Interested Party Transactions

The Manager has established an internal control system to ensure that all future Interested Party Transactions will be undertaken on normal commercial terms and will not be prejudicial to the interests of K-REIT Asia and the Unitholders. As a general rule, the Manager must demonstrate to the Audit Committee that such transactions satisfy the foregoing criteria, which may entail obtaining (where practicable) quotations from parties unrelated to the Manager, or obtaining one or more valuations from independent professional valuers (in accordance with the Property Funds Guidelines). Further, the following procedures will be undertaken:

• transactions (either individually or as part of a series or if aggregated with other transactions involving the same Interested Party during the same financial year) equal to or exceeding S$100,000 in value but below 3.0% of the value of K-REIT Asia's net tangible assets will be subject to review by the Audit Committee at regular intervals;
• transactions (either individually or as part of a series or if aggregated with other transactions involving the same Interested Party during the same financial year) equal to or exceeding 3.0% but below 5.0% of the value of K-REIT Asia's net tangible assets will be subject to the review and approval of the Audit Committee. Such approval shall only be given if the transactions are on normal commercial terms and are consistent with similar types of transactions made by the Trustee with third parties which are unrelated to the Manager; and
• transactions (either individually or as part of a series or if aggregated with other transactions involving the same Interested Party during the same financial year) equal to or exceeding 5.0% of the value of K-REIT Asia's net tangible assets will be reviewed and approved, on the basis described in the preceding paragraph, by the Audit Committee which may, as it deems fit, request advice on the transaction from independent sources or advisers, including the obtaining of valuations from independent professional valuers. Further, under the rules of the Listing Manual and the Property Funds Guidelines, such transactions would have to be approved by the Unitholders at a meeting of Unitholders.

Where matters concerning K-REIT Asia relate to transactions entered into or to be entered into by the Trustee for and on behalf of K-REIT Asia with a Interested Party of the Manager of K-REIT Asia, the Trustee is required to consider the terms of such transactions to satisfy itself that such transactions are conducted on normal commercial terms, are not prejudicial to the interest of K-REIT Asia and the Unitholders, and in accordance with all applicable requirements of the Property Funds Guidelines and/or the Listing Manual relating to the transaction in question. Further, the Trustee has the ultimate discretion under the Trust Deed to decide whether or not to enter into a transaction involving an Interested Party of the Manager or of K-REIT Asia (i.e., the Unitholder/Sponsor/adviser). If the Trustee is to sign any contract with an Interested Party of the Manager or of K-REIT Asia, the Trustee will review the contract to ensure that it complies with the requirements relating to interested party transactions in the Property Funds Guidelines (as may be amended from time to time) and the provisions of the Listing Manual relating to interested person transactions (as may be amended from time to time) as well as such other guidelines as may from time to time be prescribed by the MAS and the SGX-ST to apply to real estate investment trusts. If the Trustee is to sign any contract with an Interested Party of the Trustee, such review will be carried out by the Audit Committee, but not the Trustee (see "The Manager and Corporate Governance-Role of the Audit Committee for Interested Party Transactions" for further details).

K-REIT Asia will, in compliance with Rule 905 of the Listing Manual, announce any Interested Person Transaction if such transaction, by itself or when aggregated with other Interested Person Transactions entered into with the same interested person during the same financial year, is 3.0% or more of K-REIT Asia's latest audited net tangible assets.

The aggregate value of all Interested Party Transactions which are subject to Rules 905 and 906 of the Listing Manual in a particular financial year will be disclosed in K-REIT Asia's annual report for the relevant financial year.

Role of the Audit Committee for Interested Party Transactions

The Manager's internal control procedures are intended to ensure that Interested Party Transactions are conducted at arm's length and on normal commercial terms and are not prejudicial to Unitholders. The Manager will maintain a register to record all Interested Party Transactions (and the basis, including, where practicable, the quotations obtained to support such basis on which they are entered into) which are entered into by K-REIT Asia.

The Manager's internal auditors will submit, on a quarterly basis, a report to the Audit Committee of all the recorded interested person transactions entered into by K-REIT Asia. All Interested Party Transactions will therefore be subject to regular periodic reviews by the Audit Committee.

The Audit Committee shall review the internal audit reports to ascertain that the guidelines and procedures established by the Manager to monitor Interested Party Transactions have been complied with and also to ensure compliance of all Interested Party Transactions with the relevant provisions of the Listing Manual as well as the Property Fund Guidelines. The review will include the examination of the nature of the transaction and if necessary, its supporting documents or such other data deemed necessary by the Audit Committee. In addition, the Trustee will review such internal audit reports to ascertain that the Property Fund Guidelines have been complied with.

The Manager's internal audit functions will be carried out by the internal audit department of KCL.

If a member of the Audit Committee has an interest in a transaction, he or she is to abstain from participating in the review and approval process in relation to that transaction.

Future Interested Party Transactions

As a real estate investment trust, K-REIT Asia is regulated by the CIS Code, including the Property Funds Guidelines, and the Listing Manual. The Property Funds Guidelines regulate, among others, transactions entered into by the Trustee (for and on behalf of K-REIT Asia) with an “interested party” relating to K-REIT Asia’s acquisition of assets from or sale of assets to an “interested party”, K-REIT Asia’s investment in securities of or issued by an “interested party” and the engagement of an “interested party” as property management agent or marketing agent for K-REIT Asia’s properties. Depending on the materiality of transactions entered into by K-REIT Asia for the acquisition of assets from, the sale of assets to or the investment in securities of or issued by, an “interested party”, the Property Funds Guidelines may require that an immediate announcement to the SGX-ST be made, and may also require that the approval of the Unitholders be obtained.

The Listing Manual regulates all “interested person transactions” (as defined therein), including transactions already governed by the Property Funds Guidelines. Depending on the materiality of the transaction, K-REIT Asia may be required to make a public announcement of the transaction (Rule 905 of the Listing Manual), or to make a public announcement of and to obtain Unitholders’ prior approval for the transaction (Rule 906 of the Listing Manual). The fees and charges payable under the Interested Party Agreements are not subject to Rules 905 and 906 of the Listing Manual (see “Interested Party Transactions in Connection with the Setting Up of K-REIT Asia” above). The Trust Deed requires the Trustee and the Manager to comply with the provisions of the Listing Manual relating to “interested person transactions” as well as such other guidelines relating to “interested person transactions” as may be prescribed by the SGX-ST to apply to real estate investment trusts.

The Manager may at any time in the future seek a general annual mandate from the Unitholders pursuant to Rule 920(1) of the Listing Manual for recurrent transactions of a revenue or trading nature or those necessary for its day-to-day operations, including a general mandate in relation to leases and/or licence agreements to be entered into with interested persons, and all transactions conducted under such general mandate for the relevant financial year will not be subject to the requirements under Rules 905 and 906 of the Listing Manual. In seeking such a general annual mandate, the Trustee will appoint an independent financial adviser (without being required to consult the Manager) pursuant to Rule 920(1)(b)(v) of the Listing Manual to render an opinion as to whether the methods or procedures for determining the transaction prices of the transactions contemplated under the annual general mandate are sufficient to ensure that such transactions will be carried out on normal commercial terms and will not be prejudicial to the interests of K-REIT Asia and the Unitholders.

Both the Property Funds Guidelines and the Listing Manual requirements would have to be complied with in respect of a proposed transaction which is prima facie governed by both sets of rules. Where matters concerning K-REIT Asia relate to transactions entered or to be entered into by the Trustee for and on behalf of K-REIT Asia with a related party (either an “interested party” under the Property Funds Guidelines or an “interested person” under the Listing Manual) of the Manager or K-REIT Asia, the Trustee is required to ensure that such transactions are conducted in accordance with applicable requirements of the Property Funds Guidelines and/or the Listing Manual relating to the transaction in question.

The Manager is not prohibited by either the Property Funds Guidelines or the Listing Manual from contracting or entering into any financial, banking or any other type of transaction with the Trustee (when acting other than in its capacity as trustee of K-REIT Asia) or from being interested in any such contract or transaction, provided that any such transaction shall be on normal commercial terms and is not prejudicial to the interests of K-REIT Asia and the Unitholders. The Manager shall not be liable to account to the Trustee or to the Unitholders for any profits or benefits or other commissions made or derived from or in connection with any such transaction. The Trustee shall not be liable to account to the Manager or to the Unitholders for any profits or benefits or other commission made or derived from or in connection with any such transaction.