2 BASIS OF PREPARATION 2.1 Statement of compliance The financial statements have been prepared in accordance with the IFRS Accounting Standards issued by the International Accounting Standards Board (“IASB”), the applicable requirements of the Code on Collective Investment Schemes (the “CIS Code”) issued by the Monetary Authority of Singapore (“MAS”) and the provisions of the Trust Deed. 2.2 Basis of measurement The financial statements have been prepared on the historical cost basis except as otherwise disclosed in the accounting policies below. 2.3 Use of going concern assumption The Group reported a net loss of US$178.0 million for the year ended 31 December 2024 (2023: US$380.0 million), which is largely attributed by the net fair value decrease in the Group’s investment properties of US$187.9 million (2023: US$438.6 million). As disclosed in Note 9, during the financial year ended 31 December 2023, the decrease in the fair value of the investment properties (Note 6) contributed to the Group’s breach of a financial covenant imposed by the Group’s lenders and limited the Group’s ability to raise further debt funding. In response to these, the Group has undergone a restructuring of existing credit facilities through the Recapitalisation Plan. Under the terms and conditions of the Recapitalisation Plan and MRA, the Group is required to procure the sale of certain of the Group’s properties and to achieve minimum cumulative net sale proceeds targets (each a “Minimum Sale Target”) by certain dates as follows: (i) on a best endeavours basis by 31 December 2024: Minimum cumulative net sale proceeds of US$230.0 million (the “2024 Net Proceeds Target”) (ii) by 30 June 2025 (the "Disposal Deadline"): Minimum cumulative net sale proceeds of US$328.7 million (“2025 Net Proceeds Target”) (inclusive of the above 2024 Net Proceeds Target) Pursuant to the disposition mandate approved by the Unitholders as part of the Recapitalisation Plan (the "Disposition Mandate") the Manager has been authorised to dispose the Group's existing investment properties until it achieves net sale proceeds exceeding US$328.7 million, 31 December 2025 or if the Early Reinstatement Conditions are achieved, whichever is earliest. During the financial year ended 31 December 2024, the Group completed the sale of one property i.e., Capitol (Note 6) and the net sale proceeds of US$109.5 million, as well as existing cash of US$21.2 million, were used to repay US$130.7 million of loans and borrowings (Note 9) maturing in 2025. As the 2024 Net Proceeds Target had not been achieved, the Group incurred a fee of US$2.3 million (Note 18) payable to the lenders under the Master Restructuring Agreement as at 31 December 2024. The fee has been paid subsequent to the year end. In addition to the sale of Capitol during the year, the Group completed the sale of another property, i.e. Plaza, in February 2025 as disclosed in Note 26 and the net sales proceeds was used to repay US$40.0 million of the Group's loans and borrowings due in 2026. Following the sale of the Plaza in February 2025, the Group achieved approximately 45% of its 2025 Net Proceeds Target. Notwithstanding the above, the financial statements of the Group have been prepared on a going concern basis in view of the following factors considered by the Manager: (i) On the assumption that the Group continues to meet the amended covenants, including the 2025 Net Proceeds Target under the MRA (Note 9), the Group does not have any outstanding loans due and payable in 2025. Furthermore, as mentioned above, subsequent to the sale of a property in February 2025, the Group has partially prepaid loans due in 2026 amounting to US$40.0 million (Note 26). Based on the Group’s cash flow forecast for the next 12 months from the date of issuance of these financial statements, the Manager believes the Group will be able to meet its obligations as and when they fall due based on the contractual due dates of the existing loans. 154 | MANULIFE US REIT NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2024
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