Key Risks Details Key Mitigation Actions Fraud and Bribery Risks › MUST is subject to the risk of loss resulting from a knowing misrepresentation or concealment of a material fact or a wilful or deliberate act or failure to act with the intention of obtaining unauthorised benefits. › Fraud and bribery may result in reduced profitability and adversely affect reputation. › The Manager is committed to the highest standards of integrity and has no tolerance for any fraud and bribery in its business conduct. › The Manager has a Code of Business Conduct and Ethics in place that affirms its commitment to ethical conduct and its practice of complying with all the applicable laws, so as to avoid actual or potential conflicts of interest. › In addition, it has a whistle-blowing policy that encourages its employees and any other individuals to raise concerns about possible improprieties in matters of financial reporting and other malpractices in confidence via various channels. Liquidity, Funding and Leverage Risks › Risk associated with liquidity and cash flow management may affect MUST’s ability to meet payment obligations. › Poor visibility of cash flows may lead to poor planning and decision-making on actual funding needs and may lead to unnecessary increase to financing costs. › MUST has exceeded the aggregate leverage limit which would inhibit additional borrowings. › The Manager closely monitors and actively manages the REIT’s debt maturity profile, operating cash flow and the availability of funding resources. › The Manager actively augments the REIT's financial position and cash flows through various actions such as divestment of assets, securing long-term Sponsor-Lender loan, repayment of loans and temporary halt of distributions to Unitholders. Interest Rate Risk › Exposure to interest rate fluctuations may affect the cost of borrowings and have a material impact on MUST’s financial performance. › The Manager obtains fixed rate loans or uses derivative financial instruments such as interest rate swaps to substantially mitigate interest rate risk exposure on floating rate borrowings. › The exposure to interest rate risks is further managed through regular reviews with senior management on the optimal mix of fixed and floating rate borrowings. The Manager targets to maintain an optimal hedge ratio of 50% to 80%. Leasing and Lease Concentration Risks › MUST is subject to the risk of non-renewal and non-replacement of leases as well as a decrease in demand for office space. Any downturn in the businesses, bankruptcy or insolvency of a tenant may result in such tenant deciding not to renew its lease at the end of a lease cycle or to terminate the lease before it expires. › Concentrated lease expiry dates and inadequate diversification of tenants and tenant industries, as well as extended downtime between leases to fill up the vacancies could result in high vacancies and lower rental income. › The Manager establishes a diversified tenant base, continuously monitors the lease expiry profile and undertakes proactive tenant engagement. › The Manager has also established leasing guidelines to ensure lease concentration risk is mitigated. / 57 / MANULIFE US REIT
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