1. INTRODUCTION

The Board of Directors (“Board”) of Am ARA REIT Managers Sdn Bhd (“AARMSB” or “the Manager”), the management company of AmFIRST REIT, wishes to announce that Mayban Trustees Berhad (“MTB”), the trustees for AmFIRST REIT, based on the recommendations of AARMSB, has entered into the following agreement in relation to the Proposed Acquisition of the Property on behalf of AmFIRST REIT:

Proposed Acquisition of the Property

AmFIRST REIT proposes to acquire the Property for a total lump sum cash consideration of RM 3,730,000.00 from Air-Conditioning Systems Design Sdn Bhd (“Vendor” or “ADS”). The proposed acquisition was made on:-

(a) the representation and assurance given by ADS and a supporting written corporate guarantee given by ADS (“Guarantor”) that for a period of 3 years from the Completion Date, MTB will actually receive from the Property (“Guaranteed Minimum Gross Income”) the following sums as gross rental income (“Guaranteed Minimum Gross Income”):

(i) Ringgit Malaysia Four Hundred Fifty Two Thousand and Five Hundred (RM450,000.00) only for the first year;

(ii) Ringgit Malaysia Four Hundred Sixty Seven Thousand and Five Hundred (RM465,000.00) only for the second year; and

(iii) Ringgit Malaysia Two Hundred and Forty One Thousand (RM480,000.00) only for the third year;

(b) the execution of the relevant sets of Deed of Assignment between the Vendor and MTB (“Deed of Assignment”) whereby the Vendor assigns absolutely unto the Purchaser all the Vendor’s rights, remedies, benefits and whatsoever advantage under the existing tenancies between the Vendor and the following existing tenants (“Existing Tenants”):-

(1) Disco Hi-Tec (M) Sdn Bhd under which the Vendor has entered into a two (2) years tenancy expiring on 31 January 2009 based on a net lettable area of 2,920 sq.ft at a monthly rental of RM 2.80 per sq.ft, with an option to renew for a further two (2) years at prevailing market rent; and

(2) Kelly Services (Malaysia) Sdn Bhd (“KSSB”) under which the Vendor has entered into a three (3) years tenancy expiring on 14 April 2011 based on a net lettable area of 1,784 sq.ft at a monthly rental of RM 2.90 per sq.ft with an option to renew for a further (2) years at prevailing market rent; and

(3) Nanyo Engineering (M) Sdn Bhd (“NESB”) under which the Vendor has entered into a two (2) years tenancy expiring on 14 April 2010 based on a net lettable area of 1,900 sq.ft at a monthly rental of RM 2.80 per sq.ft with an option to renew for a further two (2) years at prevailing market rent.

(c) the right of MTB to retain from the Purchase Price a sum of RM350,000.00 to set off against nonpayment of rent by the Tenant and non receipt of rent by MTB under the tenancy taken over under the Property.

The Property is to be acquired free from encumbrances but subject to the terms and conditions stipulated in the sale and purchase agreement for such acquisition entered into between MTB and ADS on 19 January 2009 (“SPA”). Simultaneously with execution of the SPA, the Vendor will cause:

(aa) the Tenant to execute in escrow the sets of Deed of Assignment to each of the three (3) existing tenancies mentioned above that will commence or be deemed to have commenced on the Completion Date (as defined in the SPA); and

(bb) the Guarantor executes in escrow the instrument containing the corporate guarantee over the Guaranteed Minimum Gross Income (“Guarantee and Indemnity Agreement”).

As at the date hereof, all rights benefits and interest to the Property have been assigned by ADS to United Overseas Bank Malaysia Bhd (Company No. 271809-K) of Level 7, Menara UOB, Jalan Raja Laut, 50250 Kuala Lumpur (“UOB”) as security for loans obtained by ADS from UOB.

Pursuant to the trust deed dated 28 September 2006 and which said trust deed was reconstituted pursuant to a trust deed dated 15 December 2006 (hereinafter called the “Trust Deed”) constituting AmFIRST REIT, entered into between MTB and AARMSB, MTB, as the trustee for AmFIRST REIT, has approved the Proposed Acquisition of the Property, vide their letter dated 22 July 2008.

Information on the Property

The Property is an entire office unit located on the 14th Floor of Menara Summit, Persiaran Kewajipan, USJ 1, 47600 UEP Subang Jaya, Selangor Darul Ehsan, which is within an integrated commercial complex known as The Summit Subang USJ.

The Summit Subang USJ complex is situated about 35 kilometres south west of Kuala Lumpur city centre and is accessible either via Jalan Syed Putra and thence continues onto the Federal Highway or onto the New Pantai Expressway (NPE) which eventually intersect with Persiaran Kewajipan. Alternatively it is also accessible from the Lebuhraya Shah Alam via the Kewajipan Interchange.

The strata title (“Title”) to the Property has been issued by the relevant authority and is currently held under Geran 43528/M1-A/14/548 Town of Subang Jaya. The Developer, Meda Development Sdn Bhd (Company No. 276563-A) is currently the registered proprietor of the Title and the Vendor will undertake at its own costs and expense use its best endeavour to apply for a direct transfer of the Title from the Developer in favour of MTB and cause the Developer to execute a valid and registrable Memorandum of Transfer in favour of MTB (“MOT”) as outlined in the terms and conditions of this SPA.




2. DETAILS OF THE PROPOSED ACQUISITION OF THE PROPERTY

Salient terms and conditions of the Proposed Acquisition of the Property

(i) The total lump sum cash consideration for the Property of RM 3,730,000.00 (“Purchase Price”) is payable in the following manner:-

(a) A total sum of RM37,300.00 being the equivalent of 1% of the Purchase Price being refundable earnest deposit and towards part payment of the Purchase Price (“Earnest Deposit”) was paid by MTB to MTB’s solicitors as stakeholders prior to the execution of the SPA;

(b) Upon execution of the SPA, RM 335,700.00 being the equivalent to 9% of the Purchase Price shall be paid by MTB to MTB’s solicitors as stakeholders; and

(c) Pursuant to the SPA, the balance of the Purchase Price amounting to RM3,357,000.00 shall be paid within ninety (90) days from the unconditional date of the SPA (“the Completion Period”) by MTB to MTB’s solicitors named in the SPA, to be held as stakeholders, who will be authorized to deal with the balance of the Purchase Price by, amongst others, redeeming all rights, benefits and interest to the Property from UOB.

(d) MTB is entitled to a further extension of 30 days to pay the balance of the Purchase Price but this extension of time is subject to interest at a rate of 8% per annum calculated on a daily basis (the “Extended Completion Period”).

(ii) Upon the execution of the SPA, ADS shall cause the Developer to execute a valid and a registrable MOT and stamping proforma for the purpose of effecting the transfer of the Property in favour of MTB free from all encumbrances and deposit the same with MTB’s solicitors as stakeholders, who shall submit the MOT for assessment of stamp duty and to deal as stakeholders the MOT on the terms and conditions as set out in the SPA.

Conditions Precedent

Completion of the SPA is conditional upon the occurrence of the following events within 60 days from the date of the SPA subject to an extension of a further 30 days:

(a) ADS executing in escrow and depositing with MTB’s solicitors as stakeholders the Deed of Assignment.

(b) the Guarantor executing in escrow and depositing with MTB’s solicitors as stakeholders the Guarantee and Indemnity Agreement;

(c) ADS procuring and securing, at its own costs and expenses, a written consent from the Developer to directly transfer the Title from the Developer to MTB (hereinafter called the “Direct Transfer”) and the Developer’s execution of the MOT and thereafter delivery thereof together with original of the Title to MTB’s solicitors as stakeholders;
(e) ADS’s due observance and performance to the satisfaction of the Developer all conditions imposed by the Developer in executing and releasing the MOT, the original Title and all other documents to MTB’s solicitors, conditions of which may include without limitation to its and Meda Complex Management (USJ) Sdn Bhd’s (“Management Company”) receipt of full settlement of all the Developer’s administration fee payable, full settlement of current and arrears of service charges due and owing to the Management Company, contribution towards sinking fund and insurance premium contributions and all outgoings, including without limitation, sewerage charges (if any) payable in respect of the Property;

(f) the Management Company’s written confirmation on, amongst others, the time of receipt of arrears of service charges;

(g) ADS’s procurement:

(i) from KSSB and NESB, a written confirmation that the Tenancy Agreements governing the tenancy made in favour of KSSB and NESB have been varied to the extent that all rent shall be payable to MTB on Completion Date; and

(ii) from the Management Company, a written confirmation from the Management Company that it is aware of and acquiesces to the varation of the Tenancy Agreements mentioned above.

(h) ADS’s issuance of the relevant notices of assignment and thereafter delivery thereof to MTB’s solicitors as stakeholders, who are authorised to serve the notices of assignment to the Existing Tenants on Completion Date;

(i) MTB’s satisfaction of the results of the due diligence review carried out on the Property and ADS; and

(j) MTB’s solicitors’ receipt from ADS and satisfaction of the sets of the Deed of Assignments and the Guarantee and Indemnity Agreement, all corporate documents evidencing the corporate approvals, including shareholders’ approval, relating to the disposal of the Property, the assignment of of tenancy over the Property and the provision of the corporate guarantee.



Basis of the Purchase Price for the Property

The Purchase Price for the Property is derived on a willing-buyer willing-seller basis after taking into account the market value of the Property of RM 3,730,000.00 as appraised by Rahim & Co, an independent firm of registered valuers approved by the Securities Commission, in its valuation report dated 7 October 2008. The valuation is derived using a combination of comparison method/cost approach and investment methods of valuation.


Liabilities to be assumed by AmFIRST REIT

AmFIRST REIT will not assume any liabilities pursuant to the Proposed Acquisition of the Property.

Source of funding

The Proposed Acquisition of the Property will be funded by bank borrowings.


3. INFORMATION ON THE VENDOR

Air-Conditioning Systems Design Sdn Bhd

ADS is a private limited company incorporated in Malaysia under the Companies Act, 1965 on 11 July 1979. ADS is principally a company selling, installing, servicing and repairing of air-conditioning systems and equipment. As at to-date, its authorized capital is RM 10,000,000 divided into 10,000,000 ordinary shares of RM1.00 each and its issued and paid-up capital is RM 9,000,000 only. The registered office of ADS is at No. 60, Sri Bahari Road, Georgetown, Pulau Pinang.


4. RATIONALE FOR THE PROPOSED ACQUISITION OF THE PROPERTY

AmFirst REIT had on 31 March 2008 announced the completion of the acquisition of “The Summit Subang USJ” which consists of a mixed development comprising Office Lots, Retail Lots, Hotel and Car Park bays. This Proposed Acquisition of the Property will enlarge the overall ownership of the Office Lots at The Summit Subang USJ and enable AmFirst REIT to have a strategic control and effective marketing of all the office spaces. The Proposed Acquisition of the Property is consistent with the investment objective and strategy of AmFirst REIT and it will be accretive to AmFIRST REIT’s distributable income. .




5. EFFECTS OF THE PROPOSED ACQUISITION OF THE PROPERTY

Unit Capital and Substantial Unitholders’ Unitholding

The Proposed Acquisition of the Property will not have any effect on the total units in issue and substantial unitholders’ unitholding of AmFIRST REIT as the purchase consideration will be paid entirely in cash.

NAV

The Proposed Acquisition will have no impact or changes to the unaudited NAV of AmFIRST REIT at the time of completion.

Earnings

The Directors of AARMSB expect the Proposed Acquisition of the Property to contribute positively to the earnings of the Fund for the financial year ending 31 March 2010.

Gearing

AARMSB intends to utilize debt facility of approximately RM 3,730,000 from AmFIRST REIT’s existing credit lines. The proposed debt financing will increase AmFIRST REIT’s gearing ratio to 46.66% of the audited total assets as at 31 March 2008, which is below the gearing limit of 50% prescribed by the REIT Guidelines.


6. APPROVALS REQUIRED FOR THE PROPOSED ACQUISITION OF THE PROPERTY

Pursuant to the REIT Guidelines, the valuation set out in the Proposed Acquisition of the Property is not subject to approval by the Securities Commission nor the prior approval of the unitholders of AmFIRST REIT.


7. INTEREST OF DIRECTORS AND SUBSTANTIAL UNITHOLDERS OF AMFIRST REIT

None of the Directors of AARMSB and substantial unitholders of AmFIRST REIT or persons connected to them, has interest, direct or indirect, in the Proposed Acquisition of the Property.


8. RISK FACTORS

The Property may be subject to certain risks inherent in the property market industry. These include but not limited to the following:-

(a) Non-fulfilment of the conditions precedent stipulated in the SPA;
(b) Non registration of the transfer of the Title to the Property;

(c) Non-renewal of tenancy after expiry due to change in circumstances of the Tenant;

(d) The financial conditions of the Tenants, the Guarantor and the Vendor;

(e) Acts of God, uninsurable losses and other factors.


9. ESTIMATED TIMEFRAME FOR COMPLETION

The Proposed Acquisition of the Property is expected to be completed by the end of July 2009.


10. DOCUMENTS FOR INSPECTION

The following documents are available for inspection at the registered office of AARMSB at Level 22, Bangunan AmBank Group, 55 Jalan Raja Chulan, 50250 Kuala Lumpur or the place of business of MTB at 34th Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur during normal office hours from Monday to Friday (except on public holidays) for a period of three (3) months from the date of this announcement:-

(i) The SPA on the Proposed Acquisition of the Property;

(ii) Valuation report on the Property prepared by Rahim & Co dated 7 October 2008; and

(iii) Letter of Confirmation from the trustees for AmFIRST REIT dated 22 July 2008.


This announcement is dated 19 January 2009.