berhad(Life Par) HSBC Nominees(Tempatan) SdnBhd BBH andCoBoston forVanguard Emerging Markets Stock IndexFund HSBC Nominees(Asing)SdnBhd Six SISforB&IPan-Asian Total ReturnRealEstate SecuritiesFund HSBC Nominees(Asing)SdnBhd PB Growth Fund Amanahraya TrusteesBerhad BNYM SA/NVforNewton Emerging IncomeFund DB (Malaysia) Nominee(Asing)SdnBhd PAMB forPrulinkEquity Fund Nominees(Tempatan)Cartaban SdnBhd Amanah SahamMalaysia Amanahraya TrusteesBerhad Pavilion REIT ManagementSdnBhd HSBC (M) Trustee BhdforAllianzLife Insurance Malaysia Berhad(P) Pavilion REIT 2017Annual Report ntodns (cont’d) Unitholdings No. ofUnits 10,269,200 10,304,600 7,558,800 8,038,900 8,749,000 9,725,005 9,771,000 5,001,500 5,594,800 6,000,000 6,327,500 6,339,000 6,381,700 7,376,700 7,479,200 Analysis of 0.17 0.18 0.20 0.21 0.21 0.21 0.24 0.25 0.25 0.27 0.29 0.32 0.32 0.34 0.34 103 %

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 104 Unitholdings ofDirectors andChiefExecutive Officerasat31December2017 Major Unitholders(5%andabove) asat31December2017 Unitholdings (cont’d) Analysis of *: Negligible 3. 2. 1. No 3. 2. 1. No 5. 4. 7. 6. 8. Puan Sri Tan Kewi Yong Tan SriLimSiewChoon Qatar HoldingLLC Name ofUnitholders Dato’ Lee Tuck Fook Puan Sri Tan Kewi Yong Tan SriLimSiewChoon Name ofUnitholders Ooi AhHeong Navid Chamdia Dato’ Mohzani binAbdulWahab Philip HoYew Hong Dato’ Maznah bintiAbdulJalil Direct Interest Direct Interest 1,082,900,000 281,875,000 845,425,000 281,875,000 845,425,000 No. ofUnits No. ofUnits 100,000 100,000 100,000 100,000 100,000 95,000 Pavilion REIT 2017Annual Report 27.90 27.90 35.74 9.30 9.30 % % * * * * * * Deemed Interest Deemed Interest No. ofUnits No. ofUnits – – – – – – – – – – – % % – – – – – – – – – – – building materialssectors. of the electrical and electronics by sector the food-related as well as domestic-oriented as well industries as supported The manufacturing sector enjoyed strong industries growth,led by the good performance driven by both export-oriented production cutagreement. recovery of crude oil prices may stimulate an increase in production ofUSshale oil and this may impede the effect of the agreement to cut production and this helped to push prices back up to US$58.36/bbl as at 1 December. the Nevertheless, plunging mid-year to have US$46.17/bbl on 30 June. Since reachedthen, OPEC and Russia, the major oil exporters, an the year ona positive note with averageCrude oil prices started before closing at US$53.59/bbl on 31 January prices (WTI) a similarforecast. of Finance has projected a growth of between 5.0% and 5.5% Authoritywhilst the International (IMF) Monetary has made due byto strong the favourable domestic demand as well as exports supported global conditions. For 2018, the Ministry growth for 2017 to be at the upper end of the official growth projections - between 5.2% and 5.7%. The economic growth is to have grown strongly by 6.2% in the third quarter, up from 5.8% the previous quarter, leading BNM to forecast the GDP releasedBased on the bylatest report Bank Negara Malaysia (BNM) for Q3 2017, the Malaysian is economy estimated GENERAL ECONOMICOVERVIEW 2017

Annual Rate (%) G

rowth R ate (%) 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 Pavilion REIT 2017Annual Report 2010 7.2 Chart 2: WTI (Nymex)CrudeOilPrices2017 2:WTI Chart Chart 1:Malaysia –AnnualGDPGrowth Rate(%) Chart 2011 5.1 Source: Nasdaq 2012 5.6 Source: BNM 2013

4.7 2014 6.0 2015 5.0 2016 4.2 Q 3 5.8 2017 OVERVIEW

Forecast MARKET 2018 5.6

105

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 106 Table 1:RetailSupplyinKlangValley, 2017 The total retail supplyinKuala Lumpur, SelangorandPutrajaya isasdetailedoutinthetablebelow: second consecutive year from 79.9%in2016to 78.3%. total retail supply of about 74.3 million square feet. The average rateoccupancy of these shopping centres dropped for the As at December2017, Klang Valley (including Kuala Lumpur, SelangorandPutrajaya) had 262 shopping centres with a Total RetailSupplyAnd Demand Klang Valley RetailSupplyIn2017 THE RETAIL SECTOR sinceQ22017. over twoconsecutive quarters prices. The Ringgit continued to improve against the greenback andSingaporecurrency dollarandwasthe best performing 4.3% in Q1 to 4.0%in Q2 and 3.8% in Q3 but is expected to remain at elevated levels in the immediate term dueto rising oil from steadily declined has previous inflation year’s Headline the high. match record to set is year the of months nine first the for country the into inflows FDI Q2. in 5% of decline a to compared growth 4.1% a with recoveredinvestments public investments went up by 7.9% (7.4% in Q2). Public consumption on the other hand expanded by 4.2% in Q3 (3.3% in Q2) whilst In terms ofconsumptionand investment, private consumption rose 7.2% in Q3 2017 (up from7.1% in Q2) whilst private (cont’d)Overview Market to secure newtenantsto fill vacant lots. operation costs, reduced shopping traffic, decreased retail sales and early termination of tenants. Once again, it took longer For the year of2017, Klang Valley shopping centres were still facing more or less the same challenges in 2016 - higher store,supermarket, cineplex,bowlingalley department etc. in 2016 to RM8.97 per square feet per monthin 2017. This average did not include rental rates of anchortenants such as The average rental rate for Klang Valley declined for the second consecutive year from RM9.21 per square feet per month NAPIC MarketSource ButcherRetail/2H2017Property Report, :Henry * -excludes rental rates store, ofanchortenantssuchassupermarket, cineplex,bowlingalley, department etc. # -includeshypermarket mallsandarcades 1 No. 3 2 TOTAL Selangor Kuala Lumpur Location

No. ofMalls# � 112 147 262 3 Total NettFloorArea Chart 3:Malaysia’sChart GDPGrowth Source: BNM/MOF (square feet) 74,334,844 38,838,806 33,538,465 1,957,573 Pavilion REIT 2017Annual Report

per square feet permonth)* Average RentalRate(RM 12.29 8.97 3.72 9.16 Average Occupancy Rate(%) 78.3 82.0 77.0 79.6 • • • • • • • • A total of8shopping centres opened in2017: Source: ButcherRetail Henry **- AmerinMallwasopenedon15December2017. * -occupancyrates were estimatedbasedonobservation studiescarriedoutbefore 15December2017 Table 2:Newshoppingcentres openedin2017 New Openingsin2017 Selayang StarCity Mall, Bangsar Trade Centre, Evo Mall, KL Eco City Mall, Pacific Star and The Shoppes atNumerous shopping centres scheduled opening for in 2017 were delayed Four to the following year. Seasons They include M Square, Place. to take uptheirretail shops. tenants new secure to difficulty faced year this opened that centres shopping new hand, year.other improvedthis the On Shopping centres that suffered from low occupancy rates in 2016 were able to fill up more retail lots. Their occupancy rates retain existingtenants. As in the previous year, many shopping centre owners needed to introduce rental rebates or reduce rental rates in order to TOTAL Amerin Mall Centrus Mall KIP Mall Eight Kinrara Empire CityMall Melawati Mall KL Gateway Mall MyTown Name Amerin Mall in Balakong is the latest shopping centre opened that before the end of 2017. It is tenanted by SKM by tenanted is It 2017. of end the before that opened centre shopping latest the is Balakong in Mall Amerin Centrus Mall in Cyberjaya was completed and opened to the public in 2017. Only a few tenants are found in this new as Econsave with 2017 August in opened was It Sepang. of area growth new a in located is Warisan Kota Mall KIP now is initially. It tenants find to Kinrara,struggled Bandar in centre shopping neighbourhood small Kinrara,a Eight The largest shopping mall that opened in 2017 is Empire City Mall with 1.8 million square feet of nett floor area. This is It 2017. of middle the during public the to opened centre, commercial Melawati within located Mall, Melawati KL Gateway, located at the main entrance of , opened in early 2017. This retail podium of a mixed-use Grocer Village Parkson, by anchored is It 2017. early in opened Cherasdelay, in much MyTownmall After shopping the mainanchortenant. tenanted by AnytimeFitness,Maybank, F&Boutletsandretail tenants. alley. mall has yet to be open to tenants Parkson, include Other anchor VR park and CJCinemas, a public. CGV large bowling Empire CityMall were ready intimefor the SEAGamesheldinAugust 2017. ofthismegashopping The remaining part mall was supposed to open in 2015, but was delayed several times. The ice-skating rink and several F&B outlets in anchored by VillageGrocer, GSCcineplexandFitnessFirst. development isanchored by VillageGrocer. It isthesecondlargest shoppingcentre openedthisyear. and GSC cineplex. It opened the mall with numerous empty lots, but they were taken up and opened over the months. Market, AmerinCineplex,anevent hall,F&Boutletsandretail tenants. retail centre.

Bandar Kinrara Pavilion REIT 2017Annual Report Damansara Cyberjaya Balakong Melawati Location Bangsar Sepang Cheras Net LettableArea (square feet) 1,100,000 4,545,000 1,800,000 620,000 350,000 155,000 200,000 250,000 70,000 Parkson/ IceSkating Village Grocer /GSC Econsave /MrDIY SKM Mkt/Amerin Anytime Fitness Anchor Tenant Jaya Grocer Cineplex Parkson None Ring vriw (cont’d) Overview Occupancy Rate(%)* Market **NA 107 80 60 25 90 85 90 5

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 108 for refurbishment andredevelopment duringthelast2years butthey have yet to re-open to public. Pandan Safari in Pandan Perdana, LuckyPlaza Bandar Park in Old Klang Road andSSTwoMall in Petaling Jaya were closed demolishment by nextyear. for targeted is which ago years 44 Kuala in Lumpur opened centre shopping first the MRTwas Parksecond Ampang line. The Malaysian government paid about RM300 million to acquire from strata lot owners to develop the in early2018. The Sphere in Bangsar South was closed for redevelopment during the middle of 2017. The new retail centre will be reopened parking area. vicinity, immediate car its To open in its competition AEON at new extension against new fight a building is Taman Subang Avenue completeditsrefurbishment andisready foritsnewopeninginearly2018. inKualaKompleks Lumpur Pertama refurbishment citycentre to undertook improve itsbuildingfacades. Sogo KLinKuala Lumpur citycentre refurbished itsexteriorfacadeandinternallayouts whileremaining open. IPC MallinDamansara majorrefurbishment andcompletedrecently undertook withnewinteriorandtenants. LBS BinaGroup Bhdacquired M3MallinGombakforRM105millionSeptember2017. Management SdnBhdforRM87.8million. In June 2017, AEON Co(M) Bhd announced that it will sell AEON Mahkota Cheras shopping centre to Foremost Wealth In early2017,Pelaburan Bhd(PHB)boughtEmpire inSubangJaya ShoppingGallery for RM570million. Hartanah Acquisition, RefurbishmentandClosure including offering attractive rental packages. had stabilised during the second half of 2017. Landlords had been proactive to improve the ratesoccupancy of their malls, Many shopping centres in Klang Valley hadbeen facing higher vacancyrates since the beginning of 2016. This situation not but etc, Cheras Damansara, apparent inareas like Klang,Bangi,KajangandKepong. Jaya, Petaling centre, city Lumpur Kuala like areas in prominent location-specific, was The second challenge is oversupply. Klang Valley has been facing retail oversupply for the last 8 years. However, oversupply occupancy rate andaverage rental rate in2017. This affected even themostpopularshoppingcentres inKlangValley. spending due to rising cost of living and weak economic conditions. This was the main reason that led to drops in average problem facedby shopping malls in Klang ValleyThe most important in 2017 was the severe reduction in consumers’ renovation costsetc)inorder to attract reputable tenantsto openshopsintheirshoppingcentres. Shopping centre owners still needed to offer incentives monetary (including lower rental, longer rent-free period, subsidised year. Yet they are notableto increase theirrental rates anyhigherascompared to 2016. Shopping centre owners were facing higher operation costs (air-conditioning, security, cleaning and staff costs) during the Major Challenges shopping malls),there were lesspurchases made. Compared to 2 years ago,thoughconsumerswere still frequenting shopping malls, (especially during weekends, in large operation costs. Similar to 2016, the main challenges for Klang Valley shopping centres in 2017 are reduced consumer spending and rising Shopping Centre Market VALLEYKLANG SHOPPINGCENTRE IN2017 PERFORMANCES (cont’d)Overview Market

Pavilion REIT 2017Annual Report of managedfloatsysteminDecember2014. higher fuel prices. Average pump price for RON95 during the first quarter of 2017 was the highest since the implementation In addition,pricesofretail goodscontinuedto risesincethebeginningof2017, mainlydueto ourweakMalaysian currency and their spendingonfestive goods. growth rateThis poor quarterly was also due to weak Chinese New Year 2017. Shoppers sales werein January careful in Unfortunately, ithadyet to recover. ayearAs compared ago,the retail contracted to industry the same quarter by 4.4% due to strong pre-GST sales in 2015. as sales, retail in -1.2% of rate compared to thesameperiodin2016(refer to growth Table 3below). disappointing a recorded industry retail Malaysia’s 2017, of quarter first the For RetailSalePerformances Quarterly Seven replaced Gianthypermarket locatedwithinViva HomeMallinCheras duringthemiddleof2017. its leases expired. These outlets were located in Kuala Lumpur, Selangor, , Perak and Sarawak. In addition, Super GCH Retail (Malaysia) Sdn Bhd announced the closure of 5 Giant hypermarkets and supermarkets by November 2017 after Malaysian currency depreciation forthelast2years had alsoledto highercostoflivingforevery Malaysian. been severely onraw affected by materials,unfinishedgoodsand thehighercostsofimports retail goods. The currency depreciation since early 2016 has been affecting retailers in costs of retail goods. Retailers’ profit margin had economic better Despite year. duringtheyear, the performance manyMalaysian consumersdidnotenjoy highertake-home pays. during spending consumers’ in improvement significant witness not did Retailers • • • Major challengesofretailers inMalaysia were: The mainchallengesforMalaysia retail in2017were industry more orlessthesameas2016. Major ChallengesDuringtheYear depreciated currency andrisingcostofretail operation. anotherdisappointingyear2017 was forKlangValley retailers. duetoThis was spending,intensecompetition, consumer weak VALLEYKLANG RETAIL MARKET government decidedto relax thisruling.Nodetailedguidelineshave beenpublishedto-date. the government stoppedreport, all new applications to build shopping centres. However, in December 2017, the Malaysian byIn arecentBank Negara published report ofMalaysia, there is a glut of retail space in Malaysia. In response to this Freeze onShoppingCentre Development Rising costofoperation Low consumers’confidencelevel Weak consumers’spending

Pavilion REIT 2017Annual Report vriw (cont’d) Overview Market 109

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 110 also gettingcheaper. This newmethodofpayment term. willbewidelyacceptedby Malaysian consumers intheshort accepting mobile wallet payment (such as Alipay, SamsungPay, Visa Pay, Apple Pay, are etc.). The price ofsmartphones ownership in Malaysia 70% accounting foroftotal handphone ownership, moresmartphone retailers in Klang Valley are Another major development in the Klang Valley retail is the industry rapid spread ofcashless payment systems. With online merchants. (MDEC) and National ICT Association of Malaysia (Pikom). This 5-day event also broke by 1,000 a recordparticipation for Corporation Economy Digital Malaysian by organised jointly was #MyCyberSale time, first the ForCelebration. 12 Double retailers enjoyed afruitfulyear with several shopping major events including #MyCyberSale, Double11 Single Day and This year, Klang Valley retailers faced another major threat - the rapid rise of e-commerce. Foreign and Malaysian online Major Retail Trends DuringtheYear for Malaysia retail in2017. industry This wasthe third revision sinceendof2016. With consideration of the latest results, Retail Group Malaysia (RGM) revised its annual growth forecast from 3.7% to 2.2% of 0.3%achieved during thesameperiodayear ago. 2017 growth rate’s quarter Fourth estimatehadbeenrevised from 5.5% to 4.5% recently, takinginto consideration thegrowth same period.Risingcostoflivinghadalsodeteriorated thepurchasing powerofMalaysian consumers. take-home pays. The propensity to spend was not high as reflected in the decline in Consumer Sentiment Index during the retail sale. Despite strongduring the thirdperformance economic quarter, majorityofconsumersdid not receive higher of 2016). The early HariRaya festival this year (in contributed toJune 2017 as compared the lower to July2016) partly The retail failed to industry bouncebackfromduring the same period in 2016 (1.9% in third theperformance poor quarter retail salesslidinto red againinthisquarter. declined byof this year, 1.1% as compared recovery to duringthe second quarter the same period in 2016. After a short of 2017, Forthe Malaysiananother disappointing result. the thirdretail reported For quarter industry this quarter, retail sales with heavy pricediscountsoffered by retailers locatedthroughout thecountry. The Hari Raya festival that began end of May boosted retail sales during this period. Malaysian consumers shopped more managed to recover slightlyduringthesecondquarter. year, this of industry months retail the 3 first the in performance dismaying a After 2016. in period same the tocompared of 2017, an MalaysiaencouragingFor retail reported the industry growthsecond quarter rate of 4.9% in retail sales, as Source: RetailGroup Malaysia (e) -estimate Table 3:Malaysia Growth RetailIndustry Rate,2017 Malaysian consumersturnedcautiousasthey were burdened by highercostofliving. (cont’d)Overview Market Average Fourth Third Second First Quarter

% Growth Rate 4.5(e) 2.2 (e) -1.1 -1.2 4.9 Pavilion REIT 2017Annual Report Table 4:NewForeign RetailerEntrants first outletsinMalaysia. They includeatleast43brands (inKlang Valley shoppingcentres only)from 15countries: Despite several major closures, many overseas retailers continued to choose Klang Valley shopping centres to open their These retailers closeddownmainlydueto intensecompetitionandhighercostofretail operation. Tours lesJour, HelloKittyCafe, BulgogiBrothers, PumpkinPatch, Tim HoWan andAeropostale. During the year, Klang Valley’s retail market suffered closures of several overseas retailers. They include Nature Republic, Opening andClosure ofForeign RetailersinKlangValley 30 29 28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 No. South Korea South Africa Singapore Japan Italy Hong Kong France Dubai Denmark China Australia ofOrigin Country

Pavilion REIT 2017Annual Report Yoogane Isaac Toast Softree Juicy the TiramisuKiss Shinmapo Galito’s Tender Fresh The DarkGallery Hillstreet Coffee Shop Koi Jalan Japan Yamazaki Bakery Mitsuyado Seimen Owndays Lab Pokemon Cafe Off-White Honolulu Cafe Laduree Louis Quotorze Marche Movenpick Sergent Major Juiceco Vero Moda Jack &Jones JiuQiu HLA King Living Spetta Pie Face Brand Name Fashion Bookstore Fashion Furniture F&B F&B Trade F&B F&B F&B F&B F&B F&B F&B F&B F&B F&B F&B Discount store F&B F&B Optical F&B Fashion F&B F&B Fashion F&B Fashion F&B Fashion vriw (cont’d) Overview Market 111

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 112 organising this internationalmotor race event since1999. 2017 was also the final year forMalaysia to host the Formula One race in Sepang International Circuit. Malaysia had been the first5monthsofthis year, thismarket registered agrowth of7.8%. arrivals was the target set for 2017. Introduced in 2016, this programme led to a 27% increment in visits from China. For The visa-waiver programme forChinese tourists has also attracted more arrivals from this country. 4 million Chinese tourist It wasestimatedthattheseevents attracted 700,000foreign visitors. During the year, 2 major events took place in the country. Malaysia hosted the 2017 SEA Games and PARAASEAN Games. to Malaysia. Thus, itdoesnothave significantnegative impacton tourism shopping. of hotel rooms inthis Malaysia.tourism Nevertheless, tax is unlikely to have impactoninternational major tourist arrivals Effective from 1 September 2017, a flat rate of RM10.00 per room per night is charged on foreign tourists staying in all types more foreign tourist arrivals duringtheyear. However, itisunlikely to meetitstarget fortheyear. Malaysia targeted to attract 32 touristmillion arrivals in 2017. The weakened Malaysian currency since early 2016 encouraged TOURIST ARRIVALS Source: Retail Group Malaysia (cont’d)Overview Market 43 42 41 40 39 38 37 36 35 34 33 32 31 No. United States Turkey Thailand Taiwan ofOrigin Country

TR Fire Grill Wayback Burger Rebecca Minkoff WingStop LC Waikiki Tearoi Cafeayan Xugar Dream Colour DaYung Fruit NinjaatDochi Sunny Cha City Milk Brand Name Pavilion REIT 2017Annual Report F&B F&B Fashion F&B Fashion F&B F&B F&B F&B F&B F&B F&B F&B Trade Source : Property Market Report, NAPIC / Henry ButcherRetail /Henry NAPIC MarketSource Report, :Property –notapplicable NA Table 5:RentalRatesofSelectedShoppingCentres inKlangValley, 2017 The rental rates ofselectedshoppingcentres inKlangValley are detailedoutinthetablebelow: rebates andalongerrent-free periodto existingandprospective tenantsinsteadofreduction inrental rates. Shopping centres in Klang Valley registered a slight decline in achieved rental rates in 2017. Many landlords offered rental RENTAL RATES OFSELECTED SHOPPINGCENTRES VALLEY INKLANG SACC Mall The Mines Pyramid Sunway Megamall Mid Valley Mall Cheras Leisure Low Yat Plaza Suria KLCC Name 25.00 –150.00 Lower Ground 14.00 –28.00 28.00 –60.00 15.00 –29.00 10.00 –20.00 7.00 –18.00

NA Pavilion REIT 2017Annual Report 50.00 –150.00 20.00 –32.00 39.00 –60.00 14.00 –18.00 19.00 –45.00 Ground Floor 4.00 –18.00 7.00 –15.00 Rental Rate(RMpersquare feet permonth) 10.00 –18.00 13.00 –30.00 18.00 –48.00 22.00 –32.00 36.00 –90.00 5.00 –20.00 7.00 –12.00 First Floor 13.00 –26.00 11.00 –30.00 11.00 –31.00 35.00 –86.00 Second Floor 8.00 –15.00 2.00 –6.00 6.00 –9.00 10.00 –28.00 15.00 –28.00 30.00 –90.00 7.00 –17.00 4.00 –8.00 6.00 –9.00 Third Floor vriw (cont’d) Overview NA 11.00 –20.00 30.00 –56.00 Fourth Floor Fourth 5.00 –7.00 Market 113 NA NA NA NA

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 114 Central i-City Mall in Shah Alam is targeted to open by October 2018. Sogo has been confirmed as its main anchor tenant. rate. AnchortenantisJaya Grocer. The mall at Kiara 163 is scheduled to openby the middle of 2018. toThe developer have was reported secured 80% take-up of 2018. This mallisajointventure betweenGMGroup andGamudaLand. a 10-storeyGM Bukit Bintang at mall next The fashion wholesale toRobertson, Sentral,Pudu will open by the quarter second Japanese supermarket asitsanchortenants. a and Parkson confirmed has Bhd, Sdn Development Andaman and PKNS between developmentventure joint a Mall, Evo slated to openby March 2018. The Shoppes at FourSeasons Place is located next to SuriaKLCC. It has secured Robinsons as its anchor tenant and is a open will mall this Grocer, Jaya 54,000 square feet BangsarMart. with collaboration A 2018. of quarter first the by open to targeted is Mall City Eco KL open in2017butwere delayed to 2018. 41% of them are located in Kuala Lumpurand the other 59% are located in Selangor. 9 of them (53%) were supposed to Source: ButcherRetail Henry Table 6:NewShoppingCentres inKlangValley fortheYear 2018 ofKlangValley.are locatedinallparts At least 17 shopping centres are expected to open in 2018 with a total nett floor area of almost 6.0 million square feet. They VALLEYKLANG RETAIL SUPPLY IN2018 (cont’d)Overview Market 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 No. KL Eco CityMall Name TOTAL Horizon VillageOutlet Mall The Sanctuary Central i-CityMall One Kesas Concept Mall Tropicana Garden Mall Menara Dayabumi Kiara 163 Eko Cheras GM BukitBintang USJ WholesaleCityMall Evo Mall Shoppes atFour Seasons Place Selayang StarCityMall Pacific Star M Square Bangsar TradeCentre

Pavilion REIT 2017Annual Report Kuala Lumpur CBD Kota Damansara KL citycentre Petaling Jaya Subang Jaya Shah Alam Shah Alam Selayang Puchong Location Sepang Cheras Pantai Pantai Klang Bangi Pudu Nett FloorArea (square feet) 5,958,000 1,000,000 122,000 100,000 250,000 300,000 550,000 350,000 186,000 100,000 250,000 400,000 130,000 940,000 150,000 120,000 210,000 800,000 medical tourists. Flagship Medical Tourism Hospital Programme which offers special incentive to private hospitals to attract overseas cover and high-value other specialised medical services healthcare packages. Malaysian government will also introduce to implementinitiatives totreatment promote asthewitheVisa Asian fertility facility hub forto the country beextended to To promote medical tourism in Malaysia, the government is allocating RM30 million to Malaysian Healthcare Travel Council and eco-tourism programmes. RM500 million will be used to promote tourism through upgrading infrastructure facilities as well as promoting homestay subsidy of 2%.An additional RM1.0 billion will be given to Tourism Infrastructure Development Fund as soft loans. Another A sumofRM2.0 billion has been provided under SME Tourism Fund to give soft loans to tour operators with an interest facilities in2018. During Budget 2018 (announced in October 2017), RM3.8 billion has been allocated to promote and enhance tourism Malaysia targets to attract 28milliontourist arrivals in2018. TargetTourist Arrivals rental rates inorder to lure them. their lower to need will they tenants, attract openings. To their upon lots retail their of most up fill to challenges face will Similar to many newshopping centres having opened during the last 2 years, shopping centres targeted to openin 2018 major to traffic shopping shopping centresTherefore, inKlangValley isnotexpectedto decline. entertainment. and dining buying, fashion shopping, grocery for centre one-stop a friends’ gathering place, a movie day, a relaxation spot with free air-conditioning, an exciting place to see nice things, and Visiting shopping centres is a lifestyle of Malaysian especially consumers, during the weekends. It is a family outing, a to 2years ago,lesspurchases were made. Consumers are still visiting shopping malls – large malls in particular, especially during weekends. However, as compared Klang Valley ShoppingCentre Market business andindustrialsectors, consumptionwillincrease. all benefits and well performing is economy the When performance. economic to linked directly is spending Consumers’ • • • Three key factors thatwillaffect retail salesin2018: Retail Group Malaysia forecasts Malaysia retail growth industry rate in2018to beat6.0%. Klang Valley ConsumerMarket market inKlangValley nextyear. Similar to 2017, the weak economic outlook,rising cost of living and increasing retail supply will affect the shopping centre OUTLOOK VALLEY OFKLANG SHOPPINGCENTRE MARKET IN2018 Strong andsustainableeconomic datainChinaandUnitedStatesfornextyear. Ringgit againstUS$returning to 2014levels before endofnextyear confidence consumers’ boost and activity economic year.stimulate this will of This middle before election General level.

Pavilion REIT 2017Annual Report vriw (cont’d) Overview Market 115

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 116 There are anumberofmajorofficedevelopments dueforcompletion over thenext few years as listed below: Table 8:ExistingSupplyofOfficeSpace by Districtsin Kuala Lumpur asatQ12017 (WCC) butoutsidetheKLCC /GT andCBDwhilstsuburbancommercial hubscontributethebalance21%. Business District (CBD). The bulk (approximately 34%) of the existing supply are in buildings located within the city centre located within the premier KLCC /Golden Triangle area (KLCC/GT) whilst close to 15% is located within the older Central is space office the of 30% nearly 2017, Q1 for breakdown providedspace NAPIC availablebydetailed latest the on Based Source: NAPIC Table 7:ExistingSupplyofOfficeSpaces(square metres) in Kuala Lumpur &SelangorasatQ22017 contributes approximately 37 millionsquare feet (3.437millionsquare metre). is a stock ofabout22.8 million square feet (2.114 million square metre) supplied by buildings in Putrajaya whilst Selangor million 6.5 another is square feet (599,762 square metre) There of incoming supply which will add onto the space available. Outside KualaNAPIC. Lumpur, from there statistics available latest the on based 2017, of half first the in metre) square The supply of purpose built office space in Kuala Lumpur increased to approximately 94 million square feet (8.738 million Existing &IncomingSupply PURPOSE BUILT OFFICESECTOR (cont’d)Overview Market KLCC/Golden Triangle Area Total Suburban WCC CBD Total Selangor W.P. Putrajaya Kuala Lumpur State

14,289,481 3,437,013 2,114,207 8,738,261 Existing Supply Buildings No. of 435 111 143 90 91 Completed 189,791 146,951 42,840 (Square Metres) Existing Supply 0 Pavilion REIT 2017Annual Report 8,711,350 1,840,821 2,994,930 1,275,175 2,600,424 1,529,052 Incoming 447,611 481,679 599,762 Supply Supply % of Planned 864,355 822,534 100 Supply 10,276 31,545 21 34 15 30 New Planned Occupancy Rate (%) 128,764 118,488 Supply 10,276 76.4 65.6 71.9 86.4 83.3 0 Source: ButcherResearch Henry Table 9:NewOfficeBuildingsDueforCompletion2017->2019 Grand Total Total Fraser Square i-City Corporate tower 1&2 MRCB redevelopmentPetaling Tin PJCC Uptown 8 One CityPhase3 Paramount Tower 1&2 PKNS MyIPO MBSB Celcom PJ Sentral Block H HCK Tower Empire City Menara Star2@Pacific Star Mercu MustaphaKamal1&2 Petaling Jaya Total Merdeka PNB118 HSBC NewHQ Affin BankNewHQ Menara Prudential The Exchange 106(Mulia) Etiqa Insurance Equatorial Plaza South Point Menara PublicMutual Boutique offices Tower 3 Tower 2 Tower 1 KL Eco City Kuala Lumpur Building

Pavilion REIT 2017Annual Report Stadium Merdeka /Chinatown Empire CityDamansara, PJ Section 52,Petaling Jaya TRX Jalan Tun Razak TRX Jalan Tun Razak TRX Jalan Tun Razak TRX Jalan Tun Razak Damansara Perdana Damansara Uptown Jalan SultanIsmail Jalan Universiti PJ Jalan RajaChulan Abdullah Hukum Section 13PJ Petaling Jaya Shah Alam Location Bangsar USJ PJ PJ PJ NLA (squareNLA feet) 560,000* GFA 19,709,500 10,879,500 8,830,000 2,650,000 2,080,000 1,500,000 1,700,000 239.000 568,000 823,500 390,000 470,000 958,000 420,000 700,000 400,000 540,000 700,000 240,000 184,000 300,000 290,000 450,000 572,000 862,000 294,000 281,000 450,000 347,000 270,000 181,000 290,000 vriw (cont’d) Overview 2019 -2020 Completion After 2019 After 2019 After 2018 After 2018 After 2018 After 2018 After 2018 After 2018 After 2018 After 2018 Estimated Market 2018 /19 2018 /19 onwards 2017 2017 2017 2017 2017 2018 2018 2017 2017 2017 117

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 118 Source: NAPIC 4:SupplyandOccupancyRatesofOfficeBuildings inSelangor(2005 to 1H2017) Chart Source :NAPIC 3:SupplyandOccupancyRatesofOfficeBuildingsin Kuala Chart Lumpur (2005 to 1H2017) developers willnowbeallowed. the by justified be can which developments and freeze the relaxed then since have However,authorities million. the RM1 a blanket freeze on all new approvals of office buildings as well as shopping malls and luxury condominiums priced above of office space which may result in 1 in 3 offices to be vacant by 2021. This has led to the government deciding to impose significantly and this has prompted Bank Negara Malaysia in its report for Q3 2017, to issue a warning of an impending glut Nevertheless, the substantial supply of office space due to come onto the market is expected to result in vacancy rates rising office buildingsinPutrajaya to be52.6%asatQ22017whilstinSelangorthefigure was reported is74.7%. within the citycentre enjoyingthan ahigherthose occupancy outside the city centre. Meanwhile, ratesthe occupancy of located buildings with 81.4% improved to has rate occupancy the that indicate figures overall,the but areas to according The office occupancy rates provided byNAPIC’s for report Q2 2017 do not show the detailed breakdown for Kuala Lumpur Office OccupancyRates&Rentals • • • • • • • • buildings andredeveloping thesitesto take advantage ofhigherplotratios nowallowedby theauthorities: old demolishing involved projects these of Some Lumpur. Kuala in space office of supply future the to significantly add massive of part are which developments office integrated commercial developments in the city whichhave been announced and which, if launched and completed, will major other few a are there above, mentioned projects the from Apart (cont’d)Overview Market

Bandar Malaysia New 80-storey office tower to addonto Menara Dayabumi Tradewinds Towers – 50 and 26-storey office towers to be built on the former Menara Tun Razak site, Jalan Raja Laut Tradewinds Square, Jalan Sultan Ismail (redevelopment of Kompleks Antarabangsa & Crowne Plaza Hotel) – proposed Former BrickfieldsDistrict HQ–SeniNadi Bukit BintangCityCentre (BBCC) by Eco World Group Pavilion Damansara Heights –10corporate towers withfloorareas ofbetween75,000and234,000square feet Lot 185KLCC –500,000square feet ofretail &officespaceahotel 110-storey corporate tower, 61-storey mixed usetower andaretail mall

Pavilion REIT 2017Annual Report Source: ButcherResearch Henry Table 11:MajorOffice Transactions in2017 The highestpricepersquare feet wasrecorded by thesaleofMenara SelangorDredging atRM1,323persquare feet. transactions 2017.major were were noted. in the that transactions following buildings The Theremany office werenot of Major OfficeSales Transactions Source: HBMResearch Table 10:RangeofOfficeRentals(2016) as tenants are enticed by the attractive rentals and incentives offered to relocate to the newer and better quality buildings. exercises are affected by the stiff competition and some have lowered their rentals to arrest the drop inratesoccupancy offered by the new buildings eg. longer rent free periods. Older buildings which have not carried out any refurbishment rentals and this could have propped up the average rentals. Further, the rentals have not taken into account the incentives higher fetch therefore and specifications better of are market the onto come just have which buildings completed newly Overall, average rentals in the various sub-markets in Kuala Lumpur’s office sector registered a slight decline. We note that Menara SelangorDredging The Ascent@Paradigm Menara Prudential Vista Tower,Intermark The Building Suburbs WCC Grade B Grade A CBD Grade B Grade A Grade A+ KLCC /GT Location

1 million(gross floorarea Pavilion REIT 2017Annual Report including retail space) (square feet) 362,782 164,706 551,875 NLA NLA Rental range (RMpersquare feet permonth) Consideration 480 million 321 million 125 million 455 million 10.00 –14.00 (RM) 3.00 –6.50 3.00 –8.00 3.80 –4.50 4.50 –5.50 4.00 –5.50 6.50 –9.50 vriw (cont’d) Overview Price, RMper square feet Market 1,323 759 824 119

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 120 market conditions. ofthe18REITsThe performance for2017are summarized inthetablebelow: 2016) managed to generate dividend yields of above 6% with the highest at 8.82% (7.68% in 2016), a reflectionMRCB-Quill and Al-Aqar Healthcare. It is noted that only seven out ofthe eighteen REITS (it was nine out ofseventeen of in the tougher market capitalizations of above RM1 billion viz-a-viz, Capitaland Malaysia Mall Trust, Hospitality, YTL Axis Real Estate, have REITs which other five are There billion. RM4.878 at REIT Pavilion and billion RM5.595 at REIT Sunway billion, 6.32 capitalization as at end 2017 is still KLCCP which maintained its top position at RM15.6 billion followed by IGB REIT at RM There are currently 18REITs Malaysia, Bursa listedon more one thantheprevious year. The largest REIT by market THE MALAYSIAN REITS (M-REITS) MARKET OVERVIEW 2017 lookschallenginginthecoming issues, theoutlookforofficemarketyear. certainly the oversupply situation and buy sometime to allowthe market to digest the new supply. Burdened by these structural stakeholdersThe government’s on high alert. proposed freeze onnewapprovals, if enforced, will help to avoid worsening glut in supply and the ramifications it has on the market as well as the banks which finance these projects have put all the Merdeka PNB 118 and TRX are completed in the coming years. The alarm bells raised by Bank Negara Malaysia of the pressure whenthe huge supply ofspacefromthe few by megaprojects the government undertaken link companies eg Rentals have weakened in the face ofhigher vacancy rates and although generally still stable, will underincreasedcome to better quality new buildings in cityfringeareas like Damansara Heights and Mutiara Damansara /Damansara Perdana. flight as well as decentralization of trend the spurred has this and locations office attractiveas more links transportation of the commencement MRT line as well as new LRT extensions have madeareas which are by served the enhanced public amenities and higher quality specifications. As vacancy rates rise, rentals have come under pressure. The completion and businesses loseoutastenantstake advantage oftheattractive rents andincentives to relocate to buildingswithbetter newer incentives have to be offered to attract tenants. Older buildings which have not been upgraded to meet the needs of modern which may have a drastic impact on the office market. Newly completed buildings are taking a longer time The tosupply fillof upoffice space and has more increased substantially over the past six years and this has raised concerns of a serious glut Outlook forOfficeSector (cont’d)Overview Market

Pavilion REIT 2017Annual Report in individualREITs. allow investors to gain exposure to all of the companies onthat index, it will provide investors analternative to investing produced by Bursa Malaysia and will track ofall listed REITsthe performance on the local bourse. As this new index will In October, anewREIT Index was launched by BursaMalaysia to complementthe other ten in-house calculated indices capitalization. toto note that the other ten it a haveyearis heartening ago. Nevertheless, maintained or registered an increase in market has affected share prices and it is noted that eight of the REITs registered a drop in their market capitalization compared to bein oversupply.reported The weakersentiments consumer have alsothe compounded weakness of the segment. This Investors were generally cautious about REITs as the majority of the REITs own office buildings and malls which have been Source: Malaysia Stock Biz&individualREIT websites,share pricesasat29December2017 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 No. YTL Hospitality YTL UOA Tower Sunway Pavilion MRCB-Quill KLCCP Kip IGB Hektar Capitaland Axis Atrium Amanah Raya AmFirst Al-Salam Alaqar AHP Company

Hotels Office Office Diversified Retail Office / Retail Office / Retail Office / Retail Retail Retail Retail Retail Industrial / Offices / Industrial Diversified Retail Office / diversified Islamic care Health shops Office portfolio Property Pavilion REIT 2017Annual Report 685.05 m 342.21 m 600.55 m 135.20 m 521.63 m 183.70 m 580.0 m 463. 30 2.181 b 5.595 b 4.878 b 1.335 b 15.60 b 3.729 b 1.848 b 1.041 b Market Capital 437.08 6.32 b (RM) m 10.37 14.93 48.72 (sen) 7.06 7.40 8.34 5.10 3.59 5.32 8.45 2.57 6.66 9.85 7.48 6.03 8.44 EPS n.a. n.a. 18.41 24.73 17.99 21.76 18.80 18.79 16.92 32.49 15.62 18.32 12.73 16.35 16.71 17.73 14.34 21.32 Ratio n.a. n.a. P/E 10.61 5.12 5.82 6.58 3.62 2.84 5.12 6.95 2.08 6.21 3.46 7.74 5.88 6.85 6.07 7.85 ROE n.a. n.a. (%) Dividend Yield 8.82 5.81 5.57 5.32 6.51 6.01 6.19 5.46 5.42 6.63 6.47 5.68 5.41 5.06 6.76 4.52 3.40 5.38 (%) vriw (cont’d) Overview 1.378 1.272 1.267 1.409 1.184 1.262 1.039 1.215 1.237 1.473 1.670 1.926 1.407 1.273 1.273 7.110 0.994 1.075 (RM) NTA Market Share 1.300 1.830 1.500 1.110 0.910 0.675 1.000 1.430 0.835 1.280 1.620 1.220 1.900 1.610 1.250 8.640 0.865 1.800 Price (RM) 121

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 122 and willbeableto faceupto andovercometermchallenges. theseshort affect revenues REITs and income distribution. Nevertheless, which have assets of impeccablequality will be more resilient as well as an oversupply situation in both the retail and office sectors. This will have a bearish impact on the sector and will Overall, theREIT market is facing fundamental issues in the formofweaker business and consumer sentiments and spending time to reach fulloccupancy. without a substantial increase in overall business activities, newly completed office buildings are expected to take a longer built to specifications of a higher quality and by offering more incentives, will be able not to entice away tenants. have Nevertheless, which buildings Older rentals. and any refurbishment / upgradingundertaken exercises will lose out in a morerates competitive market as newer buildings are occupancy both on pressure increasing face will market office The experience inorder to inthecurrent survive highlycompetitive market planning refurbishmentsfor prime locations should be able to to maintain their edge upgradebut should start shoppers’ seen whether they will open asscheduled if they have yet to achieve arespectablerate. occupancy Older malls situated in the current tough market conditions. Fornew shopping centres which are currently under construction,it will have to be professionally-managed and which are more receptive to the needs of their tenants and customers will be able to survive Although the retail market will face a challenging environment, established shopping centres which are well-located, the viabilityoftheseprojects to goahead. condominiums priced above RM1 million although it later softened the measure by still allowing developers who can prove malls. In response, the government has announced a proposed freeze on approvals of and buildings new office these of office construction the buildings, funded which institutions malls financial the on andimpact drastic a have luxury could it as weighs down heavily on these sectors. In fact Bank Negara Malaysia has sounded the warning bells on the over-built situation The outlook for both the retail and office sectors in 2018 appears challenging, as weaker consumer sentiments and oversupply CONCLUSION (cont’d)Overview Market

Pavilion REIT 2017Annual Report WALE Unit TAV Trustee REIT PPKM Prospectus Pavilion REIT NPI NLA NAV MGS MER M-REIT Manager KLP IMF GST GFA GDP FY FBM KLCI Fund EPU DPU Deed CSR CPI CEO Company Bursa Malaysia Board

Pavilion REIT 2017Annual Report : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :

The Deed dated 13 October 2011 entered into between the Trustee and the and Trustee the between into entered 2011 October 13 dated Deed The Pavilion RealEstate Investment Trust Persatuan Pengurusan Kompleks Malaysia / Malaysia Shopping Malls Association Weighted average leaseexpiry An undividedinterest inPavilion REIT asprovided forintheDeed Total assetvalue MTrustee Berhad Pavilion REIT’s prospectus dated14November 2011 income Net property Net lettablearea Net assetvalue Malaysian Government Securities -ratio oftrustexpensesincurred inoperating Pavilion REIT to itsNAV Management expenseratio Malaysian RealEstateInvestment Trust Pavilion REIT ManagementSdnBhd Kuala Lumpur Pavilion SdnBhd FundInternational Monetary Goods &Service Tax Gross floorarea Gross domesticproduct Financial year from to 1January 31December BursaMalaysiaFTSE Kuala Lumpur CompositeIndex Pavilion RealEstateInvestment Trust Earnings perUnit Distribution perUnit Manager constitutingPavilion REIT Corporate socialresponsibility Consumer PriceIndex Chief Executive Officer Pavilion REIT ManagementSdnBhd Bursa Malaysia SecuritiesBerhad Board ofDirectors oftheManager Real EstateInvestment Trust GLOSSARY 123

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 124 2. To consider and,ifthoughtfit, to passwithorwithoutanymodification,thefollowingResolution: BUSINESS SPECIAL 1. ORDINARY BUSINESS Ehsan, Malaysia on Thursday, 29March 2018at10.00a.m.to transact thefollowingbusinesses:- will be held at Saujana Ballroom, Jalan Lapangan The Saujana Hotel, Saujana TerbangResort, 40150 SAAS, Selangor Darul NOTICE IS HEREBY GIVEN ANNUAL GENERALMEETING NOTICE OF

(Established inMalaysia undertheDeeddated13October 2011entered into betweenPavilion REIT ManagementSdnBhdandAmTrustee Berhad AND AND THAT the Proposed Authority shall be effective toand continue be in force from the date “THAT pursuant to the REITs Guidelines, Main Market Listing Requirements of Bursa Malaysia To lay theAudited ofPavilion Statements Financial REIT theyear for 2017 ended31December (c) (b) (a) whichever may bethelater, until: of receipt of all relevant authorities’ approval or the date the Unitholders pass this resolution, Pavilion REIT of3,318,000,000units; issued during the preceding 12 months, must not exceed 20% of the approved fund size of issued pursuant to this resolution, when aggregated with the number of units in Pavilion REIT and in the best interest of Pavilion REIT, provided that the aggregate number ofNew Units such persons and for such purposes as the Manager may in its absolute discretion deem fit toManager”) allot and issue new units in Pavilion REIT (“New Units”) from time to time to is required, authority be and is hereby given to Pavilion REIT Management Sdn Bhd (“the andtheapproval Berhad Securities oftherelevant regulatory where authorities, approval such TRUSTS (REITS GUIDELINES)(PROPOSEDAUTHORITY) THE SECURITIES COMMISSION MALAYSIA’S GUIDELINES ONREAL ESTATE INVESTMENT PROPOSED AUTHORITY TO ALLOT ANDISSUE NEW UNITS PURSUANT TO CLAUSE14.03 OF Sdn Bhd,asthemanagerofPavilion REIT thereon. andtheAuditors’ Report of Pavilion REIT and the Statement by the Manager issued by Pavilion REIT Management together with the Trustee’s to the Unitholders issued by MTrusteeReport Berhad, as trustee

the conclusion ofthenextannualgeneralthe conclusion (“AGM”) meeting at of the Unitholders, theProposed Authority isrevoked varied or by meeting; inaUnitholders’ theUnitholders the expiration of the period within which the next AGM ofthe Unitholders is required by lawto beheld;or is renewed; or which time it shall lapse, unless by a resolution passed at the meeting, the authority that the Sixth Annual General Meeting of Pavilion Real Estate Investment Trust (“Pavilion REIT”) (now knownasMTrustee Berhad))

Pavilion REIT 2017Annual Report Ordinary Resolution (Please refer Explanatory Note I) 7. 6. 5. 4. 3. 2. 1. Notes : 28 February 2018 Kuala Lumpur Company Secretary Lim MeiYoong (LS02201) (as theManagerofPavilion RealEstateInvestment Trust) Pavilion REIT ManagementSdnBhd(939490-H) BY ORDEROF THE BOARD Pursuant to Paragraph 8.29A(1) of the Main Market Listing Requirements of BursaMalaysia Securities Berhad, the Only unitholders registered in the Record of Depositors as at 22 March 2018 shall be entitled to attend and speak at The instrument appointing proxy shall be deposited at the Registered Office of the Manager at 6-2, Level 6, East Wing, The instrument appointing aproxy shall be in writing under the hand of the appointor orofits attorney dulyauthorised Act Depositories) (Central Industry Securities the under defined as nominee authorised an is unitholder a Where Where a unitholder is a corporation, its duly authorised representative shall be entitled to attend at the meeting and A unitholder whois entitled to attend at the meeting is entitled to appoint not more than 2 proxies to attend instead AND FURTHER THAT authority be and is hereby given to the Manager and the Trustee, acting AND THAT authoritybeandis hereby given to the Manager andthe Trustee, actingand for AND THAT the New Units to be issued pursuant to the Proposed Authority shall, upon allotment whichever occursfirst(“Validity Period”); Proposed Ordinary ResolutionsetoutintheNotice ofAnnualGeneral Meetingwillbe putto vote by way ofpoll. the meetingorappointproxy(ies) to attendonhis behalf. 2018 at10.00a.m.being48hoursbefore thetimeappointedforholdingMeeting oranyadjournmentthereof. Menara Goldstone (Holiday Inn Express), No. 84, Jalan Raja Chulan, 50200 Kuala Lumpurnot later than 27 March so authorised. in writing or if such appointor is a corporation either under its common seal or under the hand of an officer or attorney it specifies the proportions of its holdings (expressed as a percentage of the whole) to be represented by each proxy. credit of the said securities account. Where a unitholder appoints 2 proxies, the appointments shall be invalid unless 1991, it may appoint not more than 2 proxies in respect of each securities account it holds in units standing to the shall beentitledto appointanotherperson(whetheraunitholderornot)asitsproxy to attend. proxy. unless he specifies the proportions of his holding (expressed as a percentage of the whole) to be represented by each of him. Aproxy need not be aunitholder. Where a unitholder appoints 2 proxies, the appointments shall be invalid Proposed the Authority.” to effect full give and complete finalise, implement, to expedient or necessary deem any manner (including the execution ofsuchdocumentsas may be required) as they may for and on behalf of Pavilion REIT, to take all such steps and do all acts, deeds and things in may beimposedby therelevant authorities,andto dealwithallmattersrelating thereto; as and/or REIT Pavilion of interest best the in and fit deem mayTrustee the and Manager to assent to any condition, variation, modification and/or amendment in any manner as the on behalf ofPavilion REIT, to give effect to the aforesaid Proposed Authority with full powers New Units; other distributions that may be declared before the date of allotment and issuance of such any and/or entitlement benefit, right, income, distributable any to entitled be not will Units and issuance, rank pari passu in all respects with the existing Units except that the New Pavilion REIT 2017Annual Report Annual General Meeting(cont’d) Notice of 125

Others Corporate Governance Report And Financial Statements Business Review Overview Others Corporate Governance Report And Financial Statements Business Review Overview 126 (II) (I) Explanatory Noteson: Annual General Meeting(cont’d) Notice of Any allotment and issuance of New Units pursuant to the Proposed Authority will be subject to the relevant approvals The Manager may, subject to relevant laws and regulations, use the net proceeds from the issuance of New Units under finance to funds raise to Units New issue and allot to flexibility the Manager the allow will Authority Proposed The The Proposed Ordinary Resolution, if passed, would enable the Manager to allot and issue New Units from time to This Agenda is meant for discussion only as under the provision of the REITs Guidelines, audited financial statements of SecuritiesCommissionMalaysia andBursaMalaysia SecuritiesBerhad. the Proposed Authority asitsabsolutediscretion forotherpurposesaspermittedundertheREITs Guidelines. Units to raise fundscanbeavoided. Authority, costs involved delays in convening and further separate general meetings to approve such issue of New existing debt as well as working capital for purposes,subject to the relevant laws and regulations. With the Proposed future investments, acquisitions and/or capital expenditure to enhance the value of Pavilion REIT and/or to refinance Pavilion REIT of3,318,000,000units. with the ofunits number issued during the preceding 12 months must not exceed 20% of the approved fund size of time provided that the aggregate ofthe number NewUnits to beissued during the Validity Period, whenaggregated Special Business do notrequire formalapproval oftheunitholders.Hence,thismatterwillnotbeputforward forvoting. Ordinary Business Pavilion REIT 2017Annual Report (Established in Malaysia under the Deed dated 13 October 2011 entered into between Pavilion REIT Management Sdn Bhd and AmTrustee Berhad (now known as MTrustee Berhad))

PROXY FORM No. of Units Held CDS Account No.

I/We ______(name of unitholder as per NRIC, in capital letters)

NRIC No./Passport No./Company No. ______Tel./Mobile No. ______

of ______(full address) being a unitholder of PAVILION REAL ESTATE INVESTMENT TRUST (“Pavilion REIT”) and entitled to vote hereby appoint:-

1st PROXY ‘A’ Full name : Proportion of unitholdings represented No. of Units % Address : NRIC No./Passport No./ Company No.:

and/or failing *him/her

2nd PROXY ‘B’ Full name : Proportion of unitholdings represented No. of Units % Address : NRIC No./Passport No./ Company No.:

or failing *him/her, the Chairman of the Meeting as *my/our proxy to attend and vote for *me/us on *my/our behalf at the Sixth Annual General Meeting of Pavilion REIT to be held at Saujana Ballroom, The Saujana Hotel, Saujana Resort, Jalan Lapangan Terbang SAAS, 40150 Selangor Darul Ehsan, Malaysia on Thursday, 29 March 2018 at 10.00 a.m. and any adjournment thereof. * Strike out whichever not applicable Please indicate with an “X” in the space below on how you wish your votes to be cast. If you do not do so, the proxy/proxies will vote or abstain from voting at his/her/their discretion.

Ordinary Resolution – Special Business For Against Proposed Authority to Allot and Issue New Units

Dated this day 2018

______Signature of Unitholder/Common Seal

Notes : 1. A unitholder who is entitled to attend at the meeting is entitled to appoint not more than 2 proxies to attend instead of him. A proxy need not be a unitholder. Where a unitholder appoints 2 proxies, the appointments shall be invalid unless he specifies the proportions of his holding (expressed as a percentage of the whole) to be represented by each proxy. 2. Where a unitholder is a corporation, its duly authorised representative shall be entitled to attend at the meeting and shall be entitled to appoint another person (whether a unitholder or not) as its proxy to attend. 3. Where a unitholder is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint not more than 2 proxies in respect of each securities account it holds in units standing to the credit of the said securities account. Where a unitholder appoints 2 proxies, the appointments shall be invalid unless it specifies the proportions of its holdings (expressed as a percentage of the whole) to be represented by each proxy. 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 such appointor is a corporation either under its common seal or under the hand of an officer or attorney so authorised. 5. The instrument appointing proxy shall be deposited at the Registered Office of Pavilion REIT Management Sdn Bhd at 6-2, Level 6, East Wing, Menara Goldstone (Holiday Inn Express), No. 84, Jalan Raja Chulan, 50200 Kuala Lumpur not later than 27 March 2018 at 10.00 a.m. being 48 hours before the time appointed for holding the Meeting or any adjournment thereof. 6. Only unitholders registered in the Record of Depositors as at 22 March 2018 shall be entitled to attend and speak at the meeting or appoint proxy(ies) to attend on his behalf. 7. Pursuant to Paragraph 8.29A(1) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the Proposed Ordinary Resolution set out in the Notice of Annual General Meeting will be put to vote by way of poll. ✄ Please fold here

AFFIX STAMP

The Manager of Pavilion Real Estate Investment Trust PAVILION REIT MANAGEMENT SDN BHD (939490-H) 6-2, Level 6, East Wing, Menara Goldstone (Holiday Inn Express) No. 84, Jalan Raja Chulan 50200 Kuala Lumpur

Please fold here PAVILION REAL ESTATE INVESTMENT TRUST 2017 ANNUAL REPORT

Pavilion REIT Management Sdn. Bhd. Company Number : 939490-H

Level 10, Pavilion Kuala Lumpur, 168 Jalan Bukit Bintang, 55100 Kuala Lumpur T : +603 2118 8888 F : +603 2118 8889 Email : [email protected] 2017 ANNUAL www.pavilion-reit.com REPORT

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