LIFESTYLE Influencer Property Property Leisure & Development Investment Hospitality ANNUAL REPORT 2017 REPORT ANNUAL OUR VISION …is to be a leading corporation in our core businesses by providing products and services of superior values and by sustaining consistent long-term growth in volume and profitability. We shall strive to achieve responsible commercial success by satisfying our customers’ needs, giving superior performance to our shareholders, providing rewarding careers to our people, cultivating mutually beneficial relationship with our business associates, caring for the society and the environment in which we operate and contributing towards the progress of our nation. www.ioiproperties.com.my OUR CORE VALUES In our pursuit of Vision IOI, we expect our people to uphold, at all times, the IOI Core Values which are expressed as follows: INTEGRITY which is essential and cannot 01 be compromised COMMITMENT as we do what we say we will do 02 LOYALTY is crucial because we are one team 03 sharing one vision EXCELLENCE IN EXECUTION as our commitments can only be realised through actions and results 04 SPEED OR TIMELINESS in response is important in our ever 05 changing business environment INNOVATIVENESS to provide us additional competitive edge 06 COST EFFICIENCY is crucial as we need to 07 remain competitive CONTENTS Our Vision CREATING A Our Core Values SUSTAINABLE FUTURE Facts at a Glance 65 Sustainability Key Indicators 75 - Delivering Excellence BUSINESS REVIEW 87 - Caring for the Environment 6 Chairman’s Statement 97 - Creating Value for Our Employees 12 Five-Year Financial Highlights - Developing Sustainable 107 Communities 14 Group Financial Position 120 - Content Index th 15 Group Performance Highlights Annual 16 Segmental Performance General Meeting 5 18 Group Quarterly Results IOI PROPERTIES GROUP BERHAD 19 Financial Calendar (1035807-A) Management Discussion 20 and Analysis 20 - Group Financial Review DATE - Group Business Review 27 October 2017, Friday 23 - Property Development - Group Business Review 31 - Property Investment TIME - Group Business Review 35 10:00 a.m. - Leisure and Hospitality 40 Corporate Information 42 Regional Presence VENUE Putrajaya Ballroom I (Level 3), 43 Location of Operations in Malaysia Putrajaya Marriott Hotel, IOI Resort City, 44 Corporate Calendar 62502 Sepang Utara, Malaysia. 54 Our Social Responsibility Calendar WHO GOVERNS US 122 Board of Directors 124 Profile of Directors 134 Senior Management Team 135 Profile of Senior Management HOW WE ARE GOVERNED 143 Corporate Governance Report - Corporate Governance 143 Overview Statement 174 - Audit Committee Report - Statement on Risk Management 181 and Internal Control 184 Statement of Directors’ Interests Shareholdings of 185 Senior Management Team 186 Other Information FINANCIAL REPORTS 190 Directors’ Report 200 Financial Statements 332 Group’s Material Properties We’re a SHAREHOLDERS’ INFORMATION LIFESTYLE 337 Shareholders’ Information Influencer NOTICE We aspire to create a sustainable future. 340 Notice of Annual General Meeting Thus, every element of our developments is aligned to create lifestyle spaces for stay, work and play. We look into every detail, Statement Accompanying Notice of 345 from planning to design and putting the final touches – for a Annual General Meeting vibrant and lively environment of urban contemporary living with • Proxy Form accessibility to modern lifestyle amenities amidst sprawling greens and chic urban spaces. We inspire lifestyles that are full of zest within our living spaces crafted in architectural chic, coloured with the vibrant hues and textures of lush greens and foliage; crafting homes that warms the heart and work space that ignites passion to succeed. It is this exacting ideal that drives the sustainability of our business in property development, property investment and leisure & hospitality spanned across Malaysia, Singapore and Xiamen in People’s Republic of China. IOI PROPERTIES GROUP BERHAD (1035807-A) FACTS AT A GLANCE PROFIT EARNINGS BEFORE PER SHARE TAXATION RM1.44 18.42 billion 2017 sen 2017 RM1.52 billion (2016) 24.99 sen (2016) GROSS NET DIVIDEND ASSETS PER SHARE PER SHARE 6.00 sen 2017 RM3.31 2017 8.00 sen (2016) 3.60 sen (2016) SHARE MARKET PRICE CAPITALISATION RM12.11 RM2.20 2017 2017 as at 30 June billion 2.35 sen (2016) RM10.37 billion (2016) ANNUAL REPORT 2017 KEY INDICATORS % 20 15 10 5 0 -5 -10 -15 -20 JUL 16AUG 16 SEPT 16OCT 16 NOV 16 DEC 16 JAN 17 FEB 17 MAR 17 APR 17 MAY 17 JUN 17 IOI PROPERTIES FTSE BURSA BURSA MALAYSIA GROUP BERHAD MALAYSIA INDEX PROPERTY IOI PROPERTIES GROUP BERHAD (1035807-A) CHAIRMAN’S STATEMENT TAN SRI DATO’ LEE SHIN CHENG Executive Chairman DEAR SHAREHOLDERS, On behalf of the Board of Directors and the management, it gives me great pleasure to present to you the Annual Report of IOI Properties Group Berhad (“IOIPG”) for the financial year ended 30 June 2017 (“FY2017”). GROUP PERFORMANCE at 10%, and others (Penang, Melaka and Negeri Sembilan) at 3%. For our property investment For the financial year under review, the Group segment, increase in revenue was mainly from IOI recorded a revenue of RM4,185 million and profit City Mall due to higher rental income attributable to before taxation (“PBT”) of RM1,437 million compared increased occupancy rate. Meanwhile, the opening to the previous financial year of RM3,025 million and of Le Méridien Putrajaya hotel in August 2016 has RM1,525 million respectively. The increase in revenue contributed to an increase in revenue contribution to of approximately 38% was mainly attributable to the leisure & hospitality segment. increased contributions from the Group’s business segments of property development, property For the financial year under review, the Group investment and leisure & hospitality. achieved total sales of RM2,847 million (2,296 units), an increase of 29% from the previous financial Group revenue was mainly driven by our property year of RM2,214 million (2,368 units). The Group’s development segment with revenue contribution of overseas projects in Singapore and PRC accounted RM3,714 million, followed by RM302 million from for 46% and 15% respectively of total sales. Sales property investment, RM162 million from leisure & from our overseas projects are attributable to the hospitality and RM7 million from other operations. Trilinq project in Singapore and IOI Palm City project In terms of revenue contribution in the property in the PRC. Domestic sales from the Klang Valley development segment, it was largely from our which accounted for 29% of total sales were mainly projects in Singapore at 47%, Klang Valley at 27%, attributable to projects in IOI Resort City, 16 Sierra People’s Republic of China (“PRC”) at 13%, Johor and Warisan Puteri Sepang. 6 ANNUAL REPORT 2017 CHAIRMAN’S STATEMENT REVENUE FROM THE South Beach, Singpore GROUP’S OPERATING SEGMENTS PROPERTY DEVELOPMENT RM3,714 million PROPERTY INVESTMENT RM302 million LEISURE & HOSPITALITY RM162 million As at 30 June 2017, the Group’s financial position remained strong with total assets at RM33,628 million, an increase of 47% from the previous financial year of RM22,810 million and cash in hand at RM2,376 million. Meanwhile, the Group’s net assets per share stood at RM3.31. Le Méridien Putrajaya A more detailed analysis of the Group’s performance is available under the section “Management’s Discussion and Analysis” in this Annual Report. OPERATING ENVIRONMENT In the second quarter of 2017, the global economy expanded by 3.1% attributable to improved economic conditions in advanced economies and robust economic growth in emerging and developing economies. Meanwhile, the US economy expanded by 2.1% due to strong domestic and external demand. The PRC’s economy expanded by 6.9% supported by growth of 8.2% in real estate investment as property sales and investment remained strong in lower-tier cities. 7 IOI PROPERTIES GROUP BERHAD (1035807-A) CHAIRMAN’S STATEMENT Malaysia’s economy posted a strong growth of 5.8% in the second The Trilinq, Singapore quarter of 2017 supported by improved external sector and domestic demand which expanded by 5.7%, attributable to robust private sector activities. Private sector spending grew by 7.1% due to increased disposable income driven by stable employment conditions and improved export earnings. In the first half of 2017, the residential property market remained challenging. Continued tight lending conditions have impacted sales volume and values of residential properties. Singapore’s economy grew by more than 2% in the second quarter of 2017 driven by the manufacturing sector. Private home sales increased in the second quarter of 2017 driven by secondary sales market, in line with improved market sentiments following the relaxation of certain property cooling measures for example, the easing of the sellers’ stamp duty in the first quarter of 2017. Meanwhile, the primary sales market continued to perform with increase of 4.3%. Improvement in property sales and lower inventory of unsold units in the second quarter of 2017 may signal that the residential property market has bottomed out. Property cooling measures have continued in many cities in the PRC in the first half of 2017, with banks imposing more stringent lending policy and increased interest rate on property mortgages, which have impacted transaction volumes and property prices in the first and second tier cities. Even though the impact of cooling measures may persist in the short term, value of properties is expected to continue to hold in first and second tier cities in the longer term. As the Group holds a long term view on the PRC which it considers as having vast development and investment potential, we will continue to monitor developments in the property market in the PRC. Palmyra Residence in Bandar Puteri Bangi comprising 588 units of serviced apartments with gross development value (“GDV”) of BUSINESS DEVELOPMENTS RM239 million was launched in November 2016. The development is complemented by a commercial hub of lifestyle commercial Avista in Warisan Puteri Sepang comprising 182 freehold units developments developed by the Group such as Kubica Square, of two-storey terrace houses was launched in September 2016.