ANNUAL REPORT 2006 CONTENTS

Corporate Information 2 - 3

Chairman’s Statement 4

Profile of Directors of the Management Company 5 - 7

Manager’s Report on Quill Capita Trust 8 - 14

Statement by Manager & Statutory Declaration 15

Trustee’s Report 16

Report of the Auditors 17

Consolidated Income Statement 18

Consolidated Balance Sheet 19

Consolidated Statement of Changes in Net Asset Value 20

Consolidated Cash Flow Statement 21

Notes to the Financial Statements 22 - 33

Analysis of Unit Holdings 34 - 35 CORPORATE INFORMATION

MANAGER Quill Capita Management Sdn Bhd (Company No. 737252-X) (Incorporated in Malaysia)

REGISTERED ADDRESS OF THE MANAGER No. 517B, Jalan Tiong, Off Jalan Ipoh 51100 Kuala Lumpur, Malaysia Telephone No. : 603-4041 8228 Facsimile No. : 603-4041 9228

PRINCIPAL PLACE OF BUSINESS Suite 11.01A, Level 11, Menara Citibank No. 165, Jalan Ampang 50450 Kuala Lumpur, Malaysia Telephone No. : 603-2380 6288 Facsimile No. : 603-2380 6289

BOARD OF DIRECTORS OF THE MANAGER Tan Sri Datuk Dr Ahmad Tajuddin Bin Ali Chan Say Yeong Dato’ Low Moi Ing Datuk Hj Abdul Karim Bin Abu Bakar Dato’ Michael Ong Leng Chun Datuk Dr Mohamed Arif bin Nun Martin Tan Toh Tee Aw Hong Boo

SECRETARY OF THE MANAGER REGISTRAR Lee Fong Yong (MAICSA No: 7005956) Symphony Share Registrars Sdn Bhd Kan Loke Mooi (MAICSA No: 0872727) (Company No. 378993-D) Level 26, Menara Multi-Purpose MANAGEMENT TEAM Capital Square Chan Say Yeong No. 8 Jalan Munshi Abdullah (Chief Executive Officer) 50100 Kuala Lumpur Yong Su-Lin Malaysia (Investment & Business Development Manager) Telephone No. : 603-2721 2222 Corinne Tan Lean Heoh Facsimile No. : 603-2721 2530 (Finance & Compliance Manager) AUDITORS TRUSTEE Ernst & Young (AF: 0039) Mayban Trustees Berhad Level 23A, Menara Milenium (Company No. 5004-P) Jalan Damanlela 34th Floor, Menara Maybank Pusat Bandar Damansara 100, Jalan Tun Perak 50490 Kuala Lumpur 50050 Kuala Lumpur Malaysia Malaysia Telephone No. : 603-2078 8363 BANKERS FOR THE TRUST Facsimile No. : 603-2070 9387 Malayan Banking Berhad

PROPERTY MANAGER STOCK EXCHANGE LISTING Knight Frank (Ooi & Zaharin Sdn Bhd) Main Board of Bursa Malaysia Securities Berhad (Company No. 585479-A) Suite 9.01, 9th Floor Menara IGB, Mid Valley City Lingkaran Syed Putra 59200 Kuala Lumpur Malaysia Telephone No. : 603-2289 9688 Facsimile No. : 603-2289 9788

Q U I L L C A P I T A T R U S T Annual Report 2006  CORPORATE INFORMATION (cont’d)

Launch of prospectus of Quill Capita Trust on 11 December 2006

Launch of prospectus of Quill Capita Trust on 11 December 2006

Listing ceremony of Quill Capita Trust on 8 January 2007

Listing ceremony of Quill Capita Trust on 8 January 2007

Q U I L L C A P I T A T R U S T  Annual Report 2006 CHAIRMAN’S STATEMENT

Dear Unitholders,

On behalf of the Board, I am pleased to present to you Finally, I wish to take this opportunity to thank everyone the inaugural Annual Report of Quill Capita Trust for the for their support. I wish to thank my fellow Board members period 12 October 2006 (date of establishment) to 31 for their contributions and I look forward to working with December 2006. As you are aware, Quill Capita Trust was them in bringing Quill Capita Trust to another fruitful successfully listed on the Main Board of Bursa Malaysia year. Securities Berhad on 8 January 2007.

I wish to take this opportunity to extend our utmost Thank you. appreciation to the regulatory bodies, investors, business associates, consultants, bankers, lawyers and all parties that have, in one way or another, helped in making the listing of Quill Capita Trust on 8 January 2007 a great success. TAN SRI DATUK DR. AHMAD TAJUDDIN BIN ALI The price of Quill Capita Trust closed at RM0.98 on the CHAIRMAN first day of trading on 8 January 2007, which represented a 17% premium as compared with the retail price of RM0.84 per unit at IPO. Quill Capita Trust was 12.6 times subscribed by institutional investors and 7.6 times by retail investors on respective closing.

I am happy to announce that for the period from 12 Oct 2006 to 31 December 2006, Quill Capita Trust achieved a total revenue of RM1,972,386 and net profit after tax of RM 1,178,634. A distribution of RM1,178,634 presenting 100% of Net Profit After Tax, or 0.4938 sen per unit, is proposed to be distributed to unitholders.

On the assets that we currently manage, the four Quill Buildings at Cyberjaya enjoy 100% occupancy, with long leases entered into with quality tenants who are mainly subsidiaries of MNCs. We are also looking at a pipeline of potential acquisition of new properties that meet the investment objectives of Quill Capita Trust. As such, barring unforeseen circumstances, we are confident that we will continue to grow and will achieve the objectives and results for 2007 as projected in the Prospectus dated 11 December 2006.

Q U I L L C A P I T A T R U S T Annual Report 2006  PROFILE OF DIRECTORS OF THE MANAGEMENT COMPANY

BOARD OF DIRECTORS OF THE MANAGER

Name Nationality Position

Tan Sri Datuk Dr Ahmad Tajuddin Bin Ali Malaysian Chairman and Non-Independent Non Executive Director Dato’ Low Moi Ing Malaysian Non-Independent Non-Executive Director Dato’ Michael Ong Leng Chun Malaysian Non-Independent Non-Executive Director Martin Tan Toh Tee Singaporean Non-Independent Non-Executive Director Chan Say Yeong Malaysian Chief Executive Officer and Executive Director Datuk Hj Abdul Karim Bin Abu Bakar Malaysian Independent Non-Executive Director Datuk Dr Mohamed Arif Bin Nun Malaysian Independent Non-Executive Director Aw Hong Boo Malaysian Alternate Director to Dato’ Low Moi Ing

Further information on our Directors is set out in the ensuing paragraphs :

Tan Sri Datuk Dr Ahmad Tajuddin Bin Ali (“Tan Sri by Universiti Putra Malaysia in 2000. Tan Sri Tajuddin Tajuddin”), aged 58, was appointed as an Independent, is a Registered Professional Engineer with the Board of Non-Executive Director of CapitaLand Financial Limited, Engineers, Malaysia. He is a Fellow of the Institution of a wholly-owned subsidiary of CapitaLand Limited, on Engineers, Malaysia. He was the Founder President of 15 October 2003. In Malaysia, Tan Sri Tajuddin is the the Malaysian Association of Research Scientists, the chairman of Tronoh Consolidated Malaysia Berhad, Founder President of the Malaysian Society for Non- Malaysian Oxygen Berhad, Sime Engineering Services Destructive testing and also the Founder President of the Berhad, Tricubes Berhad and Opus International Malaysian Nuclear Science Society. At the international Group plc. He is also a member of the Board of Sime level, Tan Sri Tajuddin had been a member of the Darby Berhad as well as that of a number of non- Governing Council of the International Organisation listed companies. Currently, Tan Sri Tajuddin is a for Standardisation (ISO) and a member of the ASEAN member of the Advisory Panel of CapitaLand Limited, Consultative Committee on Standards and Quality Singapore and Chairman of the Malaysia-Singapore (ACCSQ). In 1994, he was conferred the Japan External Business Council. He is also the member of the Board Trade Organisation (JETRO) Award for Contribution to the of CFL Capital Management Sdn Bhd, a wholly-owned Promotion of Exports to Japan. In 1996, Tan Sri Tajuddin subsidiary of CapitaLand Limited. Tan Sri Tajuddin was formerly Chairman of Gas Malaysia Sdn Bhd and just received the Institution of Engineers Malaysia Award for prior to that, he was the Executive Chairman of Tenaga Outstanding Contribution to the Engineering Profession. Nasional Berhad. From 1989 to 1996, he was the Most recently, Tan Sri Tajuddin was a member of a Director General of Standards and Industrial Research Special Internationally-constituted panel to review the Institute of Malaysia (“SIRIM”). An engineer by training, structure and management of the Comprehensive Test- Tan Sri Tajuddin graduated with first-class honours in Ban Treaty Organisation (CTBTO) of the United Nations, Mechanical Engineering from King’s College, University Vienna. Tan Sri Tajuddin is currently the Chairman of the of London in 1973 and obtained his doctorate in Nuclear National Council for Standards and Accreditation and Engineering from Queen Mary College, University of also a member of the Governing Council of Federation London, in 1977. He was conferred the Doctor of Science of Malaysian Manufacturers.

Q U I L L C A P I T A T R U S T  Annual Report 2006 PROFILE OF DIRECTORS OF THE MANAGEMENT COMPANY (cont’d)

Dato’ Low Moi Ing, aged 45, is the Group Managing Chan Say Yeong, aged 43, is the Chief Executive Officer Director and co-founder of the Quill Group of Companies. of Quill Capita Management Sdn Bhd. He holds a Currently a practicing Interior Designer, she started her Bachelor of Accountancy from the National University of career with MAA Architect in 1981. In 1986, she set up Singapore and has extensive experience in both domestic Quill Design (Partnership). In 1988, Dato’ Low started and international capital markets. He started his career the Quill Group of Companies providing integrated with DBS Finance as a loan officer before moving to the property, construction, interior design and architectural Dai-Ichi Kangyo Bank, Singapore Branch, in 1990 where services. She is in charge of finances, administrative he was mainly involved in project and aircraft financing. and site coordination matters of the Quill Group of He concluded several major petrochemical and mining Companies. Dato’ Low was involved in the management project financing deals in Indonesia and Australia as and monitoring of the ‘Own, Build and Lease’ model well as leveraged leases for major airlines in Australia, for the Subject Properties in Cyberjaya and others. Her Malaysia and New Zealand. Subsequently in 1994, he experience lies in procurement, legal, lease and financing joined Chinatrust Commercial Bank, Taipei head office aspects of the business of the Quill Group of Companies. as Section Head, overseeing the offshore banking unit Dato’ Low holds directorships in all Quill Group of and later the domestic syndication unit. During this time, Companies and various private limited companies. he closed several major offshore & onshore syndicated loans/notes and fixed income deals for large Taiwanese, Thai and Korean corporations. In 1996, he returned to Dato’ Michael Ong Leng Chun, aged 50, is the Group Malaysia and joined Citibank Berhad as the Vice President Executive Director of Quill Group of Companies. Being for Corporate Finance where he was primarily involved Corporate Members of the Royal Institute of British in the origination and execution of debt capital market Architects (RIBA), Pertubuhan Akitek Malaysia (PAM) transactions. He was responsible for arranging large and Institut Perekabentuk Dalaman (IPDM), he is one corporate/sovereign syndications and PDS issuance of of the two founding partners of the Quill Group of which several are property related transactions. In 2002, Companies. Educated in the UK, Dato’ Michael Ong Say Yeong joined CapitaLand Financial Limited, holding graduated as a Chartered Architect in 1982 and practiced the position of Managing Director and was based in in London until 1984 when he returned to Malaysia. He Malaysia. He has gained substantial real estate experience set up Quill Design (Partnership) in 1986. In 1988, Dato’ while at CapitaLand Financial Limited and with his Michael Ong started the Quill Group of Companies financial background, had concluded several major which provides integrated property, construction, interior investments and acquisitions for the CapitaLand Group design and architectural services. He has been active in before his secondment to Quill Capita Management Sdn lobbying multinational companies to invest in Malaysia, Bhd. particularly in the business process outsourcing and IT industry. The Quill Group of Companies’ strength lies in the integration of IT services into the building Martin Tan Toh Tee, aged 45, is the Non-Independent environment and is currently practicing the ‘Own, Build Non-Executive Director of Quill Capita Management Sdn and Lease’ model for the Subject Properties and others. Bhd. In addition, he is also the Chief Executive Officer Dato’ Michael Ong is responsible for and has extensive of CapitaLand Commercial and Integrated Development experience in the design, detailing and construction of Limited and CapitaLand Financial Limited (Real Estate properties within the Quill Group of Companies. He holds Capital Management – Commercial and Integrated directorships in all the Quill Group of Companies and Development). He has held various key positions in various private limited companies. Pidemco Land (now known as CapitaLand Limited), including Head of Singapore Residential Investments and Marketing & Corporate Communications. Martin holds a Master of Business Administration degree, and graduated Summa Cum Laude with a Bachelor of Arts in Business Administration from the Washington State University. He also attended the General Manager Program at Harvard Business School in 2000.

Q U I L L C A P I T A T R U S T Annual Report 2006  PROFILE OF DIRECTORS OF THE MANAGEMENT COMPANY (cont’d)

Datuk Haji Abdul Karim bin Abu Bakar, aged 65, is the Aw Hong Boo, aged 56, is a member of the Malaysian Independent Non-Executive Director of Quill Capita Institute of Certified Public Accountants (MICPA), the Management Sdn Bhd. He holds a Diploma in Civil Malaysian Institute of Accountants (MIA) and a Fellow Engineering from Portsmouth College of Technology and of the Institute of Chartered Accountants in England a postgraduate diploma in Hydraulic Engineering from and Wales (ICAEW). He began his career in 1970 as an Delft Tecnological University in Holland. In a career Audit Senior in London and later with Ernst & Whinney, spanning over forty (40) years, Datuk Karim has served an international public accounting firm in Singapore in the Department of Drainage and Irrigation in Kedah and London. He served in RHB Bank Berhad for 21 and Kelantan. He is experienced in the field of hydrology years between 1978 and 1999, holding various senior and hydraulics, having served on the Kemubu Drainage management positions in financial management, banking, Irrigation and Muda River projects in Kelantan and Kedah finance and leasing. He was the Senior General Manager respectively from the years 1965 to 1973. Subsequently, of Branch Network and Risk Management before his he joined Rakyat Corporation Sdn Bhd in 1973 as a general optional retirement in November 1999. He presently manager and was involved in the development of Bank sits on the Board of Malaysian Building Society Berhad Rakyat building and the Angkasaraya building amongst (MBSB) and serves as the Advisor to the Quill Group of others. From the years 1980 to 1999, Datuk Karim served Companies. at executive levels with numerous developers such as TTDI Development Sdn Bhd, PGK Sdn Bhd, Peremba Development Sdn Bhd and Cyberview Sdn Bhd where he held positions such as General Manager, Managing Director, Executive Deputy Chairman and Chief Executive Officer respectively. In 1999, he was appointed as Chief Executive Officer of Setia Haruman Sdn Bhd, the master developer of the Cyberjaya Flagship Zone to spearhead the development. Currently, Datuk Karim serves as an Advisor to the Peremba group of companies.

Datuk Dr Mohamed Arif bin Nun, aged 61, is the Independent Non-Executive Director of Quill Capita Management Sdn Bhd. He holds a PhD in Electrical & Electronics Engineering from Loughborough University in England. Datuk Dr Mohamed Arif had been a lecturer, Assistant Professor and later the Head of the Communications Engineering Department in the University of Technology, Malaysia. He then joined MIMOS in 1986 and was the Deputy Director-General when he left MIMOS in 1996. He joined Multimedia Development Corporation Sdn Bhd (“MDC”) in 1996 as the Senior Vice-President and from 2003 to 2005, held the position of Chief Executive Officer of the MDC, the one- stop agency for realising the MSC. Under his leadership, he has streamlined MDC’s organizational structure to better reflect MDC’s aims and strategies in achieving the ‘MSC Next Leap’ as well as for greater functional effectiveness. A major initiative taken was the creation of the Marketing and Branding Division within MDC to better promote and position MSC as the global hub and preferred location for the Information & Communication Technology and multimedia innovation, services and operations. Datuk Dr Mohamed Arif is also the Director for Silterra Sdn Bhd, a majority Khazanah-owned wafer fabrication company and the Chairman of SGIS Sdn Bhd, a professional company specialising in satellite and land information systems.

Q U I L L C A P I T A T R U S T  Annual Report 2006 MANAGER’S REPORT ON QUILL CAPITA TRUST

Quill Capita Management Sdn. Bhd., the Manager of Quill Capita Trust (the “Trust”), is pleased to present the Manager’s Report on the Trust together with the audited financial statements of the Trust for the financial period ended 31 December 2006.

THE TRUST, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES

The Trust was constituted under a trust deed dated 9 October 2006 (the “Deed”), by Quill Capita Management Sdn. Bhd. as the manager (the “Manager”) and Mayban Trustee Berhad (the “Trustee”) and is categorised as a real estate investment trust. The Trust commenced its operations during the financial period.

The principal activity of the Trust involves acquisition of and investment in commercial properties, primarily in Malaysia. On 20 November 2006, the Trust successfully acquired a portfolio of 4 commercial properties located at Cyberjaya, Malaysia, namely Quill Building 1 - DHL 1, Quill Building 2 - HSBC, Quill Building 3 - BMW and Quill Building 4 - DHL 2. There has been no significant change in the nature of this activity during the financial period.

The Manager is a company incorporated in Malaysia. The principal activity of the Manager is to manage real estate investment trust. There has been no significant change in the nature of this activity during the financial period.

MANAGER’S FEE & COMMISSION

The Manager is entitled under the Deed to a base fee of 0.4% per annum of the gross asset value, payable monthly in arrears and a Performance Fee of 3% per annum on the net investment income, payable semi-annually in arrears. However, for the five financial years after the date of listing, no Performance Fee shall be payable in the event the Trust fails to achieve a minimum annualised distributable income per unit of 6 sen (after deducting Performance Fee).

The Manager’s remuneration is accrued and paid in accordance with the Deed. No initial service charge, fee or commission has been earned by the Manager in managing the Trust other than as disclosed in Note 7 to the financial statements.

During the period, the Manager did not receive any soft commission (ie good and services) from its broker, by virtue of transaction conducted by the Trust.

TERM OF THE TRUST

The Trust will continue its operations until such time as determined by the Trustee and the Manager as provided under the Clause 26 of the Deed.

INVESTMENT OBJECTIVES

The investment objective of the Trust is to acquire and invest in commercial properties primarily in Malaysia with a view to provide long-term growth and sustainable distribution of income to Unitholders and to achieve long-term growth in the net asset value per unit of the Trust.

Q U I L L C A P I T A T R U S T Annual Report 2006  MANAGER’S REPORT ON QUILL CAPITA TRUST (cont’d)

INVESTMENT STRATEGIES

The Manager plans to achieve the key investment objectives while seeking additional income growth and enhancement of Trust’s property portfolios over time through the following strategies :

(a) Acquisition Growth and Portfolio Management Strategy

The Manager seeks to selectively acquire additional properties that meet the investment criteria to enhance yields and returns while improving portfolio diversification. The acquisition strategy takes into consideration rental yield, occupancy and tenant characteristics, location, value-adding opportunities, and building and facilities specifications.

The Manager intends to hold the properties on a long-term basis. However, at the appropriate time, the Manager will recommend an adjustment of the portfolio mix through acquisition or sale of one or more of the authorised investments or commercial properties with the objective of maximising total returns to Unitholders. The proceeds from such a sale would be either deployed to purchase other attractive authorised investments or, in the absence of appropriate investments, distributed to Unitholders.

(b) Active Asset Management Strategy

The manager intends to increase the property yield of existing commercial space and correspondingly maximising returns from the existing commercial space by implementing the following :

(i) Maximise tenant retention through pro-active tenant management and efficient property related services;

(ii) Diversifying tenant base to balance exposure to certain business sectors that are more susceptible to general economic cycles;

(iii) Proactive marketing plans;

(iv) Continued minimisation of property expenses without compromising quality of services, and

(v) Asset enhancement by constantly improving and maintaining the quality and physical condition of the properties in the Trust’s portfolio.

(c) Capital Management Strategy

The Manager employs appropriate debt and equity financing policies in financing acquisition and/or asset enhancements, and utilise appropriate hedging strategies to optimise risk adjusted returns to Unitholders.

The Manager aims to optimise the Trust’s capital structure and cost of capital within the borrowing limits set out in the Securities Commission’s Guidelines on Real Estate Investment Trusts (“Guidelines on REIT) and intend to use a combination of debt and equity to fund future acquisitions and improvement works. The strategies involves :

(i) Adopting and maintaining an optimal gearing level; and

(ii) Adopting an active interest rate management strategy to manage the risks associated with changes in interest rates.

while maintaining flexibility in the Trust’s capital structure to meet future investment and/or capital expenditure requirements.

Q U I L L C A P I T A T R U S T  Annual Report 2006 MANAGER’S REPORT ON QUILL CAPITA TRUST (cont’d)

INVESTMENT POLICIES

The Trust’s investments are, subject to the following investment limits imposed by the Guidelines on REIT :

(a) at least 75% of the Trust’s total assets shall be invested in real estate, single-purpose companies, real estate-related assets or liquid assets;

(b) at least 50% of the Trust’s total assets must be invested in real estate or single-purpose companies;

(c) the remaining 25% of the Trust’s total assets may be invested in other assets (i.e. real estate-related assets, non-real estate-related assets or asset-backed securities); and

(d) such other limits and investments as may be permitted by the Securities Commission Guidelines on REIT.

As at 31 December 2006, the Trust’s investments are in the 4 commercial properties namely QB 1 - DHL 1, QB 2 - HSBC, QB 3 - BMW, and QB 4 - DHL 2.

The Manager will continue to comply with the Guidelines on REIT and other requirements as imposed by the Securities Commission (“SC”) from time to time and the Deed.

PERFORMANCE OF THE TRUST

Actual As per Prospectus 31.12.2006 11.12.2006 RM’000 RM’000

Gross revenue 1,972 1,971 Income before taxation 1,194 1,173 Gross income distribution per unit (sen) 0.4938 0.49

During the financial period ended 31 December 2006, the Trust recorded gross revenue and income before taxation of RM1,972,000 and RM1,194,000 respectively, as compared to the forecast gross revenue and income before taxation of RM1,971,000 and RM1,173,000 respectively reported in the prospectus dated 11 December 2006, representing an increase of 0.05% and 1.8% in net revenue and income before taxation respectively.

COMPOSITION OF INVESTMENT PORTFOLIO

As at 31 December 2006, the Trust’s investment portflio comprises its investment in the 4 commercial properties, the details of which are decribed below :

(a) Quill Building 1 - DHL 1 Address / Location 3509 & 3511, Jalan Teknokrat 5, 63000 Cyberjaya, Selangor Darul Ehsan. Property Type Commercial building Description 4-storey office building together with a sub basement and a basement car park. Tenure Term in Perpertuity Date of Acquisition 20 November 2006 Net Lettable Area 92,284 sq ft Purchase price RM52,100,000.00 Occupancy Rate 100%

Q U I L L C A P I T A T R U S T Annual Report 2006 10 MANAGER’S REPORT ON QUILL CAPITA TRUST (cont’d)

(b) Quill Building 2 - HSBC Address / Location 3500, Jalan Teknokrat 3, 63000 Cyberjaya, Selangor Darul Ehsan. Property Type Commercial building Description 4-storey office building together with a sub basement car park. Tenure Term in Perpertuity Date of Acquisition 20 November 2006 Net Lettable Area 184,453 sq ft Purchase price RM107,500,000.00 Occupancy Rate 100%

(c) Quill Building 3 - BMW Address / Location 3501, Jalan Teknokrat 5, 63000 Cyberjaya, Selangor Darul Ehsan. Property Type Commercial building Description 4-storey office building together with a level of sub-basement and a level of basement car park. Tenure Term in Perpertuity Date of Acquisition 20 November 2006 Net Lettable Area 117,198 sq ft Purchase price RM59,400,000.00 Occupancy Rate 100%

(d) Quill Building 4 - DHL 2 Address / Location 3504, Jalan Teknokrat 5, 63000 Cyberjaya, Selangor Darul Ehsan. Property Type Commercial building Description 4-storey office building together with a sub-basement and 2-level basement car parks. Tenure Term in Perpertuity Date of Acquisition 20 November 2006 Net Lettable Area 99,183 sq ft Purchase price RM57,000,000.00 Occupancy Rate 100%

Note : The Sale & Purchase Agreements dated 17 October 2006 (the “SPAs”) of the four real estate properties (Quill Building 1, Quill Building 2, Quill Building 3 and Quill Building 4) signed between Mayban Trustee Berhad (as Trustee for Quill Capita Trust) and the vendors were completed on 20 November 2006. According to the terms of the SPAs, the revenue and expenditure of the four real estate properties would accrue to QCT upon the cash payment, which was satisfied via the issuance of CPs/MTNs on 1 December 2006.

REVIEW OF PROPERTY MARKET

For the financial period ended 31 December 2006, all the 4 properties enjoyed good occupancy rates of 100%. The tenants are mainly subsidiaries of multinational companies and have long committed leases with step-up rates.

PROSPECT OF THE PROPERTY MARKET

The market outlook for commercial real estate in Malaysia is expected to remain favourable in 2007. The office situation in Cyberjaya/Putrajaya area will continue to experience limited supply situation.

Demand growth for office space in Cyberjaya/Putrajaya area is expected to continue to be positive and driven primarily by the services and information technology sectors. Thus, occupancy rates and rentals of office buildings within the Cyberjaya/Putrajaya area may show some growth as there are limited supply of new office space within these areas.

As Cyberjaya is considered as part of the Multimedia Super Corridor (“MSC”), which enjoys certain bill of guarantees in terms of tax exemptions as well as IT infrastructures to name a few, there is a potential for investment in the office buildings in this Cyberjaya area. However, these office buildings, particularly in Cyberjaya area, may face competition from future supply of office buildings in other parts of the country e.g. Kuala Lumpur Sentral area, which has also recently been granted status as CyberCentre, being part of the MSC and enjoys the similar bill of guarantees.

Q U I L L C A P I T A T R U S T 11 Annual Report 2006 MANAGER’S REPORT ON QUILL CAPITA TRUST (cont’d)

RESERVES AND PROVISIONS

There were no material transfers to and from reserves or provisions during the period other than as disclosed in the Consolidated Statement of Changes in Net Asset Value.

INCOME DISTRIBUTION

A proposed gross total income distribution of RM1,178,634, which is 100% of the income after taxation has been accrued for the financial period ended 31 December 2006. The distribution per unit is 0.4938 sen and is to be paid on 28 February 2007. In line with the new tax transparency regime introduced by the Government through the Finance Act 2004, income distributed to Unitholders by the Trust is exempted from tax at the Trust level. However, Unitholders will be taxed at their respective tax rates on the income distributed. Income distributed to non-resident companies, foreign institutional investors and unitholders other than resident companies will be subject to withholding tax.

Since the Trust was listed on 8 January 2007, the distribution is payable to all unitholders of the 238,691,000 units as at Book Closure Date, 13 February 2007.

The effect of the income distribution in terms of the net asset value per unit is as follows :

Before distribution After distribution RM RM

Net asset value (“NAV”) per unit 0.81 0.80

The calculation of NAV per unit is based on 232,501,000 units in circulation as at 31 December 2006 before listing on 8 January 2007.

Before distribution After distribution RM RM

Net asset value (“NAV”) per unit 0.78 0.78

The calculation of NAV per unit is based on 238,691,000 units in circulation after listing on 8 January 2007.

BREAKDOWN OF UNITHOLDINGS AS AT 11 JANUARY 2007

Number of Number of Percentage of Unit Class Unitholders Unitholdings Unitholdings (%)

5,000 and below 1,253 3,036,800 1.27 5,001 and 10,000 317 2,687,600 1.13 10,001 to 50,000 214 6,972,500 2.92 50,001 to 500,000 52 20,809,500 8.72 500,001 and above 28 205,184,600 85.96

1,864 238,691,000 100.00

Q U I L L C A P I T A T R U S T Annual Report 2006 12 MANAGER’S REPORT ON QUILL CAPITA TRUST (cont’d)

DIRECTORS

The names of the directors of the Manager since the date of establishment and at the date of this report are :

Tan Sri Datuk Dr Ahmad Tajuddin bin Ali (Appointed on 25 September 2006) Dato’ Low Moi Ing (First director) Dato’ Michael Ong Leng Chun (First director) Martin Tan Toh Tee (Appointed on 25 September 2006) Chan Say Yeong (Appointed on 21 July 2006) Datuk Hj Abdul Karim bin Abu Bakar (Appointed on 25 September 2006) Datuk Dr Mohamed Arif bin Nun (Appointed on 25 September 2006) Aw Hong Boo (alternate to Dato’ Low Moi Ing) (Appointed on 25 September 2006)

DIRECTORS’ BENEFITS

Neither at the end of the financial period, nor at any time during that period, did there subsist any arrangement to which the Manager was a party, whereby the directors of the Manager might acquire benefits by means of the acquisition of shares in or debentures of the Trust or any other body corporate of the acquisition of units of the Trust.

Since the establishment of the Trust, no director of the Manager has received or become entitled to receive any benefits by reason of any contract or arrangement made by the Trust or its related corporation with any director of the Manager or with a firm of which he is a member, or with a company in which he has a substantial financial interest, except for the allotment of units in the Trust as disclosed under “DIRECTORS’ INTERESTS”.

DIRECTORS’ INTERESTS

According to the register of unitholdings of the Manager, the interests of directors in office at the end of the financial period were as follows :

Number of Date of Units Bought/ Indirect Interest Establishment (Sold) 31.12.2006

Dato’ Low Moi Ling (*) – 232,500,000 232,500,000 Dato’ Michael Ong Leng Chun (*) – 232,500,000 232,500,000

(*) Deemed interested by virtue of their direct shareholdings in Quill Properties Sdn. Bhd., Quill Land Sdn. Bhd. and Quill Estates Sdn. Bhd. Their deemed interest were reduced to 71,608,000 units upon listing on 8 January 2007.

None of the other directors of the Manager in office at the end of the financial period had any interest in the Trust.

The number of units allotted and issued to the directors as at the end of the financial period and after the listing on 8 January 2007 were as follows :

As at As at Direct Interest 31.12.2006 11.1.2007

Tan Sri Datuk Dr Ahmad Tajuddin Bin Ali – 50,000 Dato’ Low Moi Ling – 50,000 Dato’ Michael Ong Leng Chun – 50,000 Martin Tan Toh Tee – 50,000 Chan Say Yeong – 50,000 Datuk Hj Abdul Karim Bin Abu Bakar – 50,000 Datuk Dr Mohamed Arif Bin Nun – 50,000 Aw Hong Boo (alternate to Dato’ Low Moi Ing) – 50,000

Q U I L L C A P I T A T R U S T 13 Annual Report 2006 MANAGER’S REPORT ON QUILL CAPITA TRUST (cont’d)

OTHER STATUTORY INFORMATION

(a) Before the income statement and balance sheet of the Trust were made out, the Manager took reasonable steps :

(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that there were no known bad debts and that no provision for doubtful debts was necessary; and

(ii) to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.

(b) At the date of this report, the Manager is not aware of any circumstances which would render :

(i) it necessary to write off any bad debts or to make any provision for doubtful debts in respect of the financial statements of the Trust; and

(ii) the values attributed to the current assets in the financial statements of the Trust misleading.

(c) At the date of this report, the directors of the Manager are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Trust misleading or inappropriate.

(d) At the date of this report, the directors of the Manager are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Trust which would render any amount stated in the financial statements misleading.

(e) As at the date of this report, there does not exist :

(i) any charge on the assets of the Trust which has arisen since the end of the financial period which secures the liabilities of any other person, except for as disclosed in Note 17 to the financial statements; or

(ii) any contingent liability of the Trust which has arisen since the end of the financial period.

(f) In the opinion of the directors of the Manager :

(i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial period which will or may affect the ability of the Trust to meet its obligations as and when they fall due; and

(ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Trust for the financial period in which this report is made.

SUBSEQUENT EVENT

Details of a subsequent event are disclosed in Note 26 to the financial statements.

AUDITORS

The auditors, Ernst & Young, have expressed their willingness to continue in office.

Signed on behalf of the Manager, Quill Capita Management Sdn. Bhd.

TAN SRI DATUK DR AHMAD TAJUDDIN BIN ALI CHAN SAY YEONG Chairman Director & Chief Executive Officer

Kuala Lumpur, Malaysia 26 February 2007

Q U I L L C A P I T A T R U S T Annual Report 2006 14 STATEMENT BY MANAGER

We, Tan Sri Datuk Dr Ahmad Tajuddin bin Ali and Chan Say Yeong, being the two of the directors of the Manager, Quill Capita Management Sdn. Bhd., do hereby state that, in our opinion, the accompanying financial statements set out on pages 18 to 33 are drawn up in accordance with applicable MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities, applicable provisions of the Deed and the Securities Commission’s Guidelines on Real Estate Investment Trusts so as to give a true and fair view of the financial position of the Trust as at 31 December 2006 and of the results and the cash flows of the Trust for the period then ended.

Signed on behalf of the Manager, Quill Capita Management Sdn. Bhd.

TAN SRI DATUK DR AHMAD TAJUDDIN BIN ALI CHAN SAY YEONG Chairman Director & Chief Executive Officer

Kuala Lumpur, Malaysia 26 February 2007

STATUTORY DECLARATION

I, Chan Say Yeong, being the Director primarily responsible for the financial management of Quill Capita Trust, do solemnly and sincerely declare that the accompanying financial statements set out on pages 18 to 33 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the abovenamed Chan Say Yeong in Kuala Lumpur in the Federal Territory on 26 February 2007

CHAN SAY YEONG

Before me,

Commissioner for Oaths

Q U I L L C A P I T A T R U S T 15 Annual Report 2006 TRUSTEE’S REPORT TO THE UNITHOLDERS OF QUILL CAPITA TRUST

We have acted as Trustee of Quill Capita Trust (the Fund) for the financial period ended 31 December 2006. To the best of our knowledge, Quill Capita Management Sdn Bhd (the Manager) has managed the Fund in accordance with the limitation imposed on the investment powers of the Manager and the Trustee under the Deed, other applicable provisions of the Deed, the Securities Commission’s Guidelines On Real Estate Investment Trusts, the Securities Commissions Act 1993 and other applicable laws during the financial period ended 31 December 2006.

We confirm that the recommended gross income distribution of 0.4938 sen per unit for the financial period ended 31 December 2006 is in line with and is reflective of the objective of Quill Capita Trust.

Mayban Trustees Berhad

WONG SU KUIN Head, Corporate Trust

Kuala Lumpur 26 February 2007

Q U I L L C A P I T A T R U S T Annual Report 2006 16 REPORT OF THE AUDITORS TO THE UNITHOLDERS OF QUILL CAPITA TRUST

We have audited the financial statements set out on pages 18 to 33. These financial statements are the responsibility of the directors of the Manager of Quill Capita Trust.

It is our responsibility to form an independent opinion, based on our audit, on the financial statements and to report our opinion to you, as a body, in accordance with the Securities Commission’s Guidelines on Real Estate Investment Trusts (“Guidelines on REIT“), and for no other purpose. We do not assume responsibility to any other person for the content of this report.

We conducted our audit in accordance with applicable Approved Standards on Auditing in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors of the Managers, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements have been properly drawn up in accordance with applicable MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities, modified by the Guidelines on REIT so as to give a true and fair view of the financial position of the Trust as at 31 December 2006 and of the results and the cash flows of the Trust for the period then ended.

Ernst & Young Mohd Sukarno Bin Tun Sardon AF: 0039 No.1697/03/07 (J) Chartered Accountants Partner

Kuala Lumpur 26 February 2007

Q U I L L C A P I T A T R U S T 17 Annual Report 2006 CONSOLIDATED INCOME STATEMENT FOR THE PERIOD ENDED 31 DECEMBER 2006

Group Date of establishment to 31.12.2006 Note RM

TOTAL INCOME Gross rental 5 1,972,386 Property operating expenses 6 (308,724)

Net rental income 1,663,662 Interest income 12,950

1,676,612

TOTAL EXPENDITURE Manager’s fees 7 (101,682) Trustee’s fee 8 (5,338) Borrowing costs 9 (315,454) Auditors’ remuneration (20,000) Tax agent’s fee (4,000) Administrative expenses (36,504)

(482,978)

INCOME BEFORE TAX 1,193,634 Income tax expense 10 (15,000)

NET INCOME FOR THE PERIOD 1,178,634

NET INCOME DISTRIBUTION Proposed distribution of 0.49 sen payable on 28 February 2007 12 1,178,634

Income distribution per unit Gross (sen) 12 0.49 Net (sen) 12 **

INCOME AFTER TAXATION IS MADE UP OF THE FOLLOWING : Realised 1,178,634 Unrealised –

1,178,634

EARNINGS PER UNIT - after managers’ fees (sen) 11 (a) 0.51 - before managers’ fees (sen) 11 (b) 0.55

** Income distributed to non-resident companies, foreign institutional investors and unitholders other than resident companies will be subject to withholding tax.

The accompanying notes form an integral part of the financial statements.

Q U I L L C A P I T A T R U S T Annual Report 2006 18 CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2006

Group Date of establishment 2006 Note RM

NON-CURRENT ASSETS Real estate properties 13 276,000,000

CURRENT ASSETS Trade and other receivables 14 4,516,419 Deposits with licensed financial institution 15 9,999,000 Cash and bank balances 753

14,516,172

CURRENT LIABILITIES Provision for income distribution 12 1,178,634 Trade and other payables 16 5,766,448 Borrowings 17 89,533,446 Provision for taxation 15,000

96,493,528

NET CURRENT ASSETS (81,977,356)

NON-CURRENT LIABILITIES Security deposits 8,021,844

NET ASSETS VALUE 186,000,800

Represented by :

UNITHOLDERS’ FUND Unitholders’ capital 18 186,000,800 Undistributed income –

186,000,800

NET ASSET VALUE PER UNIT

Before distribution 19 0.81 After distribution 19 0.80

NUMBER OF UNITS IN CIRCULATION

As at 31 December 2006 232,501,000 As at 8 January 2007 238,691,000

The accompanying notes form an integral part of the financial statements.

Q U I L L C A P I T A T R U S T 19 Annual Report 2006 CONSOLIDATED STATEMENT OF CHANGES IN NET ASSET VALUE FOR THE PERIOD ENDED 31 DECEMBER 2006

Distributable Unitholders’ Undistributed Unitholders’ Capital Income Fund RM RM RM

At date of establishment – – – Creation of units 186,000,800 – 186,000,800 Net income for the period – 1,178,634 1,178,634 Distribution to Unitholders – (1,178,634) (1,178,634)

At 31 December 2006 186,000,800 – 186,000,800

The accompanying notes form an integral part of the financial statements.

Q U I L L C A P I T A T R U S T Annual Report 2006 20 CONSOLIDATED CASH FLOW STATEMENT FOR THE PERIOD ENDED 31 DECEMBER 2006

Group Date of establishment to 31.12.2006 RM

CASH FLOW FROM OPERATING ACTIVITIES Profit before tax 1,193,634 Adjustment for : Accretion of interest expenses 305,334 Amortisation of transaction costs incurred to obtain borrowings 10,120 Interest income (12,950)

Operating income before working capital changes 1,496,138 Trade and other receivables (4,509,557) Trade and other payables 12,938,292

Net cash generated from operating activities 9,924,873

CASH FLOW FROM INVESTING ACTIVITIES Purchase of investment properties (90,000,000) Interest income 6,088

Net cash used in investing activities (89,993,912)

CASH FLOW FROM FINANCING ACTIVITIES Proceed from borrowings 90,067,992 Proceed from issuance of promoter units 800

Net cash generated from investing activities 90,068,792

NET INCREASE IN CASH AND CASH EQUIVALENTS 9,999,753 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD –

CASH AND CASH EQUIVALENTS AT END OF PERIOD 9,999,753

Cash and cash equivalents at end of period comprises :

Deposit with licensed financial institution 9,999,000 Cash and bank balances 753

9,999,753

The accompanying notes form an integral part of the financial statements.

Q U I L L C A P I T A T R U S T 21 Annual Report 2006 NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2006

1. THE TRUST, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES

Quill Capital Trust (the “Trust”) was constituted under a trust deed dated 9 October 2006 (the “Deed”), by Quill Capita Management Sdn. Bhd. as the manager (the “Manager”) and Mayban Trustee Berhad (the “Trustee”) and is categorised as real estate investment trust. The Trust commenced its operations during the financial period.

The principal activity of the Trust involves the acquisition of and investment in commercial properties, primarily in Malaysia. On 20 November 2006, the Trust successfully acquired a portfolio of 4 commercial properties located at Cyberjaya, Malaysia, namely Quill Building 1 - DHL 1, Quill Building 2 - HSBC, Quill Building 3 - BMW and Quill Building 4 - DHL 2. There has been no significant change in the nature of this activity during the financial period.

The Manager, Quill Capita Management Sdn Bhd, is a company incorporated in Malaysia. The principal activity of the Manager is management of real estate investment trust. There has been no significant change in the nature of this activity during the financial period.

The financial statements were authorised for issue by the Manager in accordance with a resolution of directors on 26 February 2007.

2. TERM OF THE TRUST

The Trust will continue its operations until such time as determined by the Trustee and the Manager as provided under the Clause 26 of the Deed.

3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Trust operates within clearly defined guidelines as set out in the Securities Commission’s Guidelines on Real Estate Investment Trusts (“Guidelines on REIT”). The Guidelines on REIT seek to provide a regulatory framework that would protect the interests of the investing public. The Trust’s risk management policies, which ensure compliance with the spirit of the Guidelines on REIT, are set out below. It is not the Trust’s policy to engage in speculative transactions.

(a) Interest Rate Risk

The Trust is exposed to movements in market interest rates due to the Commercial Papers/Medium Term Notes (“CPs/MTNs”) issuance programme. The information on maturity and effective interest rates on the CPs/MTNs are disclosed in Note 17 to the financial statements.

(b) Market Risk The Trust’s real estate properties are all occupied by quality tenants with long term leases. This helps to mitigate its exposure to market risk ie changes in the local property market conditions and changing demand for rental of office space. The Trust does not participate in any speculative activities.

(c) Credit Risk The Trust is not exposed to significant credit risks as it is not permitted to extend loans or any other forms of credit facilities. The risk of non-collectibility of monthly rental is also mitigated with rental deposits collected from the tenants.

(d) Liquidity Risk

The Trust ensures that there are adequate arrangements for the rollover of the CPs/MTNs in a timely and cost- effective manner. Sources of funds can be via issuance of units, internally generated funds or borrowings. As timing of these arrangements are critical, the Trust may be exposed to the risk of its real estate properties being foreclosed in the interim. However, the Manager are of the opinion that the CPs/MTNs programme will be available throughout the period and there is no imminent obligation to repay until the legal maturity of the CPs/MTNs.

Q U I L L C A P I T A T R U S T Annual Report 2006 22 NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2006 (cont’d)

4. SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Preparation

The financial statements have been prepared under the historical cost convention except for the investment in real estate properties which is stated at fair value.

The financial statements comply with the applicable MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities, modified by the Securities Commission’s Guidelines on Real Estate Investment Trusts.

(b) Basis of Consolidation

The consolidated financial statements include the financial statements of the Trust and its wholly-owned special purpose entity (“SPE”). The special purpose entity is established for the specific purpose of raising financing on behalf of the Trust for the acquisition of real estate and single-purpose companies. The Trust does not have any direct or indirect shareholdings in these entities. An SPE is consolidated if, based on an evaluation of the substance of its relationship with the Trust and the SPE’s risk and rewards, the Trust concludes that it controls the SPE. SPE controlled by the Trust were established under terms that impose strict limitations on the decision-making powers of the SPE’s management and that result in the Trust receiving all of the benefits related to the SPE’s operations and net assets.

(c) Adoption of New and Revised FRSs

On the date of establishment, the Trust adopted the following FRSs mandatory for financial periods beginning on or after 1 January 2006 :

FRS 101 Presentation of Financial Statements FRS 108 Accounting Policies, Changes in Estimates and Errors FRS 110 Events after the Balance Sheet Date FRS 127 Consolidated and Separate Financial Statements FRS 132 Financial Instruments : Disclosures and Presentation FRS 140 Investment Property

In addition, the Trust has not early adopted the new and revised FRS 124 : Related Party Disclosures for the financial period beginning 1 October 2006 and the deferred FRS139 - Financial Instruments : Recognition and Measurement.

Q U I L L C A P I T A T R U S T 23 Annual Report 2006 NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2006 (cont’d)

(d) Investment in Real Estate Properties

Investment in real estate properties consist of investment in real estate assets primarily in commercial properties.

Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met; and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the balance sheet date.

Gains and losses arising from changes in the fair value of investment properties are included in the income statement in the year in which they arise.

Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or lossess on the retirement or disposal of an investment property are recognised in the income statement in the year of retirement or disposal.

(e) Income Tax

Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted at the balance sheet date.

Deferred tax is provided for, using the liability method. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised.

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also recognised directly in equity.

(f) Revenue Recognition

Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the Trust and the amount of the revenue can be measured reliably.

Revenues from the rental of real estate properties, service charges and carpark income are recognised on an accrual basis.

Q U I L L C A P I T A T R U S T Annual Report 2006 24 NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2006 (cont’d)

(g) Financial Instruments

Financial Instruments are recognised in the balance sheet when the Trust has become a party to the contractual provisions of the instrument.

Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual agreement. Interest, dividends, gains and losses relating to a financial instrument classified as a liability, are reported as expense or income. Distribution to Unitholders of financial instruments classified as equity are charged directly to equity. Financial instruments are offset when the Trust has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.

(i) Cash and Cash Equivalents

For the purposes of the cash flow statement, cash and cash equivalents include cash on hand and at bank and deposits with licensed financial institutions.

(ii) Trade and Other Receivables

Trade and other receivables are carried at anticipated realisable values. Bad debts are written off when identified. An estimate is made for doubtful debts based on a reviewing of all outstanding amounts as at the balance sheet date.

(iii) Trade and Other Payables

Trade and other payables are stated at cost which is the fair value of the consideration to be paid in the future for goods and services received.

(iv) Interest-Bearing Borrowings

CPs/MTNs is recorded at the amount of proceeds received, net of transaction costs. Interests on the CPs/MTNs are recognised as an expense in the income statement in the periods in which they are incurred. Transaction costs are amortised and charged to the income statement over the period of the CPs/MTNs.

5. GROSS RENTAL

Group Date of establishment to 31.12.2006 RM

Rental income 1,550,295 Service charges 254,222 Carpark income 167,369 Other income 500

1,972,386

Rental represent rental income from the rental of the Trust’s commercial buidlings.

Q U I L L C A P I T A T R U S T 25 Annual Report 2006 NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2006 (cont’d)

6. PROPERTY OPERATING EXPENSES

Property Management Fee 63,000 Insurance and others 12,772 Maintenance fees 232,952

308,724

The Property Manager Fee of RM63,000 per month was charged by Knight Frank (Ooi & Zaharin Sdn Bhd). The Property Manager Fee is inclusive of total property management fee with permissible discount in accordance with the Valuers, Appraisers and Estate Agents Acts, 1981 and reimbursable site staff cost.

7. MANAGER’S FEE & COMMISSION

The Manager is entitled under the trust deed to a base fee of 0.4% per annum of the gross asset value, payable monthly in arrears and a Performance fee of 3% per annum on the net investment income, payable semi-annually in arrears. However, for the five financial years after the date of listing, no Performance Fee shall be payable in the event the Trust fails to achieve a minimum annualised distributable income per unit of 6 sen (after deducting Performance Fee).

The Manager’s remuneration is accrued and paid in accordance with the Deed. No initial service charge, fee or commission has been earned by the Manager in managing the Trust other than as disclosed in Note 7 to the financial statements.

During the period, the Manager did not receive any soft commission (ie goods and services) from its broker, by virtue of transactions conducted by the Trust.

8. TRUSTEE’S FEE

Trustee’s fee is payable to Mayban Trustee Berhad. For the first and second years, the Trustee’s fee is computed at 0.021% per annum of Gross Asset Value, payable monthly in arrears. In respect of third and subsequent years, 0.03% per annum on the first RM2.5 billion of the Gross Asset Value and 0.02% per annum on the Gross Asset Value in excess of RM2.5 billion, payable monthly in arrears.

The amount of Trustee’s Fee payable to Trustee shall be net of all applicable service tax and all other applicable sales tax, governmental impositions, duties and levies imposed by the relevant authorities in Malaysia.

9. BORROWING COSTS

Group Date of establishment to 31.12.2006 RM

Borrowing costs incurred on CPs/MTNs :

Accretion of interest expenses (Note 17) 305,334 Accretion of transaction costs incurred to obtain CPs/MTNs (Note 17) 10,120

315,454

Q U I L L C A P I T A T R U S T Annual Report 2006 26 NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2006 (cont’d)

10. INCOME TAX EXPENSE

Income tax expense for the period 15,000

Domestic income tax is calculated at the Malaysian statutory tax rate of 28% of the estimated assessable profit for the period. The domestic statutory tax rate will be reduced to 27% from the current year’s rate of 28%, effective year of assessment 2007 and to 26% effective year of assessment 2008.

A reconciliation of income tax expense applicable to income before taxation at the statutory income tax rate to income tax expense at the effective income tax rate of the Trust is as follows :

Group Date of establishment to 31.12.2006 RM

Income before tax 1,193,634

Taxation at Malaysian statutory tax rate of 28% 334,218 Income not subject to tax (Note (a)) (330,018) Expenses not deductible for tax purposes 10,800

Income tax expenses for the period 15,000

(a) Income not subject to tax represents gross income distribution to Unitholders amounting to RM1,178,634 pursuant to section 61A of the Income Tax Act, 1967 (“ITA”) and paragraph 35A, Schedule 6 of the ITA.

11. EARNINGS PER UNIT

(a) The calculation of earnings per unit after manager’s fee is based on net income for the period to the weighted average number of units during the period of 232,501,000.

(b) The calculation of earnings per unit before manager’s fee is based on net income for period after adding back manager’s fees and the weighted average number of units during the period of 232,501,000.

Q U I L L C A P I T A T R U S T 27 Annual Report 2006 NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2006 (cont’d)

12. PROVISION FOR INCOME DISTRIBUTION

Distribution to the unitholders is from the following sources :

Group Date of establishment to 31.12.2006 RM

Rental income 1,972,386 Interest income 12,950

1,985,336 Less : Expenses (806,702)

1,178,634

Gross distribution per unit (sen) 0.4938 Net distribution per unit (sen) **

** Income distributed to non-resident companies, foreign institutional investors and unitholders other than resident companies will be subject to withholding tax.

The calculation of distribution per unit is based on 238,691,000 units after listing on 8 Jan 2007.

13. REAL ESTATE PROPERTIES

Group Cost of Acquisition and Additions/ Date of Net book value* Description of real estate Tenure Acquisition RM

Quill Building 1 - DHL 1 Term in perpetuity 20 November 2006 52,100,000 Quill Building 2 - HSBC Term in perpetuity 20 November 2006 107,500,000 Quill Building 3 - BMW Term in perpetuity 20 November 2006 59,400,000 Quill Building 4 - DHL 2 Term in perpetuity 20 November 2006 57,000,000

276,000,000

* Since the investment properties were acquired on 20 November 2006 at RM276 million, the carrying amount approximate fair value as at 31 December 2006.

The purchase consideration of real estate properties was satisfied via issuance of 232,500,000 units in the Trust valued at RM0.80 per unit and drawdown of CPs/MTNs as disclosed in Note 17 to the financial statements.

The real estate properties were pledged as securities for borrowings as disclosed in Note 17 to the financial statements.

Q U I L L C A P I T A T R U S T Annual Report 2006 28 NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2006 (cont’d)

14. TRADE AND OTHER RECEIVABLES

Group Date of establishment 2006 Note RM

Trade receivables a 69,357 Other receivables Deposits 940,200 Sundry receivables b 3,506,862 4,516,419

a) Trade receivables

The Trust has no significant concentration of credit risk that may arise from exposures to a single tenant or groups of tenants.

b) Sundry receivables Included in sundry receivables are transaction costs of RM3,500,000 incurred in relation to the public issue. The transaction costs include fees to the issuing house, adviser, reporting accountant, solicitors and other professional advisors, printing costs and stamp duties. The transaction costs of an equity transaction shall be accounted for as a deduction from equity, net of any related income tax benefit. In view of the public issue being probable at balance sheet date, the transaction costs were capitalised in order to be accounted for as a deduction from the proceeds arising from the public issue.

15. DEPOSITS WITH LICENSED FINANCIAL INSTITUTION The effective interest rate of the deposits placed with a licensed bank is at a weighted-average interest rate of 2.3% per annum. The maturities of deposits range from 1 to 7 days.

16. TRADE AND OTHER PAYABLES

Group Date of establishment 2006 Note RM Trade payables Trade accruals 307,723

Other payable Amount due to companies related to the Manager a 940,200 Accruals b 4,518,525 5,766,448

a) Amount due to companies related to the Manager

Amount due to companies related to the Manager is unsecured, non-interest bearing and are repayable on demand.

b) Accruals Included in accruals are transaction costs of RM3,500,000 incurred in relation to the public issue. The transaction costs include fees to the issuing house, adviser, reporting accountant, solicitors and other professional advisors, printing costs and stamp duties and other expenses which are directly attributable to public issue. Included in accruals are transaction costs of RM850,000 incurred to obtain Commercial Papers/Medium Term Notes. The transaction costs include professional fees and other expenses which are directly attributable to the borrowings.

Q U I L L C A P I T A T R U S T 29 Annual Report 2006 NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2006 (cont’d)

17. BORROWINGS

Group Date of establishment 2006 RM

Face value 91,900,000 Discount (1,832,008)

Cash proceeds 90,067,992 Accretion of interest expense (Note 9) 305,334

90,373,326 Transaction costs (850,000)

89,523,326 Amortisation of transaction costs (Note 9) 10,120

89,533,446

Other information on financial risks on borrowings are disclosed in Note 3(a).

The Trust via powers vested in the Trustee through its wholly-owned special purpose entity, Gandalf Capital Sdn. Bhd. (“GCSB”), established a RM118,000,000 Commercial Papers/Medium Term Notes (“CPs/MTNs”) Programme to raise funding from the private debt securities market.

The CPs/MTNs are available up to 7 years from the date of the first issuance with the issuance of CPs with maturities ranging from 1 to 12 months and MTNs with maturities ranging from 1 to 7 years, provided the final maturity of the MTNs do not exceed the tenure of the facility.

During the period, the net proceeds of RM90,067,992 was raised from CPs/MTNs of which RM90,000,000 was utilised to part-finance the acquisition of the commercial properties as mentioned in Note 13 to the financial statements.

The CPs issued during the year are subject to interest 4.02% per annum and are renewable after 6 months.

All direct costs incurred for the CPs/MTNs Programme amounting to RM850,000 are capitalised as future finance charges and deducted against the total borrowings. These costs will be charged to income statement over the maturity periods of the financial instruments as appropriate.

The borrowings are secured, inter-alia by the following :

(a) A third party first legal charge by the Trustee over the Trust’s real estate properties;

(b) First party debenture over all present and future assets of GCSB;

(c) An undertaking from the Manager :

(i) to deposit all rental cashflows generated from the Trust’s real estate properties into the revenue account; and

(ii) that it shall not declare any dividends/distributions to unitholders if :

(a) An event of default has occurred under the Transaction Documents, is continuing and has not been waived; or

(b) The financial covenants are not met prior and after such distribution;

(d) First legal charge or assignment over the revenue account, operations account and the debt service reserve account;

(e) Assignment of all the proceeds under the tenancy/lease agreements in relation to the Trust’s real estate properties;

(f) Third party assignment over all rights and benefits under all the insurance policies in relation to the Trust’s real estate properties;

Q U I L L C A P I T A T R U S T Annual Report 2006 30 NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2006 (cont’d)

(g) An irrevocable Power of Attorney granted by the Trustee in favour of the Security Agent to dispose the Trust’s real estate properties;

(h) First legal assignment over the REIT Trustee Financing Agreement entered into between GCSB and the Trustee for the advancement of funds to acquire the Trust’s real estate properties; and

(i) Third party first legal charge over 100% of the shares of GCSB.

18. UNITHOLDERS’ CAPITAL

Trust 2006 Number of units

Authorised As at date of establishment/ 31 December 238,691,000

Trust 2006 2006 Amount Number of units RM

Issued and fully paid As at date of establishment – – Creation of units : Promoter unit 1,000 800 Units issued for acquisition of real estate assets 232,500,000 186,000,800

As at 31 December 232,501,000 186,000,800

19. NET ASSET VALUE PER UNIT

The calculation of net asset value (“NAV”) per unit is based on 232,501,000 units in circulation as at 31 December 2006 before listing on 8 January 2007.

20. TRANSACTIONS WITH STOCKBROKING COMPANIES

No transactions with stockbroking companies were made during the period.

21. UNITHOLDINGS BY THE MANAGER

As at 31 December 2006, the Manager held 1,000 units in the Trust.

The units were subsequently disposed off on 8 January 2007 upon listing of the Trust on the Main Board of Bursa Malaysia Securities Berhad.

Q U I L L C A P I T A T R U S T 31 Annual Report 2006 NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2006 (cont’d)

22. UNITHOLDERS RELATED TO THE MANAGER

Trust Percentage Number of of units in issue units (%)

Quill Properties Sdn. Bhd. 91,375,000 39.30 Quill Land Sdn. Bhd. 96,875,000 41.67 Quill Estate Sdn. Bhd. 44,250,000 19.03

232,500,000 100.00

The Manager’s directors’ indirect shareholding in the Trust : Dato’ Michael Ong Leng Chun 232,500,000 100.00 Dato’s Low Moi Ing 232,500,000 100.00

23. PORTFOLIO TURNOVER RATIO

Group Date of establishment 2006

Portfolio Turnover Ratio (“PTR”) (times) 0.74

PTR is the ratio of the average of acquisitions and disposals of investments for the period to the average net asset value of the Trust for the period calculated on a weekly basis.

24. MANAGEMENT EXPENSE RATIO

Group Date of establishment 2006 %

Management expense ratio (‘MER”) 0.09

MER is calculated based on the total fees including Manager’s fees, Trustee’s fee and valuation fee and administration expenses charged to the Trust divided by the average net asset value during the period.

Since the average net asset value of the Trust is calculated on a weekly basis, comparison of the MER of the Trust with other real estate investment trust/ units trusts which uses different basis of calculation may not be an accurate comparison.

25. RELATED PARTY TRANSACTIONS

Group Date of establishment 2006

Rental charged to Quill Construction Sdn. Bhd. 114,264 Due diligence consultancy fee to CapitaLand Commercial Project Management Pte Ltd 80,000

Q U I L L C A P I T A T R U S T Annual Report 2006 32 NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2006 (cont’d)

26. SUBSEQUENT EVENTS

On 8 January 2007, the Trust was listed on the Main Board of Bursa Malaysia Securities Berhad.

27. COMPARATIVE FIGURES

The Trust was constituted under a trust deed dated 9 October 2006. Hence no comparative figures are available.

28. FAIR VALUES OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair values of the following classes of financial instruments :

(i) Cash and bank balances, deposits with licensed financial institution, trade and other receivables/payables, amount due to companies related to the Manager and borrowings

The carrying balances of these financial instruments approximate their respective fair values due to the relatively short-term maturity of these financial instruments.

(ii) Security deposits payable after 12 months

The estimated fair value of security deposits payable after 12 months is RM7,093,000. This estimate was derived by discounting the future cash flow streams using the Trust’s current cost of funds.

29. CURRENCY

The financial statements are expressed in Ringgit Malaysia.

Q U I L L C A P I T A T R U S T 33 Annual Report 2006 ANALYSIS OF UNIT HOLDINGS

Distribution of Unitholders as at 11.01.2007

No. of % of No. of % of Unit Class Unitholders Unitholders Unitholding Unitholding

Less than 100 – – – – 100 to 1,000 units 575 31% 527,900 0% 1,001 to 10,000 units 995 54% 5,196,500 2% 10,001 to 100,000 units 214 11% 6,972,500 3% 100,001 to less than 5% of issued units 76 4% 82,778,100 35% 5% and above of issued units 4 0% 143,216,000 60%

1,864 100% 238,691,000 100%

Classification of Unitholders as at 11.01.2007

Category of Shareholder No. of Holders No. of Shares Malaysian Malaysian Bumiputra Non-Bumiputra Foreign Bumiputra Non-Bumiputra Foreign

1) Individual 369 1,187 14 1,480,000 8,570,900 227,000

2) Body corporate a) Banks/Finance Companies – 2 – – 491,000 – b) Investment Trusts/Foundations – – – – – – c) Other types of companies 3 13 8 1,000,000 77,932,000 6,532,000

3) Government Agencies / Institutions – – – – – –

4) Nominees 76 128 64 29,130,100 18,651,600 94,676,400

5) Others – – – – – –

Total 448 1,330 86 31,610,100 105,645,500 101,435,400

1,864 238,691,000

Q U I L L C A P I T A T R U S T Annual Report 2006 34 ANALYSIS OF UNIT HOLDINGS (cont’d)

Thirty Largest Unitholders as at 11.01.2007

No. Name of Unitholders Holdings Percentage

1) HSBC Nominees (Asing) Sdn Bhd 71,608,000 30.00% Exempt an for the HongKong and Shanghai Banking Corporation Limited (HBFS-B CLT 500) 2) Quill Land Sdn Bhd 29,837,000 12.50% 3) Quill Properties Sdn Bhd 28,142,000 11.79% 4) Quill Estates Sdn Bhd 13,629,000 5.71% 5) Citigroup Nominees (Asing) Sdn Bhd 10,000,000 4.19% Exempt an for American International Assurance Company Limited 6) AMMB Nominees (Tempatan) Sdn Bhd 6,241,800 2.62% Amtrustee Berhad for Pacific Pearl Fund (5/1-9) 7) Jerneh Insurance Berhad 5,000,000 2.09% 8) AMMB Nominees (Tempatan) Sdn Bhd 3,750,000 1.57% Amtrustee Berhad for Pacific Dividend Fund (5/27-2) 9) HSBC Nominees (Tempatan) Sdn Bhd 3,420,100 1.43% Nomura Asset Mgmt SG for Employees Provident Fund 10) Amanah Raya Nominees (Tempatan) Sdn Bhd 3,060,000 1.28% Public Savings Fund 11) Malaysia Nominees (Tempatan) Sendirian Berhad 3,000,000 1.26% Great Eastern Life Assurance (Malaysia) Berhad (Par 2) 12) HSBC Nominees (Tempatan) Sdn Bhd 2,680,000 1.12% HSBC (M) Trustee Bhd for Hwang-DBS Select Income Fund (4850) 13) Amanah Raya Nominees (Tempatan) Sdn Bhd 2,635,000 1.10% Public Dividend Select Fund 14) Amsec Nominees (Tempatan) Sdn Bhd 2,298,900 0.96% P.T. Arab-Malaysian Capital Indonesia for Hon Pansy 15) Citigroup Nominees (Asing) Sdn Bhd 2,250,000 0.94% Merrill Lynch International 16) Malaysia Nominees (Tempatan) Sendirian Berhad 2,000,000 0.84% Great Eastern Life Assurance (Malaysia) Berhad (Non Par 1) 17) Allianz Life Insurance Malaysia Berhad 1,722,000 0.72% 18) Amanah Raya Nominees (Tempatan) Sdn Bhd 1,700,000 0.71% Public Enhanced Bond Fund 19) HSBC Nominees (Tempatan) Sdn Bhd 1,482,000 0.62% HSBC (M) Trustee Bhd for Prudential Equity Income Fund (4801) 20) AMMB Nominees (Tempatan) Sdn Bhd 1,370,000 0.57% Amtrustee Berhad for HLG Dividend Fund (HLGDF) 21) HSBC Nominees (Asing) Sdn Bhd 1,318,800 0.55% TNTC for Government of Singapore Investment Corporation Pte Ltd 22) Allianz General Insurance Malaysia Berhad 1,300,000 0.54% 23) HSBC Nominees (Asing) Sdn Bhd 1,250,000 0.52% RBC Asia SG for Lembaga Tabung Amanah Pekerja 24) Mayban Nominees (Tempatan) Sdn Bhd 1,150,000 0.48% Hwang-DBS Investment Management Bhd for Employees Provident Fund (230571) 25) Mayban Nominees (Tempatan) Sdn Bhd 1,120,000 0.47% Hwang-DBS Investment Management Bhd for Pertubuhan Keselamatan Sosial (240234) 26) Amanah Raya Nominees (Tempatan) Sdn Bhd 1,105,000 0.46% Public Smallcap Fund 27) Beverly Tower Development Sdn Bhd 1,100,000 0.46% 28) Mayban Nominees (Tempatan) Sdn Bhd 1,015,000 0.43% Hwang-DBS Investment Management Bhd for Panglobal Insurance Berhad (220019) 29) Citigroup Nominees (Asing) Sdn Bhd 1,000,000 0.42% American Home Assurance Company 30) Mayban Nominees (Tempatan) Sdn Bhd 1,000,000 0.42% Mayban Investment Management Sdn Bhd for Kumpulan Wang Simpanan Pekerja (N14011980810)

207,184,600 86.77%

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