Forging Ahead of the Game

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Forging Ahead of the Game ANNUAL REPORT 2017 FORGING AHEAD OF THE GAME RATIONALE SUNWAY REIT ANNUAL REPORT 2017 Sunway REIT aims to be at the forefront of the industry with Main Governing Regulations and Guidelines game-changing strategies that place Sunway REIT ahead of the • The Securities Commission Guidelines on Real Estate curve. Investment Trusts • Bursa Malaysia Main Market Listing Requirements • Capital Markets and Services Act 2007 • Securities Commission Licensing Handbook • The Malaysian Code on Corporate Governance 2017 • Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 • Malaysian Financial Reporting Standards • International Financial Reporting Standards • Global Reporting Initiatives (GRI) Standards Printed Version Please contact [email protected] to request for a printed copy of the annual report. For environmental preservation, we encourage the use of online version. Online Version www.sunwayreit.com/investor-relations Sunway REIT embarks on its integrated reporting journey in this annual report. Below entails the guide to navigate through this annual report and additional online information is available on Sunway REIT’s website. Navigation Guide and Legends Connect you to more information within this report Connect you to more information online at www.sunwayreit.com The Manager Property Level / Facilities Management Team Residual Risk Rating Risk Trend DISCLAIMER: This annual report may contain forward-looking statements that involve risks and uncertainties. Actual future performance, outcomes and results may differ materially from those expressed or implied in forward- looking statements as a result of a number of risks, uncertainties and assumptions. Examples of these factors include (without limitation) general industry and economic conditions; interest rate trends; cost of capital and capital availability including availability of fi nancing in the amounts and the terms necessary to support future business; availability of real estate properties; competition from other companies; changes in operating expenses including employee wages, benefi ts and training, property expenses, government and public policy changes. You are cautioned not to place undue reliance on these forward-looking statements which are based on the Manager’s current view of future events. Past performance is not necessarily indicative of its future performance and that unit price and investment returns may fl uctuate. CONTENTS VITAL ATTRIBUTES PROPERTY DETAILS Snapshot View 6 Portfolio at a Glance 106 Key Milestones 7 Portfolio Summary & Details 108 Corporate Profi le 8 Vision, Mission, Core Values 10 Growth Strategies and Strategic Objectives 11 CORPORATE GOVERNANCE & Sunway REIT’s Value Creation 12 ACCOUNTABILITY Stakeholder Engagement 14 Corporate Governance Statement 166 Material Factors 16 Audit Committee Report 180 Corporate Information 17 Statement on Risk Management & Internal Control 185 Salient Features 18 Additional Information 189 Awards and Recognition 19 Indices Representation 19 SUSTAINABILITY STATEMENT MESSAGE TO UNITHOLDERS Introduction 192 Economic 196 Message from the Chairman 22 Environmental 201 A Conversation with the CEO 30 Social 211 TRUST STRUCTURE & LEADERSHIP FINANCIAL INSIGHTS Trust Structure 40 Financial Statements 228 Organisation Structure 41 Board of Directors 42 Management Team & Key Personnel 48 UNITHOLDERS’ INFORMATION Financial Calendar 286 Analysis of Unitholdings 287 MANAGEMENT DISCUSSION & ANALYSIS Notice of 5th Annual General Meeting 289 Financial Highlights 52 Proxy Form 291 Value Added Statement 57 Glossary 293 Trading Performance 58 Financial Review 62 Operations Review 67 Capital Management 76 Risk Management 78 Investor and Public Relations 82 Market Report Summary 90 Detailed Market Report 92 SUNWAY REIT ANNUAL REPORT 2017 SUNWAY REIT ANNUAL REPORT 2017 SKATING TO VALUE CREATION Value creation to stakeholders is an integral part of what we do. An ice skater artistically choreographing her routine symbolises the way we develop our business model with clearly defi ned strategic objectives to guide us in our value creation process. VITAL ATTRIBUTES Snapshot View 6 Key Milestones 7 Corporate Profi le 8 Vision, Mission, Core Values 10 Growth Strategies and Strategic Objectives 11 Sunway REIT’s Value Creation 12 Stakeholder Engagement 14 Material Factors 16 Corporate Information 17 Salient Features 18 Awards and Recognition 19 Indices Representation 19 4 SUNWAY REIT ANNUAL REPORT 2017 SUNWAY REIT ANNUAL REPORT 2017 5 SUNWAY REIT ANNUAL REPORT 2017 VITAL ATTRIBUTES SNAPSHOT VIEW PORTFOLIO BY PROPERTY VALUE 68% 7% $ RETAIL OFFICE PROPERTY VALUE NUMBER OF ASSETS1 GROSS FLOOR AREA1 RM6.69BILLION 15 12,803,285 20% 5% SQ.FT. HOTEL OTHERS PORTFOLIO BY REVENUE 78% 6% RETAIL OFFICE DPU 12% 4% GROSS REVENUE DPU DISTRIBUTION YIELD RM523MILLION 9.19 SEN 5.2% HOTEL OTHERS PORTFOLIO BY NPI 75% 4% NET PROPERTY INCOME MARKET CAPITALISATION ANNUAL TOTAL RETURN RETAIL OFFICE RM389MILLION RM5.24BILLION 12.4% 15% 6% HOTEL OTHERS 1 Including Sunway REIT Industrial – Shah Alam 1 acquisition which was completed on 1 August 2017 Note: Financial results for the fi nancial year ended 30 June 2017 exclude Sunway REIT Industrial – Shah Alam 1 6 VITAL ATTRIBUTES SUNWAY REIT ANNUAL REPORT 2017 KEY MILESTONES 2016 NOV Relaunched and soft re-opening of Sunway Pyramid Hotel 2016 DEC Completed the acquisition of a piece of commercial land in Seberang Jaya for the expansion of Sunway Carnival Shopping Mall 2017 JAN Maiden acquisition of an industrial property in Shah Alam, Artist Impression on the expansion of Sunway Carnival Selangor. This marks Sunway REIT’s foray into the industrial, Shopping Mall Phase 1 logistics and data centre properties under the “Others” segment with a cap of up to 15% of Total Asset Value (TAV) 2017 MAY Launch of Sunway REIT’s sustainability initiative – Clean Air Project at Sunway Pyramid Shopping Mall 2017 JUN Embarked on the Integrated Reporting journey 7 SUNWAY REIT ANNUAL REPORT 2017 VITAL ATTRIBUTES CORPORATE PROFILE 8 VITAL ATTRIBUTES SUNWAY REIT ANNUAL REPORT 2017 Sunway Real Estate Investment Trust (Sunway REIT) has a Pyramid Shopping Mall, Sunway Resort Hotel & Spa, Sunway diverse portfolio and is one of the largest retail-focused1 real Pyramid Hotel (formerly known as Sunway Pyramid Hotel East), estate investment trusts (REITs) in Malaysia that is strategically Menara Sunway and Sunway Medical Centre. The success of located across award-winning integrated townships in key Sunway City is replicated in Sunway City Ipoh, Perak; the fi rst locations within Klang Valley, Penang and Perak. integrated township in Southeast Asia with fi ve FIABCI accolades, where SunCity Ipoh Hypermarket is located. On the mainland of Sunway REIT was listed on the Main Market of Bursa Malaysia Penang, Sunway REIT owns Sunway Carnival Shopping Mall and Securities Berhad (Bursa Malaysia) on 8 July 2010 with an initial Sunway Hotel Seberang Jaya. In FY2015, Sunway REIT added 2 market capitalisation of RM2.4 billion. The market capitalisation assets into the portfolio, namely Wisma Sunway in Shah Alam, of Sunway REIT stood at RM5.2 billion as at 30 June 2017. Sunway Selangor and Sunway Hotel Georgetown, marking our maiden REIT is a component of the FTSE Bursa Malaysia Mid 70 Index, foray into the Penang Island. FTSE4 Good Bursa Malaysia Index, GPR APREA Composite REIT Index - Malaysia, FTSE EPRA/NAREIT Global REIT Index, FTSE Sunway REIT owns four properties in Kuala Lumpur, namely, EPRA/NAREIT Global Index, FTSE EPRA/NAREIT Asia ex Japan Sunway Tower and the remaining three which constitute part Index, FTSE EPRA/NAREIT Asia Pacifi c Index, FTSE EPRA/NAREIT of the 3-in-1 integrated development, Sunway Putra, consisting Emerging REIT Index and MSCI Malaysia Small Cap Index. of Sunway Putra Mall, Sunway Putra Hotel and Sunway Putra Tower. With an initial portfolio of 8 assets, Sunway REIT has grown to 152 assets comprising 4 retail malls, 5 hotels, 4 offi ces, a medical In FY2017, Sunway REIT made its maiden foray with the acquisition centre and an industrial property. The property value has grown of an industrial property, Sunway REIT Industrial - Shah Alam 1 by 93% from the initial RM3.46 billion to RM6.69 billion as at 30 in Section 23, Shah Alam, Selangor, which is a prime industrial June 2017. hub that is predominantly occupied by established multinational logistics and manufacturing companies. The Sponsor, Sunway Berhad (Sunway), is an established and reputable conglomerate group with a market capitalisation Sunway REIT’s key investment objective is to provide unitholders of RM8.9 billion as at 30 June 2017. Sunway has recently been with exposure to a diverse portfolio of authorised investments reclassifi ed from the Property sector to the Trading/Services that will provide stable cash distributions with the potential for sector on the Main Market of Bursa Malaysia. The reclassifi cation sustainable growth in net asset value per unit. better refl ects Sunway’s strength as a conglomerate with diverse yet complementary businesses that are mostly in leadership position in their respective sectors. Note: 1 Retail-focused is defi ned as at least 60% contribution from the retail Sunway REIT’s assets are primarily located in Sunway City, assets to property value, revenue or net property income 2 Selangor, Malaysia’s fi rst Green Building Index (GBI) certifi ed Including Sunway REIT Industrial – Shah Alam 1 acquisition which was completed on 1 August 2017. Financial results for the fi nancial year sustainable integrated
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