THE PLACESPACES INSPIRED FOR THE PEOPLE INTEGRATED ANNUAL REPORT 2019 SPACES INSPIRED FOR THE PEOPLE Our spaces are game changers – they challenge the norm and shape a new world. A place where conversations matter, that brings people together, building on knowledge, connecting ideas and inspiring action. Our spaces drive trends and styles, from physical design to technology, converging cultural diversity, commercial vibrancy and sustainable living. We fill our spaces with people and life. We are inspired by YOU and in turn, we imagine more, making our unique spaces a world-class customer experience into the future. KLCCP STAPLED WHO WE ARE GROUP SEC 1 ABOUT THIS REPORT OUR INTEGRATED JOURNEY THE KLCCP As part of our on-going efforts to improve corporate reporting standards and adoption STAPLED of best practices, KLCCP Stapled Group embarked on a journey to integrated corporate reporting, explaining how the organisation’s strategy, governance, performance and GROUP’S prospects, in the context of economy, social as well as environment, lead to the creation INTEGRATED of stakeholder value over the short, medium and long-term. ANNUAL This annual report enhances our disclosure of the relationship between our resources, actions and the value we create as well as draws closer links between our financial and REPORT AIMS non-financial risks and opportunities. TO PROVIDE REPORTING PRINCIPLES AND FRAMEWORKS STAKEHOLDERS The Integrated Annual Report has been prepared in accordance with the concepts and WITH A guiding principles of the International Integrated Reporting (<IR>) Framework issued by the International Integrated Reporting Council (IIRC), including disclosures based BALANCED on the six identified capitals. KLCCP Stapled Group has also applied the principles of Malaysian Code on Corporate Governance (MCCG), Main Market Listing Requirements ASSESSMENT OF (MMLR) of Bursa Malaysia Securities Berhad (Bursa Malaysia), Guidelines on Listed Real Estate Investment Trusts (Listed REITs Guidelines) of Securities Commission Malaysia, THE GROUP’S Bursa Malaysia’s Management Discussion and Analysis Disclosure Guide (MD&A), as ABILITY TO well as Companies Act 2016 (CA 2016). In preparing the Sustainability Report, KLCCP Stapled Group is guided by Bursa Malaysia’s Sustainability Reporting Guide. CREATE AND Disclosures are guided by the material economic, environmental and social issues which SUSTAIN VALUE the directors believe have the potential to substantially impact the Group’s ability to create and sustain value for its stakeholders. Due consideration is given to appropriate TO ENSURE internal and external factors, including the operating environment, stakeholder SHORT, MEDIUM expectations, the Group’s strategies, risks and opportunities. AND LONG-TERM Additionally, the financial statements of KLCC Property Holdings Berhad (KLCCP) and KLCC Real Estate Investment Trust (KLCC REIT) are prepared in accordance with the VIABILITY Malaysian Financial Reporting Standards (MFRS), International Financial Reporting Standards and the requirements of CA 2016. FORWARD-LOOKING STATEMENTS This report contains forward-looking statements characterised by the use of words and phrases such as “might”, “forecast”, “anticipate”, “project”, “may”, “believe”, “predict”, “expect”, “continue”, “will”, “estimate”, “target”, and other similar expressions. As our business operates in a changing environment, it is subject to uncertainties that could cause actual results to differ from those reflected in any forward-looking statements. 2 INTEGRATED ANNUAL REPORT 2019 ABOUT THIS REPORT REPORTING STRUCTURE AND NAVIGATION ICONS The Integrated Annual Report 2019 is a key document in the suite, and should be read in conjunction with the Sustainability Report. The suite comprises: INTEGRATED SUSTAINABILITY REPORTING SUITE ANNUAL REPORT 2019 REPORT 2019 REPORTING • MCCG • Bursa Malaysia’s Sustainability Reporting • Bursa Malaysia’s MD&A Guide FRAMEWORK • MMLR • FTSE4Good Themes and Indicators for Real • MFRS Estate Holdings and Development Sector • <IR> Framework • <IR> Framework • CA 2016 • Listed REITs Guidelines Our full fledged Sustainability Report 2019 is available at www.klcc.com.my/sustainability.php NAVIGATION ICONS The following navigation icons are used throughout this Integrated Annual Report to link our strategies, material matters, risks and key performance indicators: This icon tells you where you can find related information in this report. SIX CAPITALS STRATEGIC PILLARS STRATEGIC PRIORITIES Leverage industry-leading Maximising Value of Strong Financial Position S1 capabilities and relationships to Investments drive growth and opportunities Portfolio of Diverse, Iconic Assets Resilience in Soft Market Customer-led provision of vibrant and Management Services Conditions S2 spaces which inspire Deep Knowledge and Creating Value Through Active management of capital Strong Capabilities Sustainability S3 and risks Engaged and Inspired Embracing Digital For Pursue organic and inorganic Employees Business Enhancement S4 growth Natural Resources Trusted Relationships with Stakeholders For a more bitesized version of our report, please scan the QR code or log on to www.klcc.com.my/investor-relations/annual_report.html 3 INSIDE SEC 1 SEC 3 Who We Are Management Discussion THIS and Analysis 6 At A Glance 42 Market Report REPORT 8 2019 Key Highlights 10 Property Portfolio OUR BUSINESS 17 Corporate Information STRATEGY 18 KLCCP Stapled Group and 55 Key Trends Shaping Our KLCC REIT Structure Market 56 Our Strategy 60 Understanding Our Principal SEC 2 Risks Key Messages 67 Stakeholder Management 70 Investor Relations 20 Case Study – Always 74 Value Creating Business Something New Model 22 Case Study – The Right Solutions OUR PERFORMANCE 24 Case Study – Keeping You 78 Key Performance Indicators KLCCP STAPLED Connected GROUP 80 KLCCP Stapled Group 5-Year 26 Letter From The Chairman Financial Highlights KLCC PROPERTY 32 CEO’s Year In Review HOLDINGS BERHAD 83 KLCCP Stapled Group 5-Year Financial Summary KLCC REAL ESTATE INVESTMENT TRUST (KLCC REIT) 84 KLCCP Stapled Group Value 154 Profiles of KLCCP and KLCC Added Statement REIT Boards of Directors SEC 7 88 Financial Review 162 Management Team KLCC KLCC Real Estate Investment Trust 92 Operations Review Property Holdings Berhad & (KLCC REIT) KLCC REIT Management Sdn 108 Capital Management Bhd 280 KLCC REIT Salient Features 111 Prospects 164 Profiles of KLCCP and KLCC 281 Profile of Shariah Adivser REIT Management Team 282 KLCC REIT Financial Highlights SEC 4 169 Corporate Governance 283 KLCC REIT Value Added Statement Overview Statement Commitment to Sustainability 284 KLCC REIT Fund Performance 177 Nomination and 288 Manager’s Financial and Operational 114 Sustainability Statement Remuneration Committees Review 122 Economic Report 183 Audit Committees Report 126 Environment 136 Social 187 Statement on Risk SEC 8 Management and Internal 146 Corporate Governance KLCC Real Estate Investment Trust Control Financial Statements 192 Additional Compliance Information 296 Manager’s Report SEC 5 300 Statement by the Manager A Framework of Trust 300 Statutory Declaration 301 Trustee’s Report 152 KLCCP and KLCC REIT Boards of Directors 302 Shariah Adviser’s Report 303 Statements of Financial Position 305 Statements of Comprehensive Income 307 Consolidated Statement of SEC 6 Changes in Net Asset Value KLCC Property Holdings 308 Statement of Changes in Net Asset Berhad Financial Statements Value 309 Statements of Cash Flows 194 Directors’ Report 311 Notes to the Financial Statements 200 Statement by Directors 351 Independent Auditors’ Report 200 Statutory Declaration 201 Statements of Financial Position Holders of Stapled Securities’ 203 Statements of Comprehensive Information Income 204 Statements of Income 355 Analysis of Shareholdings and Distribution to Stapled Unitholdings Securities Holders 358 List of Properties of KLCCP Stapled 205 Consolidated Statement of Group Changes in Equity 360 Notice of Annual General Meeting 207 Statement of Changes in - Administrative Details Equity - Proxy Form 208 Statements of Cash Flows - Corporate Directory 210 Notes to the Financial Statements 273 Independent Auditors’ Report AT A GLANCE 7 Properties 6 MENARA MAXIS 11.9 million Gross Floor Area (sq. ft.) RM15.9 billion Portfolio Value 4 SURIA KLCC Diversified office-focused REIT 1 PETRONAS TWIN TOWERS OFFICE AND RETAIL OFFICE RETAIL HOTEL PETRONAS MENARA 3 MENARA SURIA KLCC 1TWIN TOWERS 2PETRONAS 3EXXONMOBIL 4 The premier An iconic Premium office Office tower shopping landmark, the and retail space currently tenanted destination in the world’s tallest twin seamlessly by major oil and heart of Kuala towers connected to gas corporations Lumpur Suria KLCC NATION BUILDING SOCIAL DEVELOPMENT CATALYST FOR CUSTOMER A progressive symbol An inclusive space that SURROUNDING EXPERIENCE of Malaysia – Malaysia’s bridges people together DEVELOPMENT A must-visit destination iconic belt, point of and builds a stronger A game-changer spurring where there is a perfect business as the oil and sense of community – the growth of millions of experience for everyone gas hub and centre of Place to Work, Shop, Stay, sq. ft. of commercial build- – Malaysia’s Iconic MICE activities Dine and Play up, creating significant Experience in Kuala value enhancements Lumpur (MIEKL) 3MENARA EXXONMOBIL 5MANDARIN ORIENTAL, KUALA LUMPUR OUR PURPOSE WE CREATE PLACES PEOPLE LOOK FORWARD TO, PROGRESSING LIFESTYLE FOR A SUSTAINABLE FUTURE 2MENARA 3 PETRONAS WHO WE ARE Malaysia’s largest