3.1 overview - listed...

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Overview and Assessment of South Jakarta & Bali Healthcare Services Market in Indonesia – First REIT

Frost & Sullivan Page 47 of 88

3 OVERVIEW OF THE HEALTHCARE SERVICES INDUSTRY IN BALI AND SILOAM HOSPITALS BALI

3.1 OVERVIEW

Bali is divided into one “kota” or “kotamadya” ("cities" – formerly municipalities) and eight regencies (“kabupaten”) The regencies of Bali are: Buleleng, Badung, Gianyar, Tabanan, Karang Asem, Jembrana, Bangli, and Klungkung. Denpasar City is the only city/municipality in Bali. Bali consists of 57 districts and 715 villages with a total population of approximately 3.9 million in 2011.

Table 3-1: Population in Bali by Regencies, 2009 – 2011

Regency / City 2009 2010 2011

Denpasar City 508,339 788,589 819,869

Buleleng 654,061 624,125 629,374

Badung 388,514 543,332 568,532

Gianyar 397,977 469,777 477,128

Tabanan 421,843 420,913 424,498

Karang Asem 432,791 396,487 399,093

Jembrana 270,584 261,638 264,093

Bangli 213,808 215,353 217,024

Klungkung 184,035 170,543 171,646

Bali 3,551,012 3,890,757 3,972,385

Source: BPS

3.2 MARKET DYNAMICS, TRENDS AND IMPACTS

3.2.1 Drivers of the Healthcare Services Market in Bali

Table 3-2: Drivers of Healthcare Services Market in Bali, 2012

Drivers

a Longer Life Expectancy and Ageing Population

b Rising Urbanization

c High Maternal Mortality Rate (MMR)

d Increasing Non-Communicable and Communicable Diseases to shift Healthcare Demand and Cost

e Modest Growth of Middle-Class Population

Source: Frost & Sullivan

C-48

Overview and Assessment of

Frost & Sullivan

74.1

74.0

74.5

75.0

2007

Lif

e E

xpec

tenc

y (y

ears

)

a) Longer Life Expectancy and Ag

Chart 3-1 indicates that life expforecasts that, life expectancy in population (age 65 years and abrequirement for chronic care and s

Bali’s elderly population is expectthe creation of healthcare infrastproviders, and NGOs are developinThese factors are expected to drmidwives, and medical technicians

Chart 3-1: A

Chart 3-2: Working age

6 Working age group indicates the population

values in charts are millions unless specified

2012

256

- 100 200 300 400

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65+

Age Group

2,583

1

2

2

3

3

4

4

5

5

6

G

South Jakarta & Bali Healthcare Services Market in Indones

74.5

74.7

2012 2017FYear

geing Population

ectancy in Bali has been increasing over the yeBali would be 74.8 years by 2022, leading to an i

bove). The increasing life expectancy is likely to support as well as an increase in the per capita health

ted to reach 358,000 by 2022. The increasing elderltructure catering to geriatric care. The Governmeg more personalized / customized healthcare services ive the demand for specialists and allied health s).

Average life expectancy in Bali, 2007, 2012, 2017 and 2022

e group6 and elderly population in Bali, 2012, 2017 and 2022

n between 15-64 years old and elder population indicates the populadifferently.

2017F

300

- 100 200 300 400

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65+

Age Group

2,717

- 100

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65+

Age Group

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Page 48 of 88

74.8

2022F

ars. The Government increase in the elderly

lead to an increased hcare expenditure.

y population has led to ent, private healthcare for elderly population. professionals (nurses,

Source: BPS, Bappenas

2, in ‘000s


ation above 65 years. All

2022F

358

200 300 400

2,818

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Frost & Sullivan

58%

55%

60%

65%

70%

75%

80%

2005

% o

f po

pula

tion

57

50

60

70

80

90

100

2010

MM

R p

er 1

00,0

00

child

birt

hs

b) Rising Urbanization

Chart 3-3 outlines the urbanizationpopulation would be living in urbmore health conditions and therebwill come from unhealthy food con

The large and growing share of urdrive the improvement in standards programs are expected to drive thehealthcare professionals in Bali.

Chart 3-

c) High Maternal Mortality Rate (

As shown in Chart 3-4, the numbchildbirths in 2010 to 95 per 100,0remote areas and were attributed toawareness, inadequate facilites, an

There is a crucial need to significreduce infant and maternal mortengagement with private midwives

Chart 3-4: Mate


65%

71%

2010 2015FYear

84

2011

n trends in Bali. The Government forecasts that moban areas by 2015. Increasing urban population evy to an increased healthcare expenditure. Demand fnsumption patterns and unhealthy lifestyle habits.

rban population will support the socio-economic devof healthcare services. Moreover, new investments in

e demand for higher skilled positions such as physici

-3: Urbanization rate in Bali, 2005, 2010, 2015 & 2020

(MMR)

ber of maternal deaths reported in Bali increased 000 childbirths in 2012. Most of the maternal deatho delays in providing adequate and relevant treatme

nd infrastructure contribute to the high MMR in Bal

cantly improve the quality of Maternal Child Healtality. The growth of private healthcare service ps can lead to a reduction in MMR and therefore is a

ernal Mortality Rate in Bali per 100,000 childbirth, 2010-201

Sou

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Page 49 of 88

76%

2020F

95

2012

ore than 70% of Bali’s ventually gives rise to for healthcare services

velopment of Bali and n education and training ians, nurses, and allied


from 57 per 100,000 s in Bali took place in

ent. The limited public i.

lth (MCH) in order to providers and greater

a strong driver.

12

urce: BPS, Frost & Sullivan

C-50


Frost & Sullivan

d) Increasing Non-Communicable

Lifestyle habits, including consumall industries in Bali. This in turn diseases, cancer, diabetes, hypertedengue fever, gastroenteritis, sexu

Tubercolosis remains one of majorDenpasar City has the most numberin Bali and one of the most commremains one of major public health p

Chart 3-

Ageing and increased prevalence onon-communicable diseases in thecare and inpatient care, thus genepublic sector resources will be funon-communicable diseases, there

This is being currently managed increase in volume of patients wneeded in addition to the current p

Total pneumonia cas

Total tubercolosis case

Dengue fever cases per 100,000 populati

Total measles cas

Total bird flu cas


e and Communicable Diseases to shift Healthcare Dem

mption patterns have been altered by the increasinghas caused increasing cases of non-communicable

ension, and kidney failure. The major communicablually transmissible infections, and rabies.

r public health problem in Bali. Based on health prr of TB cases reported. Malaria remains one of majormon causes of hospitalization. Despite national contproblem in Bali.

5: Incidence of selected health conditions in Bali, 2011

Sour

of degenerative diseases are likely to cause a shift fe long term. As a result, there will be an increase oerating requirements for new healthcare workers aurther restrained while responding to the increasingeby moving the patient base to the private sector.

via the use of social health insurance (Askes andwith non-communicable diseases, other approachespractices.

2

12

3,215

3,183

2,996

124

3

1 10 100 1,000 10,000

ses

es

on

ses

ses

Bali Indonesia

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Page 50 of 88

mand and Cost

g globalization across diseases such as heart le diseases in Bali are

rofile of the regencies, r public health problem trol initiatives, dengue

rce: MOH, Frost & Sullivan

from communicable to of demand for curative nd hospital beds. The g demands of treating

d Jamsostek). With an s and mechanisms are

480,033

316,562

65,432

21,893

100,000 1,000,000

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Frost & Sullivan

e) Modest Growth of Middle-Clas

Bali’s GDP per capita increased significantly lower than the natioexpected to modestly increase, leprovide better healthcare services

The new middle class population (general would have an increasingsame demographic group will alsbeauty, further driving the demandidentify the products and services

Ch

3.2.2 Restraints of the Healthca

Table 3-3:

a Limited Number of Healthcare P

b Unequal Distribution of Healthc

c Restrictive Regulations Governi

d Shortage of Local Medical Profe

a) Limited Number of Healthcare

Chart 3-7 depicts the current healtin Bali is concentrated in the majoportrayed in Chart 3-7, approximapopulation, which is higher than ththe higher salary levels and monMiddle East, also seek to attract th

14.2

2008

GD

P p

er c

apit

a (I

DR

mill

ion)


s Population

from IDR 14.2 million in 2008 to IDR 18.5 milonal GDP per capita of around IDR 35.0 millioneading to preference of services of private medicand facilities such as air conditioned rooms and adv

(households with annual income between USD 5,00g preference towards affordable and premium heao spend more of their income on services such asd for private healthcare service providers. Healthcarthat they can offer to these new middle class popula

hart 3-6: GDP Per Capita in Bali, 2008-2011 (IDR million)

are Services Market in Bali

: Restraints of Healthcare Services Market in Bali, 2012

Restraints

Professionals and Accredited Hospitals

care Facilities and Professionals

ing Healthcare Services

essionals

Professionals & Limited Number of Accredited Hospi

thcare workforce in Bali. The existing number of heor densely populated regencies like Denpasar, Klunately 24 doctors and 122 nurses are catering to evhe national average. In addition to the low number netary incentives in overseas countries like Singhese healthcare professionals.

16.2 17.1

2009 2010

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llion in 2011. This is n. GDP per capita is

cal hospitals, as these vanced equipment.

00 and USD 10,000) in althcare services. The fitness, wellness and re providers must then ation.



itals

ealthcare professionals ngkung and Bangli. As very 100,000 of Bali’s of doctors and nurses, apore, Japan and the

18.5

2011

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Frost & Sullivan

Chart 3-7: Number of Docto

Once a hospital is operational, theaccreditation, and upon successfumajority of the hospitals have notin Bali have been fully accredited.

Table

No Hospital

1 RSU Negara

2 RSU Tabanan

3 RS Dharma Kerti Tabanan

4 BIMC

5 RSUD Sanjiwani Gianyar

6 RSU Klungkung

7 RSU Bangli

8 RS Jiwa Bangli

9 RSU Amlapura

10 RSUD Kab. Buleleng

11 RS Karya Dharma Husada

12 RSUP Sanglah Denpasar

b) Unequal Distribution of Health

Overall, access to healthcare faBuleleng and Badung. Chart 3-8respective population. Karang Aswith one hospital in Karang Asem

13.7

0.0 20.0

Midwives (National)

Midwives (Bali)

Nurses (National)

Nurses (Bali)

Doctors (National)

Doctors (Bali)


ors, Nurses and Midwives per 100,000 population (Bali & Na

e hospital would request Hospital Accreditation Comul accreditation, a standard operating license wout yet been accredited. Only 24 out of the 54 hospita.

3-4: Hospitals with Full Accreditation in Bali, 2012

Accreditation Date No Hospital

05-Mar-2007 13 RSUD Wangaya

15-Feb-2009 14 RSU Manuaba

22 May 2012 15 RS Indera Propinsi Bali

22 Dec 2011 16 RSU Surya Husadha

03-Jan-2012 17 RSU Kasih Ibu

27-Sep-2002 18 RSU Dharma Yadnya

26-Apr-1999 19 RSU Prima Cipta

28-Feb-2012 20 RS Balimed

26-Jan-2012 21 RSUD Badung

12-Jan-2012 22 RS Parama Sidhi

25-Jan-2012 23 Rumah Sakit Ganesha

02 Aug 2011 24 RS Surya Husada Ubung

hcare Facilities and Professionals

acilities in Bali requires improvement, particular8 outlines the number of hospitals in each regeem, Buleleng and Badung have the lowest hospitacatering to almost 400,000 of its population.

52.2

61.3

92.8

7

24.2

0 40.0 60.0 80.0 100.0

sia – First REIT

Page 52 of 88

ational), 2011

Source: MOH

mmission (KARS) for ld be issued. In Bali, als currently operating

Accreditation Date

31 Dec 2010

02 May 2012

22 Nov 2010

28-Jan-2010

03-Jan-2012

06 May 2012

28 Nov 2011

06-Jul-2011

21-Jan-2011

26-Jan-2012

23 May 2012

06-Jul-2011

Source: MOH

rly in Karang Asem, ency catering to their al to population ratio,

122.3

120.0 140.0

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Frost & Sullivan

Chart 3-8: Nu

Healthcare professionals are moreGPs, nurses and dentists per 100,0on equalizing the presence of healtheir regencies.

Chart 3-9: H

23

6

819,869

424,498

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

Kota Denpasar

Tabanan

Pop

ulat

ion

7.66.8

0.0 5.0 10

DenpasarBangli

TabananBadung

Karang AsemBuleleng

Jembarana Gianyar

Bali

0.0 50.0

BangliKlungkung

TabananKarang Asem

BadungJembarana

GianyarBuleleng

Bali


umber of Hospitals vs Population by Regencies in Bali, 2011

e concentrated in the bigger regencies. Chart 3-9 000 population in all the regencies. Government’s ilthcare resources can address the movement of local

Healthcare workforce per 100,000 population in Bali, 2011

6 4 4 4 3 3

629,374

264,093

568,532

477,128

171,646217,024

Buleleng Jembrana Badung Gianyar Klungkung Bangli

Number of hospitals Population

28.828.7

2319.7

18.1

24.2

0.0 15.0 20.0 25.0 30.0 35.0

171.2130.9

76.267.2

60.860.7

57.8

122.3

100.0 150.0 200.0

Number of GPs per 100,

Number of Nurses per 100

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Page 53 of 88

Source: MOH

shows the number of intervention and focus l population to outside

1

4

399,093

-

5

10

15

20

25

i Karang Asem

Num

ber

of

hos

pita

l

39.1

40.0 45.0

207.6

250.0

000 population

0,000 population

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Frost & Sullivan

c) Restrictive Regulations Govern

At present, there are several healthin the country. Foreign ownershipcan only invest in hospitals of ovfunds the hospital could use for einstitutions and the local hospital o

d) Shortage of Local Medical Prof

The current education system for augmented to improve upon the qand private healthcare service prhealthcare graduates in Bali. The Indonesian cities.

Table 3-5: Number of p

City Nursing Midwives E

Yogyakarta 125 100

Surabaya 475 325

Denpasar 125 100

Semarang 575 250

2

0.8

0.0 2.0

Tabanan

KlungkungDenpasar

Badung

Karang Asem

Buleleng

Gianyar

Jembarana

Bali


ning Healthcare Services

hcare regulations that are restricting the operation ops of small health clinics are largely closed to forever 200 beds. The lack of foreign interests in locaexpansion, and limits the inbound technology tranoperators.

fessionals

healthcare and allied healthcare professionals in Baquality of graduates, so as to improve the service roviders. Denpasar City is the only center for pfollowing table provides a comparison of Denpasa

polytechnic healthcare graduates in selected cities in Indone

Study Major

Environmental Health Nutrition Dentistry Health

Analysis El

T

125 125 125 100

225 0 125 125

125 100 100 0

125 125 125 0

10.0

9.0

7.55.3

4.5

2.8

7.0

4.0 6.0 8.0 10.0

Number of Dentists per 100,0

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Page 54 of 88

Source: MOH

of healthcare providers eign investments, who al hospitals limits the

nsfers between foreign

ali needs to be further quality in both public

producing polytechnic ar City with other key

sia, 2011

lectromedic Technique Total

0 700

125 1,400

0 550

0 1,200

Source: MOH

11.6

12.0 14.0

000 population

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Frost & Sullivan

3.2.3 Challenges of the Healthc

Table 3-6:

a Negative Perceptions on Domes

b Significantly higher levels of po

c Huge Disparity of Population D

a) Negative Perceptions on Domes

A perceived lack of quality affecpopulation seeking better healthcafor their medical needs, if the quhealthcare sector are needed to perceptions among the society.

b) Significantly higher levels of po

The chart below shows that povepoverty rate in Bali rural areas hBali’s urban areas.

Chart 3-10: Rura

Poverty is the main reason for thhave less money to pay for healMoreover, physician salaries in puleads to overall low level of health

This scenario has led the state Gpractice, which has enabled the pua common engagement seen in Baneed to extend their services to affordable but quality care will heniche players in the market.

4.5%5.9%

2009


are Services Market in Bali

Challenges of Healthcare Services Market in Bali, 2012

Challenges

stic Healthcare Quality

overty in rural areas

Density

stic Healthcare Quality

ts patients’ trust in the local hospital services. Theare services is likely to continue to travel to Jakartauality issue is not addressed. Various efforts by bo

improve the level of healthcare services in Ba

overty in rural areas

erty level is significantly higher in the rural parts have been declining over the past years, it is high

al-Urban Poverty in Bali (percentage of population), 2009-20

he rising issues in health inequalities across Bali. Rlthcare, which attracts less number of health pro

ublic hospitals are relatively lower compared to the ph services in such areas.

Governments to allow physicians to engage in mublic sector physicians to engage in private practiceali and is also a crucial portion of their income. Hea

not only the rich and capable, but to the poor elp these healthcare providers to differentiate them

4.0% 4.2

6.0%

2010

Urban Rural

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Page 55 of 88


e proportion of Bali’s a or other bigger cities oth public and private ali and correct these

of Bali. Although the when compared with

011

Source: MOH

Rural inhabitants will oviders to rural areas. private hospitals. This

more than one clinical e. The dual practice is althcare providers may as well. Focusing on

mselves from the other

2%5.2%

2011

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Frost & Sullivan

c) Huge Disparity of Population D

The chart below portrays that tpopulation density of 6,416 and resides in Denpasar City.

Physical infrastructure in rural areto provide access to central healththe healthcare supply chain, thus equipment. The unequal geographproper sanitation, which adds to th

Chart 3-11: Popula

1,298

1,277

541

472

457

439

415

311

673

Denpasar

Badung

Gianyar

Klungkung

Karang Asem

Buleleng

Bangli

Tabanan

Jembarana

Bali

Population Density in Bali bRegencies, 2010


Density

the population is concentrated in Denpasar City 1,358 per km square, respectively in 2011. 21.0%

eas, such as roads and transportation is lacking, whh facilities. This could eventually lead to the lack otranslating to further complication of medicine su

hical distribution of population affects the provisiohe current healthcare issues in rural areas.

tion Density (per km square) in Bali by Regencies, 2010 and

6,171

by

1,358

1,297

545

506

475

461

417

314

705

Denpasar

Badung

Gianyar

Klungkung

Tabanan

Karang Asem

Buleleng

Bangli

Jembarana

Bali

Population Density in BRegencies, 2011

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Page 56 of 88

and Badung with a % of Bali’s population

hich makes it difficult of connectivity within upplies and healthcare on of clean water and

d 2011

Source: MOH

6,416

Bali by 1

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3.2.4 Barriers to Enter the Healthcare Services Market in Bali

Table 3-7: Barriers to Enter the Healthcare Services Market in Bali, 2012

Barriers to Entry

a Intense Competition

b Brand Differentiation


a) Intense Competition

There are 54 hospitals in Bali with over 20 hospitals located in Denpasar. Any new entity trying to enter the industry is likely to face stiff competition from existing players like SHBL, Balimed, BIMC, BROS, etc. With many players already competing in the market, potential new entrants will need to assess its core offerings (brand name, technology know how, etc) and determine whether entering the market will bear positive results.

Table 3-8: Number of Hospital in Bali by Regency/City, 2013

No Regency Hospitals No Regency Hospitals

1 Denpasar City 23 6 Gianyar 4

2 Tabanan 6 7 Klungkung 3

3 Buleleng 6 8 Bangli 3

4 Jembrana 4 9 Karang Asem 1

5 Badung 4

Total (Bali) 54

Source: MOH, Frost & Sullivan

b) Brand differentiation

Some of the hospitals in Bali are known for their specific healthcare product/offerings. The hospitals mentioned in the previous paragraph have a strong brand recognition in the eyes of the local population. For instance, SHBL is known for its trauma center, orthopaedics and cardiology; Kasih Ibu is known for their MRI and BIMC for their expertise in cosmetic surgery. It will be a difficult task for any new entrants to the industry to be able to replicate the existing players’ strong brand recognition. New players trying to enter the market will need to create a strong brand awareness among the Balinese population.

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Frost & Sullivan

3.3 TRENDS IN HEALTHCA

3.3.1 Demographics

Bali is expected to be one of the facountry’s capital, the rapid urbaniexpansion of population in the islanin 2010 to 3.95 million in 2025.

Chart 3-12: Popu

Chart 3-13:

650

2010

2011

PopulatioCAGR


3.89

3.91

0.00

1.00

2.00

3.00

4.00

5.00

2010 2015F

Pop

ulat

ion

(Mill

ions

)

ARE SERVICES IN BALI

astest growing province from 2015 to 2025. Despite ization and industrial development in Bali is likel

nd. The population is expected to grow a CAGR of 0.1

ulation growth in Bali (in millions), 2010, 2015, 2020 and 202

Source: B

Population Density in Bali (per km square), 2010 & 2011

Source: Indonesi

673

705

660 670 680 690 700 710

on Growth 0.11%

sia – First REIT

Page 58 of 88

3.93

3.95

2020F 2025F

DKI Jakarta being the y to result in a rapid 11%, from 3.89 million

25

Bappenas, Frost & Sullivan

ia Census, Frost & Sullivan

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Frost & Sullivan

3.3.2 Socio-economic Profile

Bali’s GDP contribution is dominatwas the agriculture and fisheries sectransportation & communication sec

Chart 3-

During the period January to Decesame period, Bali also managed tremarkable growth, compared to thcrisis.

Chart 3-15: E

Hotel and Restaurant, 30.6%

Transportation and Communication, 14.5%

FinanCompan

287.7

44.3

243.4

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

2007Exp

ort,

Im

port

& T

rade

Bal

ance

(U

SD M

illio

ns)

Export


ed by the hotel and restaurant sector (30.6%). The secctor, contributing 17.3% to the economy, followed by ctor (14.5% each).

-14: Contribution to GDP (in percentage) in Bali, 2011

Sou

mber 2011, Bali’s export of goods reached USD 608to keep a fairly positive trade balance, at USD 42he trade balance at USD 3.8 million in 2009, caused

Export, Import & Trade Balance in Bali (USD million), 2011

Sou

Agriculture and Fisheries, 17.3%

Mining and Quarrying, 0.7%

Processing/Mg Industr

Electricity, GaWater, 2.0

Construction, 4

Services, 14.5%%

nce, Leasing and ny Services, 6.7%

267.5 253.6

605.1

103.3

249.8 248.8

164.2

3.8

356.3

2008 2009 2010

t Import Trade Balance

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Page 59 of 88

cond largest contributor the services sector and


8.6 million. During the 29.2 million. This is a by the global financial


%

Manufacturinry, 9.0%

as and %

4.7%

608.6

179.3

429.2

2011

C-60


Frost & Sullivan

Healthcare Expenditure

The proportion of monthly healthcalthough it tends to fluctuate at timeto 6.0% in 2010. In 2011, the propofrom the previous year. On averagerelated expenses.

Chart 3-16: Heal

3.3.4 Healthcare Facilities

Table 3-8 indicates that Denpasar hIn recent years, an upward trend hospitals in 2012. As of 2013, the increase from the previous year.

Table 3-9:

Year Public H

2012 34

2013 37

3.3.5 Trends in Technology

Bali’s hospital information systempopulation) has relatively been insuto improve upon the understandinrequire a database of health informplanning to implementation phase.Governments. This has resulted in dplanning.

5.6%

2009


care expenditure and health insurance per capita in Bes. In 2009, the proportion of healthcare expenditure wortion of expenditure of total healthcare expenditure we, Balinese allocate about 6.0% of their total expendit

lthcare Expenditure as a % of Total Expenditure in Bali, 20

Sou

as the highest number of hospitals in comparison withis noticed in the number of private hospitals. Thernumber jumped to a staggering 17 private hospitals

Total Public and Private Hospitals in Bali, 2012 & 2013

ospitals Private Hospitals

4 9

7 17

m and coordination amongst stakeholders (i.e. Goveufficient. Adding to the above, the provincial and distg of their roles and technical expertise for the samation, in order to be able to provide further inputs to In terms of information flow, the MOH relies on delayed submission and poor quality data, which in tu

6.0%

2010

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Page 60 of 88

Bali continues to rise, was 5.6% and increased was 5.8%, a slight drop ture towards healthcare

11


h the rest of the district. re were only 9 private s, approximately 100%

Total Hospitals

43

54

Source: MOH

ernment, hospitals and trict Governments need

me. These stakeholders take the overall health provincial and district

urn has impacted policy

5.8%

2011

C-61



3.3.6 Key Alliances

a) Australia Agency for International Development (AusAID)

There is significant potential to improve the quality of healthcare services in Bali. The district and provincial health offices are interested in collaborating with the private sector to overcome the many health issues in Bali. They welcome new ideas and support to implement changes in healthcare methods to improve priority areas (Communicable Disease, NCD and other infectious diseases). However, they lack the technical and monetary support. Australia Agency for International Development (AusAID) plays a catalytic role by supporting provinces and districts health officials in utilising innovative approaches to to improve access and quality of health services in Bali. The following are some interventions AusAID is targeting to participate in:

• The 12 October Australia Memorial Center is a collaboration with Sanglah Hospital, funded by the Australian Government. The centre houses a 14-bed post-operative intensive care unit, a six-bed intensive coronary care unit, a 15-bed burns unit, and a dedicated operating theatre. Upgrades also include refurbishment of the hospital's morgue, an improved water supply system, a new hospital incinerator and training for hospital staff in the use of specialized equipment.

• The Australia-Bali Memorial Eye Center (ABMEC), a collaboration with Indera Hospital, is responsible for the treatment of eye, skin and ear, nose and throat conditions. Under the Indera Hospital management team, ABMEC / Indera provides assessment and diagnosis of patients with general eye disease.

b) U.S. Agency for International Development (USAID)

The incidence of rabies in 2008 caused panic among the people of Bali. The virus spread rapidly throughout the island, killing thousands of dogs and hundreds of humans. In coordination with the Animal Health Services, the campaign, co-funded by the Government of Indonesia and USAID have been carrying out a dog vaccination campaign to achieve vaccination coverage to 70.0% of the dog population in Bali. The campaigns have dramatically cut the incidence of rabies, with cases in humans decreasing by 68.0% in 2011 compared to 2010. Great efforts have also been made to improve cooperation between human and Animal Health Services to ensure that people who are infected are treated correctly, and suspect animal cases are promptly investigated and tested if necessary.

c) Indonesian Midwives Association (IMA) and Bidan Delima (BD)

For many years, Balinese women had to attend midwifery training in Java because Bali had no accredited educational institutions teaching midwifery. The Indonesian Midwives Association (IMA) launched Bidan Delima (BD) to set and ensure adherence to standards for safe pregnancy and delivery practices among private midwives in Indonesia. Since its inception, the program has served over 8,500 midwives in 196 districts in 15 provinces in Indonesia, including Bali. The program creates demand for quality midwifery services alongside a certification program that recognizes those midwives as BD members. The program aims to improve the quality of midwife service delivery according to the central clinical standards with respect to family planning, infection prevention and safe deliveries.

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3.3.7 Outlook

The standards of healthcare services and access to quality healthcare in Bali have the potential to rise. Currently a disparity in the population density and high levels of Maternity Mortality Rate (MMR) exists. To make a positive impact on key healthcare indicators, the Government needs to ensure seamless connectivity across the supply chain. If this is achieved, it will eventually help in addressing the adequacy of medicine supply and healthcare equipments.

Although middle income earners in Bali is on the rise, there is still a large number of Bali’s population below the poverty line. If this issue is not addressed, Bali’s present healthcare system may have uneven directions, such as the increasing hospital utilization rate on one side whereas rising demand for sophisticated healthcare in-patient as well as out-patient on other side. Bali is also expected to require more specialists and healthcare professionals in the future.

Utilization of the private healthcare services by the low income earners is towards an upward trend. In the long term, demand is expected to increase for private sector healthcare services. This however, requires a detailed planning to design the right financing and service levels that could ultimately support Bali’s healthcare coverage on a long term basis..

Balinese are now taking a more active role in making decisions that affect their health. As health risk associated with unhealthy lifestyles arises, more people increasingly become aware of advantages of being healthy. Using various channels like the internet, print media, television and radio, patients are getting more educated and well informed with knowledge on diseases, treatments and availability of options.

On the supply side, healthcare providers are increasingly working on to pursue quality of care and equipping their facilities with the latest healthcare technology and equipments. Some hospital providers are also banking on the wellness services and alternative therapies services demanded by the health conscious consumers.

As a result of these trends, integrated healthcare solutions are likely to emerge and grow (for example: medical spa, retirement villages, etc), This will fuel the growth opportunities for healthcare providers who can offer innovative healthcare products and services to prevent diseases as well as save costs.

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Frost & Sullivan

2.57

2.4

2.5

2.6

2.7

2.8

2.9

3.0

2010

3.4 OVERVIEW OF MEDIC

3.4.1 Historical Growth

Medical Tourism is defined as thecountry, and requires a patient to t(akin to a tourist) such as entry vinecessary due to the patient’s prev

Medical tourism in Bali is at its ihubs like Singapore, Malaysia anfacility upgrades in the healthcareIndonesian patients, the private heare attaining international accredit

Tourist arrivals to Bali have incrapproximately 2.90 million in 20tourists arriving in Bali are belieIndonesia Tours and Travel Agapproximately 200,000 to 300,00specifically for medical purposesSullivan believe that Bali’s medicthe next 3 to 5 years.

Chart


2.82

2011

CAL TOURISM IN BALI

e activity of seeking medical treatment outside the travel to a destination country, including making neisas / permits, transfers and accommodation. Such mvailing illness, but may also include elective procedu

infancy stage. In order to be positioned alongside nd Thailand, Bali still requires a collective scale

e delivery sector. As a result of Government initiativealthcare system has been improving and increasintation, which in turn benefits the medical tourism m

eased at a CAGR of 6.2% from approximately 2.5012. According to industry estimates, approximateved to visit Bali for medical treatment. Accordigencies (ASITA), Indonesia’s medical tourist v00. Statistics on medical tourists (number of pe) are not published, however, industry experts int

cal tourism market is growing and this trend is like

t 3-17: Tourist Arrivals to Bali (million), 2010-2012

Source:

sia – First REIT

Page 63 of 88

2.90

2012

borders of one’s own ecessary arrangements medical travel is often ures.

international medical e up of standards and ves to retain outbound g number of hospitals

market in Bali.

57 million in 2010 to tely 10% of the total ing to Association of

volume in 2012 was eople coming to Bali terviewed by Frost & ely to strengthen over

BPS Bali, Frost & Sullivan

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3.4.2 Trends in medical tourism in Bali

Patient Movement

It has been observed that medical tourists increasingly visit Bali for cosmetic enhancement surgeries such as abdominoplasty (tummy tuck), mammoplasty (breast augmentation), blepharoplasty (eyelid surgery), rhinoplasty (reshaping of the nose), liposuction (removal of fat deposits) and augmentation of cheek/chin/lips. A few private hospitals are trying to tap into this new demand from medical tourists.

Bali Royal Hospital (BROS) is one of the few private hospitals having medical packages specifically targeting medical tourists. BROS has four medical tourism packages. These include medical checkup, IVF, plastic surgery and orthopedic surgery. The new BIMC Nusa Dua Hospital, in its medical tourism package, offers advanced dialysis treatments, surgical and non-surgical cosmetic procedures and dental care.

Knowledge Transfer Model

The current regulation does not allow foreign doctors to practice in Indonesia despite the country’s low doctor to patient ratio. These foreign doctors, however, are allowed to supervise and perform procedures in the course of educating Indonesian doctors. Indonesia-born doctors practicing abroad may practice in Indonesia after going through a 6 months adjustment program.

This inhibits the growth of medical tourism and general healthcare service delivery. The local population still perceives the domestic healthcare services to be of lower quality and perceives foreign doctors to be more capable. Hence, many Indonesians seek medical treatment overseas, making Indonesia a large source market for medical tourism hubs like Singapore and Malaysia. The knowledge transfer model seeks to address this issue. BIMC Hospital is the pioneer in using this model, which allows them to invite foreign doctors to their hospital for knowledge transfer. This term knowledge transfer includes:

- Surgery training: The foreign doctors bring their own patient, and perform a surgery, accompanied by local doctors, in the process transferring knowledge to them

- Lecture and seminar: The foreign doctors participate in lectures and seminars to guide/train the local doctors

- Short stay: The foreign doctors are not allowed to stay permanently in Bali, but only for a short duration of time of 1-2 weeks per visit.

With this model, healthcare providers are able to partially overcome the regulation, but at the same time, able to provide the services of foreign based medical professionals in their hospital. As this model gains momentum, more private hospitals are likely to follow suit.

3.4.3 Key alliances

BIMC partnered with Courtyard by Marriott Bali in June 2012, to provide Bali’s first-ever medical tourism package. The newly opened and internationally managed BIMC Hospital in Nusa Dua is ideally positioned to offer visitors dialysis treatments, dental care, and surgical and non-surgical cosmetic procedures. The hotel has added specific aftercare services such as recuperation programs, special nutritional diets, unique spa and wellness programs, to its hospitality services portfolio.

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Hospitals are also collaborating with insurance companies to help assist in marketing the medical tourism packages. Since patients rely mainly on out-of-pocket expenses to pay for the medical tourism packages, the insurance providers play a pivotal role in the payment for healthcare services. International insurance companies like Allianz, Global Assistance, etc, are some of the popular insurance companies in this business model in Bali.

3.4.4 Medical Tourism Outlook

According to the Ministry of Tourism, Indonesians spend more than USD 400 million on overseas medical treatment annually. The identified reasons for seeking overseas medical care is the perceived low quality of local medical care, lack of technology usage, unavailability of treatment in the home country, low access to treatment due to overcrowded facilities and long waiting times in the home country. The Indonesian Government is actively trying to develop the healthcare infrastructure in the country, which is likely to improve the quality of local medical care to international standards and reduce the waiting times to receive medical services. Such an improvement is expected to retain the affluent Indonesians who go overseas for medical treatment, as well as attract medical tourists to come into Indonesia.

Despite being in the early stage of development, the improving regulatory environment and infrastructure to promote the tourism industry is likely to help nurture growth opportunities for the medical tourism market in Bali. Bali offers a good combination of medical treatment facilities and subsequent recuperation. With greater branding of its medical infrastructure, Bali can create a unique position capitalizing on its legendary appeal as a tourist destination in order to attract medical tourists into Bali.

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3.5 OVERVIEW OF SILOAM HOSPITALS BALI (SHBL)

3.5.1 Background

Siloam Hospitals Bali (SHBL), located in the district of Badung in Bali, is an international-standard hospital with COEs for Medical Tourism, Trauma, Orthopaedics, and Cardiology. The hospital is located in a 4-storey building with a maximum capacity of 295 beds (currently 104 beds operational in phase 1, with another 93 beds to be operational in phase 2 by the end of 2013 and the remaining beds expected to be operational by 2014-2015). The hospital is complemented with shops for related use by the patients, visitors, and general public.

SHBL started operations in December 2012 and is currently equipped with 104 beds, 17 ICU/ICCU units, 6 Neonatal ICU units, 4 delivery suites, and 3 operating theatres and houses state-of-the-art equipments, including 1.5T MRI, 256-slice dual source CT Scanner, Mammography Scanner and 4D Ultrasound machine. The 24-hour trauma centre is equipped with two ambulances and a helicopter for medical evacuation.

SHBL is situated in a commercial neighbourhood of Jalan Sunset Road, with many retail stores, restaurants, and hotels. The notable retail options nearby are Carrefour (about 250 meters from SHBL) and Bali Galleria Shopping Mall (about 850 meters from SHBL). The Ngurah Rai International Airport located 3.4 km from SHBL adds value due to its focus on medical tourism.

Currently SHBL is served by 104 doctors, and ample number of nurses and other allied healthcare personnel. SHBL benefits from the ‘hub and spoke’ model of SHG, and extends the reach of its experienced specialists from the Siloam ‘hub’ hospitals in Jakarta and Surabaya to the ‘spoke’ hospitals like SHBL. Patients in Bali can have access to experienced specialists who are not readily available at their location, through SHBL’s real-time tele-medicine capabilities and tele-radiology facilities. Clinical information from SHBL is transferred through interactive audiovisual media to specialists in Siloam’s COE like Siloam Hospitals Lippo Village, MRCCC, Siloam Hospitals Kebon Jeruk, and Siloam Hospitals Surabaya to provide consultations on a real time basis for diagnosis, treatment and sometimes procedures. This reduces cost and increases the community’s access to a wider range of highly specialized medical services.

Figure 3-1: SHBL – Front View

Source: SHBL

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3.5.2 Key Focus Area of Diseases

Catering to both inpatients and outpatients, SHBL is committed to providing high quality affordable services and genuine care for patients’ physical, emotional and spiritual wellness. SHBL has COE for Medical Tourism, Trauma, Orthopaedics and Cardiology.

3.5.3 Service Profile

SHBL aims to provide a comprehensive range of inpatient and outpatient services. Apart from therapeutic services, SHBL includes an extensive series of diagnostic and preventive healthcare services. SHBL offers an international standard emergency department based on international best practice guidelines. The doctors, nurses, and paramedical staff have been trained to handle heart attacks, stroke and trauma in recommended timeframes. The ambulances are fully equipped with AED (Automatic External Defibrillator) to overcome life threatening cardiac arrests and re-establish an effective rhythm and emergency kits to respond to all emergencies and communicate with the hospital base to prepare for the arrival of the patients.

3.5.4 SHBL Operations

a) Workforce

As of March 2013, SHBL has 104 doctors, which include 36 exclusive / full-time specialists and 68 part-time specialists. Various specialties include Adult and Paediatric Cardiologists, Obstetrician & Gynaecologists, Neurosurgeons, Dentists, Radiologists, Anaesthesiologists, Orthopaedic surgeons, Urologists and Cosmetic Surgeons. SHBL plans to increase this head count progressively. In recognition of the medical workforce as one of its critical success factor, SHBL has collaborated with Udayana School of Medicine, the only medical university in Bali, for recruiting doctors.

Furthermore, the hospital has also established attractive partnership and revenue sharing models for its doctors through its Siloam Doctor Partnership Development Program. SHBL recruits medical doctors under three different schemes of full-time, part-time and visiting basis.

As of March 2013, SHBL has assigned at least one senior specialist per specialty for most specialties. To ensure effective monitoring and to promote enhancement of medical capabilities, SHBL has assigned full time resident medical doctors, who are usually fresh medical graduates and part-time specialists (senior consultants). The full-time doctors have undergone a clinical training program at the Siloam Hospitals Lippo Village headquarter to become familiarized with the standard hospital operation protocols within the hospital group.

Under the Department of Health ruling, the Government permits licensed doctors in Indonesia to practice at up to a maximum of three different hospitals, provided part-time employment status is attained at each hospital. SHBL follows strictly to the regulatory requirements to recruit experienced doctors on a part-time basis; however the emphasis is on recruiting more exclusive / full-time doctors.

SHBL has staffed an experienced nursing team and a broad spectrum of allied healthcare personnel including radiographers, speech therapists, physiotherapists, and biomedical engineers in the hospital. The hospital group has collaboration with nursing schools in Bali by conducting regular career seminars at the college campus for on-site recruitment, which may enhance the employment of nursing staffs at SHBL.

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b) Technology

SHBL is currently equipped with advanced diagnostic technologies including 1.5T MRI, 256-slice dual source CT Scanner, Mammography Scanner and 4D Ultrasound machine. The hospital will also be equipped with endoscopic and laparoscopic equipment for its minimally invasive surgical procedures.

From the operational perspective, SHBL has already installed Hospital Information System (HIS) and Electronic Resource Planning (ERP) systems for its patient record and clinical data maintenance. Furthermore, SHBL is equipped with video conferencing capabilities and telemedicine hub supported with 10MB LAN/Wi-Fi, linking the hospital with other Siloam Hospitals.

c) Affiliations and Partnerships

In 2012, SHBL signed a memorandum of understanding (MOU) with the Udayana School of Medicine, the only medical university in Bali. The collaboration will allow the two premier institutions to work together on joint training and doctor resource support.

At the group level, the hospital has also established a partnership with a Consultant from John Hopkins Hospital. The purpose of this partnership is to obtain expertise, knowledge sharing, and training support with respect to Emergency and Trauma care. SHBL will be among one of the hospitals within the group to receive this program.

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3.5.5 Demand Side Analysis

Primary Catchment Area: Areas within 15 km radius of SHBL

The main catchment area within the 15 km radius of SHBL includes the urban districts of Bali. As the third most populous district in Bali with approximately 569,000 residents, Badung represents about 14% of Bali’s total population. Within Badung, several key target catchment districts are likely to become important markets for SHBL. Table 3-10 profiles the key target customers and the healthcare services preferred in each catchment district.

Table 3-10: Patient Profile in the Catchment Area within 15 km radius of SHBL

Catchment Districts

Population (2010)

Distance to SHBL

Target Patients Key Services Required

Kuta 37,902 3 - 4 km Middle income to affluent local residents Tourists (medical/leisure) Expatriates

Elective & curative procedures for multiple specialties Preventive, Rehabilitation services Dental Emergency & Trauma O&G / Paediatric Services

Legian 8,759 3 - 4 km Middle income to affluent local residents Tourists (medical/leisure) Expatriates


Seminyak 6,140 3 - 4 km Middle income to affluent local residents Tourists (medical/leisure) Expatriates


Kedonganan 10,735 8 - 9 km Middle income to affluent local residents Tourists (medical/leisure)


Jimbaran 44,376 13 - 14 km Middle income to affluent local residents Tourists (medical/leisure) Expatriates


Nusa Dua 21,556 (including Benoa)

14 - 15 km Local affluent population Tourists (medical/leisure) Expatriates

Elective & curative procedures for multiple specialties Preventive, Rehabilitation services Dental O&G / Paediatric Services


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Based on the current hospital landscape and vicinity, BIMC can be considered the closest competitor for SHBL. The positioning of BIMC as a premium private hospital has allowed the hospital to build a strong client base from the middle income to affluent Balinese population within the catchment area.

Despite being a leading private hospital in the catchment area, BIMC lacks certain services, such as ICCU, NICU, PICU, and MRI to administer the hospital care that matches international standards for the community. Amenities and ward facilities within the hospital have a single pricing structure (USD 550-all inclusive). The demands in medical care standards and technologies shall therefore create favourable market opportunity for SHBL to address through its state-of-the-art modalities and advanced trauma centre to provide patient care around the clock.

Secondary Catchment Area: Areas beyond 15 km radius of SHBL

According to SHBL, the hospital is planning to expand its target market area in the long term to the surrounding districts. Other Bali regions such as Canggu, Pecatu, Ubud, Gianyar, Tampaksiring and Tabanan are likely to provide favourable patient source for SHBL.

The tourism and service industry in these areas are likely to continue expanding the middle and higher income population and increase expatriate households, who are able to afford premium healthcare services. As of 2010, the total population of these six catchment areas was approximately 287,000. The wealthier population in these catchment areas signals a favourable potential for their ability to afford premium or better quality healthcare services. On average, the population in these areas spends about 5.3% to 8.8% of their total expenditure towards healthcare related expenses.

Table 3-11: Patient Profile in the Catchment Area beyond 15 km radius of SHBL

Catchment Area

Population (2010)

Distance to SHBL

Current Healthcare Infrastructure

Target Patients

Canggu 7,088 16 km • Community Health Center : 1

(entire North Kuta)

• Middle income to affluent native population

• Expatriates

Pecatu 7,378 21 km • Community Health Centers : 2

(entire South Kuta)


• Expatriates

Ubud 69,323 36 km

• Community Health Centers : 2 • Public Hospitals : 1 • Private Hospitals : 3

(entire Gianyar district)

• Affluent native population • Expatriates

Gianyar 86,843 46 km




• Expatriates

Tampaksiring 45,818 48 km




• Expatriates

Tabanan 70,526 46 km • Community Health Centers : 3

(entire South Kuta)


• Expatriates

Source: Bali Department of Statistics, Google Maps, Frost & Sullivan

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There are 14 community health centres, 1 public hospital, and 4 private hospitals within the secondary catchment area. The current healthcare delivery system in these areas is mostly community health centres with limited service offerings and modalities. The already limited number of hospitals in the catchment area only offers basic services. The positioning of SHBL as a state-of-the-art private hospital is, likely to address the current needs for advanced and premium healthcare services in these areas. SHBL, as an international standard hospital, is also well positioned to retain affluent patients to seek treatment within the province.

3.5.6 SHBL’s Branding Strategies

SHBL is anchored on a four-pillar foundation strategy synergized from the overall SHG strategy, comprising of (a) Excellence in Emergency & Trauma, (b) State-of-the-art equipment and technologies, (c) Robust doctor partnership program, and (d) Utilization of healthcare IT and telemedicine. In order to expand its target markets, SHBL is also likely to position itself as a “value for money” state-of-the-art private general hospital that targets to serve patients from all socio-economic classes.

a) Excellence in Emergency & Trauma

In Bali, cardiovascular disease, stroke, hypertension, diabetes, cancer, kidney failure, and accidental injuries are the major reasons for mortalities. The Emergency department in SHBL is likely to provide additional support to the acute care needs of the local population through its emergency care facilities, such as helicopter evacuation, well equipped Emergency Trauma Department with resuscitation units, and ambulance with on-board treatment capabilities. These delivery capabilities are likely to be the first-of-its-kind in Bali.

b) State-of-the-art Equipments and Technologies

With the installation of 1.5 Tesla MRI and cardiac catheterization lab, SHBL is poised to become the most comprehensive private hospital in the Bali, whereby these systems are scarcely available in the other key private hospitals. Furthermore, the hospital has other state-of-the-art facilities, including a 256-slice CT scanner, 4D Ultrasound system, chemotherapy, and haemodialysis facilities.

To ensure optimal service quality, SHBL will implement its clinical operation based on the JCI accreditation protocols currently used at the Siloam Hospitals Lippo Village Headquarters in Jakarta. The hospital manager at SHBL is also required to provide monthly medical performance updates to the SHG Chief of Clinical Improvement based in the Jakarta headquarters and has established standard protocols to handle adverse medical events. The state-of-the-art equipment, conducive environment, well-structured medical practice protocols and reputable brand name of Siloam are likely to be the key factors of attraction for the patients and practising doctors, particularly where such offerings are currently lacking in the hospital market within the region.

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Figure 3-4: SHBL infrastructure and state-of-the-art equipments

SHBL Building Exterior Look

SHBL Building Lobby and Registration Area

SHBL Building Interiors and Walkway

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v

SHBL Emergency Ward and Nurse Station

SHBL Wards

SHBL Wards

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SHBL Operation Theatre and Pre-Operation Wards

SHBL Cath Labs

SHBL CT Scanners and MRI Scanners

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SHBL Ambulance and Helipad

SHBL Rehabilitation Centre and Pharmacy

SHBL Waiting and Dining Areas

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SHBL Shops for Related Use



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c) Robust Doctor Partnership Program

SHG regards the medical workforce as one of the fundamental factors for success. Hence, Siloam Doctor Partnership Development Program (SDPDP), which provides attractive remuneration packages, benefits, and career development opportunities, manages all doctor engagements established at SHBL.

In order to qualify for the SDPDP, participating doctors are only required to practice for at least 30 hours at SHBL monthly. Depending on the employment nature of the doctor (full time, part time, or visiting basis), remuneration packages may include guaranteed base income, or high profit sharing arrangements. Furthermore, SHBL provides comprehensive benefits, such as lifetime health insurance coverage for the practicing doctor and their immediate family members. Participating doctors receive sponsorship for local and overseas clinical training.

Concurrently, SHBL will regularly conduct clinical symposiums and hospital visit sessions to increase the awareness of SHBL’s clinical facilities and capability, thus increasing the attractiveness of SHBL as a practicing location for the local doctor community. Through more conducive practice location, advanced facilities, and more attractive remuneration schemes, SHBL anticipates that practicing doctors will thereby have a higher tendency to refer more patients from hospitals they used to practice in, to undergo treatment at SHBL. This recruitment strategy will simultaneously serve as one of the key patient attraction models for SHBL.

Table 3-12: Doctor Employment and Reimbursement Model in SHBL

Employment Basis Reimbursement Model

Full Time • Under contract and exclusive

employment with SHBL

• Unable to practice in other hospitals

• Targeting fresh medical graduates

• Minimal income model

• SHBL will reimburse any shortfall from the pre-agreed minimal income

Part Time

• Able to practice in other hospitals

• Targeting experienced or senior medical specialists from the public or private sectors

• Will be provided with outpatient clinic suite and able to utilize all facilities within SHBL

• Will be based in SHBL hospital for 2 to 3 hours per day

• Medical fee sharing model

• SHBL will absorb about 2% to 12% of the medical fee, depending on the duration of the doctor’s availability at the hospital

Visiting • Able to practice in other hospitals

• Targeting experienced or senior medical specialist from the public or private sectors

• Will not be provided with outpatient clinic suite

• Able to refer patients for facility usage at SHBL

• Will be based in SHBL for 2 to 3 days per week

• Medical fee sharing model

• SHBL will absorb about 2% to 12% of the medical fee, depending on the duration of the doctor’s availability at the hospital


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d) Utilization of Healthcare IT and Telemedicine

The availability of telemedicine infrastructure within the group hospitals will enable SHG to effectively utilise the clinical expertise from the COE at Siloam Hospitals Lippo Village headquarter. According to SHBL, SHG is currently the only private hospital group in Indonesia to possess the system that allows doctors to conduct consultations, assess diagnostic scan reports, and provide clinical instructions for patient stabilisation remotely, without the need for patients to travel to the Siloam Hospitals Lippo Village headquarter in Jakarta. Through the telemedicine system, copies of all diagnostic scan reports are simultaneously transferred to SHG’s radiologist expert partners in India to provide second opinion on the diagnostic results. As a result, doctors in SHBL will be able to make third party validated clinical decisions to ensure optimal patient safety and treatment outcomes.

e) Pricing Strategies

SHBL uses competitive pricing strategy as part of its marketing strategy. Based on Frost & Sullivan analysis, average inpatient ward charges are at least 30% to 35% lower than the charges at comparable private hospitals in Bali. As illustrated in Table 3-13, SHBL’s pricing for the second and third class wards (targeted at low income to poor population) are approximately 40% to 60% lower than the comparable private hospitals in Bali, while its high end wards, such as the Presidential suite, VVIP and VIP wards are priced at approximately 20% to 50% lower than the competitors.

Table 3-13: Pricing Comparison of Inpatient Ward Charges for SHBL (IDR per overnight stay)

Ward Type SHBL Prima

Medika BIMC Kasih Ibu BROS BaliMed Sanglah

Presidential Suite 900,000 2,000,000 5,300,000 2,000,000 2,450,000 1,700,000 1,100,000

Super VIP / VVIP 800,000 800,000 N/A 1,000,000 1,850,000 980,000 800,000

VIP 675,000 600,000 N/A 900,000 775,000-975,000

810,000 265,000-425,000

1st Class 500,000 400,000 N/A 500,000 550,000 675,000 124,000

2nd Class 225,000 300,000 N/A 400,000 435,000 550,000 102,500

3rd Class 100,000 200,000 N/A 300,000 380,000 395,000 50,500


Given that SHBL is targeting the middle income and affluent segments of the local population along with the medical tourists, pricing the premium wards at a good discount than its competitors, provides a good opportunity to grow their patient base in future. The lower price coupled with better standard of care, more advanced technology and more conducive medical care environment generates good value for its patients.

SHBL has adopted mass marketing strategies, such as advertising discounted packages for health screening, pathology and preventive diagnostic services as a mode of relationship building with the local customers and subsequently develop its patient database for the longer term. It is also planning to collaborate with a tourist agent in the future to develop medical packages for the medical tourists. As the medical tourism market in Bali is set for decent growth in the next 3 to 5 years, SHBL’s service offerings and competitive pricing strategy is likely to yield them a sizeable share of the market.

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3.5.7 SWOT Analysis of SHBL

Frost & Sullivan has identified the following strengths, weakness, opportunities and threats for SHBL.

Table 3-14: SWOT analysis of SHBL

Strengths

Strong Siloam brand: The brand name is trusted and always associated with quality healthcare services

Leverage on group infrastructure: SHBL has the ability to leverage on the strengths of its parent company’s expertise and networks, including specialists and doctors

Strong financial and operational capabilities: SHG’s planned expansion of 25 hospitals across Indonesia is likely to create economies of scale for subsidiary hospitals

Conducive facilities: Wards, clinical facilities and hospital building are equipped with advanced diagnostic equipments

Strategic location : SHBL is located in a prime location to attract medical tourists, being close to Denpasar city, Kuta beach and the airport; it is accessible by a main road which is a value add

Integrated facilities: SHBL is integrated with shops for related use, such as pharmacies, optical stores, and wellness centres

Weakness

Lack of awareness: Though Siloam is a well known brand in Indonesia, the local population lacks awareness about SHBL and its range of services; however SHBL’s mass marketing strategies and pricing that is lower than the competitors are expected to create more awareness among the locals.

Lack of local workforce: There is a lack of local medical resources, such as cardiologists, radiologists, pathologists, nurses, and allied health professionals; this resource constraint will be more significant, as SHBL expands its operations in near future

Opportunities

Excellence in emergency care: There is high demand for emergency care in suburban and remote areas of Bali, especially among the corporate and industrial clients; and SHBL is well positioned to tap into this sector with its 911 emergency call centre, fully equipped ambulance service, and helicopter evacuation facility

Receptiveness of local population: The low to middle income population in Bali is showing an increasing receptiveness towards private healthcare providers, as more bad press circulates around public hospitals in Bali

Residential and commercial developments: The commercial neighbourhood of Jalan Sunset Road is likely to transform into a leading prime residential, recreational and commercial hub of Bali, allowing the growth of middle income and affluent local residents and expatriates

Growing tourism market: Bali’s popularity as a leisure destination is likely to create medical tourism opportunities

Threats

Proximity to key competitors: BIMC Hospital and Kasih Ibu Hospital are situated approximately 2 km and 6 km respectively, away from SHBL, which is likely to attract SHBL’s target patient base

Public perception: There is a general perception that SHBL caters only to the upper middle income and affluent patients

JCI accreditation: A few hospitals in Bali, including the Sanglah Hospital are planning to attain JCI accreditation in 2013-2014, which is likely to further intensify the competition

New entrants: As the healthcare market in Bali proves to be lucrative, many new entrants may commence operations in Bali in near future, thereby increasing the competition


C-82



3.5.8 Competitive Landscape of SHBL

Frost & Sullivan has identified the following hospitals as competitors to SHBL:

• BIMC Hospital

• Kasih Ibu Hospital

• Prima Medika Hospital

• BaliMed Hospital

• Bali Royal Hospital (BROS)

• Sanglah Hospital

Sanglah Hospital is a public hospital serving all classes of the population, while the other hospitals listed above are private groups targeting the middle to high income patients in Bali.

BIMC Hospital – Kuta and Nusa Dua

BIMC Hospital was established as an international standard medical centre, in a bid to cater to the growing needs of quality healthcare services for residents and tourists in Bali. In July 1998, with only 10 staff, BIMC Hospital opened its doors in a modest building. Needing a larger and more comprehensive facility, a four-storey building was built in 2005 in Simpang Siur area in Kuta. In 2007, BIMC Hospital secured its official license as a fully accredited hospital. In 2010, BIMC Hospital affirmed its standpoint in the medical tourism industry. To this effect, a new hospital was built in 2012 in Nusa Dua, which now offers dialysis treatments with spa services, surgical and non-surgical cosmetic treatments, as well as dental care.

Kasih Ibu Hospital – Denpasar & Kedonganan

Kasih Ibu Hospital commenced operations in October 1987. Kasih Ibu received the authorization from the Minister of Health to become a private general hospital in 1992 and hence was able to provide a wider range of medical services to the Balinese population. In order to provide high standards of treatment and services suitable for international patients, Kasih Ibu also launched its international patients division in October 2007. Its international ER and Alarm Center teams are available around the clock.

C-83



Prima Medika Hospital

Prima Medika Hospital is a multi-specialty hospital located in the heart of Denpasar City in Bali. Founded in 2002, with 115 beds and over 30 specialty centres, Prima Medika Hospital offers diagnostic, therapeutic and intensive care facilities in a one-stop medical centre. The hospital has a medical coordination office staffed by doctors, nurses, and interpreters who serve the special needs of international patients.

BaliMed Hospital

BaliMed Hospital is located in the west of Denpasar City in Bali, Indonesia. Founded in January 2008 with 57 doctors from various specialties, the hospital provides medical services for both local and international patients. The hospital offers comprehensive services from routine health screenings, internal medicine, general surgery, orthopaedic surgery, cardio-thoracic surgery, cardiology, radiology, urology and neurology.

Bali Royal Hospital (BROS)

Bali Royal Hospital (BROS) commenced operations in July 2010. Located in Denpasar City, BROS offers a variety of healthcare services. BROS has 65 rooms with over 100 beds and is divided into six types of inpatient rooms including the intensive care unit. BROS is equipped with modern diagnostic support facilities such as multi-slices CT-Scan, Ultrasound 4 Dimensions, Endoscopy, Mammography, Laboratory, and others.

C-84

Fros

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N

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N

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C-85

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C-86


4 GLOSSARY

Terms Meaning

Askes Asuransi Kesehatan is Government insurance for Government employee

Askeskin Asuransi Kesehatan Masyarakat Miskin (English equivalent to Health Insurance for the Poor)

ASEAN Association of South East Asian Nations

BD Bidan Delima (English Equivalent to midwife)

BOR Bed Occupancy Rate, typically used as a hospital capacity management method to measure the utilisation rate of a hospital’s inpatient facilities. BOR is usually calculated by dividing the total inpatient days of care (totalling the number of days in which each patient occupied a bed) over the maximum number of available bed-days (total number of beds multiplied by the total number of operating days)

BPS Badan Pusat Statistik (English equivalent to Central Bureau of Statistics)

BPJS Badan Penyelenggara Jaminan Sosial (English Equivalent to Social Security and Health Insurance)

Cardiac Catheterisation An interventional cardiology procedure that involves insertion of a catheter into a chamber or vessel of the heart

CAGR Compound Annual Growth Rate

CT Computed Tomography, a radiation diagnostic technology that is often graded by the number of images (termed as slice) in a scan procedure. Currently in the market, CT scanners range from 16-slice to the most advanced 320-slice categories. CT scanners can also be classified as single or dual source, whereby the dual source models will offer better image resolution and more accurate diagnostic outcomes.

COE Centre of Excellence

Dinkes Provincial Health Office

DKI Jakarta Daerah Khusus Ibukota Jakarta

DTPK Daerah Terpencil Perbatasan Kepulauan (English Equivalent to Remote Area Border Islands)

DBK Daerah Bermasalah Kesehatan (English Equivalent to Problematic areas of Health)

D/S Indicator to measure child development in Posyandu

EEG Electroencephalography

ECG Electrocardiograph

ERP Electronic Resource Planning

ERCP Combined Endoscopy and Fluoroscopy

C-87

Overview and Assessment of South Jakarta&Bali Healthcare Services Market in Indonesia– First REIT


GDP Gross Domestic Bruto

GPs General Practitioners

Gakin Warga Miskin (English Equivalent to Poor Community)

GI Gastroenterology

HIS Hospital Information System

HDI Human Development Index

ICU Intensive Care Unit

ICCU Intensive Cardiac Care Unit

IMA Indonesian Midwives Association

IT Information Technology

Jamkesmas Jaminan Kesehatan Masyarakat (English equivalent to Community Health Security)

Jamsostek Jaminan Sosial Tenaga Kerja (English Equivalent to Workers' Social Security)

JCI Joint Commission International

KARS Komisi Akreditasi Rumah Sakit (English equivalent to Hospital Accreditation Commission)

MCH Maternal Child Health

MDGs Millennium Development Goals

MOH Ministry of Health

MOU Memorandum of Understanding

MRI Magnetic Resonance Imaging, a clinical diagnostic technique that utilises magnetic field technology. MRI scanners are usually graded by the strength of their magnet (usually termed as Tesla or abbreviated as “T”). Currently in the market, MRI scanners range from 0.5Tesla to the most advanced 3.0Telsa.

MMR Maternity Mortality Rate

Neonatal Visit Newborn infant visit to Posyandu

NCDs Non-communicable Diseases

NHG National Healthcare Group

NICU Neonatal Intensive Care Unit

NGOs Non Government Organizations

O&G Obstetrics and Gynaecology

PICU Paediatric Intensive Care Unit

PPSDM Badan Pengembangandan Pemberdayaan SDN Kesehatan (English equivalent to Development of Human Resources Strategic Program)

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Overview and Assessment of South Jakarta&Bali Healthcare Services Market in Indonesia– First REIT


PUSKESMAS Pusat Kesehatan Masyarakat (English equivalent to Centre of Public Health)

Posyandu Pos Pelayanan Terpadu is a suburban program for health activity including child development supervision and maternal check up

PN Total number of labour assisted by medical personnel

RS Rumah Sakit (English equivalent to Hospital)

RPJPK Rencana Pembangunan Jangka Panjang Kesehatan (Long Term Health Planning)

SDPDP Siloam Doctor Partnership Development Program

SHG Siloam Hospitals Group

SHTS Siloam Hospitals TB Simatupang

SHBL Siloam Hospitals Bali

Specialist A physician who completed multiple years of residency to further their medical education in specific specialty after completing medical school

TB Tuberculosis

Trauma Critical injury to body tissue by physical or chemical means

USG Ultrasonography

USAID United States Agency for International Development

WHO World Health Organisation

STIRLING COLEMAN CAPITAL LIMITED(Company Registration Number: 200105040N)

4 Shenton Way #07-03

SGX Centre 2

Singapore 068807

12 April 2013

To: The Independent Directors of

Bowsprit Capital Corporation Limited

(as Manager of First Real Estate Investment Trust) (the “Manager”) and

HSBC Institutional Trust Services (Singapore) Limited

(in its capacity as trustee of First Real Estate Investment Trust) (the “Trustee”):

Dear Sirs

INDEPENDENT FINANCIAL ADVISER’S ADVICE IN RESPECT OF:

(1) THE ACQUISITION OF SILOAM HOSPITALS BALI FROM AN INTERESTED PERSON

(THE “SHBL ACQUISITION”);

(2) THE ACQUISITION OF SILOAM HOSPITALS TB SIMATUPANG FROM AN INTERESTED

PERSON (THE “SHTS ACQUISITION”);

(3) THE SHBL AND SHTS MASTER LEASES;

(4) THE ISSUANCE OF CONSIDERATION UNITS FOR THE SHTS ACQUISITION

(COLLECTIVELY THE “IPT TRANSACTIONS”); AND

(5) THE WHITEWASH RESOLUTION

For the purpose of this letter, capitalised terms not otherwise defined shall have the meaning

given to them in the circular dated 12 April 2013 to the Unitholders of First Real Estate Investment

Trust (the “Circular”).

1 INTRODUCTION

First REIT was established with the principal investment objective of owning and investing in

a diversified portfolio of income-producing real estate and/or real estate-related assets in

Asia that are primarily used for healthcare and/or healthcare-related purposes including, but

not limited to, hospitals, nursing homes, medical clinics, pharmacies, laboratories,

diagnostic/imaging facilities and real estate and/or real estate related assets used in

connection with healthcare research, education, lifestyle and wellness management,

manufacture, distribution or storage of pharmaceuticals, drugs, medicine and other

healthcare goods and devices and such other ancillary activities relating to the primary

objective, whether wholly or partially owned, and whether directly or indirectly held through

the ownership of special purpose vehicles whose primary purpose is to hold or own real

estate.

As part of First REIT’s growth strategy, the Manager is committed to pursuing acquisition

opportunities that will enhance First REIT’s asset base and maintain an attractive cash flow

and yield profile.

D-1

1.1 THE SHBL ACQUISITION

SHBL, a four-storey hospital with a basement level is located at Jalan Sunset Road No. 818,

Kuta, Badung, Bali 80361, Indonesia, commenced operations on 17 December 2012. SHBL

has an operational capacity of 295 beds, with integrated shops for related use. SHBL is

located on Jalan Sunset Road which connects to the Kuta Area and Denpasar City, one of

the fastest growing areas in Bali. Notable developments in the close vicinity of SHBL include

Carrefour, Bali Galeria Shopping Mall and Ngurah Rai International Airport. SHBL is a Centre

of Excellence for trauma, medical tourism, intensive care unit, orthopaedic and cardiology.

(Please refer to APPENDIX A of the Circular for further details on SHBL.)

SHBL is entirely owned by PT BMS, an indirect wholly-owned subsidiary of the Sponsor

incorporated on 7 September 2007. First REIT will indirectly acquire SHBL from PT BMS

through PT DGJ, which was incorporated on 21 February 2013, and was ratified by the

Ministry of Law and Human Rights of the Republic of Indonesia on 25 February 2013. First

REIT’s wholly-owned subsidiary, Globalink, and Globalink’s wholly-owned subsidiary,

Fortuna, respectively own 75.0% and 25.0% of the issued share capital of PT DGJ. Globalink

was incorporated on 31 July 2007 and Fortuna was incorporated on 6 August 2007.

On 26 March 2013, PT DGJ entered into a conditional land sale and purchase agreement

with PT BMS (the “SHBL SPA”) pursuant to which PT DGJ proposes to acquire SHBL at the

SHBL Purchase Consideration. Under Indonesian law, First REIT would not be considered a

legal entity, and therefore it may not directly own land in Indonesia or shares in an Indonesian

limited liability company. In addition, pursuant to Indonesian Company Law, an Indonesian

limited liability company must be owned by at least two entities. The proposed holding

structure for SHBL is consistent with Indonesian Company Law.

First REIT will, upon acquiring SHBL, indirectly hold SHBL through PT DGJ under seven

‘Right to Build’ (Hak Guna Bangunan or “HGB”) title certificates which will expire on 26 March

2038 respectively. In Indonesia, a HGB title is the closest form of land title to the

internationally recognised concept of ‘leasehold’ title and under Indonesian Agrarian Law, the

highest title which can be obtained by a company incorporated or located in Indonesia is a

‘Right to Build’ or HGB title. HGB titles can only be obtained by an Indonesian citizen, or by

a legal entity which is incorporated under Indonesian law and located in Indonesia including

foreign capital investment companies. A holder of the HGB title has the right to erect, occupy

and use buildings on the parcel of land and sell all or part of such parcel. A HGB title is

granted for a maximum initial term of 30 years. By application to the relevant local land office

two years prior to the expiration of such initial term, a HGB title may be extended for an

additional term not exceeding 20 years.

As at the Latest Practicable Date, the Sponsor directly and/or through its subsidiaries and

through its interest in the Manager, has deemed interests of (i) 28.7% in First REIT and (ii)

100.0% in the Manager, and is therefore regarded as a “Controlling Unitholder” of First REIT

and a “Controlling Shareholder” of the Manager respectively under both the Listing Manual

and the Property Funds Appendix.

For the purposes of Chapter 9 of the Listing Manual and the Property Funds Appendix, PT

BMS, being an indirect wholly-owned subsidiary of the Sponsor (which in turn is a Controlling

Unitholder of First REIT and a Controlling Shareholder of the Manager), is an Interested

Person and Interested Party of First REIT.

D-2

Given the SHBL Purchase Consideration of S$97.3 million (which is 17.7% of the NTA and

NAV respectively of First REIT as at 31 December 2012), the value of the SHBL Acquisition

will in aggregate exceed (i) 5.0% of First REIT’s latest audited NTA and (ii) 5.0% of First

REIT’s latest audited NAV. As such, the SHBL Acquisition will constitute an Interested Person

Transaction under Chapter 9 of the Listing Manual and an Interested Party Transaction under

paragraph 5 of the Property Funds Appendix.

In compliance with the requirements of the Listing Manual and the Property Funds Appendix,

the Manager is therefore seeking Unitholders’ approval for the SHBL Acquisition.

1.2 THE SHTS ACQUISITION

SHTS is located at Jalan Letjend. TB Simatupang/Jalan R.A. Kartini No. 8, RT 010/RW 04,

Cilandak, Jakarta Selatan, Indonesia. SHTS, a 16-storey hospital with two basement levels,

will commence operations on or about 15 April 2013. SHTS will have an operational capacity

of 271 beds. SHTS, located close to the Fatmawati toll gate on Jakarta Outer Ring Road

which connects the inner-city toll road with Bintaro and Serpong areas and which is near

middle upper residential area at Pondok Indah and Cinere, is highly accessible via public and

private transportation. Notable developments in the close vicinity of SHTS include

Metropolitan Tower Office Building, upcoming South Quarter (a mixed-use development

comprising integrated office towers, apartment and retail facilities) and Point Square

Superblock (a mixed-use development comprising apartment and retail facilities). SHTS is a

Centre of Excellence for trauma, cardiology, oncology and neuroscience.

(Please refer to APPENDIX A of the Circular for further details on SHTS.)

SHTS will be entirely owned by PT PDS, a special purpose vehicle incorporated in Indonesia

on 21 July 2011 and was ratified by the Ministry of Law and Human Rights of the Republic

of Indonesia on 28 July 2011 for the purpose of holding SHTS. PT PDS is in turn 75.0% and

25.0% owned by Great Capital and Key Capital respectively. Great Capital and Key Capital

are companies incorporated in Singapore on 31 July 2007 and 6 August 2007, respectively.

Key Capital is a wholly-owned subsidiary of Great Capital, and Great Capital is wholly-owned

by Evodia, a company incorporated in Labuan, Malaysia on 30 August 2007 which is an

indirect wholly-owned subsidiary of the Sponsor. First REIT proposes to acquire SHTS

through the acquisition of the entire issued share capital of Great Capital from Evodia.

Evodia is present in the current holding structure of SHTS by the Sponsor. This structure will

have no impact on First REIT before or after the acquisition. For the avoidance of doubt, First

REIT will not be holding Evodia, which is the vendor.

On 26 March 2013, the Trustee entered into a conditional sale and purchase agreement with

Evodia (the “SHTS SPA”) pursuant to which the Trustee proposed to acquire the entire share

capital of Great Capital at the SHTS Purchase Consideration.






For the purposes of Chapter 9 of the Listing Manual and the Property Funds Appendix, PT

BMS, being an indirect wholly-owned subsidiary of the Sponsor (which in turn is a Controlling

Unitholder of First REIT and a Controlling Shareholder of the Manager), is an Interested

Person and Interested Party of First REIT.

D-3

Given the SHTS Purchase Consideration of S$93.1 million (which is 16.9% of the NTA and

NAV respectively of First REIT as at 31 December 2012), the value of the SHTS Acquisition

will in aggregate exceed (i) 5.0% of First REIT’s latest audited NTA and (ii) 5.0% of First

REIT’s latest audited NAV. As such, the SHTS Acquisition will constitute an Interested Person

Transaction under Chapter 9 of the Listing Manual and an Interested Party Transaction under

paragraph 5 of the Property Funds Appendix.

In compliance with the requirements of the Listing Manual and the Property Funds Appendix,

the Manager is therefore seeking Unitholders’ approval for the SHTS Acquisition.

1.3 THE SHBL MASTER LEASE AND THE SHTS MASTER LEASE

In relation to the SHBL Acquisition, the SHBL Master Lease Agreement has been entered into

between PT DGJ (as the SHBL master lessor) and the Sponsor (as the SHBL master lessee)

on 26 March 2013 pursuant to which the SHBL Master Lease will be granted to the Sponsor

for a lease term of 15 years, commencing from the date of completion of the SHBL SPA, with

an option to renew for a further term of 15 years.

In relation to the SHTS Acquisition, the SHTS Master Lease Agreement has been entered

into between PT PDS (as the SHTS master lessor) and the Sponsor (as the SHTS master

lessee) on 26 March 2013 pursuant to which the SHTS Master Lease will be granted to the

Sponsor for a lease term of 15 years, commencing from the date of completion of the SHTS

SPA with an option to renew for a further term of 15 years.






The value of the SHBL Master Lease is approximately S$9.7 million for the first year of the

SHBL Master Lease, which represents approximately 1.8% of First REIT’s latest audited

NTA.

The value of the SHTS Master Lease is approximately S$9.3 million for the first year of the

SHTS Master Lease, which represents approximately 1.7% of First REIT’s latest audited

NTA.

As the SHBL and SHTS Master Leases constitute Interested Person Transactions under

Chapter 9 of the Listing Manual for which Unitholders’ approval is required, the approval of

Unitholders is sought for both the SHBL Master Lease and SHTS Master Lease.

1.4 THE PROPOSED ISSUANCE OF CONSIDERATION UNITS FOR THE SHTS ACQUISITION

The Manager will make partial payment for the SHTS Acquisition by issuing new Units to

Evodia (or a nominee of Evodia which is a wholly-owned subsidiary of the Sponsor)

amounting up to an aggregate value of S$50.0 million. The final issue price of the

Consideration Units will be determined based on the 10-Day Volume Weighted Average Price

of the Units immediately preceding the date of completion of the SHTS Acquisition, in

accordance with the provisions of the Trust Deed.

D-4

The Consideration Units will not be entitled to distributions by First REIT for the period from

1 April 2013 to the date preceding the date of issue of the Consideration Units. Holders of the

Consideration Units will only be entitled to receive distributions by First REIT from the date

of their issue to 30 June 2013 as well as all distributions thereafter. The Consideration Units

will, upon issue, rank pari passu in all respects with the existing Units in issue.

The issue of the Consideration Units to Evodia (or a nominee of Evodia which is a

wholly-owned subsidiary of the Sponsor) will constitute a placement to a Substantial

Unitholder as Evodia is an indirect wholly-owned subsidiary of the Sponsor, and the Sponsor

has deemed interests of (i) 28.7% in First REIT and (ii) 100.0% in the Manager. Under Rule

812 of the Listing Manual, any issue of Units must not be placed to a Substantial Unitholder

unless Unitholders’ approval is obtained.

1.5 THE PROPOSED WHITEWASH RESOLUTION

In connection with the proposed issuance of the Consideration Units to Evodia (or a nominee

of Evodia which is a wholly-owned subsidiary of the Sponsor) as part consideration for the

SHTS Purchase Consideration, the Manager is seeking approval from Independent

Unitholders for a waiver of their rights to receive a Mandatory Offer from the Sponsor and

parties acting in concert with it for all the remaining issued Units not owned or controlled by

the Sponsor and parties acting in concert with it, in the event that the Sponsor and parties

acting in concert with it incur a mandatory bid obligation pursuant to Rule 14 of the Singapore

Code of Take-overs and Mergers (the “Code”) as a result of:

(i) the receipt by Evodia (or a nominee of Evodia which is a wholly-owned subsidiary of the

Sponsor) of the Consideration Units as partial consideration for the SHTS Acquisition;

and/or

(ii) the receipt by the Manager in its own capacity of the SHBL Acquisition Fee Units and/or

the SHTS Acquisition Fee Units.

Rule 14.1(a) of the Code states that the Sponsor and parties acting in concert with it would

be required to make a Mandatory Offer if the Sponsor and parties acting in concert with it

acquire additional Units which increases their aggregate unitholding in First REIT to 30.0%

or more.

The Securities Industry Council (the “SIC”) has on 8 April 2013 granted a waiver (the “SIC

Waiver”) of the requirement by the Sponsor and parties acting in concert with it to make a

Mandatory Offer for the remaining Units not owned or controlled by the Sponsor and parties

acting in concert with it at the highest price paid or agreed to be paid by the Sponsor and

parties acting in concert with it, in the event that they incur an obligation to make a Mandatory

Offer pursuant to Rule 14 of the Code, subject to the satisfaction of the conditions specified

in the SIC Waiver (as set out in section 8.2 of the Letter to Unitholders) including the approval

of the Whitewash Resolution by Independent Unitholders at a general meeting of

Unitholders.

Accordingly, approval for the Whitewash Resolution is sought from the Independent

Unitholders.

2 TERMS OF REFERENCE

Stirling Coleman has been appointed to advise the Independent Directors on whether (a) the

IPT Transactions are on normal commercial terms and are prejudicial to the interests of First

REIT and its Independent Unitholders, and (b) the Whitewash Resolution is prejudicial to the

interests of First REIT’s Independent Unitholders.

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We have prepared this IFA Letter for the use of the Independent Directors in connection with

their consideration of the IPT Transactions and the Whitewash Resolution and their advice

and recommendation to the Independent Unitholders in respect thereof. The

recommendations made to the Independent Unitholders in relation to the IPT Transactions

and the Whitewash Resolution remains the responsibility of the Independent Directors. This

IFA Letter is further given for the benefit of HSBC Institutional Trust Services (Singapore)

Limited, as Trustee of First REIT.

We were not involved in any aspect of the negotiations in relation to the Transactions (as

defined in the Circular), nor were we involved in the deliberations leading up to the decision

by the Board of Directors to enter into the Transactions, and we do not, by this Letter or

otherwise, advise or form any judgment on the merits of the Transactions other than to form

an opinion, as to (a) whether the IPT Transactions are based on normal commercial terms

and prejudicial to the interests of First REIT and its Independent Unitholders, and (b) whether

the Whitewash Resolution is prejudicial to the interests of First REIT’s Independent

Unitholders.

We have confined our evaluation to the financial terms of the IPT Transactions and the

Whitewash Resolution and our terms of reference do not require us to evaluate or comment

on the risks and/or merits of the Transactions or the future prospects of First REIT, including

whether the Transactions are commercially desirable or justifiable, and we have not made

such evaluation or comment. Such evaluation or comment, if any, remains the responsibility

of the Directors and the management of the Manager, although we may draw upon their

views or make such comments in respect thereof (to the extent deemed necessary or

appropriate by us) in arriving at our opinion as set out in this Letter. Accordingly, it is not

within our scope to conduct a comprehensive independent review of the business, operations

or financial condition of First REIT.

It is not within our terms of reference to compare the relative merits of the Transactions

vis-à-vis any alternative transaction previously considered by the Manager or transactions

that the Manager may consider in the future, and such comparison and consideration remain

the responsibility of the Directors.

We have not made an independent evaluation or appraisal of the assets and liabilities

(including without limitation, real property, machinery and equipment) of First REIT or the

SHBL and SHTS Acquisitions and we have not been furnished with any such evaluation or

appraisal except for the relevant valuation reports by the Independent Valuers. We are not

experts in the evaluation or appraisal of assets and liabilities or the determination of the

market value of the SHBL and SHTS and have relied solely on the Independent Valuers in

this respect.

In formulating our opinion and recommendation, we have held discussions with the Directors

and management of the Manager and have examined publicly available information and we

have relied to a considerable extent on the information set out in the Circular, other public

information collated by us and the information, representations, opinions, facts and

statements provided to us, whether written or verbal, by the Manager and its other

professional advisers. We have relied upon the assurance of the Directors and the

management of the Manager that all statements of fact, opinion and intention made by the

Directors and the management of the Manager in the Circular have been reasonably made

after due and careful enquiry. We have not independently verified such information but have

made such reasonable enquiries and exercised our judgement as we deemed appropriate on

such information and have no reason to doubt the accuracy or reliability of the information

used for the purposes of our evaluation. Accordingly we cannot and do not expressly and

impliedly represent or warrant, and do not accept any responsibility for the accuracy, or

completeness or adequacy of such information or the manner in which it has been classified

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or presented or the basis of any valuation which may have been included in the Circular or

announced by First REIT. The information which we relied on were based upon market,

economic, industry, monetary and other conditions prevailing as at the Latest Practicable

Date and may change significantly over a relatively short period of time. Accordingly, we do

not express an opinion herein as to the prices at which the Units of First REIT may trade upon

completion of the Transactions.

In rendering our services, we have not taken into consideration the specific investment

objectives, financial situation, tax position, tax status, risk profiles or particular needs and

constraints or circumstances of any individual Unitholder. As each Unitholder would have

different investment objectives and profiles, any individual Unitholder who may require

specific advice in the context of his specific investment objectives or portfolio should consult

his stockbroker, bank manager, solicitor, accountant, tax adviser or other professional

adviser immediately.

The Manager has been separately advised by its own advisers in the preparation of the

Circular (other than this Letter). We have had no role or involvement and have not provided

any advice, financial or otherwise, whatsoever in the preparation, review and verification of

the Circular (other than this Letter). Accordingly, we take no responsibility for and express no

views, expressed or implied, on the contents of the Circular (other than this Letter).

Our recommendation in respect of the IPT Transactions and the Whitewash Resolution

as set out in sections 9.1, 9.2, 9.3, and 9.4 of the Letter to Unitholders, should be

considered in the context of the entirety of this Letter and the Circular. Where

information in this Letter has been extracted from the Circular, Independent

Unitholders are urged to read the corresponding sections in the Circular carefully.

3 INFORMATION ON THE SHBL ACQUISITION

3.1 The SHBL Property

Detailed descriptions of the SHBL Property are set out in APPENDIX A of the Circular. We

recommend that the Independent Directors advise Independent Unitholders to read

APPENDIX A of the Circular very carefully.

3.2 Details of the SHBL Acquisition

Details of the SHBL Acquisition and the conditions precedent for the completion of the sale

and purchase of the SHBL are set out in sections 2.2, 2.3 and 2.5 of the Letter to Unitholders.

We recommend that the Independent Directors advise Independent Unitholders to read

these sections of the Letter to Unitholders very carefully.

3.3 Cost of the SHBL Acquisition

The SHBL Acquisition Cost is currently estimated to be approximately S$99.2 million,

comprising the following:

(i) the SHBL Purchase Consideration of S$97.3 million;

(ii) the SHBL Acquisition Fee1 of approximately S$973,000 payable to the Manager

pursuant to Clause 14.2.1 of the Trust Deed which shall be payable in the form of the

SHBL Acquisition Fee Units; and

1 Being 1.0% of the SHBL Purchase Consideration.

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(iii) the estimated professional and other fees and expenses of approximately S$0.9

million2 incurred by First REIT in connection with the SHBL Acquisition.

3.4 Method of Financing

The SHBL Acquisition Cost is expected to be financed via a drawdown from First REIT’s

committed debt facility. The final decision regarding the method of financing will be made at

the appropriate time taking into account the relevant market conditions.

4 INFORMATION ON THE SHTS ACQUISITION

4.1 The SHTS Property

Detailed descriptions of the SHTS Property are set out in APPENDIX A of the Circular. We

recommend that the Independent Directors advise Independent Unitholders to read

APPENDIX A of the Circular very carefully.

4.2 Details of the SHTS Acquisition

Details of the SHTS Acquisition and the conditions precedent for the completion of the sale

and purchase of SHTS are set out in sections 3.2, 3.3 and 3.5 of the Letter to Unitholders.

We recommend that the Independent Directors advice Independent Unitholders to read

these sections of the Letter to Unitholders very carefully.

4.3 Cost of the SHTS Acquisition

The SHTS Acquisition Cost is currently estimated to be approximately S$95.0 million,

comprising the following:

(i) the SHTS Purchase Consideration of S$93.1 million;

(ii) the SHTS Acquisition Fee3 of approximately S$931,000 payable to the Manager

pursuant to Clause 14.2.1 of the Trust Deed which shall be payable in the form of the

SHTS Acquisition Fee Units; and

(iii) the estimated professional and other fees and expenses of approximately S$1.0

million4 incurred by First REIT in connection with the SHTS Acquisition.

2 It is expected that most of the professional and other fees and expenses in connection with the SHBL Acquisition

will be incurred by First REIT even if the Manager does not proceed with the SHBL Acquisition.

3 Being 1.0% of the SHTS Purchase Consideration.

4 It is expected that most of the professional and other fees and expenses in connection with the SHTS Acquisition

will be incurred by First REIT even if the Manager does not proceed with the SHTS Acquisition.

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4.4 Method of Financing

S$43.1 million of the SHTS Purchase Consideration will be paid in cash, and the remaining

S$50.0 million, being the SHTS Equity Consideration, will be satisfied by way of the issuance

of the Consideration Units to Evodia (or a nominee of Evodia which is a wholly-owned

subsidiary of the Sponsor).

The cash portion of the SHTS Acquisition Cost is expected to be financed via drawdown from

First REIT’s committed debt facility. The proportion of debt financing for SHTS will be

approximately 47.4%. The final decision regarding the method of financing and the

proportion of debt and equity to be employed will be made at the appropriate time taking into

account the relevant market conditions.

5 THE MASTER LEASES

As part of the SHBL Acquisition and SHTS Acquisition, PT DGJ and PT PDS have entered

into the SHBL Master Lease Agreement and the SHTS Master Lease Agreement with the

Sponsor respectively, whereby both the SHBL and SHTS Properties will be leased to the

Sponsor for an initial period of 15 years, commencing upon the completion of the respective

acquisitions (collectively, the “Master Leases”), with an option to renew for a further term of

15 years.

The principal terms of the SHBL and SHTS Master Leases are set out respectively in

sections 2.7 and 3.7 of the Letter to Unitholders. We recommend that the Independent

Directors advise Independent Unitholders to read these sections in the Letter to Unitholders

very carefully.

As the SHBL Master Lease and the SHTS Master Lease are structured as part of the SHBL

Acquisition and SHTS Acquisition respectively, we wish to highlight to the Independent

Directors that by approving the SHBL Acquisition and the SHTS Acquisition,

Independent Unitholders would also be deemed to have approved the SHBL Master

Lease and the SHTS Master Lease.

6 THE ISSUANCE OF CONSIDERATION UNITS FOR THE SHTS ACQUISITION

For the SHTS Acquisition, part of the SHTS Purchase Consideration to Evodia (or a nominee

of Evodia which is a wholly-owned subsidiary of the Sponsor) will be satisfied by way of the

issuance of Consideration Units, amounting up to an aggregate value of S$50.0 million.

Based on an illustrative issue price of S$1.243, the total number of consideration units will

be equivalent to 40,225,262 Units, representing 6.0% of the total number of Units in issue as

at the Latest Practicable Date. The final issue price of the Consideration Units will be

determined based on the 10-Day Volume Weighted Average Price of the Units immediately

preceding the date of completion of the SHTS Acquisition, in accordance with the provisions

of the Trust Deed.






Further details concerning the issuance of the Consideration Units are set out in section 4 of

the Letter to Unitholders. We recommend that the Independent Directors advise Independent

Unitholders to read this section of the Letter to Unitholder very carefully.

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The issue of the Consideration Units to Evodia (or a nominee of Evodia which is a

wholly-owned subsidiary of the Sponsor) will constitute a placement to a Substantial

Unitholder which requires shareholders approval.

We wish to highlight that the approval of the SHBL Acquisition, the SHTS Acquisition,

the issuance of the Consideration Units and the Whitewash Resolution are subject to

and contingent upon the approval of each other.

7 THE WHITEWASH RESOLUTION

In connection with the proposed issuance of the Consideration Units to Evodia (or a nominee

of Evodia which is a wholly-owned subsidiary of the Sponsor) as part consideration for the

SHTS Purchase Consideration, the Manager is seeking approval from Independent

Unitholders for a waiver of their rights to receive a Mandatory Offer from the Sponsor and

parties acting in concert with it for all the remaining issued Units not owned or controlled by

the Sponsor and parties acting in concert with it, in the event that the Sponsor and parties

acting in concert with it incur a mandatory bid obligation pursuant to Rule 14 of the Code as

a result of:

(i) the receipt by Evodia (or a nominee of Evodia which is a wholly-owned subsidiary of the

Sponsor) of the Consideration Units as partial consideration for the SHTS Acquisition;

and/or

(ii) the receipt by the Manager in its own capacity of the SHBL Acquisition Fee Units and/or

the SHTS Acquisition Fee Units.

Rule 14.1(a) of the Code states that the Sponsor and parties acting in concert with it would

be required to make a Mandatory Offer if the Sponsor and parties acting in concert with it

acquire additional Units which increases their aggregate unitholding in First REIT to 30.0%

or more.

To the best of the knowledge of the Manager and the Sponsor, the Sponsor and parties acting

in concert with it hold, in aggregate, 191,352,932 Units representing 28.7% of the voting

rights of First REIT as at the Latest Practicable Date.

The maximum possible increase in the unitholdings of the Sponsor and parties acting in

concert with it would occur in the scenario where (i) Evodia (or a nominee of Evodia which

is a wholly-owned subsidiary of the Sponsor) receives Consideration Units for the SHTS

Equity Consideration and (ii) the Manager elects to receive its full entitlement to the SHBL

Acquisition Fee and the SHTS Acquisition Fee in Units. Based on an illustrative issue price

of S$1.243 per Consideration Unit, the aggregated unitholding of the Sponsor and parties

acting in concert with it immediately after the issue of the Consideration Units, the SHBL

Acquisition Fee Units and the SHTS Acquisition Fee Units will be 32.9%.

An application was made to the SIC on 14 March 2013 for the waiver of the obligation of the

Sponsor and parties acting in concert with it to make a Mandatory Offer under Rule 14 of the

Code should the obligation to do so arise as a result of the issuance of the Consideration

Units, the SHBL Acquisition Fee Units and/or the SHTS Acquisition Fee Units. The SIC

granted the SIC Waiver on 8 April 2013, subject to, inter alia, the satisfaction of the following

conditions:

(i) a majority of Unitholders present and voting at a general meeting, held before the

issuance of the Consideration Units, the SHBL Acquisition Fee Units and the SHTS

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Acquisition Fee Units, approve by way of a poll, the Whitewash Resolution to waive

their rights to receive a general offer from the Sponsor and parties acting in concert with

it;

(ii) the Whitewash Resolution is separate from other resolutions;

(iii) the Sponsor, parties acting in concert with it and parties not independent of them

abstain from voting on the Whitewash Resolution;

(iv) the Sponsor and parties acting in concert with it did not acquire or are not to acquire any

Units or instruments convertible into and options in respect of Units (other than

subscriptions for, rights to subscribe for, instruments convertible into or options in

respect of new Units which have been disclosed in this Circular):

(a) during the period between the announcement of the Acquisitions and the date

Unitholders’ approval is obtained for the Whitewash Resolution; and

(b) in the six months prior to the announcement of the Acquisitions, but subsequent to

negotiations, discussions or the reaching of understandings or agreements with

the Manager in relation to the Acquisitions;

(v) First REIT appoints an independent financial adviser to advise the Independent

Unitholders on the Whitewash Resolution;

(vi) First REIT sets out clearly in this Circular:

(a) details of the Acquisitions and the issuance of the Consideration Units;

(b) the dilution effect to existing Unitholders of voting rights in First REIT of the issue

of issuing the Consideration Units, the SHBL Acquisition Fee Units and the SHTS

Acquisition Fee Units;

(c) the number and percentage of Units as well as the number of instruments

convertible into, rights to subscribe for and options in respect of Units held by the

Sponsor and parties acting in concert with it as at the Latest Practicable Date;

(d) the number and percentage of Units to be issued to the Sponsor and parties acting

in concert with it as a result of the Acquisitions; and

(e) that Unitholders, by voting for the Whitewash Resolution, are waiving their rights

to a general offer from the Sponsor and parties acting in concert with it at the

highest price paid or agreed to be paid by the Sponsor and parties acting in

concert with it for Units in the six months preceding the commencement of the

offer;

(vii) this Circular states that the waiver granted by SIC to the Sponsor and parties acting in

concert with it from the requirement to make a general offer under Rule 14 of the Code

is subject to the conditions set out in Sections 8.2(i) to 8.2(vi) in the Letter to

Unitholders;

(viii) the Sponsor obtains SIC’s approval in advance for the paragraphs of this Circular that

refer to the Whitewash Resolution; and

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(ix) to rely on the Whitewash Resolution, the acquisitions of the Consideration Units, the

SHBL Acquisition Fee Units and SHTS Acquisition Fee Units by the relevant parties

must be completed within three months of the date of approval of the Whitewash

Resolution.

Further details concerning the Whitewash Resolution can be obtained throughout the

Circular, in particular within section 8 of the Letter to Unitholders. We recommend that the

Independent Directors advise Independent Unitholders to read this section of the Letter to

Unitholders very carefully.

Independent Unitholders should further note that by voting for the Whitewash

Resolution,

• Independent Unitholders are waiving their rights to receive a Mandatory Offer

from the Sponsor and parties acting in concert with it at the highest price paid or

agreed to be paid by the Sponsor and parties acting in concert with it for Units in

the six months preceding (i) the receipt by Evodia (or a nominee of Evodia which

is a wholly-owned subsidiary of the Sponsor) of the Consideration Units as partial

consideration for the SHTS Acquisition; and/or (ii) the receipt by the Manager in

its own capacity of the SHBL Acquisition Fee Units and/or the SHTS Acquisition

Fee Units.

• Independent Unitholders could also be forgoing the opportunity to receive a

general offer from another person who may be discouraged from making a

general offer in view of the dilutive effect resulting from the (i) issuance of the

Consideration Units to Evodia (or a nominee of Evodia which is a wholly-owned

subsidiary of the Sponsor) and (ii) the receipt by the Manager in its own capacity

of the SHBL and SHTS Acquisition Fee Units.

8 EVALUATION OF THE IPT TRANSACTIONS

In arriving at our opinion, as to (a) whether the IPT Transactions are on normal commercial

terms and are prejudicial to the interests of First REIT and its Independent Unitholders, and

(b) whether the Whitewash Resolution is prejudicial to the interests of First REIT’s

Independent Unitholders, we have performed among other things, the following analysis:

The SHBL Acquisition and the SHTS Acquisition

• Rationale for the SHBL Acquisition and the SHTS Acquisition to assess whether they

are prejudicial to the interests of First REIT and its Independent Unitholders;

• Financial assessment of the SHBL Acquisition and the SHTS Acquisition to evaluate the

reasonableness of the respective SHBL and SHTS Purchase Considerations;

• Review of the market conditions and prospects of the healthcare industry in South

Jakarta and Bali;

• Review of the financial effects of the SHBL Acquisition and the SHTS Acquisition; and

• Analysis of the pro forma distribution yield of First REIT as compared to other REITs

listed on the SGX-ST.

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The Master Leases

• Rationale for the Master Leases to assess whether the objectives of the Master Leases

are prejudicial to interests of First REIT and its Independent Unitholders;

• Analysis of the impact of the Master Leases on property yields and distribution yields;

• Analysis of the key terms of the Master Leases as compared to other master lease

agreements of properties used for healthcare and/or healthcare-related purposes

owned by SGX-ST listed REITs; and

• Other considerations relating to the Master Leases.

The Issuance of the Consideration Units and the Whitewash Resolution

• Rationale for the issuance of the Consideration Units to assess whether the objectives

is prejudicial to interests of First REIT and its Independent Unitholders;

• Rationale for the Whitewash Resolution to assess whether the Whitewash Resolution is

prejudicial to the interest of First REIT’s Independent Unitholders;

• Dilution Impact Analysis to assess the potential maximum dilution impact to the

Independent Unitholders arising from the issuance of the Consideration Units and the

receipt of Acquisition Fee Units by the Manager; and

• Comparison with similar offerings of units made by REITs listed on the SGX-ST in

connection with acquisitions made by such REITs for the period commencing 1 January

2012 to the Latest Practicable Date.

8.1 Rationale for the SHBL Acquisition and the SHTS Acquisition

The Manager’s rationale for the SHBL Acquisition and the SHTS Acquisition are set out in

section 6 of the Letter to Unitholders. We reproduce below extracts relevant to the

Acquisitions:

Acquisition of attractive and high quality properties in Bali and South Jakarta,

Indonesia, at prices below valuation

The Acquisitions represent an opportunity for First REIT to acquire two hospitals which are

attractive, high quality and of international standards, in prime locations in Indonesia.

Both SHBL and SHTS are well-positioned for the middle to upper middle-income segment of

the healthcare market.

Additionally, the Properties will be acquired at prices below the average of their independent

valuations. SHBL will be acquired at a discount of 13.3% to the average of the independent

valuations by W&R and Rengganis and SHTS will be acquired at a discount of 12.5% to the

average of the independent valuations by W&R and Rengganis.

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Increased absolute size of First REIT’s asset base which may raise the profile of First

REIT among global investors and an increased portfolio size which is expected to

enhance First REIT’s competitive positioning and ability to pursue future acquisitions

First REIT’s asset size will grow from S$796.7 million as at 31 December 2012 to S$1.0

billion after the completion of the Acquisitions. The value of First REIT’s Deposited Property

is expected to increase by 32.7% from S$828.8 million as at 31 December 2012 to S$1.1

billion after the completion of the Acquisitions and there will also be a 21.2% increase in the

total GFA from 186,790 square metres (“sq m”) before the Acquisitions to 226,353 sq m after

the completion of the Acquisitions. The maximum number of hospital beds for the Indonesia

properties will increase by 32.4% from 1,748 to 2,314.

The larger asset base is expected to enhance First REIT’s overall capital management

flexibility, which will, among others, facilitate future acquisitions by First REIT.

The SHBL Acquisition and the SHTS Acquisition are expected to benefit Unitholders by

improving diversification of Gross Rental Income due to diversification in geographical

location. With an enlarged asset base, the operator of the Properties will also enjoy greater

operating synergies in the long term which would indirectly benefit First REIT through higher

variable rent and potential capital appreciation.

(APPENDIX A provides further details in relation to the Properties as well as First REIT’s

Existing Portfolio.)

The Acquisitions would enable First REIT to grow through the acquisition of two

hospitals, which enhances the diversification of First REIT’s portfolio across locations

and medical specialisations

The Properties are located in Indonesia in which First REIT already operates and are an

extension of First REIT’s Existing Portfolio.

Both SHBL and SHTS are equipped with comprehensive state-of-the-art equipment and the

latest generation of smart IT-systems in Indonesia, and provide a broad range of quality

general and specialist services, including therapeutic services and an extensive range of

diagnostic and preventive healthcare services. SHBL is a Centre of Excellence for trauma,

medical tourism, intensive care unit, orthopaedic and cardiology, and SHTS is a Centre of

Excellence for trauma, cardiology, oncology and neuroscience.

As SHBL is located on Jalan Sunset Road which connects Kuta Area and Denpasar City, one

of the fastest growing areas in Bali, SHBL is highly accessible via public and private

transportation.

SHTS, located close to the Fatmawati toll gate on Jakarta Outer Ring Road which connects

the inner-city toll road with Bintaro and Serpong areas and which is near middle upper

residential area Pondok Indah and Cinere, is also highly accessible via public and private

transportation.

As both SHBL and SHTS are located in Indonesia Fringe Central Region, the Acquisitions will

enhance First REIT’s competitive advantage and presence in Indonesia Fringe Central

Region.

The above qualities of SHBL and SHTS are expected to enhance the diversification of First

REIT’s portfolio across locations and medical specialisations.

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Increase in attractiveness of the Enlarged Portfolio given the reduction in the weighted

average age of the properties in the Enlarged Portfolio given that SHBL and SHTS are

newly refurbished and built

As at 31 December 2012, the weighted average age of properties of the Enlarged Portfolio

will decrease from 10.4 years to 8.6 years (or about 17.3%) from that of the Existing Portfolio.

8.2 Financial Assessment of the SHBL Acquisition

In evaluating the reasonableness of the SHBL Purchase Consideration, we have considered

the following factors which have a bearing on our assessment:

Basis for arriving at the purchase consideration of the SHBL Acquisition

Pursuant to the SHBL SPA, the SHBL Purchase Consideration is approximately S$97.3

million.

Cost of the SHBL Acquisition

We note that the SHBL Purchase Consideration was arrived at on a willing-buyer willing-

seller basis after taking into account the two independent valuations of SHBL by W&R which

was commissioned by the Manager and by Rengganis which was commissioned by the

Trustee. The valuations were derived by W&R and Rengganis using the income approach

utilising the discounted cash flow (“DCF”) method as the subject property will be under a

master lease agreement with the Sponsor, as the master lessee of SHBL. This method

considers the subject property as an income producing property.

Valuation of the SHBL by the Independent Valuers

Two independent property valuers were appointed for the purpose of determining the market

value of SHBL. The market value by W&R (appointed by the Manager) is as at 26 February

2013, and the market value by Rengganis (appointed by the Trustee) is as at 21 February

2013.

Summarised versions of the valuation reports (the “Valuation Reports”) are contained in

APPENDIX B of the Circular, with the determined market values set out below:

Valuation of SHBL by the Independent Valuers

S$ million

W&R (As at 26 February 2013) 113.0

Rengganis (As at 21 February 2013) 111.4

Our observations in relation to the Valuation Reports are as follows:

• The Valuation Report prepared by W&R has adopted the basis of market value in

accordance with the Indonesian Valuation Standards (Standar Penilaian Indonesia/SPI)

2007.

The Valuation Report prepared by Rengganis has adopted the basis of market value in


2007.

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• The Valuation Reports by W&R and Rengganis assess the ‘market value’ of SHBL as at

26 and 21 February 2013 respectively, which are close to the dates for the SHBL Sale

and Purchase Agreement. The market value is the estimated amount for which an asset

should exchange on the date of valuation between a willing buyer and a willing seller in

an arm’s-length transaction after proper marketing wherein the parties had each acted

knowledgeably, prudently and without compulsion.

• The income approach utilising the DCF method was used for the purposes of

completing the Valuation Reports.

According to W&R and Rengganis, the DCF method was used considering that SHBL

is an income producing property. The valuation had taken into account the terms of the

SHBL Master Lease and was conducted having regard to the prevailing market

conditions as at 26 February 2013 and 21 February 2013 respectively, especially those

pertaining to the healthcare services industry in the locality of SHBL.

• The appraised value of SHBL is between S$111.4 million and S$113 million. The agreed

purchase consideration is S$97.3 million. We note that the purchase consideration is

12.7% and 13.9% below the appraised values as determined by Rengganis and W&R,

respectively or at a discount of 13.3% to the average of the two independent valuations

of SHBL by the Independent Valuers.

• We note that the purchase consideration will be received in Singapore dollars which

eliminates any foreign currency risk.

8.3 Financial Assessment of the SHTS Acquisition

Basis for arriving at the purchase consideration of the SHTS Acquisition

Pursuant to the SHTS SPA, the SHTS Purchase Consideration is approximately S$93.1

million.

Cost of the SHTS Acquisition

We note that the SHTS Purchase Consideration was arrived at on a willing-buyer

willing-seller basis after taking into account the two independent valuations of SHTS by W&R

which was commissioned by the Manager and by Rengganis which was commissioned by the

Trustee. The valuations were derived by W&R and Rengganis using the income approach

utilising the DCF method as the subject property will be under a master lease agreement with

the Sponsor, as the master lessee of SHTS. This method considers the subject property as

an income producing property.

Valuation of SHTS by the Independent Valuers

Two independent property valuers were appointed for the purpose of determining the market

value of SHTS. The market value by W&R (appointed by the Manager) is as at 26 February

2013, and the market value by Rengganis (appointed by the Trustee) is as at 21 February

2013.

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Summarised versions of the valuation reports (the “Valuation Reports”) are contained in

APPENDIX B of the Circular, with the determined market values set out below:

Valuation of SHTS by the Independent Valuers

S$ million

W&R (As at 26 February 2013) 108.4

Rengganis (As at 21 February 2013) 104.3

Our observations in relation to the Valuation Reports are as follows:

• The Valuation Report prepared by W&R has adopted the basis of market value in


2007.

The Valuation Report prepared by Rengganis has adopted the basis of market value in


2007.

• The Valuation Reports by W&R and Rengganis assess the ‘market value’ of SHTS as

at 26 and 21 February 2013 respectively, which are close to the dates for the SHTS Sale

and Purchase Agreement. The market value is the estimated amount for which an asset

should exchange on the date of valuation between a willing buyer and a willing seller in

an arm’s-length transaction after proper marketing wherein the parties had each acted

knowledgeably, prudently and without compulsion.

• The income approach utilising the DCF method was used for the purposes of

completing the Valuation Reports.

According to W&R and Rengganis, the DCF method was used considering that SHTS

is an income producing property. The valuation had taken into account the terms of the

SHTS Master Lease and was conducted having regard to the prevailing market

conditions as at 26 February 2013 and 21 February 2013 respectively, especially those

pertaining to the healthcare services industry in the locality of SHTS.

• The appraised value of SHTS is between S$104.3 million and S$108.4 million. The

agreed purchase consideration is S$93.1 million. We note that the purchase

consideration is 10.7% and 14.1% below the appraised values as determined by

Rengganis and W&R, respectively or at a discount of 12.5% to the average of the two

independent valuations of SHTS by the Independent Valuers.

• We note that the purchase consideration will be received in Singapore dollars which

eliminates any foreign currency risk.

Further information regarding the Valuation Reports can be obtained throughout the Circular,

in particular within APPENDIX B of the Circular. We recommend that the Independent

Directors advise Independent Unitholders to read these sections of the Circular carefully.

D-17

8.4 Review of market conditions and prospects of the healthcare industry in South Jakarta

and Bali

We were provided with a copy of the report entitled “Overview and Assessment of South

Jakarta & Bali Healthcare Services Market in Indonesia” by Frost & Sullivan, as at April 2013,

in relation to which we note the following:

• Despite the unstable global economy, Indonesia’s healthcare expenditure has

continued to grow. With the growing penetration of the universal public health

insurance, healthcare expenditure in Indonesia is expected to reach US$40 billion in

2015.

• Jakarta, with more than 10 million inhabitants, is the most populous city in Indonesia

and Southeast Asia, and also one of the largest urban areas in the worlds. Despite

having 341 community health centers and more than 4000 integrated health service

posts, Jakarta is getting older and still battling preventable diseases.

• With an aging population, longer life expectancy, and increasing urbanization rate in

Bali, demand for healthcare services and health expenditure per capita are expected to

increase.

• At present, the standard of healthcare services offered by hospitals in Bali is generally

acknowledged as mediocre or below-par. There is also a serious shortage of healthcare

resources in Bali with approximately 24 doctors and 122 nurses to 100,000 people. The

lack of quality healthcare services if not addressed will result in an increasing proportion

of Bali’s population travelling to bigger cities such as Jakarta for their medical needs.

• Statistics often associate high income to high spending. In the case of the healthcare

industry, the higher the income per capita, the higher health expenditure will be as a

percentage of GDP. In nominal terms, Indonesian GDP per capita has grown from

US$1,260 in 2007 to US$2,963 in 2010. Jakarta and Bali are two of the more affluent

Indonesian regions with GDP per capita at US$10,000 and between US$10,000 –

US$13,000 respectively.

We note the significant growth potential and positive outlook for the Healthcare Services

Market in Jakarta and Bali. Further information regarding the “Overview and Assessment of

South Jakarta & Bali Healthcare Services Market in Indonesia” can be obtained throughout

the Circular, in particular within APPENDIX C of the Circular. We recommend that the

Independent Directors advise Unitholders to read these sections of the Circular carefully.

8.5 Review of the financial effects of the SHBL Acquisition and the SHTS Acquisition

The pro-forma financial effects of the Transactions are set out in sections 7.1, 7.2 and 7.3 of

the Letter to Unitholders, and are reproduced below for convenience. We note that

assumptions were made for the purposes of analysing the pro-forma financial effects. We

recommend that the Independent Directors advise Independent Unitholders to read these

assumptions carefully, and take them into consideration when considering the financial

effects.

D-18

Financial Year Ended 31 December 2012

Pro Forma DPU and distribution yield

The pro forma financial effects of the Acquisitions on the DPU for FY2012, as if First REIT

had purchased the Properties on 1 January 2012, and held and operated the Properties

through to 31 December 2012, are as follows:

FY2012

Before the

Acquisitions(1)

After the

Acquisitions

Distributable Income (S$’000) 41,690 49,291

Units in issue and to be issued 664,948,936 707,909,972

DPU (cents)(2) 6.58 6.96

Distribution Yield(3) 5.10% 5.40%

Notes:

(1) Based on the FY2012 Audited Consolidated Financial Statements.

(2) Excludes the other distribution component which is attributable to the gain on divestment of the Adam Road

Property.

(3) Based on the Pro forma DPU as at FY2012 and the closing price of S$1.290 as at 10 April 2013 which is the

Latest Practicable Date

Based on the figures above, we note that the distribution yield will increase from 5.10% to

5.40%.

Pro forma NAV per Unit

The pro forma financial effects of the Acquisitions on the NAV per Unit as at 31 December

2012, as if First REIT had purchased the Properties on 31 December 2012, are as follows:

As at 31 December 2012

Before the

Acquisitions(1)

After the

Acquisitions

NAV (S$’000) 550,074 635,723

Units in issue and to be issued 664,948,936 707,909,972

NAV per Unit (S$) 0.83 0.90

Note:

(1) Based on the FY2012 Audited Consolidated Financial Statements.

Based on the figures above, we note that the pro forma NAV per Unit will increase from

S$0.83 to S$0.90.

Pro forma capitalization

The following table sets forth the pro forma capitalisation of First REIT as at 31 December

2012, as if First REIT had purchased the Properties on 31 December 2012.

D-19

As at 31 December 2012

Actual

As adjusted

for the

Acquisitions

(S$’000) (S$’000)

Short-term debt:

Unsecured – –

Secured – –

Total short-term debt – –

Long-term debt:

Unsecured – –

Secured 212,842 358,992

Total long-term debt 212,842 358,992

Total Debt 212,842 358,992

Unitholders funds 550,074 635,723

Total Capitalisation 762,916 994,715

Based on the figures above, we note that the total capitalisation will increase from

approximately S$762.9 million to S$994.7 million.

8.6 Analysis of the Pro Forma Distribution Yield of First REIT

We have extracted the distribution yield (on a trailing 12-month basis) of other REITs listed

on the SGX-ST (“Singapore REITs”) in order to compare the distribution yields offered by the

Singapore REITs with the pro forma distribution yield of First REIT.

The information in the table presented below is for illustration purposes only. While we have

made our comparisons against the Singapore REITS as shown in the table below, we

recognised that the properties of the Singapore REITs may differ significantly from the

properties owned by First REIT in terms of property segments, building size and design,

building age, location, accessibility, tenant composition, market risks, future prospects,

operating history and other relevant criteria. There is no REIT which may be considered

identical to First REIT in terms of the aforesaid factors.

Accordingly, the Independent Directors should note that any comparison made with

respect to the Singapore REITs serves as an illustrative guide only.

Comparable REIT Yield

Name

Yield

(%)

Trailing

12 months

Distribution

Per Unit

(S$)

Closing Price

as at the Latest

Practicable

Date(1)

(S$)

Sabana Shari’ah Compliant Industrial

REIT 7.11 0.0928 1.305

Perennial China Retail Trust 6.43 0.0386 0.600

D-20

Comparable REIT Yield

Name

Yield

(%)

Trailing

12 months

Distribution

Per Unit

(S$)

Closing Price

as at the Latest

Practicable

Date(1)

(S$)

AIMS AMP Capital Industrial REIT 6.21 0.1028 1.655

Saizen REIT 5.86 0.0129 0.220

Cambridge Industrial Trust 5.91 0.0479 0.810

Ascendas India Trust 6.11 0.0507 0.830

Ascott Residence Trust 6.19 0.0876 1.415

Lippo Malls Indonesia Retail Trust 5.62 0.0295 0.525

Cache Logistics Trust 6.08 0.0837 1.375

Mapletree Industrial Trust 6.06 0.0906 1.495

Suntec REIT 5.05 0.0949 1.880

Mapletree Logistics Trust 5.36 0.0683 1.275

Capitaretail China Trust 5.17 0.0954 1.845

Ascendas REIT 5.29 0.1418 2.680

CDL Hospitality Trusts 5.36 0.1132 2.110

Starhill Global REIT 4.75 0.0439 0.925

Frasers Commercial Trust 4.44 0.0677 1.525

Frasers Centrepoint Trust 4.75 0.1021 2.150

Mapletree Commercial Trust 4.58 0.0630 1.375

Capitacommercial Trust 4.86 0.0804 1.655

Parkway Life REIT 3.91 0.1031 2.640

Capitamall Trust 4.34 0.0946 2.180

Keppel REIT 5.65 0.0777 1.375

High 7.11

Low 3.91

Simple Average 5.44

First REIT(2) 5.40%

Source: Bloomberg

Notes:

1. The latest practicable date is 10 April 2012

2. Based on the pro forma distribution yield for FY2012

From the table above, we noted the following:

(a) The distribution yields of the Singapore REITs range between 3.91% and 7.11%;

(b) The pro forma distribution yield of First REIT at 5.40% is within and similar to the

average of the range. In addition, we also note that the pro forma distribution yield of

First REIT is higher than the distribution yield of Parkway Life REIT of 3.91%, being the

closest comparable to First REIT in terms of property segment.

D-21

Based on the above, the SHBL and SHTS Purchase Considerations do not appear to be

unreasonable or prejudicial to the interests of First REIT and its Independent Unitholders.

8.7 Rationale for the Master Leases

The Manager’s rationale for the Transactions is set out in section 6 of the Letter to

Unitholders. We reproduce below extracts relevant to the Master Leases:

Increased income stability of First REIT through the SHBL Master Lease Agreement

and the SHTS Master Lease Agreement and an increase in First REIT’s weighted

average lease to expiry

The SHBL Master Lease and the SHTS Master Lease will be beneficial to First REIT as the

Properties are expected to provide stability to First REIT’s Gross Rental Income over the next

15 to 30 years (assuming that the option to renew for a further term of 15 years is exercised).

The step-up feature of the base and variable rental components under the SHBL Master

Lease Agreement and the SHTS Master Lease Agreement would also provide locked-in

organic growth in First REIT’s cash flow. To ensure stability in First REIT’s Gross Rental

Income from the Properties, security deposits equivalent to six months of (i) SHBL’s annual

rental payable (amounting to S$4,840,000) and (ii) SHTS’ annual rental payable (amounting

to S$4,630,000) will be made to First REIT in the form of bankers’ guarantees. Such security

deposit amounts will be adjusted at relevant rent review dates.

The Acquisitions are also in line with the Manager’s acquisition growth strategy of pursuing

opportunities for asset acquisitions that will provide stable cash flows and returns relative to

First REIT’s cost of capital and opportunities for future income and capital growth.

Currently, the master leases of the properties in the Existing Portfolio are between 10 to 15

years. With the Acquisitions, First REIT will benefit from the increase in the Enlarged

Portfolio’s weighted average lease to expiry based on secured Gross Rental Income with

SHBL and SHTS contributing 21.2% of First REIT’s total Gross Rental Income under the

SHBL Master Lease Agreement and the SHTS Master Lease Agreement. The weighted

average lease to expiry of the Enlarged Portfolio will increase from approximately 11.3 years

from that of the Existing Portfolio as at 31 December 2012 to approximately 12.0 years after

the completion of the Acquisitions.

8.8 Analysis of the impact of the Master Leases on property and distribution yields

The base property yield5 of the SHBL Master Lease is 9.95% based on the Purchase

Consideration and the annual base rent of S$9.68 million guaranteed under the SHBL Master

Lease Agreement. Similarly, the base property yield of the SHTS Master Lease is 9.95%,

based on the Purchase Consideration and annual base rent of S$9.26 million guaranteed

under the SHBL Master Lease Agreement.

The estimated base property yields of the SHBL and SHTS Master Leases of 9.95% is within

the range of the base property yields of between 7.8% and 15.6% of the properties in the

Existing Portfolio computed on a similar basis but below the average of 11.0%. When

compared against the Indonesian properties in the Existing Portfolio, we note that the

estimated base property yields of the SHBL and SHTS Master Leases of 9.95% is in the

lower end of the range of the base property yields of between 9.7% and 15.6% of the

Indonesian properties in the Existing Portfolio computed on a similar basis.

5 Base property yield is calculated based on the initial base rent divided by the purchase consideration

D-22

However, we note that the base property yield of the properties in the Existing Portfolio would

have taken into account the then prevailing economic and market conditions. In particular, we

note that the current base yields6 of the Indonesian properties have since come down as their

appraised values have significantly increased.

If we compare against the current base yields of the Indonesian properties in the Existing

Portfolio, the base property yields of the SHBL and SHTS Master Leases at 9.95% is above

the range of the current base yields of between 8.2% and 9.8% of the Indonesian properties

in the Existing Portfolio, and above the range of the current base yields of between 7.1% and

9.8% of all the properties in the Existing Portfolio.

In addition, the base property yields of the SHBL and SHTS Master Leases at 9.95% is within

and above the average (9.1%) of the range of the current yield7 of between 8.6% and 10.3%

of the Indonesian properties in the Existing Portfolio, and within and above the average

(9.0%) range of the current yields of between 7.1% and 10.3% of all the properties in the

Existing Portfolio.

Further, we note the adjustment features in the Master Leases such as the adjustments to

the base rent and the variable rent component can provide potential further upside to the

total rent and in turn increase the property yields of the Master Leases.

We note that there are similar adjustment features in the master lease agreements for the

Indonesia properties in the Existing Portfolio. The Sponsor, which is the lessee for the Master

Leases is also the master lessee for the Indonesia properties in the Existing Portfolio.

Further, we note that even though the Properties are located in Indonesia, the rental income

to be received from the Sponsor will be denominated in Singapore Dollars under the Master

Leases. This will eliminate any foreign currency exchange risk that First REIT may face from

its rental income.

The Master Leases are for a period of 15 years with an option to renew for a further 15 years

(on terms as may be agreed between the parties) and will provide strong underpinning to

property yields and stability in rental income for First REIT for the next 15 to 30 years.

Currently, the years to lease expiry of the properties in the Existing Portfolio are between 4

to 15 years. With the Master Leases in place, First REIT will benefit from the increase in its

weighted average years to lease expiry for its Enlarged Portfolio.

Further, based on the pro forma figures set out in section 7 of the Letter to Unitholders, with

the inclusion of the Master Leases, the distribution yield for First REIT is expected to

increase from 5.10% to 5.40%.

8.9 Comparison of the key terms in the Master Leases

We note that while there are many precedents for such master lease agreements of

properties owned by SGX-ST listed REITs (for example, Ascendas REIT, CapitaCommercial

Trust, CDL Hospitality Trust, Frasers Commercial Trust), they are mostly in other property

segment, such as the commercial and retail property segments. As such, most of these

master lease agreements have their own unique features (such as rent-free period, fixed rent

adjustments, performance-based variable rents, etc), which makes it difficult for

comparisons to be made to them.

6 Current base yield is calculated based on the current base rent divided by the latest appraised value as at

31 December 2012

7 Current yield is calculated by dividing the total (base and variable) current rent by the appraised value as at

31 December 2012

D-23

For our purpose, we made a comparison of the principal terms of the Master Leases to the

master lease agreements for properties used for healthcare-related and retail-related

purposes, set out in the table below:

Companies/REIT

Return on

base rent(1)

Annual adjustment to

base rent Variable rent

SHBL and SHTS

Master Leases

SHBL: 9.95%

SHTS: 9.95%

Payable from the fourth

year of lease based on:

Base rent x (2 x CPI%

increase)

Subject to floor of 0%

and cap of 2%.

Payable from the fourth year of

lease based on fixed exchange

rate of S$1 = Rp. 7,000 and based

on:

1. the percentage growth in

gross operating revenue in

the preceding financial year

compared to the year before

(“GRG%”); and

2. the surplus of gross

operating revenue of the

preceding financial year

over the year before (“GOR

surplus”)

(a) If 5% # GRG% < 15%,

Equivalent to 0.75% of GOR

surplus

(b) If 15% # GRG% < 30%,


surplus

(c) If 30% # GRG%, Equivalent

to 2.0% of GOR surplus

Computation for GOR

Hospital GOR = Gross Operating

Revenue from hospital operations

Shops GOR (applicable only to

SHBL) = Gross Rental Revenue +

Service Charge – Operating

Expenses

Healthcare-related

Parkway Life

REIT (Singapore

portfolio)

3.9% None Equivalent to 3.8% of the adjusted

hospital revenue(2) of the

preceding financial year

Provided that total rent payable

(base + variable) shall not be

lower than:

Total rent for preceding year x [1 +

(CPI + 1%)], where if CPI is

negative, it is deemed to be zero.

Indonesia 6.5%(4) None For the first year, gross lease

D-24

Companies/REIT

Return on

base rent(1)



properties in the

Al – A’qar

Healthcare

REIT(3)

rental shall be between 10.0%

and 11.5% of the purchase

consideration, with the final

amount to be negotiated between

both parties.

From the second year onwards,

the gross lease rental with a cap

of 14.5% per annum of the

purchase consideration, shall be

negotiated between both parties.

Provided that:

In any event, gross lease rental

shall not result in the cash flows

from the Indonesia SPV to Al-

A’qar to be below 6.5% per annum

of the purchase consideration.

Singapore

properties in the

Existing Portfolio

that are leased

to third parties

7.8% Base rent x (2 x

CPI(5)% increase)


and cap of 2%

None

Indonesia

properties in the

Existing Portfolio

9.7% to

15.6%

Payable from the fourth

year of lease based on:

Base rent x (2 x CPI%

increase)


and cap of 2%.

Siloam Hospitals Manado and

Hotel Aryaduta Manado and

Siloam Hospitals Makassar which

were the most recent acquisition

by First REIT in November 2012.

Same computation basis as that

for SHBL and SHTS.

Other Indonesia properties in the

Existing portfolio

Payable from the second year of

lease based on fixed exchange

rate of S$1 = Rp. 6,600 and based

on:

1. the percentage growth in

gross operating revenue in

the preceding financial year

compared to the year before

(“GRG%”); and

2. the gross operating revenue

of the preceding financial

year (“GOR”)

(a) If 5% < GRG% < 15%,


(b) If 15% < GRG% < 30%,


D-25

Companies/REIT

Return on

base rent(1)



(c) If 30% < GRG%,


Retail – related(6)

Lippomall

Indonesia Retail

Trust(7) (“LMIR”)

8.2% 1. Fixed base rent

amount for the

period

commencing from

listing date (19

Nov 2007) to 31

December 2007

2. An annual

increment of 8.0%

over the lease

rental payable for

the immediately

preceding financial

year for each of

FY2008 to FY2011

3. For each of FY202

to FY2016, an

amount equivalent

to the lease rental

payable in respect

of FY2011

For each of FY2012 to FY2016,

4.25% of the amount by which the

net revenue of the Master Lessee

for the immediately preceding

financial year exceeds the net

revenue of the Master Lessee

derived for FY2010

CapitaRetail

China Trust

(“CRCT”)

(CapitaMall

Anzhen and

Capitamall

Erqi)(8)

CapitaMall

Anzhen

9.8%

CapitaMall

Erqi

10.5%

CapitaMall Anzhen

Base rent is revised

annually with an

increment of 1%

CapitaMall Erqi

Base rent is increased

by 2% for the fourth

year and 1% for each

year since the fifth year

CapitaMall Anzhen:

2.5% on the surplus of the Master

Lessee’s actual annual turnover

over RMB1,250 million

CapitaMall Erqi

2.5% on the surplus of the Master

Lessee’s actual annual turnover

over RMB600 million

D-26

Companies/REIT

Return on

base rent(1)



Starhill Global

REIT (“SGREIT”)

(Ngee Ann

City)(9)

Not Available Rental rate is subject to

review every three years.

In the event that the

parties cannot agree on

the rental rent to be used,

the rental rent shall be

based on the average

market rental value of the

premises as determined

by three separate

licensed valuers.

The new rental rate shall

be between 100%-125%

of the existing rental rate.

None

Source: Extracted from the prospectus or latest available annual report of the relevant REITs

Notes:

(1) Return on base rent = initial base rent/cost of investment.

(2) Refers to invoiced value of revenue relating to inpatient revenue including lodger revenue, outpatient

revenue, rental and licence fees, carpark revenue, retail pharmacy revenue, food and beverage revenue,

radiology services revenue, and excluding all other revenue and revenue collected on behalf of physicians or

providers of ancillary services, service, cess charges, and GST.

(3) Listed on Bursa Malaysia.

(4) Based on base rent from second year onwards.

(5) CPI refers to the consumer price index of Singapore for the preceding calendar year.

(6) As the SHBL and SHTS Master Leases have lease term of 15 years with an option to renew for a further 15

years, we have only selected retail-related trusts that have long-term master lease agreements for

comparison purposes.

(7) As at IPO on 19 November 2007, LMIR had entered into master lease agreements to lease the seven retail

strata spaces in its portfolio to PT. Matahari Putra Prima Tbk (“Matahari”) for 10 years with an option to renew

for a further 10 years. The Sponsor of LMIR, Lippo Group has a controlling stake in Matahari.

(8) The tenure of the master lease agreements for CapitaMall Anzhen and CapitaMall Erqi is 20 years.

(9) Toshin, a unit of Takashimaya is a master tenant at Ngee Ann City. On 19 April 2012, Starhill Global REIT

announced that they have received a written notice from Toshin to exercise the option to renew the lease for

a further term of 12 years.

D-27

In our comparison of the key terms of the Master Leases, we note the following:

• the return on base rent of 9.95% for both the SHBL and SHTS Master Lease compare

favorably to the return on base rent of 3.9% for the master leases of Parkway Life REIT,

6.5% for the Indonesia properties of Al A’qar REIT, and 7.8% for the Singapore

properties in the Existing Portfolio;

• the return on base rent of 9.95% for both the SHBL and SHTS Master Lease is at the

lower end of the range of between 9.7% and 15.6% for the Indonesia properties in the

Existing Portfolio. As mentioned in section 7.8 above, this is because the purchase

consideration would have taken into account the then prevailing economic and market

conditions. We noted that the current base yields of the existing Indonesian properties

(computed based on the current base rent and the latest appraised value) have since

decreased as their appraised values have increased significantly;

• the return on base rent of 9.95% for both the SHBL and SHTS Master Lease is higher

than the return on base rent for LMIR at 8.2% and close to the return on base rent of

9.8% for Capitamall Anzhen and 10.5% for Capitamall Erqi;

• there are no annual adjustment features to the base rent in the master lease

agreements of Parkway Life REIT and Al A’qar REIT. Both the Singapore properties and

Indonesian properties in the Existing Portfolio has the same adjustment to base rent as

the Master Leases;

• the variable rent for the Master Leases is up to 2.0% of the surplus in the audited gross

operating revenue (depending on the year-on-year growth of the gross operating

revenue). In comparison, the variable rent for the master leases of Parkway Life REIT

is fixed at 3.8% of the adjusted hospital revenue, while the gross lease rental for Al A’qar

REIT is variable between 6.5% and 14.5% of the purchase consideration. The

Singapore properties in the Existing Portfolio do not have any variable rent component;

• the variable rent structure for the Master Leases is the same as the variable rent

structure for Siloam Hospitals Manado and Hotel Aryaduta Manado and Siloam

Hospitals Makassar which were the most recent acquisition by First REIT in November

2012. We understand that variable rent will only be payable from the fourth year

onwards to allow the lessee to conserve cash flow thereby enabling the lessee to step

up and enhance its operations to an optimal level;

• the variable rent for LMIR is fixed at 4.35% on the surplus in net revenue of the

immediately preceding financial year over the net revenue achieved for FY2010. For

Capitamall Anzhen and Capitamall Erqi, the variable rent as per the master lease is

2.5% on the surplus of the turnover of the immediately preceding financial year over a

fixed amount. The variable rent at 2.0% of the surplus in the audited gross operating

revenue of the hospital (depending on the year-on-year growth of the gross operating

revenue) appears less favourable than that of LMIR, Capitamall Anzhen and Capitamall

Erqi but more favourable than that of SGREIT which has no variable rent component;

• we note that LMIR, Capitamall Anzhen, Capitamall Erqi and SGREIT are pure retail

REITs. Therefore their base and variable rent structure are established differently and

therefore not directly comparable.

D-28

8.10 Other Considerations relating to the Master Leases

We advise that you highlight the following factor to the Independent Unitholders, which

should be considered, together with the other comments and issues raised in this Letter and

the contents of the Circular.

Benefits from the Sponsor’s property management and operating expertise and the

use of the established “Siloam” brand for hospitals

The Sponsor is the master lessee for both the SHBL and SHTS. The Sponsor is an

internationally recognised corporation and is one of the largest broad-based property

companies in Indonesia listed on both the Jakarta Stock Exchange and the Surabaya Stock

Exchange. The Sponsor has a large property portfolio comprising townships and residential

developments, commercial and retail development properties, healthcare, infrastructure and

hospitality properties with a recognised track record in the planning and development of large

property, infrastructure and township projects as well as ongoing maintenance, upkeep and

renovation of properties.

The Sponsor ventured into the healthcare business in 1995 when it established and

developed Siloam Hospitals Lippo Karawaci. Since then, it had developed and acquired

several hospitals, such as Siloam Hospitals Lippo Cikarang, Siloam Hospitals Surabaya,

Siloam Hospitals West Jakarta under it “Siloam” brand of hospitals and built up its expertise

in managing healthcare businesses including the Indonesian properties of the Existing

Portfolio.

Upon entering into the Master Leases, both SHBL and SHTS will be able to benefit from the

Sponsor’s expertise in property management and operating expertise as well as being

managed under the “Siloam” brands, which is a well-known and established brand name for

hospitals in Indonesia.

9 THE ISSUANCE OF THE CONSIDERATION UNITS AND THE WHITEWASH RESOLUTION

9.1 Rationale for the issuance of the Consideration Units

The Manager’s rationale for the issuance of the Consideration Units is set out in section 6 of

the Letter to Unitholders. We reproduce the relevant extracts below:

The issuance of the Consideration Units would limit the increase in First REIT’s

aggregate leverage

The aggregate leverage ratio of First REIT is expected to increase from 26.0% as at 31

December 2012 to 38.8% if the SHTS Purchase Consideration is funded wholly by debt.

Assuming S$50.0 million of the SHTS Purchase Consideration is satisfied by way of

issuance of Consideration Units at an illustrative issue price of S$1.243 per Unit, with the

balance of the SHTS Purchase Consideration to be paid to Evodia in cash, the aggregate

leverage ratio of First REIT is expected to decrease to 34.3% compared to 38.8% if the SHTS

Purchase Consideration is funded wholly by debt.

The issuance of the Consideration Units will further align the interests of the Sponsor

with that of First REIT and its Unitholders

The issuance of the Consideration Units will further align the interests of the Sponsor with

that of First REIT and its Unitholders as the recipient of the Consideration Units (being

Evodia or its nominee) would be an indirect wholly-owned subsidiary of the Sponsor.

D-29

9.2 Rationale for the Whitewash Resolution

The Manager’s rationale for the Whitewash Resolution is set out in section 8.3 of the Circular.

We reproduce the relevant extracts below:

Rationale for the Whitewash Resolution

The Whitewash Resolution is to enable Evodia (or a nominee of Evodia which is a

wholly-owned subsidiary of the Sponsor) to receive the Consideration Units as partial

consideration for the SHTS Acquisition and the Manager to receive (in its own capacity) the

SHBL Acquisition Fee Units and the SHTS Acquisition Fee Units.

9.3 Dilution Impact Analysis

As at the Latest Practicable Date, the Sponsor and parties acting in concert with it hold, in

aggregate, 191,352,932 Units representing 28.7% of the voting rights of First REIT.

The maximum possible increase in the unitholdings of the Sponsor and parties acting in

concert with it would occur in the scenario where (i) Evodia (or a nominee of Evodia which

is a wholly-owned subsidiary of the Sponsor) receives Consideration Units for the SHTS

Equity Consideration and (ii) the Manager elects to receive its full entitlement to the SHBL

Acquisition Fee and the SHTS Acquisition Fee in Units. Based on an illustrative issue price

of S$1.243 per Consideration Unit, the aggregated unitholding of the Sponsor and parties

acting in concert with it immediately after the issue of the Consideration Units, the SHBL

Acquisition Fee Units and the SHTS Acquisition Fee Units will be 32.9%.

The following table sets out the respective unitholdings of the Sponsor and parties acting in

concert with it if (i) Evodia (or a nominee of Evodia which is a wholly-owned subsidiary of the

Sponsor) receives 40,225,262 Consideration Units representing 6.0% of the total number of

Units in issue as at the Latest Practicable Date (based on an illustrative issue price of

S$1.243 per Consideration Unit) and (ii) the Manager receives the SHBL Acquisition Fee

Units and the SHTS Acquisition Fee Units.

Before the

Acquisitions

Immediately after the Acquisitions

and the issuance of the

Consideration Units, the SHBL

Acquisition Fee Units and the

SHTS Acquisition Fee Units

Issued Units 666,152,932 707,909,972

Number of Units held by the

Sponsor and parties acting in

concert with it

191,352,932 233,109,972

Number of Units held by

Unitholders, other than the


concert with it

474,800,000 474,800,000

D-30

Before the

Acquisitions

Immediately after the Acquisitions

and the issuance of the

Consideration Units, the SHBL

Acquisition Fee Units and the

SHTS Acquisition Fee Units

% of issued Units held by the


concert with it

28.7 32.9

% of Issued Units held by

Unitholders, other than the


concert with it

71.3 67.1

9.4 Comparison with similar offerings of units by REITS listed on SGX-ST in connection

with acquisitions

As described in sections 3.10 and 4 of the Letter to Unitholders, the Manager will make

partial payment for the SHTS Acquisition by issuing new Units to Evodia (or a nominee of

Evodia which is a wholly-owned subsidiary of the Sponsor) amounting up to an aggregate

value of S$50.0 million. The final issue price of the Consideration Units will be determined

based on the 10-Day Volume Weighted Average Price of the Units immediately preceding the

date of completion of the SHTS Acquisition, in accordance with the provisions of the Trust

Deed.






We set out below, for illustrative purposes only, examples of similar offerings of units made

by REITs listed on the SGX-ST in connection with the acquisitions made by such REITs for

the period commencing 1 January 2012 to the Latest Practicable Date, including those that

had raise funds through private placement of units to fund its acquisition.

REIT

Date of

Announcement Description of Transaction Basis of Issue Price

Ascendas

REIT

Circular dated

8 March 2012

Issuance of consideration units

as partial consideration for the

acquisition of 73 Science Park

Drive, Cintech I, 75 Science Park

Drive, Cintech II, 77 Science Park

Drive, Cintech III, and 79 Science

Park Drive, Cintech IV

The 10-Day volume weighted

average price of the Units

immediately preceding the

completion date

Cache

Logistics

Trust

21 March 2012 Private Placement of 60,000,000

new units at an issue price of

S$0.985 for the acquisition of 21

Changi North Way

Discount of 5.2% to the volume

weighted average price for trades

in the units done for the full

market day immediately

preceding the announcement

date

D-31

REIT

Date of


Ascendas

REIT

3 May 2012 Private Placement of

150,000,000 new units at an

issue price of S$1.99. Some of

the proceeds were used to fund

the following:

− construction costs of the

business park development

at Fusionpolis

− construction costs of the

Unilever Four Acres

Singapore built-to-suit

facility

− the forward purchase of a

business space property

located at No.200 Jinsu

Road, Jinqiao Export

Processing Zone, Shanghai,

China






date

K-REIT

Asia

25 June 2012 Private Placement of 60,000,000


S$1.17 for the acquisition of

12.39% interest in Ocean

Properties LP which holds

interest in Ocean Financial

Center

Premium of 14.6% to the volume





date

Ascendas

India Trust

28 September

2012

Private Placement of


issue price of S$0.72. Some of

the proceeds were used to fund

the following:

− construction and acquisition

costs of aVance Building 3

− construction costs of

Aviator, a new multi-

tenanted building in ITPB






date

First REIT 16 November

2012

Private Placement of 30,900,000


S$0.95 for the acquisition of

Siloam Hospitals Manado & Hotel

Aryaduta and Siloam Hospitals

Makassar in Indonesia






date

Ascott

Residence

Trust

28 January

2013

Private Placement of

114,943,000 new units at an issue

price of S$1.305 to fund future

potential acquisitions, finance any

asset enhancement initiatives,

and repay existing debt






date

D-32

REIT

Date of


Ascendas

REIT

8 March 2013 Private Placement of


issue price of S$2.54 to fund the

potential acquisition of a property

located within Singapore Science

Park II, and a potential acquisition

of an integrated industrial mixed

used property at Kallang Avenue.






date

In our comparison of the above offerings, we note the following:

• Ascendas REIT had previously in March 2012 issued consideration units on the same

basis of 10-Day volume weight price average of the Units immediately preceding the

completion date as partial consideration in relation to the acquisition of assets;

• For those that conducted a private placement exercise, with the exception of K-REIT

Asia, the units were all issued at a discount (of no more than 10%) to the volume

weighted average price for trades in the units done for the full market day immediately

preceding the announcement date.

10 SUMMARY OF ANALYSIS

In arriving at our recommendation in respect of the IPT Transactions and the Whitewash

Resolution, we have taken into account the views and representations by the Directors and

management of the Manager and the factors set out in Sections 8 and 9 above. The key

considerations are summarised below. Independent Unitholders should be advised to read

the following in conjunction with, and in the context of, the full text of this Letter and the

Circular.

The SHBL Acquisition and SHTS Acquisition

a. for SHBL, we note that the purchase consideration is 12.7% and 13.9% below the

appraised values as determined by W&R and Rengganis, respectively or at a discount

of 13.3% to the average of the two independent valuations by the Independent Valuers;

b. the purchase considerations will be received in Singapore dollars which eliminates any

foreign currency risk;

c. for SHTS, we note that the purchase consideration is 10.7% and 14.1% below the

appraised values as determined by W&R and Rengganis, respectively or at a discount

of 12.5% to the average of the two independent valuations by the Independent Valuers;

d. the rationale for the SHBL and SHTS Acquisitions, taken in the entire context of the

Transactions, appears to be based on sound commercial grounds;

e. we note the significant growth potential and positive outlook for the healthcare services

market in Jakarta and Bali as noted in the report titled “Overview and Assessment of

South Jakarta & Bali Healthcare Services Market in Indonesia” by Frost & Sullivan;

f. the net effect of the Transactions is yield accretive to Unitholders as the FY2013 pro

forma distribution yield will increase from 5.10% to 5.40%; and

D-33

g. the pro forma distribution yield of First REIT at 5.40% is within the range and similar to

the average of the distribution yields of comparable Singapore REITs. In addition, we

also note that the pro forma distribution yield of First REIT is higher than the 3.91%

distribution yield of Parkway Life REIT, being the closest comparable to First REIT in

terms of property segment.

The Master Leases

a. the Manager’s rationale for the Master Leases appears to be based on sound

commercial grounds;

b. The estimated base property yields of the SHBL and SHTS Master Leases of 9.95% is

within the range of the base property yields of between 7.8% and 15.6% of properties

in the Existing Portfolio computed on a similar basis but below the average of 11.0%.

When compared against the Indonesian properties in the Existing Portfolio, we note that

the estimated base property yields of the SHBL and SHTS Master Leases of 9.95% is

in the lower end of the range of the base property yields of between 9.7% and 15.6%

of the Indonesian properties in the Existing Portfolio computed on a similar basis.

However, we note that the base property yield of the properties in the Existing Portfolio

would have taken into account the then prevailing economic and market conditions. In

particular, we note that the current base yields of the Indonesian properties have since

come down as their appraised values have significantly increased. In this respect, the

base property yields of the SHBL and SHTS Master Leases at 9.95% is above the range

of the current base yields of between 8.2% and 9.8% of the Indonesian properties in the

Existing Portfolio, and above the range of the current base yields of between 7.1% and

9.8% of all the properties in the Existing Portfolio;

c. In addition, the base property yields of the SHBL and SHTS Master Leases at 9.95% is

within and above the average (9.1%) of the range of the current yield of between 8.6%

and 10.3% of the Indonesian properties in the Existing Portfolio, and within and above

the average (9.0%) range of the current yields of between 7.1% and 10.3% of all the

properties in the Existing Portfolio;

d. the adjustments to the base rent and variable rent component under the terms of the

Master Leases will provide potential further upside to the total rent and property yield

and will also allow First REIT to benefit from the growth of the healthcare industry in

South Jakarta and Bali;

e. the return on base rent of 9.95% for both the SHBL and SHTS Master Lease compare

favorably to the return on base rent of 3.9% for the master leases of Parkway Life REIT,

6.5% for the Indonesia properties of Al A’qar REIT, and between 8.6% and 9.3% for the

Singapore properties in the Existing Portfolio;

f. the return on base rent of 9.95% for both the SHBL and SHTS Master Lease is at the

lower end of the range of between 9.7% and 15.6% for the Indonesia properties in the

Existing Portfolio. As mentioned above, this is because the purchase consideration

would have taken into account the then prevailing economic and market conditions. We

also noted above that the current base yields of the Indonesian properties in the

Existing Portfolio (computed based on the current base rent and the latest appraised

value) have since decreased as their appraised values of these Indonesian properties

have increased significantly;

g. the return on base rent of 9.95% for both the SHBL and SHTS Master Lease is higher

than the return on base rent for LMIR at 8.2% and close to the return on base rent of

9.8% for Capitamall Anzhen and 10.5% for Capitamall Erqi;

D-34

h. there are no annual adjustment features to the base rent in the master lease

agreements of Parkway Life REIT and Al A’qar REIT. Both the Singapore properties in

the Existing Portfolio and the Master Leases provide for potential upward adjustment to

the base rent, based on two times the increase in the consumer price index of

Singapore for the preceding calendar year, subject to a floor of 0% and cap of 2.0%;

i. the variable rent for the Master Leases is up to 2.0% of the surplus in the audited gross

operating revenue of the hospital (depending on the year-on-year growth of the gross

operating revenue). In comparison, the variable rent for the master leases of Parkway

Life REIT is fixed at 3.8% of the adjusted hospital revenue, while the gross lease rental

for Al A’qar REIT is variable between 6.5% and 14.5% of the purchase consideration.

The Singapore properties in the Existing Portfolio do not have any variable rent

component;

j. we note that LMIR, Capitamall Anzhen, Capitamall Erqi and SGREIT are pure retail

REITs. Therefore their base and variable rent structure are established differently and

therefore not directly comparable;

k. the variable rent structure for the Master Leases is the same as the variable rent

structure for Siloam Hospitals Manado and Hotel Aryaduta Manado and Siloam

Hospitals Makassar which were acquired in November 2012. Variable rent will only be

payable from the fourth year onwards. We understand that this is to allow conservation

of cash flow thereby enabling the tenant to step up and enhance its operations to an

optimal level;

l. the improvement in the pro forma distribution yield of First REIT from 5.10% to 5.40%

with the inclusion of the Master Leases;

m. even though the Properties are located in Indonesia, the rental income to be received

from the Sponsor will be denominated in Singapore Dollars under the Master Leases.

This will eliminate any foreign currency exchange risk that First REIT may face from its

rental income; and

n. First REIT will be able to benefit from the Lessees’ property management and operating

expertise and the use of the established “Siloam” brand names for hospitals.

The issuance of the Consideration Units and the Whitewash Resolution

a. the Manager’s rationale for the issuance of the Consideration Units appears to be

based on sound commercial grounds;

b. the Manager’s rationale for the Whitewash Resolution appears to be based on sound

commercial grounds;

c. Ascendas REIT had previously in March 2012 issued consideration units on the same

basis of 10-Day volume weight price average of the Units immediately preceding the

completion date as partial consideration in relation to the acquisition of assets. We note

that deriving average unit price over a period of 10 market days may serve to even out

the effects of unit price volatility; and

d. for those that conducted a private placement exercise, with the exception of K-REIT

Asia, the units were all issued at a discount (of no more than 10%) to the volume

weighted average price for trades in the units done for the full market day immediately

preceding the announcement date.

D-35

11 RECOMMENDATION AND CONCLUSION

Having carefully considered the information available to us, and based upon the monetary,

industry, market, economic and other relevant conditions subsisting on the Latest Practicable

Date and based on the factors set out in Section 10 above, and subject to the qualifications

and assumptions made herein, we are of the view that (a) the IPT Transactions are on normal

commercial terms and are not prejudicial to the interests of First REIT and its Independent

Unitholders, and (b) the Whitewash Resolution is not prejudicial to the interests of First

REIT’s Independent Unitholders. Accordingly, we are of the view that the Independent

Directors should recommend that Independent Unitholders vote in favour of the IPT

Transactions and the Whitewash Resolution to be proposed at the EGM.

In performing our evaluation and arriving at these conclusions, we wish to emphasise that the

opinion set forth herein is based solely on publicly available information and information

provided by the Directors and the management of the Manager and therefore does not reflect

any projections or future financial performance of First REIT after the completion of the IPT

Transactions and the Whitewash Resolution and is based on the economic and market

conditions prevailing as of the date of this Letter. Our advice is strictly confined to our views

on the IPT Transactions and the Whitewash Resolution.

This Letter (for inclusion in the Circular) is addressed to the Independent Directors and the

Trustee for their benefit, in connection with and for the purpose of their consideration of the

IPT Transactions and the Whitewash Resolution. The recommendation made by the

Independent Directors to the Independent Unitholders in relation to the IPT Transactions and

the Whitewash Resolution remains the responsibility of the Independent Directors.

This Letter is governed by, and construed in accordance with, the laws of Singapore, and is

strictly limited to the matters stated herein and does not imply by implication to any other

matter.

Yours faithfully,

For and on behalf of

STIRLING COLEMAN CAPITAL LIMITED

ANG LIAN KIAT

DIRECTOR

YAP YEONG KEEN

DIRECTOR

D-36

APPENDIX E

SINGAPORE TAX CONSIDERATIONS

The following summary of certain Singapore income tax considerations to Unitholders in respect

of the Acquisitions is based upon tax laws, regulations, rulings and decisions now in effect, all of

which are subject to change (possibly with retroactive effect). The summary is not a tax advice and

does not purport to be a comprehensive description of all the considerations that may be relevant

to Unitholders. Unitholders should consult their own tax advisers on the tax implications that may

apply to their own individual circumstances.

Words and expressions in this summary have the same meaning as defined in the Circular.

Singapore Income Tax

Income derived from the Properties

The rental income and other related income earned from the Properties will be received in

Singapore by the relevant Singapore subsidiaries in a combination of some of the following forms:

(i) dividend income;

(ii) interest income; and

(iii) proceeds from repayment of shareholder’s loans.

The dividend income received in Singapore by the relevant Singapore subsidiaries in respect of

the Properties (the “Foreign Dividend Income”) will be exempt from tax under Section 13(8) of

the Income Tax Act, Chapter 134 of Singapore (the “Income Tax Act”) provided that each of the

relevant Singapore subsidiaries is a tax resident of Singapore and the following conditions are

met:

(i) in the year the Foreign Dividend Income is received in Singapore, the headline corporate tax

rate of the jurisdiction from which it is received is at least 15.0%;

(ii) the Foreign Dividend Income has been subjected to tax in the jurisdiction from which it is

received; and

(iii) the Singapore Comptroller of Income Tax is satisfied that the tax exemption would be

beneficial to the relevant Singapore subsidiary.

The relevant Singapore subsidiaries in respect of the Properties will collectively make an

application to the Inland Revenue Authority of Singapore to exempt the interest income received

in Singapore in respect of the Properties from Singapore income tax under Section 13(12) of the

Income Tax Act.

This tax exemption, if granted to the relevant Singapore subsidiaries, will be subject to stipulated

conditions and will only apply to interest income received in Singapore on or before 31 March

2015. Unless the tax exemption is subsequently extended by the Singapore Government, any of

such interest income received in Singapore after 31 March 2015 may be subject to Singapore

income tax at the prevailing corporate rate of tax, currently 17.0%.

E-1

Cash that cannot be repatriated by the Indonesian subsidiaries (i.e. PT DGJ and PT PDS) in the

form of dividends may be used by these Indonesian subsidiaries to repay the principal amount of

shareholder’s loans. The proceeds from the repayment of shareholder’s loans received in

Singapore by the relevant Singapore subsidiaries are capital receipts and hence not subject to

Singapore income tax.

First REIT will in turn receive dividends and redemption (at cost) of preference shares from the

relevant Singapore subsidiaries. Provided these Singapore subsidiaries are residents of

Singapore for income tax purposes, the dividends received by First REIT will be one-tier

(tax-exempt) dividends and hence exempt from Singapore income tax. The proceeds from

redemption (at cost) of preference shares received by First REIT are capital receipts and not

subject to Singapore income tax.

Distributions to Unitholders

Distributions made by First REIT out of the income or cashflow generated from the Properties may

comprise either or both of the following two components:

(i) tax-exempt income component (“Tax-Exempt Income Distributions”); and

(ii) capital component (“Capital Distributions”).

Tax-Exempt Income Distributions refer to distributions made by First REIT out of its tax-exempt

income (which comprises mainly the one-tier (tax-exempt) dividends that it will receive from the

relevant Singapore subsidiaries). Such distributions are exempt from Singapore income tax in the

hands of Unitholders. No tax will be deducted at source on such distributions.

For this purpose, the amount of Tax-Exempt Income Distributions that First REIT can distribute for

a distribution period will be to the extent of the amount of tax-exempt income that it has received

or is entitled to receive in that distribution period. Any distribution made for a distribution period

out of profits or income which First REIT is entitled to receive as its own tax-exempt income after

the end of that distribution period will be treated as a capital distribution and the tax treatment

described in the next paragraph on “Capital Distributions” will apply. The amount of such

tax-exempt income that is subsequently received may be used to frank tax-exempt income

distributions for subsequent distribution periods.

Capital Distributions refer, inter alia, to distributions made by First REIT out of proceeds received

from the redemption of preference shares. Unitholders will not be subject to Singapore income tax

on such distributions. These distributions are treated as returns of capital for Singapore income

tax purposes and the amount of Capital Distributions will be applied to reduce the cost of Units

held by Unitholders. Accordingly, the reduced cost base will be used for the purpose of calculating

the amount of taxable trading gains for those Unitholders who hold Units as trading or business

assets and are liable to Singapore income tax on gains arising from the disposal of Units. If the

amount of Capital Distributions exceeds the cost or the reduced cost, as the case may be, of

Units, the excess will be subject to tax as trading income of such Unitholders.

E-2

F-1

APPENDIX F

INDEPENDENT INDONESIAN TAXATION REPORT

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NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an EXTRAORDINARY GENERAL MEETING of First Real Estate

Investment Trust (“First REIT”) will be held at Capricorn Room, Level 1, Marina Mandarin

Singapore, 6 Raffles Boulevard, Marina Square, Singapore 039594 on Monday, 29 April 2013 at

10:30 a.m. (or as soon thereafter following the conclusion or adjournment of the Annual General

Meeting of First REIT to be held at 10:00 a.m. on the same day and at the same place), for the

purpose of considering and, if thought fit, passing, with or without modifications, the following

resolutions:

ORDINARY RESOLUTION

1. THE SHBL ACQUISITION

That subject to and contingent upon the passing of Resolutions 2, 3 and 4:

(i) approval be and is hereby given for the acquisition of Siloam Hospitals Bali (“SHBL”) by

First REIT through the acquisition of SHBL from PT Buana Mandiri Selaras (“PT BMS”),

an indirect wholly-owned subsidiary of PT Lippo Karawaci Tbk (the “Sponsor”), at the

purchase consideration described in the circular dated 12 April 2013 issued by Bowsprit

Capital Corporation Limited, in its capacity as manager of First REIT (the “Manager”),

to holders of units in First REIT (“Unitholders”, and the circular dated 12 April 2013

issued by the Manager, the “Circular”) and on the terms and conditions set out in the

sale and purchase agreement dated 26 March 2013 entered into between PT Dasa

Graha Jaya (“PT DGJ”), an indirect wholly-owned subsidiary of First REIT, and PT BMS,

and for all payment of all fees and expenses relating to the SHBL Acquisition (as defined

and described in the Circular), such acquisition being an “interested person transaction”

under Chapter 9 of the Listing Manual of Singapore Exchange Securities Trading

Limited (the “SGX-ST”, and the Listing Manual of the SGX-ST, the “Listing Manual”) as

well as an “interested party transaction” (as defined in Appendix 6 of the Code on

Collective Investment Schemes issued by the Monetary Authority of Singapore in

relation to real estate investment trusts (the “Property Funds Appendix”));

(ii) approval be and is hereby given for First REIT to grant (through PT DGJ) the SHBL

Master Lease (as defined in the Circular and which constitutes an “interested person

transaction” under Chapter 9 of the Listing Manual) to the Sponsor on the terms and

conditions set out in the master lease agreement dated 26 March 2013 entered into

between PT DGJ and the Sponsor; and

(iii) the Manager, any director of the Manager (“Director”) and HSBC Institutional Trust

Services (Singapore) Limited (in its capacity as trustee of First REIT) (the “Trustee”) be

and are hereby severally authorised to complete and do all such acts and things

(including executing all such documents as may be required) as the Manager, such

Director or, as the case may be, the Trustee may consider expedient or necessary or in

the interests of First REIT to give effect to the SHBL Acquisition and the SHBL Master

Lease.

G-1

ORDINARY RESOLUTION

2. THE SHTS ACQUISITION


(i) approval be and is hereby given for the acquisition of Siloam Hospitals TB Simatupang

(“SHTS”) indirectly by First REIT through the acquisition of Great Capital Pte. Ltd.,

(which, directly and through its wholly-owned subsidiary, Key Capital Pte. Ltd.,

wholly-owns PT Perisai Dunia Sejahtera (“PT PDS”), which in turn will hold SHTS) from

Evodia Strategic Investment Limited (“Evodia”), an indirect wholly-owned subsidiary of

the Sponsor, at the purchase consideration described in the Circular and on the terms

and conditions set out in the sale and purchase agreement dated 26 March 2013

entered into between the Trustee and Evodia, and for payment of all fees and expenses

relating to the SHTS Acquisition (as defined and described in the Circular), such

acquisition being an “interested person transaction” (as defined under Chapter 9 of the

Listing Manual) as well as an “interested party transaction” (as defined in the Property

Funds Appendix);

(ii) approval be and is hereby given for First REIT to grant (through PT PDS) the SHTS

Master Lease (as defined in the Circular and which constitutes an “interested person

transaction” under Chapter 9 of the Listing Manual) to the Sponsor on the terms and

conditions set out in the master lease agreement dated 26 March 2013 entered into

between PT PDS and the Sponsor; and

(iii) the Manager, any Director and the Trustee be and are hereby severally authorised to

complete and do all such acts and things (including executing all such documents as

may be required) as the Manager, such Director or, as the case may be, the Trustee

may consider expedient or necessary or in the interests of First REIT to give effect to

the SHTS Acquisition and the SHTS Master Lease.

ORDINARY RESOLUTION

3. THE PROPOSED ISSUANCE OF THE CONSIDERATION UNITS


(i) approval be and is hereby given for the Manager to issue, in the manner described in

the Circular, such number of Consideration Units (as defined in the Circular) to Evodia

or a nominee of Evodia which is a wholly-owned subsidiary of the Sponsor, as would be

required to satisfy the SHTS Equity Consideration (as defined in the Circular) in relation

to the SHTS Acquisition; and

(ii) the Manager, any Director and the Trustee be and are hereby severally authorised to

complete and do all such acts and things (including executing all such documents as

may be required) as the Manager, such Director or, as the case may be, the Trustee

may consider expedient or necessary or in the interests of First REIT to give effect to

the issuance of the Consideration Units.

G-2

ORDINARY RESOLUTION

4. THE WHITEWASH RESOLUTION

That subject to the conditions in the letter from the Securities Industry Council dated 8 April

2013 being fulfilled, Unitholders, other than the Sponsor, parties acting in concert with it and

parties which are not independent of the Sponsor, hereby (on a poll taken) waive their rights

to receive a mandatory offer from the Sponsor and parties acting in concert with it for all the

remaining issued units in First REIT (“Units”) not owned or controlled by the Sponsor and

parties acting in concert with it, in the event that they incur a mandatory bid obligation

pursuant to Rule 14 of the Singapore Code on Take-overs and Mergers as a result of:

(i) the receipt by Evodia or a nominee of Evodia which is a wholly-owned subsidiary of the

Sponsor of the Consideration Units as partial consideration for the SHTS Acquisition;

and/or

(ii) the receipt in Units by Bowsprit Capital Corporation Limited of the acquisition fee in

relation to the acquisition of SHBL and/or SHTS.

BY ORDER OF THE BOARD

Bowsprit Capital Corporation Limited

(as manager of First Real Estate Investment Trust)

(Company Registration No. 200607070D)

Elizabeth Krishnan

Company Secretary

Singapore

12 April 2013

Important Notice:

(1) A unitholder of First REIT entitled to attend and vote at the Extraordinary General Meeting is entitled to appoint not

more than two proxies to attend and vote in his/her stead. A proxy need not be a unitholder of First REIT.

(2) Where a unitholder of First REIT appoints more than one proxy, the appointments shall be invalid unless he/she

specifies the proportion of his/her holding (expressed as a percentage of the whole) to be represented by each

proxy.

(3) The instrument appointing a proxy must be lodged at the Unit Registrar and Unit Transfer Office at Boardroom

Corporate & Advisory Services Pte. Ltd., 50 Raffles Place, #32-01 Singapore Land Tower, Singapore 048623 not

less than 48 hours before the time appointed for the Extraordinary General Meeting.

(4) In the case of a conflict between the English text of this Notice of Extraordinary General Meeting and its Chinese

translation, the English text will prevail.

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FIRST REAL ESTATE INVESTMENT TRUST(Constituted in the Republic of Singapore

pursuant to a trust deed dated 19 October 2006

(as amended)) Managed by Bowsprit Capital Corporation

Limited (as manager of First Real Estate Investment

Trust) (Company Registration No. 200607070D)

PROXY FORMEXTRAORDINARY GENERAL MEETING

IMPORTANT:

1. For investors who have used their CPF money to buy units in First

REIT, this Circular is forwarded to them at the request of their CPF

Approved Nominees and is sent FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF Investors and shall be

ineffective for all intents and purposes if used or is purported to be

used by them.

3. CPF Investors who wish to attend the Extraordinary General

Meeting as observers have to submit their requests through their

CPF Approved Nominees within the time frame specified. If they

also wish to vote, they must submit their voting instructions to the

CPF Approved Nominees within the time frame specified to enable

them to vote on their behalf.

4. PLEASE READ THE NOTES TO THE PROXY FORM.

I/We (Name)

of (Address)

being a unitholder/unitholders of First Real Estate Investment Trust (“First REIT”), hereby appoint:

Name NRIC/Passport

Number

Proportion of Unitholdings

No. of Units %

Address

and/or (delete as appropriate)

Name NRIC/Passport

Number

Proportion of Unitholdings

No. of Units %

Address

or, both of whom failing, the Chairman of the Extraordinary General Meeting as my/our proxy/proxies to attend and to votefor me/us on my/our behalf and if necessary, to demand a poll, at the Extraordinary General Meeting of First REIT to beheld at Capricorn Room, Level 1, Marina Mandarin Singapore, 6 Raffles Boulevard, Marina Square, Singapore039594 on Monday, 29 April 2013 at 10:30 a.m. (or as soon thereafter following the conclusion or adjournment of theAnnual General Meeting of First REIT to be held at 10:00 a.m. on the same day and at the same place) and anyadjournment thereof. I/We direct my/our proxy/proxies to vote for or against the resolutions to be proposed at theExtraordinary General Meeting as indicated hereunder. If no specific direction as to voting is given, the proxy/proxies willvote or abstain from voting at his/her/their discretion, as he/she/they may on any other matter arising at the ExtraordinaryGeneral Meeting, authority herein includes the right to demand or to join in demanding a poll and to vote on a poll.

Resolutions

To be used on a show

of hands

To be used in the event

of a poll

For* Against*No. of Votes

For**

No. of Votes

Against**

ORDINARY RESOLUTION

1 To approve the SHBL Acquisition

(Conditional upon Resolutions 2, 3 and 4

being passed)

2 To approve the SHTS Acquisition

(Conditional upon Resolutions 1, 3 and 4

being passed)

3 To approve the proposed issuance of the

Consideration Units (Conditional upon

Resolutions 1, 2 and 4 being passed)

4 To approve the Whitewash Resolution

* If you wish to exercise all your votes “For” or “Against”, please tick (u) within the box provided.

** If you wish to exercise all your votes “For” or “Against”, please tick (u) within the box provided. Alternatively, please indicate the

number of votes as appropriate.

Dated this day of 2013

Total number of Units held

Signature(s) of unitholder(s)/Common Seal

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"

IMPORTANT: PLEASE READ THE NOTES TO PROXY FORM BELOW

Notes to Proxy Form

1. A unitholder of First Real Estate Investment Trust (“First REIT” and a unitholder of First REIT, “Unitholder”) entitled to attend and vote atthe Extraordinary General Meeting is entitled to appoint one or two proxies to attend and vote in his/her stead.

2. Where a Unitholder appoints more than one proxy, the appointments shall be invalid unless he/she specifies the proportion of his/her holding(expressed as a percentage of the whole) to be represented by each proxy.

3. A proxy need not be a Unitholder.

4. A Unitholder should insert the total number of units in First REIT (“Units”) held. If the Unitholder has Units entered against his/her name inthe Depository Register maintained by The Central Depository (Pte) Limited (“CDP”), he/she should insert that number of Units. If theUnitholder has Units registered in his/her name in the Register of Unitholders of First REIT, he/she should insert that number of Units. If theUnitholder has Units entered against his/her name in the said Depository Register and registered in his/her name in the Register ofUnitholders, he/she should insert the aggregate number of Units. If no number is inserted, this form of proxy will be deemed to relate to allthe Units held by the Unitholder.

5. The instrument appointing a proxy or proxies (the “Proxy Form”) must be deposited at the Unit Registrar and Unit Transfer Office atBoardroom Corporate & Advisory Services Pte. Ltd., 50 Raffles Place, #32-01 Singapore Land Tower, Singapore 048623, not less than 48hours before the time set for the Extraordinary General Meeting.

6. The Proxy Form must be under the hand of the appointor or of his/her attorney duly authorised in writing. Where the Proxy Form is executedby a corporation, it must be executed either under its common seal or under the hand of its attorney or a duly authorised officer.

7. Where the Proxy Form is signed on behalf of the appointor by an attorney or a duly authorised officer, the power of attorney or other authority(if any) under which it is signed, or a notarially certified copy of such power or authority must (failing previous registration with BowspritCapital Corporation Limited, as manager of First REIT (the “Manager”)) be lodged with the Proxy Form; failing which the instrument maybe treated as invalid.

8. A corporation which is a Unitholder may authorise by resolution of its directors or other governing body such person as it thinks fit to act asits representative at the Extraordinary General Meeting and the person so authorised shall upon production of a copy of such resolutioncertified by a director of the corporation to be a true copy, be entitled to exercise the powers on behalf of the corporation so representedas the corporation could exercise in person if it were an individual.

9. The Manager and/or the Unit Registrar shall be entitled to reject a Proxy Form which is incomplete, improperly completed or illegible or wherethe true intentions of the appointor are not ascertainable from the instructions of the appointor specified on the Proxy Form. In addition, inthe case of Units entered in the Depository Register, the Manager and/or the Unit Registrar may reject a Proxy Form if the Unitholder, beingthe appointor, is not shown to have Units entered against his/her name in the Depository Register as at 48 hours before the time appointedfor holding the Extraordinary General Meeting, as certified by CDP to the Manager.

10. All Unitholders will be bound by the outcome of the Extraordinary General Meeting regardless of whether they have attended or voted at theExtraordinary General Meeting.

11. At any meeting, a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declarationof the result of the show of hands) demanded by the Chairman or by five or more Unitholders present in person or by proxy, or holding orrepresenting one-tenth in value of the Units represented at the meeting. Unless a poll is so demanded, a declaration by the Chairman thatsuch a resolution has been carried or carried unanimously or by a particular majority or lost shall be conclusive evidence of the fact withoutproof of the number or proportion of the votes recorded in favour of or against such resolution.

12. On a show of hands, every Unitholder who (being an individual) is present in person or by proxy or (being a corporation) is present by oneof its officers as its proxy shall have one vote. On a poll, every Unitholder who is present in person or by proxy shall have one vote for everyUnit of which he/she is the Unitholder. A person entitled to more than one vote need not use all his/her votes or cast them the same way.

13. CPF Approved Nominees acting on the request of the CPF investors who wish to attend the Extraordinary General Meeting as observersare requested to submit in writing, a list with details of the CPF Investors’ names, NRIC/Passport numbers, addresses and number of Unitsheld. The list, signed by an authorised signatory of the relevant CPF Approved Nominees, should reach the Unit Registrar and Unit TransferOffice at Boardroom Corporate & Advisory Services Pte. Ltd., 50 Raffles Place, #32-01 Singapore Land Tower, Singapore 048623, not lessthan 48 hours before the time appointed for holding the Extraordinary General Meeting.

The Unit Registrar of First Real Estate Investment Trust

Boardroom Corporate & Advisory Services Pte. Ltd.

50 Raffles Place

#32-01 Singapore Land Tower

Singapore 048623

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