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IJM Land Sukuk (IJM Corporation Berhad) RM2 Billion - Information Memorandum

IM Insights
By IM Insights
1 year ago
IJM Land Sukuk (IJM Corporation Berhad) RM2 Billion - Information Memorandum

Kafalah, Murabahah, Musharakah, Shariah, Shariah compliant, Sukuk, Takaful, Ta’widh, Credit Risk, Net Assets, Participation, Provision, Receivables, Reserves, Sales


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  1. Strictly Private & Confidential IJM LAND BERHAD (Company No. 187405-T) INFORMATION MEMORANDUM IN RELATION TO THE ISSUANCE OF SUKUK MUSHARAKAH PURSUANT TO A PERPETUAL SUKUK PROGRAMME OF UP TO RM2.0 BILLION IN NOMINAL VALUE BASED ON THE SHARIAH PRINCIPLE OF MUSHARAKAH BY IJM LAND BERHAD WITH A SUBORDINATED GUARANTEE BY IJM CORPORATION BERHAD LEAD ARRANGER/LEAD MANAGER CIMB INVESTMENT BANK BERHAD (COMPANY NO. 18417-M) This Information Memorandum is dated 20 February 2019
  2. STRICTLY CONFIDENTIAL – DO NOT FORWARD ATTACHED IS AN ELECTRONIC COPY OF THE INFORMATION MEMORANDUM DATED 20 FEBRUARY 2019 (“INFORMATION MEMORANDUM”), IN RELATION TO THE ISSUANCE OF PERPETUAL ISLAMIC NOTES UNDER THE SHARIAH PRINCIPLE OF MUSHARAKAH (“SUKUK MUSHARAKAH”) PURSUANT TO A PERPETUAL SUKUK PROGRAMME (“PERPETUAL SUKUK PROGRAMME”) OF RM2.0 BILLION IN NOMINAL VALUE BY IJM LAND BERHAD (187405-T) (“ISSUER”) WITH A SUBORDINATED GUARANTEE FROM IJM CORPORATION BERHAD (COMPANY NO. 104131-A) (“KAFALAH PROVIDER”). BY OPENING AND ACCEPTING THIS ELECTRONIC TRANSMISSION CONTAINING THE INFORMATION MEMORANDUM, THE RECIPIENT AGREES TO BE BOUND BY ALL THE TERMS AND CONDITIONS BELOW. IF YOU DO NOT AGREE TO ANY OF THE TERMS AND CONDITIONS, PLEASE DELETE THIS ELECTRONIC TRANSMISSION IMMEDIATELY. THE INFORMATION MEMORANDUM IS STRICTLY CONFIDENTIAL AND ANY DISTRIBUTION OF THE INFORMATION MEMORANDUM WITHOUT THE PRIOR WRITTEN CONSENT OF THE ISSUER, THE LEAD ARRANGER (THE “LA”) AND THE LEAD MANAGER (THE “LM”) IS UNAUTHORISED. THE PERSON RECEIVING THIS ELECTRONIC TRANSMISSION FROM THE ISSUER, THE LA/LM AND ITS/THEIR RESPECTIVE AGENTS IS PROHIBITED FROM DISCLOSING THE INFORMATION MEMORANDUM, ALTERING THE CONTENTS OF THE INFORMATION MEMORANDUM OR FORWARDING A COPY OF THE INFORMATION MEMORANDUM OR ANY PORTION THEREOF BY ELECTRONIC MAIL OR OTHERWISE TO ANY PERSON. THE INFORMATION MEMORANDUM IS NOT A PROSPECTUS AND HAS NOT BEEN REGISTERED NOR WILL IT BE REGISTERED AS A PROSPECTUS UNDER THE CAPITAL MARKETS AND SERVICES ACT, 2007 AS AMENDED FROM TIME TO TIME (“CMSA”). AT THE POINT OF ISSUANCE, THE SUKUK MUSHARAKAH MAY ONLY BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED DIRECTLY OR INDIRECTLY TO A PERSON TO WHOM AN OFFER FOR SUBSCRIPTION OR PURCHASE OF, OR INVITATION TO SUBSCRIBE FOR OR PURCHASE THE SUKUK MUSHARAKAH AND TO WHOM THE SUKUK MUSHARAKAH ARE ISSUED WOULD FALL WITHIN PART 1 OF SCHEDULE 6 AND PART 1 OF SCHEDULE 7 OF THE CMSA, READ TOGETHER WITH SCHEDULE 9 OR SECTION 257(3) OF THE CMSA. THEREAFTER, THE SUKUK MUSHARAKAH MAY ONLY BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED DIRECTLY OR INDIRECTLY, TO A PERSON TO WHOM AN OFFER FOR SUBSCRIPTION OR PURCHASE OF, OR INVITATION TO SUBSCRIBE FOR, OR PURCHASE THE SUKUK MUSHARAKAH AND TO WHOM THE SUKUK MUSHARAKAH ARE ISSUED WOULD FALL WITHIN PART 1 OF SCHEDULE 6 OR SECTION 229(1)(b) OF THE CMSA, READ TOGETHER WITH SCHEDULE 9 OR SECTION 257(3) OF THE CMSA. THE PERPETUAL SUKUK PROGRAMME WILL BE RATED. THIS TRANSMISSION SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THE PERPETUAL SUKUK PROGRAMME IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL UNDER THE LAWS OF SUCH JURISDICTIONS.
  3. TRANSMISSION OVER THE INTERNET MAY BE SUBJECT TO INTERRUPTIONS , TRANSMISSION BLACKOUT, DELAYED TRANSMISSION DUE TO INTERNET TRAFFIC, INCORRECT DATA TRANSMISSION DUE TO THE PUBLIC NATURE OF THE INTERNET, DATA CORRUPTION, INTERCEPTION, UNAUTHORISED AMENDMENT, TAMPERING, VIRUSES OR OTHER TECHNICAL, MECHANICAL OR SYSTEMIC RISKS ASSOCIATED WITH INTERNET TRANSMISSIONS. THE ISSUER, THE LA/LM OR ITS/THEIR RESPECTIVE AGENTS HAVE NOT ACCEPTED AND WILL NOT ACCEPT ANY RESPONSIBILITY AND/OR LIABILITY FOR ANY SUCH INTERRUPTION, TRANSMISSION BLACKOUT, DELAYED TRANSMISSION, INCORRECT DATA TRANSMISSION, DATA CORRUPTION, INTERCEPTION, AMENDMENT, TAMPERING OR VIRUSES OR ANY CONSEQUENCES THEREOF WHICH MAY RESULT IN A DIFFERENCE BETWEEN THE INFORMATION MEMORANDUM DISTRIBUTED TO YOU IN ELECTRONIC FORMAT AND THE HARD COPY VERSION AVAILABLE TO YOU ON REQUEST FROM US. THE FOREGOING IS IN ADDITION TO AND WITHOUT PREJUDICE TO ALL OTHER DISCLAIMERS AND AGREEMENTS WHICH A RECIPIENT OF THE INFORMATION MEMORANDUM SHALL BE DEEMED TO HAVE AGREED TO OR BE BOUND BY AS PROVIDED IN THE INFORMATION MEMORANDUM.
  4. IMPORTANT NOTICE RESPONSIBILITY STATEMENT This information memorandum dated 20 February 2019 (“Information Memorandum”) has been approved by the directors of IJM Land Berhad (Company No. 187405-T) (“IJM Land” or the “Issuer”) and they collectively and individually accept full responsibility for the accuracy of the information given and confirm that, after having made all reasonable enquiries in the circumstances, and to the best of their knowledge, information and belief, there are no false or misleading statements or other material facts the omission of which would make any statement in this Information Memorandum false or misleading and that there are no material omissions in this Information Memorandum. IMPORTANT NOTICE AND GENERAL STATEMENTS OF DISCLAIMER This Information Memorandum is provided on a confidential basis to potential investors for the sole purpose of assisting them to decide whether to subscribe for or purchase the perpetual Islamic notes issued under the Shariah principle of Musharakah (“Sukuk Musharakah”) pursuant to a perpetual Sukuk programme of up to RM2.0 billion in nominal value”)("Perpetual Sukuk Programme") by the Issuer with a subordinated guarantee from IJM Corporation Berhad (Company No. 104131-A) (“IJM Corp” or “Kafalah Provider”)(“Subordinated Guarantee"). At the point of issuance of the Sukuk Musharakah, the Sukuk Musharakah may only be offered, sold, transferred or otherwise disposed directly or indirectly, to a person to who an offer for subscription or purchase of, or invitation to subscribe for or purchase the Sukuk Musharakah and to whom the Sukuk Musharakah are issued would fall within Part 1 of Schedule 6 and Part 1 of Schedule 7 of the Capital Markets and Services Act, 2007 (as amended from time to time) ("CMSA") read together with Schedule 9 or Section 257(3) of the CMSA. Thereafter, the Sukuk Musharakah shall not be offered, sold, transferred or otherwise disposed, directly or indirectly, nor shall any document or other material in connection therewith including this Information Memorandum be distributed, in Malaysia to any person unless such offer, sale, transfer or disposal to such person qualifies as excluded offer or excluded invitation under Part 1 of Schedule 6 or section 229(1)(b) of the CMSA read together with Schedule 9 or section 257(3) of the CMSA. The Sukuk Musharakah will be rated. No application is being made to list the Sukuk Musharakah on any stock exchange, nor is any such application contemplated. This Information Memorandum shall not be, in whole or in part, reproduced or used for any other purpose, or shown, given, copied to or filed with any other person including, without limitation, any government or regulatory authority except with the prior written consent of the Issuer or as required under Malaysian laws, regulations or guidelines. The Issuer has authorised CIMB Investment Bank Berhad (Company No. 18417-M) as the lead arranger and the lead manager (“LA/LM”), to distribute this Information Memorandum. None of the information or data contained in this Information Memorandum has been independently verified by the LA/LM of the Perpetual Sukuk Programme. Accordingly, no representation, warranty or undertaking, express or implied, is given or assumed by the LA/LM as to the authenticity, origin, validity, accuracy or
  5. completeness of such information and data or that the information or data remains unchanged in any respect after the relevant date shown in this Information Memorandum . The LA/LM has not accepted and will not accept any responsibility for the information and data contained in this Information Memorandum or otherwise in relation to the Sukuk Musharakah or the Perpetual Sukuk Programme and shall not be liable for any consequences of reliance on any of the information or data in this Information Memorandum, except as provided by the laws of Malaysia. The information in this Information Memorandum supersedes all other information and material previously supplied (if any) to the recipients. By taking possession of this Information Memorandum, the recipients are acknowledging and agreeing and are deemed to have acknowledged and agreed that they will not rely on any previous information supplied. No person is authorised to give any information or data or to make any representation or warranty other than as contained in this Information Memorandum and, if given or made, any such information, data, representation or warranty must not be relied upon as having been authorised by the Issuer, the LA/LM or any other person. This Information Memorandum has not been and will not be made to comply with the laws of any country (including its territories, all jurisdictions within that country and any possession areas subject to its jurisdiction), other than Malaysia (“Foreign Jurisdiction”), and has not been and will not be lodged, registered or approved pursuant to or under any legislation (or with or by any regulatory authorities or other relevant bodies) of any Foreign Jurisdiction and it does not constitute an issue or offer or sale of, or an invitation to subscribe for or purchase of the Sukuk Musharakah or any other securities of any kind by any party in any Foreign Jurisdiction. The distribution or possession of this Information Memorandum in or from certain jurisdictions may be restricted or prohibited by law. Each recipient is required by the Issuer and the LA/LM to seek appropriate professional advice regarding, and to observe, any such restriction or prohibition. Neither the Issuer nor the LA/LM accepts any responsibility or liability to any person in relation to the distribution or possession of this Information Memorandum in or from any such Foreign Jurisdiction. This Information Memorandum is not and is not intended to be a prospectus and has not been registered or lodged under the laws of Malaysia or any Foreign Jurisdiction as a prospectus. Unless otherwise specified in this Information Memorandum, the information contained in this Information Memorandum is current as at the date hereof. By accepting delivery of this Information Memorandum, each recipient agrees to the terms upon which this Information Memorandum is provided to such recipient as set out in this Information Memorandum, and further agrees and confirms that (a) it will keep confidential all of such information and data, (b) it is lawful for the recipient to subscribe for or purchase the Sukuk Musharakah under all jurisdictions to which the recipient is subject, (c) the recipient has complied with all applicable laws in connection with such subscription or purchase of the Sukuk Musharakah, (d) the Issuer, the LA/LM and their respective directors, officers, employees and professional advisers are not and will not be in breach of the laws of any jurisdiction to which the recipient is subject as a result of such subscription or purchase of the Sukuk Musharakah, and they shall not have any responsibility or liability in the event that such subscription or purchase of the Sukuk Musharakah is or shall become unlawful, unenforceable, voidable or void, (e) it is aware that the Sukuk Musharakah can only be offered, sold, transferred or otherwise disposed of directly or indirectly in accordance with the relevant selling restrictions and all applicable laws, (f) it has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of subscribing or purchasing the Sukuk Musharakah, and is able and is prepared to bear the economic and financial risks
  6. of investing in or holding the Sukuk Musharakah , (g) it is subscribing for or accepting the Sukuk Musharakah for its own account, and (h) it is a person falling within one of the categories of persons specified in Part 1 of Schedule 6 and Part 1 of Schedule 7 read together with Schedule 9 or Section 257(3) of the CMSA as amended from time to time at issuance and Part 1 of Schedule 6 or Section 229(1)(b) of the CMSA, read together with Schedule 9 or Section 257(3) of the CMSA thereafter. Each recipient is solely responsible for seeking all appropriate expert advice as to the laws of all jurisdictions to which it is subject. For the avoidance of doubt, this Information Memorandum shall not constitute an offer, issue or invitation to subscribe or purchase of the Sukuk Musharakah in relation to any recipient who does not fall within item (h) above. This Information Memorandum or any document delivered under or in relation to the issue, offer and sale of the Sukuk Musharakah is not, and should not be construed as, a recommendation by the Issuer, the LA/LM or any other party to the recipient to subscribe for or purchase the Sukuk Musharakah. This Information Memorandum is not a substitute for, and should not be regarded as, an independent evaluation and analysis and does not purport to be all inclusive. Each issue of the Sukuk Musharakah will carry different risks and all potential investors are strongly encouraged to evaluate each issue on its own merit. Each recipient should perform and is deemed to have made its own independent investigation and analysis of the Issuer, the Sukuk Musharakah and all other relevant matters, and each recipient should consult its own professional advisers. Neither the delivery of this Information Memorandum nor the offering, sale or delivery of any Sukuk Musharakah shall in any circumstance imply that the information contained herein concerning the Issuer is correct at any time subsequent to the date hereof or that any other information supplied in connection with the Sukuk Musharakah is correct as of any time subsequent to the date indicated in the document containing the same. The LA/LM expressly does not undertake to review the financial condition or affairs of the Issuer or its subsidiaries during the life of the Sukuk Musharakah or to advise any investor in the Sukuk Musharakah of any information coming to their attention. The recipient of this Information Memorandum or the potential investors should review, inter alia, the most recently published documents incorporated by reference into this Information Memorandum when deciding whether or not to purchase any Sukuk Musharakah. This Information Memorandum includes certain historical information, estimates, or reports thereon derived from sources mentioned in this Information Memorandum and other parties with respect to the Malaysian economy, the material businesses in which the Issuer operates and certain other matters. Such information, estimates, or reports have been included solely for illustrative purposes. No representation or warranty is made as to the accuracy or completeness of any information, estimate and or report thereon derived from such and other third party sources. Certain statements, information, estimates and reports in this Information Memorandum are based on historical data, which may not be reflective of the future, and others are forward-looking in nature and are subject to risks and uncertainties, including, among others, the Issuer’s business strategy and expectation concerning its position in the Malaysian economy, future operations, growth prospects and industry prospects. While the Board believes that these forward-looking statements are reasonable, these statements are nevertheless subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in such forward-looking statements. In light of all this, the inclusion of forward-looking
  7. statements in this Information Memorandum should not be regarded as a representation or warranty by the Issuer that the plans and objectives of the Issuer will be achieved . All discrepancies (if any) in the tables included in this Information Memorandum between the listed amounts and totals thereof are due to, and certain numbers appearing in this Information Memorandum are shown after, rounding. Where this Information Memorandum contains or refers to a summary of a document or agreement, the summary is not meant to be exhaustive. The contents of the summary may be subject to some other provisions in the relevant document or agreement. Acknowledgement The Issuer hereby acknowledges that it has authorised the LA/LM to circulate or distribute this Information Memorandum on its behalf in respect of or in connection with the proposed offer or invitation to subscribe for and issue of, the Sukuk Musharakah to prospective investors falling within one of the categories of persons specified in Part 1 of Schedule 6 and Part 1 of Schedule 7 read together with Schedule 9 or Section 257(3) of the CMSA as amended from time to time and that no further evidence of authorisation is required. STATEMENTS OF DISCLAIMER BY THE SECURITIES COMMISSION MALAYSIA (“SC”) In accordance with the CMSA, a copy of this Information Memorandum will be deposited with the SC, which takes no responsibilities for its contents. The issue, offer or invitation to subscribe or purchase the Sukuk Musharakah in this Information Memorandum or otherwise are subject to the fulfilment of various conditions precedent including without limitation, the lodgement of the documents and information relating to the Perpetual Sukuk Programme with the SC in accordance with the Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework of the SC (Issued on 9 March 2015 and revised on 11 October 2018) (as amended from time to time) (“LOLA Guidelines”). The lodgement of the documents and information relating to the Sukuk Musharakah and the Perpetual Sukuk Programme with the SC in accordance with the LOLA Guidelines has been made on 20 February 2019. Please note that lodgement to the SC shall not be taken to indicate that the SC recommends the subscription or purchase of the Sukuk Musharakah under the Perpetual Sukuk Programme. The SC shall not be liable for any non-disclosure on the part of the Issuer and assumes no responsibility for the correctness of any statements made or opinions or reports expressed in this Information Memorandum. EACH ISSUANCE OF THE SUKUK MUSHARAKAH WILL CARRY DIFFERENT RISKS AND ALL INVESTORS SHOULD EVALUATE EACH ISSUANCE OF THE SUKUK MUSHARAKAH BASED ON ITS MERITS AND RISKS. INVESTORS SHOULD RELY ON THEIR OWN EVALUATION TO ASSESS THE MERITS AND RISKS OF THEIR INVESTMENT IN THE SUKUK MUSHARAKAH. IT IS RECOMMENDED THAT PROSPECTIVE INVESTORS CONSULT THEIR FINANCIAL, LEGAL AND OTHER ADVISERS BEFORE PURCHASING OR SUBSCRIBING FOR THE SUKUK MUSHARAKAH. CONFIDENTIALITY
  8. To the recipient of this Information Memorandum : This Information Memorandum and its contents are strictly confidential and are made strictly on the basis that it will remain confidential. Accordingly, this Information Memorandum and its contents, or any information, which is made available in connection with any further enquiries, must be held in complete confidence. In the event that there is any contravention of this confidentiality undertaking or there is a reasonable likelihood that this confidentiality undertaking may be contravened, the Issuer and/or the LA/LM may, at its discretion, apply for any remedy available to the Issuer and/or the LA/LM whether at law or equity, including without limitation, injunctions. Each of the Issuer and/or the LA/LM is entitled to fully recover from the contravening party all costs, expenses and losses incurred and/or suffered. For the avoidance of doubt, it is hereby deemed that this confidentiality undertaking shall be imposed upon the recipient, the recipient’s professional advisors, directors, employees and any other persons concerned with the Sukuk Musharakah and the Perpetual Sukuk Programme. The recipient must return this Information Memorandum and all reproductions thereof whether in whole or in part and any other information in connection therewith to the LA/LM promptly upon the LA/LM’s request, unless that recipient provides proof of a written undertaking satisfactory to the LA/LM with respect to destroying these documents as soon as reasonably practicable after the said request from the LA/LM. This Information Memorandum is submitted to prospective investors specifically in reference to the Sukuk Musharakah and the Perpetual Sukuk Programme and may not be reproduced or used, in whole or in part, for any purpose, nor furnished to any person other than those to whom copies have been sent by the Issuer and/or LA/LM. DOCUMENTS INCORPORATED BY REFERENCE The following documents issued from time to time after the date hereof shall be deemed to be incorporated in, and to form part of, this Information Memorandum:(i) the most recently published audited annual financial statements and, if published later, the most recently published interim financial report of the Issuer and Kafalah Provider (if any); (ii) the most recently published annual report of the Kafalah Provider (if any); (iii) all supplements or amendments to this Information Memorandum circulated by the Issuer, if any, save that any statement contained herein or in a document which is deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purpose of this Information Memorandum to the extent that a statement contained in any such subsequent document which is deemed to be incorporated by reference herein modifies or supersedes such earlier statement (whether expressly, by implication or otherwise). Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Information Memorandum; (iv) any pricing supplements prepared and issued in relation to an issuance of the Sukuk Musharakah under the Perpetual Sukuk Programme, and
  9. (v) all announcements of the Kafalah Provider at Bursa Malaysia’s website, where applicable. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
  10. TABLE OF CONTENTS DEFINITIONS .................................................................................................................. 1 SECTION 1.0 EXECUTIVE SUMMARY ........................................................................ 5 SECTION 2.0 PRINCIPAL TERMS AND CONDITIONS ............................................. 15 SECTION 3.0 INVESTMENT CONSIDERATIONS...................................................... 74 SECTION 4.0 BACKGROUND INFORMATION ON THE ISSUER AND KAFALAH PROVIDER ........................................................................................... 97 SECTION 5.0 BUSINESS OVERVIEW OF THE ISSUER AND THE KAFALAH PROVIDER ......................................................................................... 131 SECTION 6.0 INDUSTRY OVERVIEW AND FUTURE PROSPECTS ....................... 167 SECTION 7.0 OTHER MATERIAL INFORMATION .................................................. 177 APPENDIX I ................................................................................................................. 184 LATEST AUDITED FINANCIAL STATEMENTS OF THE ISSUER FOR THE FYE 2018 . APPENDIX II ................................................................................................................ 185 LATEST AUDITED FINANCIAL STATEMENTS OF THE KAFALAH PROVIDER FOR THE FYE 2018 AND LATEST QUARTERLY REPORT FOR THE FINANCIAL PERIOD ENDED 30 SEPTEMBER 2018 OF THE KAFALAH PROVIDER.....................................
  11. DEFINITIONS In this Information Memorandum , the following words or expressions shall have the following meanings except where the context otherwise requires: Besraya - Besraya Highway. Breakwater 2 Project - has the same meaning ascribed to in Section 5.3(ii) of this Information Memorandum. BNM - Bank Negara Malaysia. Board - the board of directors of the Issuer. BOS - Blue Ocean Strategy. BOT - Build-Operate-Transfer. BIM - Building Information Modelling. Bursa Malaysia - Bursa Malaysia Securities Berhad (Company No. 635998-W). CIDB - Construction Industry Development Board. CIMB - CIMB Investment Bank Berhad (Company No. 18417-M). CMSA - Capital Markets and Services Act, 2007 (as amended from time to time). Companies Act - Companies Act, 2016 (as amended from time to time). CPKO - crude palm kernel oil. CPO - crude palm oil. DSB - Durabon Sdn. Bhd. EU - European Union. Facility Agent - CIMB. FAST - the Fully Automated System for Issuing/ Tendering as varied, upgraded or substituted from time to time. FFB - fresh fruit bunches. FSA - Financial Services Act, 2013 (as amended from time to time). FYE - the financial year ending/ended, as the case may be. Government - Government of Malaysia. GDV - Gross Developmental Value 1
  12. ICP - Industrial Concrete Products Sdn Bhd (Company No. 32369-W). ICPJM - ICP Jiangmen. IJMC - IJM Construction Sdn Bhd (Company No. 195650-H). IJM Land Group - the Issuer and/or its subsidiaries, associated companies and/or jointly controlled entities collectively. IJM Corporation Group - the Kafalah Provider and its subsidiaries, associated companies and/or jointly controlled entities, collectively. IJMP - IJM Plantations Berhad (Company No. 133399-A). IPS - PT Indonesia Plantation Synergy. INCEIF ISPO - International Centre for Education in Islamic Finance, Malaysia. - Indonesian Sustainable Palm Oil. Issuer or IJM Land - IJM Land Berhad (Company No. 187405-T) and includes its successors in title. JKR - Public Works Department. Kafalah Provider/ IJM Corp - IJM Corporation Berhad (Company No. 104131-A). KER - kernel extraction rate. KPC - Kuantan Port Consortium Sdn Bhd. LAD - Liquidated & Ascertained Damages. Lead Arranger (“LA”)/Lead Manager (“LM”) - CIMB. LEKAS - Kajang Seremban Highway. LOLA Guidelines - the SC’s Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework of the SC (Issued on 9 March 2015 and revised on 11 October 2018) (as amended from time to time). LRT3 Light Rail Transit Line 3. MASB - Malaysian Accounting Standards Board. MIA - Malaysian Institute of Accountants. MICPA - Malaysian Institute of Certified Public Accountants. MIHAN - Multi-modal International Cargo Hub and Airport, Nagpur. 2
  13. MCKIP - Malaysia-China Kuantan Industrial Park . MPOB - Malaysian Palm Oil Board. MSPO - Malaysian Sustainable Palm Oil. mt - metric tonne. NDWT - New Deep Water Terminal. NPE - New Pantai Highway. OER - oil extraction rate. PBT - pre-tax profit. Perpetual Sukuk Programme - the perpetual sukuk programme of up to RM2.0 billion in nominal value based on the Shariah principle of Musharakah with a Subordinated Guarantee from the Kafalah Provider. PK - palm kernel. PKE - palm kernel expellers. Principal Adviser (“PA”) - CIMB. Prudential - Prudential Assurance Malaysia Berhad. PSS - PT Perindustrian Sawit Sinergi. RAM/ Rating Agency - RAM Rating Services Berhad (Company No. 763588-T). RBH Group - RBH group of companies. RICS - Royal Institution of Chartered Surveyors. RISM - Royal Institution of Surveyors Malaysia. RBH - Road Builder (M) Holdings Bhd (Company No. 237152-M). Ringgit/RM and sen - Ringgit Malaysia and sen respectively, being the lawful currency of Malaysia. Sukuk Musharakah - the perpetual Islamic notes issued or to be issued under the Shariah principle of Musharakah pursuant to the Perpetual Sukuk Programme. Sukukholders - the holders of the Sukuk Musharakah. SC - Securities Commission Malaysia. Shariah Adviser - CIMB Islamic Bank Berhad (Company No. 671380-H). 3
  14. Subordinated Guarantee - the subordinated guarantee based on the Shariah principle of Kafalah provided by the Kafalah Provider as a continuing obligation , in favour of the Sukuk Trustee for and on behalf of the Sukukholders. Sukuk Trustee (“UTM”) - Universal Trustee (Malaysia) Berhad (Company No. 17540-D). Transaction Documents - the Transaction Documents shall include the following: (i) the programme agreement; (ii) the Trust Deed; (iii) the Subordinated Guarantee; (iv) the securities lodgement form; (v) the subscription agreement; and (vi) the relevant Islamic documents. Trust Deed - the trust deed constituting the Sukuk Musharakah entered or to be entered between the Issuer and the Sukuk Trustee. Trust Deeds Guidelines - the SC’s Trust Deeds Guidelines (revised on 12 July 2011 and effective on 12 August 2011) (as amended from time to time). WCESB - West Coast Expressway Sdn Bhd. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 4
  15. SECTION 1 .0 EXECUTIVE SUMMARY The information set out in this section is an executive summary of the principal features of the transaction. It is qualified in its entirety by, and must be read in conjunction with, the further detailed information appearing elsewhere in this Information Memorandum. 1.1 Brief background of the Issuer The Issuer was incorporated on 29 September 1989 in Malaysia under the Companies Act 1965 as a private company limited by shares. On 28 September 1990, the Issuer had converted its status to a public company limited by shares. The Issuer is principally engaged in investment holding. The principal activities of the Issuer’s subsidiaries are property development, management services, construction activities, investment holding and hotel operations. 1.2 Brief background of the Kafalah Provider IJM Corp, which currently owns 100% of the Issuer, was formed in 16 July 1983 following the merger between three construction companies - IGB Construction Sdn Bhd, Jurutama Sdn Bhd and Mudajaya Sdn Bhd. It was listed on the Main Market of Bursa Securities on 29 September 1986. IJM Corp is one of Malaysia’s leading conglomerates. IJM Corp is principally engaged in construction and investment holding activities. IJM Corporation Group’s activities are in construction, property development, manufacturing and quarrying, hotel operations, port operations, tollway operations, plantations and investment holding. Principal business segments of the IJM Corporation Group (i) Construction: Construction activities. (ii) Property development: Development of land into vacant lots, residential, commercial and/ or industrial buildings. (iii) Industry: Production and sale of concrete products, and quarrying activities. (iv) Plantation: Cultivation of oil palms, milling of fresh fruit bunches and trading of crude palm oil. (v) Infrastructure and others: Tollway and port operations. Other operations of the IJM Corporation Group comprise mainly investment holding. 1.3 Brief summary of the structure of the Perpetual Sukuk Programme (Please refer to the definitions in Section 2.0 of this Information Memorandum for all terminologies used under this Section 1.3) 5
  16. The Perpetual Sukuk Programme entails the issuance of Sukuk Musharakah of up to RM2 .0 billion in nominal value outstanding at any point in time. The Sukuk Musharakah have been structured with a perpetual tenure and there is no fixed maturity date where the Issuer is required to mandatorily redeem the Sukuk Musharakah. There are also no events of default which will entitle the Sukuk Trustee or the Sukukholders to declare that any or all amounts under the Sukuk Musharakah to be immediately due and payable, save for certain Enforcement Events including: (1) where a final and effective order is made or an effective resolution is passed for the liquidation, winding-up or dissolution of the Issuer or the Kafalah Provider, provided that a stay on such order has not been granted by the relevant court of competent jurisdiction within thirty (30) days from the date of such order; (2) the Issuer fails to pay (a) any amount in respect of the Exercise Price as a result of a Redemption Event and (b) any amount in respect of the Sukuk Musharakah whether in respect of the due and payable Expected Periodic Distribution Amount or part thereof and any Arrears of Deferred Periodic Distribution, and such failure to pay under items (a) and (b) continues for a period of seven (7) business days or more (for this purpose, such payment of Expected Periodic Distribution Amount or part thereof and Arrears of Deferred Periodic Distribution will not be due if the Issuer has elected to defer such Expected Periodic Distribution Amount or part thereof in accordance with the Transaction Documents); and (3) the Kafalah Provider fails to pay any amount due under the Subordinated Guarantee and such failure continues for a period of seven (7) business days or more. For the avoidance of doubt, a breach of covenant by the Issuer or the Kafalah Provider (apart from failure to pay the amounts stated under item (2) and (3) above) will not constitute an Enforcement Event. Each Sukuk Musharakah issued under the Perpetual Sukuk Programme will be unsecured and the Perpetual Sukuk Programme will be rated. The Kafalah Provider will provide the Subordinated Guarantee in favour of the Sukuk Trustee for and on behalf of the Sukukholders, as further set out in section 1.4 below. The Issuer may at its option redeem the Sukuk Musharakah (i) at the Optional Redemption date(s) (which will be determined prior to each issuance) and (ii) upon the occurrence of certain Redemption Events, such as an Accounting Event Redemption, a Tax Event Redemption, a Rating Event Redemption and/or a Change of Control Redemption. Further, under the terms of the Perpetual Sukuk Programme, the Issuer may at its sole discretion (unless an Issuer’s Compulsory Periodic Distribution Payment Event or a Kafalah Provider’s Compulsory Periodic Distribution Payment Event has occurred) opt to defer payment (in whole or in part) of the Expected Periodic Distribution Amount which is otherwise scheduled to be paid on a Periodic Distribution Date, to the next Periodic Distribution Date by giving an optional deferral notice in writing ("Optional Deferral Notice"). Please refer to Section 2.0 below for details of the principal terms and conditions of the Perpetual Sukuk Programme. 1.4 Subordinated Guarantee (Please refer to the definitions in Section 2.0 of this Information Memorandum for all terminologies used under this Section 1.4). 6
  17. The Kafalah Provider shall provide a guarantee based on the Shariah principle of Kafalah , as a continuing obligation, in favour of the Sukuk Trustee for and on behalf of the Sukukholders, whereby pursuant to the Subordinated Guarantee: (A) Subordinated guarantee for Non Payment of Periodic Distribution Payment In the event of any non-payment of the Expected Periodic Distribution Amount under the Sukuk Musharakah falling due and payable (whether by virtue of the occurrence of an Issuer's Compulsory Periodic Distribution Payment Event / Kafalah Provider's Compulsory Periodic Distribution Payment Event or a breach of the Dividend and Capital Stopper by the Issuer or the Kafalah Provider), the relevant Musharakah Venture shall be dissolved through an exercise of the Purchase Undertaking and the Exercise Price less the Expected Periodic Distribution Amount falling due and payable (i.e. the nominal value of the relevant Sukuk Musharakah) shall be invested into a new Musharakah Venture and is therefore not due and payable notwithstanding the exercise of the Purchase Undertaking and the Kafalah Provider shall pay such due and payable Expected Periodic Distribution Amount (i.e. the remaining part of the Exercise Price) within 15 days from the date where such payment notice is served by the Facility Agent (such payment notice under the Subordinated Guarantee shall be served by the Facility Agent within 2 business days from the relevant Periodic Distribution Date) to the Kafalah Provider. For the avoidance of doubt, any amount of Expected Periodic Distribution Amount under the Sukuk Musharakah deferred pursuant to Optional Deferral of Distribution shall NOT be deemed to be due and payable. Should there be a breach of the Dividend and Capital Stopper by the Issuer or the Kafalah Provider, the relevant Musharakah Venture shall be dissolved through an exercise of the Purchase Undertaking and the Exercise Price less the Expected Periodic Distribution Amount falling due and payable (whether by virtue of the occurrence of an Issuer's Compulsory Periodic Distribution Payment Event / Kafalah Provider's Compulsory Periodic Distribution Payment Event or a breach of the Dividend and Capital Stopper by the Issuer or the Kafalah Provider) (i.e. the nominal value of the relevant Sukuk Musharakah) shall be invested into a new Musharakah Venture and is therefore not due and payable notwithstanding the exercise of the Purchase Undertaking and the Kafalah Provider shall pay such deferred Expected Periodic Distribution Amount including any Arrears of Deferred Periodic Distribution (if any) (i.e. the remaining part of the Exercise Price) to the Sukukholders within 15 days from the date of such breach. Once the deferred Expected Periodic Distribution Amount including any Arrears of the Deferred Periodic Distribution (if any) has been paid in full by the Kafalah Provider in accordance with the Subordinated Guarantee, the obligations of the Issuer in respect of the same shall then be extinguished. (B) Subordinated guarantee for the Exercise Price pursuant to the Issuer’s Winding Up Event Following an Enforcement Event of the Issuer where there is a final and effective winding up order made on the Issuer, or when an effective resolution is passed for the winding-up or dissolution of the Issuer (“Issuer’s Winding Up Event”), the Subordinated Guarantee shall be 7
  18. triggered and the Exercise Price under the Sukuk Musharakah shall be due and payable in cash by the Kafalah Provider to the Sukukholders no later than 3 months from the date of Issuer ’s Winding Up Event, or upon the issuance of the Replacement Perpetual Sukuk (as defined below), whichever is earlier. Hence, unless so decided otherwise by the Sukukholders by way of an extraordinary resolution that the Replacement Perpetual Sukuk is not required, the Kafalah Provider shall take all immediate and necessary steps to, within 3 months from the occurrence of the Issuer’s Winding Up Event, issue a replacement perpetual Sukuk mirroring the terms of the Sukuk Musharakah including, but not limited to, the same periodic distribution rates and call dates, for a nominal amount similar to that of the Sukuk Musharakah (“Replacement Perpetual Sukuk”). For the purposes of the issuance of the Replacement Perpetual Sukuk, the Sukukholders irrevocably authorise the Kafalah Provider to retain the Exercise Price (payable to the Sukukholders by the Kafalah Provider in cash pursuant to the Subordinated Guarantee) and invest, on behalf of the Sukukholders, part of the Exercise Price equivalent to the nominal value of the Sukuk Musharakah into the new Musharakah venture under the Replacement Perpetual Sukuk, while the Kafalah Provider shall contribute the business operation of the Kafalah Provider and/or its subsidiaries or part thereof identified and held on trust by the Kafalah Provider on behalf of the holders of the Replacement Perpetual Sukuk as a contribution in kind to the Musharakah venture under the Replacement Perpetual Sukuk. The Sukukholders also irrevocably authorise the Kafalah Provider to invest the remaining part of the Exercise Price into the Musharakah venture under the Replacement Perpetual Sukuk as additional capital, which form part of the expected periodic distribution amount under the Replacement Perpetual Sukuk and would itself be entitled to additional periodic distribution amount. For the avoidance of doubt, such additional capital shall not increase the nominal value of the Replacement Perpetual Sukuk. Any payment of such additional capital to the holders of the Replacement Perpetual Sukuk shall be deemed as a repayment of such additional capital, and not payment of profit from the Musharakah venture under the Replacement Perpetual Sukuk. Upon issuance of the Replacement Perpetual Sukuk, the Sukuk Musharakah will be deemed cancelled and there shall be no further obligations whatsoever from the Issuer, on the Sukuk Musharakah. For the avoidance of doubt, the issuance of the Replacement Perpetual Sukuk shall be subject to a new SC Lodgement and other necessary regulatory approvals as required at the time for the new issuance. The Replacement Perpetual Sukuk shall be issued to the Sukukholders in consideration of the Sukukholders’ investment of part of the Exercise Price equivalent to the nominal value of the Sukuk Musharakah (payable to the Sukukholders by the Kafalah Provider in cash pursuant to the Subordinated Guarantee) into the new Musharakah venture under the Replacement Perpetual Sukuk. 8
  19. Until the completion of the issuance of the Replacement Perpetual Sukuk , Dividend and Capital Stopper shall apply to the Kafalah Provider. In the event of a breach of Dividend and Capital Stopper arising from an Issuer’s Winding Up Event and completion of the issuance of the Replacement Perpetual Sukuk, the Exercise Price shall be payable by the Kafalah Provider, pursuant to the Subordinated Guarantee, within 30 days from the date of the breach of Dividend and Capital Stopper. In the event of a failure by the Kafalah Provider to issue the Replacement Perpetual Sukuk within 3 months from the date of Issuer’s Winding Up Event, the Exercise Price shall be immediately due and payable by the Kafalah Provider. For the avoidance of doubt, no Replacement Perpetual Sukuk shall be issued if the Enforcement Event relates to the liquidation, winding up or dissolution of the Kafalah Provider. 1.5 Status of the Sukuk Musharakah (Please refer to the definitions in Section 2.0 of this Information Memorandum for all terminologies used under this Section 1.5). The Sukuk Musharakah shall constitute direct, unsecured, unconditional and subordinated obligations of the Issuer under the laws of Malaysia and shall at all times rank as follows:(i) below all present and future creditors of the Issuer; (ii) pari passu with the Parity Obligations (as defined below) of the Issuer; and (iii) above the Junior Obligations (as defined below) of the Issuer. Upon the declaration of an Enforcement Event, the payment obligations of the Issuer under the Sukuk Musharakah shall rank ahead of the holders of Junior Obligations of the Issuer and rank junior to the claims of all other present and future creditors of the Issuer (other than Parity Obligations of the Issuer). 1.6 Status of the Subordinated Guarantee (Please refer to the definitions in Section 2.0 of this Information Memorandum for all terminologies used under this Section 1.6) The payment obligations of the Kafalah Provider under the Subordinated Guarantee shall constitute direct, unsecured, unconditional and subordinated obligations of the Kafalah Provider under the laws of Malaysia and shall at all times rank as follows: (i) below all present and future creditors of the Kafalah Provider; (ii) pari passu with the Parity Obligations of the Kafalah Provider; and (iii) above the Junior Obligations of the Kafalah Provider. 9
  20. Upon the declaration of an enforcement event , the payment obligations of the Kafalah Provider under the Subordinated Guarantee shall rank ahead of the holders of Junior Obligations of the Kafalah Provider and rank junior to the claims of all other present and future creditors of the Kafalah Provider (other than Parity Obligations of the Kafalah Provider). “Junior Obligations” means any class of the Issuer's or Kafalah Provider’s (as the case may be) share capital including, without limitation, any ordinary shares and preference shares in the capital of the Issuer or the Kafalah Provider, as the case may be, and any other instruments or securities issued, entered into or guaranteed by the Issuer or the Kafalah Provider (as the case may be) whether by its terms or by operation of law, which are subordinated to the Sukuk Musharakah or Subordinated Guarantee (as the case may be). “Parity Obligations” means any instrument or security (other than ordinary shares or preference shares) issued, entered into or guaranteed by the Issuer or the Kafalah Provider (as the case may be) that ranks or is expressed to rank, whether by its terms or by operation or law, pari passu with the Sukuk Musharakah or Subordinated Guarantee (as the case may be). 1.7 Utilisation of proceeds (Please refer to the definitions in Section 2.0 of this Information Memorandum for all terminologies used under this Section 1.7) The proceeds from the issuance of the Sukuk Musharakah shall be utilised by the Issuer and/or IJM Land Group to refinance its existing financing/debt obligations (whether in whole or in part), repayment of intercompany borrowings, and/or to finance working capital requirements, investments, capital expenditure and/or its general corporate purposes (which shall include, without limitation, the payment of fees, costs and expenses relating to the Perpetual Sukuk Programme). In any case, all utilisation of proceeds raised under the Sukuk Musharakah shall be Shariah-compliant. 1.8 Regulatory approvals obtained The Issuer has obtained the approval from the SC for waiver from compliance with certain provisions under the Trust Deeds Guidelines in respect of the Perpetual Sukuk Programme. The approval from the SC for the above was obtained on 6 December 2018 for waiver from compliance with paragraph 12.01(a) (in respect of items (i), (iv), (v), (vi), (vii) and (viii)) of the Trust Deeds Guidelines. 1.9 Selling Restrictions The Sukuk Musharakah may only be offered, sold, transferred or otherwise disposed directly or indirectly, to a person to whom an offer for subscription or purchase of, or invitation to subscribe for or purchase the Sukuk Musharakah and to whom the Sukuk Musharakah are issued would fall within: (i) Part 1 of Schedule 6 and Part 1 of Schedule 7; and (ii) read together with Schedule 9 or Section 257(3), of the CMSA, as amended from time to time. 10
  21. Thereafter , the Sukuk Musharakah may only be offered, sold, transferred or otherwise disposed directly or indirectly, to a person to whom an offer for subscription or purchase of, or invitation to subscribe for or purchase the Sukuk Musharakah and to whom the Sukuk Musharakah are issued would fall within: (i) Part 1 of Schedule 6 or Section 229(1)(b); and (ii) read together with Schedule 9 or Section 257(3), of the CMSA, as amended from time to time. 1.10 Upsizing of the Perpetual Sukuk Programme (Please refer to the definitions in Section 2.0 of this Information Memorandum for all terminologies used under this Section 1.10) The Issuer has the option to upsize the limit of the Perpetual Sukuk Programme at any time and from time to time subject to the following being fulfilled prior to the exercise of the option to upsize by the Issuer: (i) where relevant, the consents from existing financiers/lenders of the Issuer being obtained; (ii) the compliance with the relevant requirements under Part 3 of the LOLA Guidelines; (iii) confirmation from the Rating Agency that the prevailing rating of the Perpetual Sukuk Programme will not be adversely affected upon the implementation of such upsizing; and (iv) the necessary corporate authorisations of the Issuer being obtained, and the Sukukholders shall be deemed to have consented to such upsizing of the limit of the Perpetual Sukuk Programme in the Trust Deed. No consent is required from the Sukuk Trustee, the Facility Agent and any other party under the Perpetual Sukuk Programme when the upsizing of the limit of Perpetual Sukuk Programme is exercised by the Issuer. 1.11 Key Financial Highlights of the Issuer For the latest audited financial statements of the Issuer, please refer to Appendix I of the Information Memorandum. 1.12 Key Financial Highlights and Key Financial Metrics of the Kafalah Provider (a) Key Financial Highlights of the Kafalah Provider The following table presents a summary of the segmental information in respect of the IJM Corporation Group for the FYE 31 March 2018. 11
  22. Construction RM ’000 Revenue: Total revenue Less: Intersegment revenue Less: Share of operating revenue of associates and joint ventures Revenue from external customers RESULTS: Profit before taxation Depreciation and amortisation (A) * Finance cost (B) Earnings before interest, tax, depreciation and amortisation Other than (A) and (B), profit before taxation also includes: -Interest income -Impairment of property development costs -Share of profits/(losses) of associates -Share of profits/(losses) of joint ventures Property Development RM’000 Manufacturing & Quarrying RM’000 Investment & others RM’000 Group RM’000 1,076,247 747,217 1,001,873 488,637 7,947,850 (635,980) - (19,150) - - (485,807) (1,140,937) 2,674,392 (348,505) 1,323,504 (78,605) 1,057,097 (3,081) 747,217 - 1,001,873 (349,774) 2,830 - 6,806,913 (779,965) 2,325,887 1,244,899 1,054,016 747,217 652,099 2,830 6,026,948 226,014 110,559 82,479 77,304 120,115 13,088 629,559 10,721 57,717 294,452 11,815 14,126 136,500 48,234 6,256 136,969 79,937 46,556 203,797 169,317 61,019 350,451 13,088 320,024 185,674 1,135,257 66,897 - 41,574 (21,869) 1,245 - 5,722 - 6,585 - 2,626 - 124,649 (21,869) 28,661 2,884 (310) - (24,478) (1,217) 5,540 26,344 (6,119) - - (30,227) - (10,002) 3,310,372 1,323,504 Plantation RM’000 Infrastructure RM’000 * It comprises depreciation and amortisation of property, plant and equipment, land use rights, investment properties, concession assets, intangible assets and government grants. 12
  23. The following table presents a summary of the quarterly report for the financial period ended 30 September 2018 . Individual Period Year Preceding Year Corresponding Quarter 30 September 2018 30 September 2017 RM’000 RM’000 Restated Cumulative Period Current Year Preceding to Date Year Corresponding Period 30 September 30 September 2018 2017 RM’000 RM’000 Restated 1,309,166 35,832 11,766 21,918 1,599,045 183,895 126,474 114,229 2,753,482 139,060 72,583 84,682 3,060,607 370,353 262,158 235,398 0.60 3.15 2.33 6.50 2.00 3.00 2.00 3.00 Current Quarter Revenue Profit before taxation Net Profit for the period Net Profit attributable to owners of the Company Basic earnings per share (sen) Proposed/Declared dividend per share (sen) Net assets per share attributable to ordinary equity holders of the parent (RM) As at end of current quarter 2.54 As at preceding financial year end Restated 2.58 For the latest audited financial statements of the Kafalah Provider and quarterly report for the financial period ended 30 September 2018, please refer to Appendix II of the Information Memorandum. 13
  24. (b) Key Financial Metrics FYE 31 March 2018 and FYE 31 March 2017 Construction Division 2018 2017 Revenue (RM’ million) PBT (RM’ million) PBT margin (%) 2,674.39 226.01 8.5 2,532.15 216.72 8.6 Property Division 2018 2017 Revenue (RM’ million) PBT (RM’ million) 1,323.50 110.56 1,516.23 303.28 8.4 20.0 PBT margin (%) Industry Division 2018 2017 Revenue (RM’ million) PBT (RM’ million) PBT margin (%) 1,057.10 82.48 7.8 1,136.61 142.42 12.5 Plantation Division 2018 2017 Revenue (RM’ million) PBT (RM’ million) PBT margin (%) 1.13 747.22 77.30 10.4 Infrastructure Division 2018 Revenue (RM’ million) PBT (RM’ million) PBT margin (%) 1,001.87 120.12 12.0 753.71 168.51 22.4 2017 975.52 62.31 6.4 Credit Rating The Sukuk Musharakah has been accorded a credit rating as follows: Credit Rating Agency Credit Rating Final/ Indicative Rating Amount Rated RAM A2 Final RM2.0 billion THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 14
  25. SECTION 2 .0 PRINCIPAL TERMS AND CONDITIONS OF THE PERPETUAL SUKUK PROGRAMME The principal terms and conditions hereunder are NOT intended as a summary of the legal documentation entered or to be entered into in connection with the Perpetual Sukuk Programme. To understand all of the terms and conditions of the Perpetual Sukuk Programme, investors should read the legal documentation concerned and obtain such necessary professional advice on the same. Words and expressions used and defined in this Section 2.0, in the event of any inconsistency with the definition section of this Information Memorandum, shall only be applicable for this Section 2.0. 2.1 DETAILS OF FACILITY / PROGRAMME 1. Name of facility : A perpetual Islamic notes issuance programme of RM2.0 billion in nominal value based on the Shariah principle of Musharakah with a Subordinated Guarantee from IJM Corporation Berhad (“Perpetual Sukuk Programme”). 2. One time programme 3. Shariah Sukuk) 4. Facility description (for ringgit-denominated sukuk, to provide description as cleared by the SC) issue Principle or : Programme (for : Musharakah Any perpetual Islamic notes to be issued under the Perpetual Sukuk Programme will be issued under the Shariah principle of Musharakah (“Sukuk Musharakah”). The Sukuk Musharakah comprise certificates representing undivided beneficial interest in the Musharakah Venture (as defined below) and any funds held by the Manager (as defined below) on account of holders of the Sukuk Musharakah (“Sukukholders”). A description of the structure and summary of the principal Islamic documents are set out below. Underlying Transaction Master Musharakah Agreement The Sukuk Trustee (on behalf of the Sukukholders) and IJM Land will enter into a master Musharakah agreement (the “Master Musharakah Agreement”) under which, the parties as partners (each a "Partner" and collectively the "Musharakah Partners") may, from time to time, enter into Musharakah agreements (each a “Musharakah Agreement”) 15
  26. for the purposes of undertaking a venture (the “Musharakah Venture”) consisting of Shariahcompliant investments in the business operations of the Issuer and/or its subsidiaries or part thereof identified and held on trust by IJM Land on behalf of the Sukukholders (“Business”) which are to be identified prior to the issuance of the Sukuk Musharakah. The Issuer shall issue the Sukuk Musharakah to the Sukukholders and the Sukukholders shall participate in the Musharakah Venture via subscription of the Sukuk Musharakah issued by the Issuer. The Sukuk Musharakah shall represent the respective Sukukholders' undivided proportionate interest in the Musharakah Venture and any funds held on account of the Sukukholders. The capital contribution of the Sukukholders (“Musharakah Capital”) to the Musharakah Venture is the proceeds raised from the Sukuk Musharakah while IJM Land shall contribute the Business as a capital contribution in kind to the Musharakah Venture. Simultaneously, the Issuer shall make a declaration that it holds on trust the Musharakah Partners' interest in the Business for the benefit of the Sukukholder(s) and itself pursuant to the Musharakah Venture. For avoidance of doubt, the value of the Business shall be valued at the point of issuance based on net book value, market value or such other valuation methods acceptable to the Shariah Adviser. The Sukukholder(s) shall appoint the Issuer as the manager to manage the Musharakah Venture ("Manager"). Income from the Musharakah Venture shall be distributed to each Partner based on a profit sharing ratio of 95:5 (Sukukholder(s): Issuer). Any losses incurred in the Musharakah Venture shall be borne by each Partner in proportion to each Partner’s respective capital contribution in the Musharakah Venture. Each Musharakah Agreement will contain terms for the expected periodic distributions from that Musharakah Venture for each agreed period (each a “Distribution Period”). The expected periodic distribution amount (“Expected Periodic Distribution Amount”) on any relevant Periodic Distribution Date (to be paid on a semi-annual basis, or such other period to be agreed between the Issuer and the Sukukholder(s) from the issue date) is calculated at the prevailing Periodic Distribution Rate (as defined in the section entitled Other terms and conditions – Periodic Distribution 16
  27. Rate ) on the nominal value of the relevant tranche of the Sukuk Musharakah. Should the Issuer decide to dissolve or dispose of the Business, the Manager shall substitute from time to time throughout the tenure of the Sukuk Musharakah via a substitution agreement entered into between the Manager and the Sukuk Trustee (on behalf of the Sukukholders), to substitute the Business with a new business that is Shariahcompliant and approved by the Shariah Adviser. For the avoidance of doubt, the Business of the existing Musharakah Venture will be substituted with a different Business of at least equal value to the Business of such existing Musharakah Venture being replaced. Under the relevant Musharakah Venture, the Sukukholders have agreed upfront that they shall receive income generated from the relevant Musharakah Venture up to the aggregate Expected Periodic Distribution Amount. Any excess income from the relevant Musharakah Venture shall be retained by the Manager as a reserve ("Reserve") on behalf of the Sukukholders which may be utilised by the Manager from time to time for its own purposes provided that the Manager shall be required to re-credit such amounts when (a) there is a Shortfall (as defined below) and to the extent required of such Shortfall; and (b) upon the dissolution of the relevant Musharakah Venture pursuant to the Redemption Events (as defined in the section entitled Call options and details, if applicable) and/or Enforcement Events (as defined in the section entitled Events of default or enforcement events, where applicable, including recourse available to investors). Upon dissolution of the relevant Musharakah Venture pursuant to the Redemption Events and/or Enforcement Events and if there is positive balance in the Reserve, such amount in the Reserve will be given to the Manager as an incentive fee. In the event the income generated is insufficient to pay the Expected Periodic Distribution Amount, the Manager (i) shall utilise any amount available in the Reserve to cover the shortfall between such Expected Periodic Distribution Amount and the income generated (“Shortfall”) and (ii) may at its sole discretion provide a Shariah-compliant liquidity facility whereby it shall advance to the Sukuk Trustee (on behalf of the Sukukholders) an amount sufficient to make up the Shortfall (adjusted accordingly pursuant to any utilisation of 17
  28. the Reserve as referred to in (i) above, if applicable) in order to enable the Issuer to make payment in full of the said Expected Periodic Distribution Amount. Any amount of liquidity facility advanced by the Manager throughout the tenure of the Sukuk Musharakah will be repaid to the Manager upon redemption of the Sukuk Musharakah in full and such amount to be repaid shall be referred to as the “Liquidity Facility”. Periodic Distribution Deferral As agreed by the Sukukholders, IJM Land may at its sole discretion (unless an Issuer’s Compulsory Periodic Distribution Payment Event OR a Kafalah Provider’s Compulsory Periodic Distribution Payment Event (as defined in the section entitled Other terms and conditions – Issuer’s Compulsory Periodic Distribution Payment Event and Kafalah Provider’s Compulsory Periodic Distribution Payment Event respectively) has occurred) elect to make payment of all or some of the Expected Periodic Distribution Amount (such Expected Periodic Distribution Amount being deferred shall constitute the “Arrears of Deferred Periodic Distribution”) on the Periodic Distribution Date (as defined in the section entitled Other terms and conditions - Periodic Distribution Frequency) or elect to defer all or some of such payment by giving an optional deferral notice in writing (“Optional Deferral Notice”) signed by the Issuer to the Facility Agent and the Sukuk Trustee (for and on behalf of the Sukukholders) not more than fifteen (15) nor less than five (5) business days prior to the relevant Periodic Distribution Date. Each amount of Arrears of Deferred Periodic Distribution shall (unless the same has been paid by the Kafalah Provider) itself be entitled to Expected Periodic Distribution Amounts (as the deferred Expected Periodic Distribution Amount will form part of the Sukukholders’ Musharakah Capital) at the prevailing Periodic Distribution Rate and the amount of such Expected Periodic Distribution Amount (the "Additional Periodic Distribution Amount") with respect to Arrears of Deferred Periodic Distribution shall be payable pursuant to this paragraph and shall be calculated by applying the then prevailing Periodic Distribution Rate to the Arrears of Deferred Periodic Distribution and otherwise mutatis mutandis as provided in the foregoing provisions of this paragraph. The Additional Periodic Distribution Amount accrued up to any Periodic Distribution Date shall be added for the purpose of calculating 18
  29. the Additional Periodic Distribution Amount accruing thereafter , to the amount of Arrears of Deferred Periodic Distribution remaining unpaid on such Periodic Distribution Date so that it will itself become Arrears of Deferred Periodic Distribution. Partial or Full Deferral Income from Musharakah Venture equal to or in excess of Expected Periodic Distribution Amount If there has been sufficient income generated from the relevant Musharakah Venture to satisfy the payment of such part of or all the relevant Expected Periodic Distribution Amount being deferred which would otherwise become due and payable under the Sukuk Musharakah, under the relevant Musharakah Agreement, the Sukukholders irrevocably authorise the Manager to reinvest the income generated from the relevant Musharakah Venture up to the value of such Expected Periodic Distribution Amount being deferred pursuant to optional deferral into the existing Musharakah Venture as additional capital from the Sukukholders (“Additional Capital”). For avoidance of doubt, any reinvestment shall not increase the nominal value of the relevant Sukuk Musharakah. Any excess of the income generated from the relevant Musharakah Venture above the relevant Expected Periodic Distribution Amount shall be retained by the Manager in the Reserve on behalf of the Sukukholders. Any payment of the Arrears of Deferred Periodic Distribution which are reinvested into the Musharakah Venture shall constitute payment of the Additional Capital (“Capital Payment”). Any Capital Payment made by the Issuer shall be shared by the Sukukholders of all outstanding Sukuk Musharakah on a pro-rata basis and the respective Sukukholders’ Musharakah Capital shall be adjusted accordingly. Any payment of the Arrears of Deferred Periodic Distribution shall constitute Capital Payment to the Sukukholders. For the avoidance of doubt, there would not be any double counting with regard to the payment of the Arrears of Deferred Periodic Distribution vis-à-vis Capital Payment of the Musharakah Venture. Income from the Musharakah Venture less than Expected Periodic Distribution Amount 19
  30. If the income from the relevant Musharakah Venture is insufficient to pay the Expected Periodic Distribution Amount or such part thereof which has not been deferred pursuant to optional deferral and is therefore due and payable , the Manager (i) shall utilise any amount available in the Reserve to cover the Shortfall in respect of such Expected Periodic Distribution Amount which has not been deferred and is therefore due and payable and (ii) may at its sole discretion provide a Shariahcompliant liquidity facility whereby it shall advance to the Sukuk Trustee (on behalf of the Sukukholders) an amount sufficient to make up the Shortfall (adjusted accordingly pursuant to any utilisation of the Reserve as referred to in (i) above, if applicable), in order to enable the Issuer to make payment of the said Expected Periodic Distribution Amount which has not been deferred. The Liquidity Facility will be repaid to the Manager upon redemption of the Sukuk Musharakah in full. In the event the income generated from the relevant Musharakah Venture is lower than the Expected Periodic Distribution Amount, the amount in the Reserve has been fully utilised and the Manager does not provide any Liquidity Facility, the relevant Musharakah Venture shall be dissolved (“Deferral Dissolution”) through an exercise of the Purchase Undertaking (as defined herein), and such part of or all of the Exercise Price (as defined in the section entitled Other terms and conditions - Exercise Price) shall be applied towards investment in a new Musharakah Venture. The book entries associated with the dissolution of the relevant Musharakah Venture and investment into a new Musharakah Venture shall be made in the books of the Manager. For the avoidance of doubt, (i) a dissolution of the relevant Musharakah Venture in this manner will not result in a redemption of the relevant Sukuk Musharakah and (ii) any investment shall not increase the nominal value of the relevant Sukuk Musharakah. For the avoidance of doubt, in the event of a Deferral Dissolution, a failure by the Issuer to pay any Expected Periodic Distribution Amount due and payable up to the date of dissolution (including any Arrears of Deferred Periodic Distribution and any Additional Periodic Distribution Amount) shall constitute an Enforcement Event, if such failure continues for a period of seven (7) business days or more. 20
  31. Purchase Undertaking The Issuer , as the obligor to the Purchase Undertaking (“Purchase Undertaking Obligor”), shall issue a master purchase undertaking ("Purchase Undertaking") to the Sukuk Trustee (acting for and on behalf of the Sukukholders), where the Issuer (as the Purchase Undertaking Obligor) undertakes to purchase the Sukukholders’ interests in the relevant Musharakah Venture from the Sukuk Trustee (acting for and on behalf of the Sukukholders) at the Exercise Price upon (i) the declaration of an Enforcement Event in accordance with the terms set out herein; (ii) a Deferral Dissolution; or (iii) non-payment of the Expected Periodic Distribution Amount under the Sukuk Musharakah falling due and payable by the Issuer and the Kafalah Provider (whether by virtue of the occurrence of an Issuer's Compulsory Periodic Distribution Payment Event or Kafalah Provider's Compulsory Periodic Distribution Payment Event or a breach of the Dividend and Capital Stopper (as defined in the section entitled Other terms and conditions – Dividend and Capital Stopper), and to execute a sale agreement for such purchase. The purchase of the Sukukholders’ undivided beneficial interests in the relevant Musharakah Venture would lead to dissolution of the said Musharakah Venture. For the avoidance of doubt: (a) in the case of Deferral Dissolution, the Exercise Price pursuant to the exercise of the Purchase Undertaking, less the amount of such portion of the Expected Periodic Distribution Amount which is not deferred shall be invested into a new Musharakah Venture; and (b) in the case of non-payment of the Expected Periodic Distribution Amount under the Sukuk Musharakah falling due and payable by the Issuer and the Kafalah Provider (whether by virtue of the occurrence of an Issuer's Compulsory Periodic Distribution Payment Event or Kafalah Provider's Compulsory Periodic Distribution Payment Event or a breach of the Dividend and Capital Stopper by the Issuer or the Kafalah Provider), the Exercise Price less the Expected Periodic Distribution Amount falling due and payable (i.e. the nominal value of the relevant Sukuk Musharakah) shall be invested into a new Musharakah Venture and is therefore not due and payable notwithstanding the exercise of the Purchase Undertaking. The Business of the new Musharakah Venture shall be different from the original Business that was part of the dissolved Musharakah Venture. The balance of the Exercise 21
  32. Price (if applicable) shall be distributed to the Sukukholders as Expected Periodic Distribution Amount which is not deferred. Sale Undertaking The Sukuk Trustee (for and on behalf of the Sukukholders) shall issue a master sale undertaking ("Sale Undertaking") to the Issuer, where the Sukuk Trustee (for and on behalf of the Sukukholders) undertakes to sell the Sukukholders’ interests in the relevant Musharakah Venture to the Issuer at the Exercise Price, upon redemption of the Sukuk Musharakah pursuant to the relevant Redemption Events and execute a sale agreement for such sale, in accordance with the terms as set out herein. The Exercise Price shall be the sum payable by the Issuer or the Kafalah Provider pursuant to its obligations under the Subordinated Guarantee (as defined in the section entitled Details of guarantee, if applicable) (as the case may be) to the Sukukholders pursuant to the relevant Redemption Events, Deferral Dissolution or Enforcement Events and such purchase shall be effected by the Issuer or the Kafalah Provider (as the case may be) via a sale agreement pursuant to the Sale Undertaking or the Purchase Undertaking, as the case may be. The Exercise Price shall be calculated in accordance with the formula described in the section entitled Other terms and conditions - Exercise Price. For the avoidance of doubt, in the event of a breach of Dividend and Capital Stopper by the Kafalah Provider, the outstanding deferred Expected Periodic Distribution Amount will become due and payable by the Kafalah Provider, and failure to pay such amount within the stipulated timeframe will trigger an Enforcement Event and where a final and effective order is made or an effective resolution is passed for the liquidation, winding-up or dissolution of the Kafalah Provider, provided that a stay on such order has not been granted by the relevant court of competent jurisdiction within thirty (30) days from the date of such order, the Exercise Price shall then be due and payable by the Kafalah Provider. For the avoidance of doubt, a separate sale agreement will be executed from time to time upon the occurrence of a Redemption Event or Deferral Dissolution or Enforcement Event, where relevant, pursuant to the Purchase Undertaking or Sale 22
  33. Undertaking , as the case may be. Please refer to the Annexure for the diagrammatic illustration of the Musharakah structure. 5. Currency 6. Expected : ☐Up to RM2.0 billion facility/programme size (for Option to upsize: Yes programme, to state the option to upsize) 7. Tenure facility/programme 8. Availability period of sukuk : The Sukuk Musharakah may be issued at any time programme upon completion of the Transaction Documents and fulfillment of all conditions precedent to the satisfaction of the LA, unless waived by the LA, provided that the first issuance of the Sukuk Musharakah shall be made within sixty (60) business days from the date of the Lodgement with the SC. 9. Clearing platform 10. Mode of issue : 11. Selling restrictions : (i) : Ringgit and of : Perpetual settlement : PayNet    ☐ ☐    ☐ ☐  Private/direct placement Bought deal Book building Tender At issuance Exclusively to persons outside Malaysia Part 1 of Schedule 6 of the CMSA Part 1 of Schedule 7 of the CMSA Read together with Schedule 9 of CMSA Schedule 8 of CMSA Section 2(6) of the Companies Act,2016 Other Selling Restrictions at Issuance The Sukuk Musharakah may only be offered, sold, transferred or otherwise disposed directly or indirectly, to a person to whom an offer for subscription or purchase of, or invitation to subscribe for or purchase the Sukuk Musharakah and to whom the Sukuk Musharakah are issued would fall within Part 1 of Schedule 6 and Part 1 of Schedule 7 of the Capital Markets and Services Act, 2007 as amended from time to time ("CMSA") 23
  34. read together with Schedule 9 or Section 257 (3) of the CMSA. (ii) ☐   ☐ ☐  After issuance Exclusively to persons outside Malaysia Part 1 of Schedule 6 of the CMSA Read together with Schedule 9 of CMSA Schedule 8 of CMSA Section 2(6) of the Companies Act, 2016 Other Selling Restrictions after Issuance The Sukuk Musharakah may only be offered, sold, transferred or otherwise disposed directly or indirectly, to a person to whom an offer for subscription or purchase of, or invitation to subscribe for or purchase the Sukuk Musharakah and to whom the Sukuk Musharakah are issued would fall within Part 1 of Schedule 6 or Section 229(1)(b) of the CMSA read together with Schedule 9 or Section 257(3) of the CMSA. 12. Tradability transferability and : Tradable & transferable. 13. Details of security/collateral : Unsecured. pledged, if applicable 14. Details of applicable guarantee, if : The Kafalah Provider shall provide a guarantee based on the Shariah principle of Kafalah, as a continuing obligation, in favour of the Sukuk Trustee for and on behalf of the Sukukholders (“Subordinated Guarantee”), whereby pursuant to the Subordinated Guarantee: (A) Subordinated guarantee for Non Payment of Periodic Distribution Payment In the event of any non-payment of the Expected Periodic Distribution Amount under the Sukuk Musharakah falling due and payable (whether by virtue of the occurrence of an Issuer's Compulsory Periodic Distribution Payment Event or Kafalah Provider's Compulsory Periodic Distribution Payment Event or a breach of the Dividend and Capital Stopper by the Issuer or the Kafalah Provider), the relevant Musharakah Venture shall be dissolved through an exercise of the Purchase Undertaking and the Exercise Price less the Expected Periodic Distribution Amount falling due and 24
  35. payable (i.e. the nominal value of the relevant Sukuk Musharakah) shall be invested into a new Musharakah Venture and is therefore not due and payable notwithstanding the exercise of the Purchase Undertaking and the Kafalah Provider shall pay such due and payable Expected Periodic Distribution Amount (i.e. the remaining part of the Exercise Price) within 15 days from the date where such payment notice is served by the Facility Agent (such payment notice under the Subordinated Guarantee shall be served by the Facility Agent within 2 business days from the relevant Periodic Distribution Date) to the Kafalah Provider. For the avoidance of doubt, any amount of Expected Periodic Distribution Amount under the Sukuk Musharakah deferred pursuant to Optional Deferral of Distribution (As defined in the section entitled Other terms and conditions – Optional Deferral of Distribution) shall NOT be deemed to be due and payable. Should there be a breach of the Dividend and Capital Stopper by the Issuer or the Kafalah Provider, the relevant Musharakah Venture shall be dissolved through an exercise of the Purchase Undertaking and the Exercise Price less the Expected Periodic Distribution Amount falling due and payable (whether by virtue of the occurrence of an Issuer's Compulsory Periodic Distribution Payment Event or Kafalah Provider's Compulsory Periodic Distribution Payment Event or a breach of the Dividend and Capital Stopper by the Issuer or the Kafalah Provider) (i.e. the nominal value of the relevant Sukuk Musharakah) shall be invested into a new Musharakah Venture and is therefore not due and payable notwithstanding the exercise of the Purchase Undertaking and the Kafalah Provider shall pay such deferred Expected Periodic Distribution Amount including any Arrears of Deferred Periodic Distribution (if any) (i.e. the remaining part of the Exercise Price) to the Sukukholders within 15 days from the date of such breach. Once the deferred Expected Periodic Distribution Amount including any Arrears of the Deferred Periodic Distribution (if any) has been paid in full by the Kafalah Provider in accordance 25
  36. with the Subordinated Guarantee , the obligations of the Issuer in respect of the same shall then be extinguished. (B) Subordinated guarantee for the Exercise Price pursuant to Issuer’s Winding up Event Following an Enforcement Event of the Issuer where there is a final and effective winding up order made on the Issuer, or when an effective resolution is passed for the winding-up or dissolution of the Issuer (“Issuer’s Winding Up Event”), the Subordinated Guarantee shall be triggered and the Exercise Price under the Sukuk Musharakah shall be due and payable in cash by the Kafalah Provider to the Sukukholders no later than 3 months from the date of Issuer’s Winding Up Event, or upon the issuance of the Replacement Perpetual Sukuk (as defined below), whichever is earlier. Hence, unless so decided otherwise by the Sukukholders by way of an extraordinary resolution that the Replacement Perpetual Sukuk (as defined below) is not required, the Kafalah Provider shall take all immediate and necessary steps to, within 3 months from the occurrence of the Issuer’s Winding Up Event, issue a replacement perpetual Sukuk mirroring the terms of the Sukuk Musharakah including, but not limited to, the same periodic distribution rates and call dates, for a nominal amount similar to that of the Sukuk Musharakah (“Replacement Perpetual Sukuk”). For the purposes of the issuance of the Replacement Perpetual Sukuk, the Sukukholders irrevocably authorise the Kafalah Provider to retain the Exercise Price (payable to the Sukukholders by the Kafalah Provider in cash pursuant to the Subordinated Guarantee) and invest, on behalf of the Sukukholders, part of the Exercise Price equivalent to the nominal value of the Sukuk Musharakah into the new Musharakah venture under the Replacement Perpetual Sukuk, while the Kafalah Provider shall contribute the business operation of the Kafalah Provider and/or its subsidiaries or part thereof identified and held on trust by the Kafalah Provider on behalf of the holders of the Replacement Perpetual Sukuk as a contribution in kind to the Musharakah 26
  37. venture under the Replacement Perpetual Sukuk . The Sukukholders also irrevocably authorise the Kafalah Provider to invest the remaining part of the Exercise Price into the Musharakah venture under the Replacement Perpetual Sukuk as additional capital, which form part of the expected periodic distribution amount under the Replacement Perpetual Sukuk and would itself be entitled to additional periodic distribution amount. For the avoidance of doubt, such additional capital shall not increase the nominal value of the Replacement Perpetual Sukuk. Any payment of such additional capital to the holders of the Replacement Perpetual Sukuk shall be deemed as a repayment of such additional capital, and not payment of profit from the Musharakah venture under the Replacement Perpetual Sukuk. Upon issuance of the Replacement Perpetual Sukuk, the Sukuk Musharakah will be deemed cancelled and there shall be no further obligations whatsoever from the Issuer, on the Sukuk Musharakah. For the avoidance of doubt, the issuance of the Replacement Perpetual Sukuk shall be subject to a new SC Lodgement and other necessary regulatory approvals as required at the time for the new issuance. The Replacement Perpetual Sukuk shall be issued to the Sukukholders in consideration of the Sukukholders’ investment of part of the Exercise Price equivalent to the nominal value of the Sukuk Musharakah (payable to the Sukukholders by the Kafalah Provider in cash pursuant to the Subordinated Guarantee) into the new Musharakah venture under the Replacement Perpetual Sukuk. Until the completion of the issuance of the Replacement Perpetual Sukuk, Dividend and Capital Stopper shall apply to the Kafalah Provider. In the event of a breach of Dividend and Capital Stopper arising from an Issuer’s Winding Up Event and completion of the issuance of the Replacement Perpetual Sukuk, the Exercise Price shall be payable by the Kafalah Provider, pursuant to the Subordinated Guarantee, within 30 days from the date of the breach of Dividend and 27
  38. Capital Stopper . In the event of a failure by the Kafalah Provider to issue the Replacement Perpetual Sukuk within 3 months from the date of Issuer’s Winding Up Event, the Exercise Price shall be immediately due and payable by the Kafalah Provider. For the avoidance of doubt, no Replacement Perpetual Sukuk shall be issued if the Enforcement Event relates to the liquidation, winding up or dissolution of the Kafalah Provider. 15. Convertibility of issuance : Non-convertible. and details of the convertibility 16. Exchangeability of issuance : Non-exchangeable. and details of the exchangeability 17. Call option and details, if : The Issuer may redeem the Sukuk Musharakah applicable pursuant to the following: (1) Optional Redemption (as defined in the section entitled Other terms and conditions – Optional Redemption); (2) Accounting Event Redemption (as defined in the section entitled Other terms and conditions - Accounting Event Redemption); (3) Tax Event Redemption (as defined in the section entitled Other terms and conditions – Tax Event Redemption); (4) Rating Event Redemption (as defined in the section entitled Other terms and conditions – Rating Event Redemption); and (5) Change of Control Redemption (as defined in the section entitled Other terms and conditions – Change of Control Redemption), (collectively, the "Redemption Events" and each a "Redemption Event"). 18. Put option and details, if : No put option. applicable 28
  39. 19 . Details of covenants: (a) Positive covenants in respect of the Issuer : To include but not limited to the following: (1) the Issuer shall maintain in full force and effect all relevant authorisations, consents, rights, licences, approvals and permits (governmental and otherwise) and will promptly obtain any further authorisations, consents, rights, licences, approvals and permits (governmental and otherwise) which is or may become necessary to enable it to own its assets, to carry on its business or for the Issuer to enter into or perform its obligations under the Transaction Documents or to ensure the validity, enforceability, admissibility in evidence of the obligations of the Issuer or the priority or rights of the Sukukholders under the Transaction Documents and the Issuer shall comply with the same; (2) the Issuer shall at all times on demand execute all such further documents and do all such further acts reasonably necessary at any time or times to give effect to the terms and conditions of the Transaction Documents; (3) the Issuer shall exercise reasonable diligence in carrying out its business and affairs in a proper and efficient manner and in accordance with sound financial and commercial standards and practices; (4) the Issuer shall promptly perform and carry out all its obligations under all the Transaction Documents to which it is a party (including but not limited to payment of amounts due under the Sukuk Musharakah on the relevant dates on which such amounts are due and payable, subject to the Optional Deferral of Distribution as defined in the section entitled Other terms and conditions – Optional Deferral of Distribution) and ensure that it shall immediately notify the Sukuk Trustee in the event that the Issuer is unable to fulfil or comply with any of the provisions of the Transaction Documents; (5) the Issuer shall prepare its financial statements on a basis consistently applied in accordance with approved accounting standards in Malaysia and those financial statements shall give a true and fair view of 29
  40. the results of the operations of the Issuer for the period to which the financial statements are made up in line with the approved accounting standard ; (6) the Issuer shall promptly comply with all applicable laws including the provisions of the CMSA and/or the notes, circulars, conditions or guidelines issued by the SC from time to time; (7) the Issuer shall at all times maintain a paying agent who is based in Malaysia and the Issuer shall procure the paying agent to notify the Sukuk Trustee, through the Facility Agent, if the paying agent does not receive payment from the Issuer on the due dates as required under the Trust Deed and the terms and conditions of the Sukuk Musharakah (unless any payment is deferred in accordance with the terms of the Sukuk Musharakah); (8) the Issuer shall keep proper books and accounts at all times and to provide the Sukuk Trustee and any person appointed by it (e.g. auditors) access to such books and accounts to the extent permitted by law with a notice of seven (7) business days to be given in writing; (9) the Issuer shall ensure that the terms in the Transaction Documents do not contain any matter which is inconsistent with the provisions of the IM; (10) the Issuer shall maintain adequate Takaful/insurance where necessary for the business of such nature with reputable Takaful providers / insurance companies and shall notify the Sukuk Trustee within seven (7) business days of any event which or may give rise to any claim or right of action under any Takaful / insurance; (11) the Issuer shall open and maintain the Shariah-compliant Sukuk Trustees' Reimbursement Account for Sukukholders’ actions (the “Sukuk Trustees’ Reimbursement Account”) with a sum of Ringgit Malaysia Thirty Thousand (RM30,000.00) to be set up from the monies received by the Issuer when the Sukuk Musharakah are issued. The Sukuk Trustees' Reimbursement Account shall be 30
  41. solely operated by the Sukuk Trustee and the money in the Sukuk Trustees ' Reimbursement Account may be used for defraying expenses that may be incurred in carrying out its duties in relation to the occurrence of Enforcement Events which are provided under the Transaction Documents; and (12) any other covenants as advised by the Solicitor and mutually agreed between the LA and the Issuer. (b) Negative covenants in : To include but not limited to the following; wherein respect of the Issuer the Issuer SHALL NOT, for so long as any liability under the Perpetual Sukuk Programme remains undischarged, without the prior written consent of the Sukuk Trustee (acting on instructions of the Sukukholders): (1) other than those disclosed in writing to the PA/LA prior to the execution of the Transaction Documents, create or permit to exist any encumbrance, mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment by way of security, trust arrangement for the purpose of providing security or other security interest of any kind over the whole or any part of its property, assets or revenues (whether present or future), unless the following conditions are complied with: (i) There is no outstanding Arrears of Deferred Periodic Distribution; (ii) No Enforcement Event has occurred; and (iii) The amount subject to such security interest shall not exceed the aggregate amount of Ringgit Malaysia One Hundred Million (RM100,000,000.00) at any one point in time. For the avoidance of doubt, no consent from the Sukuk Trustee is required for the Issuer to give any guarantee, indemnity, undertaking, financial assistance or credit support letter including but not limited to letter of comfort or any other similar agreement or arrangement, which are not secured against any of the Issuer’s property/assets/revenues, in relation to the borrowings/financings/operations of any of 31
  42. the entities within the IJM Land Group (as defined in the section entitled Other terms and conditions – Utilisation of Proceeds) and/or as required in the ordinary course of business of the IJM Land Group; (2) add, delete, amend, supplement, vary or substitute its Memorandum or Articles of Association/Constitution in a manner which may have a Material Adverse Effect and/or may be materially prejudicial to the interest of the Sukukholders; For the purpose of these terms and conditions, “Material Adverse Effect” shall mean any material adverse effect on: the business or condition (financial or otherwise) or results of the operations of the Issuer or the Kafalah Provider which would affect the ability of the Issuer or the Kafalah Provider to perform any of its obligations under any of the Transaction Documents in accordance with its terms. (3) enter into any transactions, whether directly or indirectly with any of its interested persons (including its directors, chief executive and major shareholders or persons connected with them) (“Interested Persons”) unless such transaction is entered into: (a) on an arms-length basis and on terms no less favourable to the Issuer than those which could have been obtained in comparable transactions from persons who are not Interested Persons; and (b) with respect to transactions involving an aggregate payment or value equal to or greater than the agreed percentage ratios as set out in the Main Market Listing Requirements of Bursa Malaysia (“Main Market Listing Requirements”), the Issuer obtains certification from an independent adviser that the transaction is carried out on fair and reasonable terms, Provided that the Issuer certifies to the Sukuk Trustee that the transaction complies with paragraph (a) above, that the Issuer has received the certification referred to in paragraph (b) (where applicable) and that the transaction has been approved by the 32
  43. majority of the board of directors or shareholders in a general meeting as the case may require ; (4) utilise the proceeds of the Sukuk Musharakah except for the purposes set out in the Transaction Documents and the IM and change the utilisation of proceeds set out therein; (5) take steps to wind-up or dissolve itself; (6) lend any money to any party other than: (a) normal trade credit in the ordinary course of business; (b) loans to the Issuer’s directors, officers or employees as part of their terms of employment; and/or (c) inter-company loans or advances to any entity within the IJM Land Group; and (7) any other covenants as advised by the Solicitor and mutually agreed between the LA and the Issuer. (c) Financial covenant : No financial covenant. (d) Information covenants : To include but not limited to the following: in respect of the Issuer (1) the Issuer shall provide to the Sukuk Trustee at least on an annual basis, a certificate confirming, executed by any two directors of the Issuer, that it has complied with all its obligations under the Transaction Documents and that there does not exist or had not existed, from the date the Sukuk Musharakah were issued or the date of the previous certificate as the case may be, any Enforcement Event, and if such is not the case, to specify the same; (2) the Issuer shall deliver to the Sukuk Trustee the following: (a) 33 as soon as they become available (and in any event within one hundred and eighty (180) days after the end of each of its financial years) copies of its consolidated annual financial statements for that year which shall contain the income statements and balance sheets of the Issuer and which are audited and certified without qualification by a firm of independent certified public accountants acceptable to the Sukuk Trustee;
  44. (3) (b) as soon as they become available (and in any event within ninety (90) days after the end of the first half of each of its financial year) copies of its unaudited half yearly income statements and balance sheets of the Issuer; (c) promptly, any relevant information as the Sukuk Trustee may from time to time reasonably request in writing in order to discharge its duties and obligations as Sukuk Trustee under the Transaction Documents relating to the Issuer's affairs to the extent permitted by law; and (d) promptly, (i) all statutory notices or other documents received by the Issuer from its shareholders which contents may materially and adversely affect the interests of the Sukukholders; and (ii) a copy of all accounts, reports, notice, statement or circular dispatched by the Issuer to its shareholders generally at the same time as these documents are dispatched to these shareholders; the Issuer shall notify the Sukuk Trustee in writing immediately in the event that the Issuer becomes aware of: (a) the occurrence of any Enforcement Event; (b) the happening of any event that has caused or could cause, one or more of the following: 34 (i) any amount payable under the Sukuk Musharakah to become immediately payable; (ii) the Sukuk Musharakah to become immediately enforceable; or (iii) any other right or remedy under the terms, provisions or covenants of the Sukuk Musharakah or the Trust Deed to become immediately enforceable;
  45. (4) (c) any circumstance that has occurred that would materially prejudice the Issuer and/or the Kafalah Provider; (d) any substantial change in the nature of the business of the Issuer and/or the Kafalah Provider; (e) any change in the name of the Kafalah Provider; (f) any change in withholding tax position or taxing jurisdiction of the Issuer; (g) any cessation of liability of the Kafalah Provider for the payment of the whole or part of the moneys for which it was liable under the Subordinated Guarantee; (h) any other matter that may materially prejudice the interests of the Sukukholders; (i) any change in the utilisation of proceeds arising from the issuance of the Sukuk Musharakah under the Perpetual Sukuk Programme; and any other covenants as advised by the Solicitor and mutually agreed between the LA and the Issuer. 20. Details of designated : No designated accounts. account(s), if applicable 21. Name of credit rating : agency, credit rating(state whether final or indicative) and amount rated, if applicable 22. Conditions precedent Credit Rating Agency Credit Rating Final/ Indicative Rating Partial Amount Rated RAM A2 Final No RM2.0 billion : Conditions precedent shall consist of conditions which are standard and customary for a facility of this nature, to the satisfaction of the LA and shall include but not limited to the following (all have to be in form and substance acceptable to the LA): (1) Main Documentation 35
  46. (2) (3) (a) all relevant Transaction Documents have been executed, endorsed as exempted under Stamp Duty Exemption (No 23) Order 2000 or presented for registration where applicable. (b) all relevant notices and acknowledgements (where applicable) shall have been made or received as the case may be. The Issuer and Kafalah Provider (a) certified true copies of the Certificate of Incorporation and the Memorandum and Articles of Association/Constitution, of the Issuer and Kafalah Provider; (b) certified true copies of the latest Return for Allotment of Shares, Notification for Change in the Registered Address, and Notification of Change in the Register of Directors, Managers and Secretaries of the Issuer and Kafalah Provider; (c) certified true copy of board resolution(s) of the Issuer authorising, amongst others, the execution of the Transaction Documents; (d) a list of the Issuer's and relevant Kafalah Provider’s authorised signatories and their respective specimen signatures; (e) a report of the relevant company search of the Issuer and Kafalah Provider; and (f) a report of the relevant winding-up search of the Issuer and Kafalah Provider or the relevant statutory declaration of the Issuer and the Kafalah Provider. General (a) 36 acknowledgement from the SC on the lodgement made in respect of the Perpetual Sukuk Programme under the LOLA Guidelines, and, where applicable, approval from other
  47. regulatory authorities in connection with the issuance of the Sukuk Musharakah ; (b) the Perpetual Sukuk Progamme has received the requisite rating as stated in these terms and conditions; (c) satisfactory evidence that the Sukuk Trustees' Reimbursement Account has been opened in accordance with the Transaction Documents; (d) the LA have received from its Solicitor a satisfactory legal opinion addressed to them and the Sukuk Trustee advising with respect to, among others, the legality, validity and enforceability of the Transaction Documents and a confirmation addressed to the LA that all the conditions precedent have been fulfilled or otherwise waived; (e) evidence that all fees, costs and expenses in relation to the Perpetual Sukuk Programme have been paid or will be paid in full to the extent that the same are due and payable before the issuance of the Sukuk Musharakah; (f) where required, satisfactory evidence that all requisite consents/approvals have been obtained from the relevant financiers in respect of the Issuer’s and Kafalah Provider’s existing indebtedness (where applicable), for the Issuer to issue the Sukuk Musharakah and for the Kafalah Provider to issue the Subordinated Guarantee; (g) confirmation from the Shariah Adviser that the structure, mechanism and the Transaction Documents are in compliance with Shariah principles; and (h) such other conditions precedent to be advised by the Solicitor and mutually agreed between the LA and the Issuer and the Kafalah Provider. 37
  48. 23 . Representations warranties: (a) in respect Issuer: and of the Representations and warranties typical and customary for transaction of this nature which shall include but not limited to the following: (1) the Issuer is a company with limited liability duly incorporated and validly existing under the laws of Malaysia, and has full power to carry on its business and to own its property and assets, and has full beneficial ownership of all its respective property and assets; (2) the Memorandum and Articles of Association/Constitution of the Issuer incorporate provisions which authorise, and all necessary corporate and other relevant actions have been taken to authorise, and all relevant consents and approvals of any administrative, governmental or other authority or body in Malaysia have been duly obtained and are in full force and effect which are required to authorise, the Issuer to execute and deliver and perform the transactions contemplated in the Transaction Documents in accordance with their terms; (3) neither the execution and delivery of any of the Transaction Documents nor the performance of any of the transactions contemplated by the Transaction Documents did or does as at the date this representation and warranty is made or repeated (a) contravene or constitute a default under any provision contained in any agreement, instrument, law, ordinance, decree, judgment, order, rule, regulation, licence, permit or consent by which the Issuer or any of its assets is bound or which is applicable to the Issuer, or any of their assets, (b) cause any limitation on the Issuer or the powers of its directors, whether imposed by or contained in its Memorandum and Articles of Association/Constitution or in any agreement, instrument, law, ordinance, decree, order, rule, regulation, judgment or otherwise, to be exceeded, or (c) cause the creation or imposition of any security interest or restriction of any nature on any of the Issuer’s assets; (4) each of the Transaction Documents is or will when executed and/or issued, as the case may be, be in full force and effect and constitutes, or will when executed or issued, as the case may be, constitute, valid and legally binding obligations of the Issuer 38
  49. enforceable in accordance with its terms ; (b) in respect of Kafalah Provider: (5) no other registration, recording, filing or notarisation of the Transaction Documents and no payment of any duty or tax and no other action whatsoever is necessary or desirable, apart from those required to be done as conditions precedent for the issuance of Sukuk Musharakah as stated in item Conditions precedent herein, to ensure the validity or enforceability in Malaysia of the liabilities and obligations of the Issuer or the rights of the Sukuk Trustee under the Transaction Documents in accordance with their terms or to ensure the admissibility in evidence in Malaysia of the Transaction Documents; (6) the audited consolidated financial statements (including the statements of profit or loss and other comprehensive income and statements of financial position) of the Issuer for each financial year are prepared in accordance with approved accounting standards in Malaysia and give a true and fair view of the results of its operations for that year and the state of its affairs at that date; (7) there is no litigation, arbitration, winding-up or administrative proceeding or any other proceeding or claim which might by itself or together with any other such proceedings or claims which will have a Material Adverse Effect, is presently in progress or, pending or, to the best of the Issuer’s knowledge, threatened against the Issuer; and (8) such other representations and warranties as may be advised by the Solicitor and mutually agreed between the LA and the Issuer. the : Representations and warranties typical and customary for transaction of this nature which shall include but not limited to the following: (1) the Kafalah Provider is a company with limited liability duly incorporated and validly existing under the laws of Malaysia, and has full power to carry on its business and to own its property and assets, and has full beneficial ownership of all its respective property and assets; 39
  50. (2) the Memorandum and Articles of Association/Constitution of the Kafalah Provider incorporate provisions which authorise, and all necessary corporate and other relevant actions have been taken to authorise, and all relevant consents and approvals of any administrative, governmental or other authority or body in Malaysia have been duly obtained and are in full force and effect which are required to authorise, the Kafalah Provider to execute and deliver and perform the transactions contemplated in the Transaction Documents in accordance with their terms; (3) neither the execution and delivery of any of the Transaction Documents nor the performance of any of the transactions contemplated by the Transaction Documents did or does as at the date this representation and warranty is made or repeated (a) contravene or constitute a default under any provision contained in any agreement, instrument, law, ordinance, decree, judgment, order, rule, regulation, licence, permit or consent by which the Kafalah Provider or any of its assets is bound or which is applicable to the Kafalah Provider, or any of their assets, (b) cause any limitation on the Kafalah Provider or the powers of its directors, whether imposed by or contained in its Memorandum and Articles of Association/Constitution or in any agreement, instrument, law, ordinance, decree, order, rule, regulation, judgment or otherwise, to be exceeded, or (c) cause the creation or imposition of any security interest or restriction of any nature on any of the Kafalah Provider’s assets; (4) each of the Transaction Documents to which it is a party is or will when executed and/or issued, as the case may be, be in full force and effect and constitutes, or will when executed or issued, as the case may be, constitute, valid and legally binding obligations of the Kafalah Provider enforceable in accordance with its terms; (5) no other registration, recording, filing or notarisation of the Transaction Documents and no payment of any duty or tax and no other action whatsoever is necessary or desirable, apart from those required to be done as conditions precedent for the 40
  51. issuance of Sukuk Musharakah as stated in item Conditions precedent herein , to ensure the validity or enforceability in Malaysia of the liabilities and obligations of the Kafalah Provider or the rights of the Sukuk Trustee under the Transaction Documents in accordance with their terms or to ensure the admissibility in evidence in Malaysia of the Transaction Documents; 24. (6) the audited consolidated financial statements (including the statements of profit or loss and other comprehensive income and statements of financial position) of the Kafalah Provider for each financial year are prepared in accordance with approved accounting standards in Malaysia and give a true and fair view of the results of its operations for that year and the state of its affairs at that date; (7) there is no litigation, arbitration, winding-up or administrative proceeding or any other proceeding or claim which might by itself or together with any other such proceedings or claims which will have a Material Adverse Effect, is presently in progress or, pending or, to the best of the Kafalah Provider’s knowledge, threatened against the Kafalah Provider; and (8) such other representations and warranties as may be advised by the Solicitor and mutually agreed between the LA and the Kafalah Provider. Events of default or : Events of Default or Dissolution Events enforcement events, where applicable, including There are no events of default or dissolution recourse available to events which will entitle the Sukuk Trustee or the investors Sukukholders to declare that any or all amounts under the Sukuk Musharakah to be immediately due and payable. Enforcement Events Upon the occurrence of any of the following enforcement events set out below, the Enforcement Method (as defined below) may be enforced. The enforcement events (collectively, the "Enforcement Events" and each an "Enforcement Event") are as follows: 41
  52. (1) where a final and effective order is made or an effective resolution is passed for the liquidation, winding-up or dissolution of the Issuer or the Kafalah Provider, provided that a stay on such order has not been granted by the relevant court of competent jurisdiction within thirty (30) days from the date of such order; (2) the Issuer fails to pay (a) any amount in respect of the Exercise Price as a result of a Redemption Event and (b) any amount in respect of the Sukuk Musharakah whether in respect of the due and payable Expected Periodic Distribution Amount or part thereof and any Arrears of Deferred Periodic Distribution, and such failure to pay under items (a) and (b) continues for a period of seven (7) business days or more (for this purpose, such payment of Expected Periodic Distribution Amount or part thereof and Arrears of Deferred Periodic Distribution will not be due if the Issuer has elected to defer such Expected Periodic Distribution Amount or part thereof in accordance with the Transaction Documents); and (3) the Kafalah Provider fails to pay any amount due under the Subordinated Guarantee and such failure continues for a period of seven (7) business days or more. For the avoidance of doubt, a breach of covenant by the Issuer or the Kafalah Provider (apart from failure to pay the amounts stated under item (2) and (3) above) will not constitute an Enforcement Event. Enforcement-Method Upon the occurrence of an Enforcement Event under item (1) above, the Sukuk Trustee may at its discretion, and shall if so directed by an extraordinary resolution of the Sukukholders, declare that an Enforcement Event has occurred and require the Issuer to purchase the Sukukholders’ interest in the Musharakah Venture from the Sukuk Trustee (for and on behalf of the Sukukholders) at the relevant Exercise Price. Upon the occurrence of an Enforcement Event under item (2) and (3) above, the Sukuk Trustee may at its discretion, and shall if so directed by an extraordinary resolution of the Sukukholders, declare that an Enforcement Event has occurred 42
  53. and :(a) institute winding-up proceedings against the Issuer or Kafalah Provider as the case may be; and/or (b) prove in the winding-up of the Issuer or the Kafalah Provider (as the case may be) and/or claim in the liquidation of the Issuer or the Kafalah Provider (as the case may be) for such payment as it may think fit to enforce the obligations of the Issuer or the Kafalah Provider, under or arising from the Sukuk Musharakah and the Subordinated Guarantee (as the case may be). Without prejudice to the above, the Sukuk Trustee may at its discretion or shall, if directed to do so by an extraordinary resolution of the Sukukholders, without further notice institute such proceedings against the Issuer or the Kafalah Provider (as the case may be), as it may think fit to enforce any term or condition binding on the Issuer under the Sukuk Musharakah, or the Kafalah Provider under the Subordinated Guarantee, the Trust Deed (other than any payment obligation of the Purchase Undertaking Obligor under or arising from the Purchase Undertaking, including, without limitation, payment of the Exercise Price for the satisfaction of the nominal value, any Expected Periodic Distribution Amount and any Arrears of Deferred Periodic Distribution in respect of the Sukuk Musharakah including any damages (excluding opportunity cost) awarded for breach of any obligations), and in no event shall the Issuer, by virtue of the institution of any such proceedings, be obliged to pay any sum or sums, in cash or otherwise, sooner than the same would otherwise have been payable by them. For the avoidance of doubt, it is not allowed under the terms and conditions of the Sukuk Musharakah for acceleration of payments of all the outstanding Sukuk Musharakah, save for an Enforcement Event under item (1) above. 25. Governing laws : Laws of Malaysia. 43
  54. 26 . Provisions on buy-back, if : The Issuer or its subsidiaries or its agent(s) who applicable is/are acting for the redemption or purchase, may at any time purchase the Sukuk Musharakah at any price in the open market or by private treaty, and such Sukuk Musharakah purchased by the Issuer or its subsidiaries or its agent(s) shall be cancelled by the Issuer and cannot be resold or reissued. 27. Provisions on early : The Sukuk Musharakah are issued on a perpetual redemption, if applicable basis and may only be redeemed by the Issuer upon the occurrence of a Redemption Event. The Sukuk Musharakah redeemed by the Issuer shall be cancelled and cannot be reissued or resold. 28. Voting : Voting by the Sukukholders under the Perpetual Sukuk Programme shall be carried out as follows:- Prior to upsizing of the Perpetual Sukuk Programme All matters (save in relation to the upsizing of the Perpetual Sukuk Programme) which require the Sukukholders’ consent under the Perpetual Sukuk Programme shall be carried out on a collective basis. Post upsizing of the Perpetual Sukuk Programme All matters which require the Sukukholders’ consent under the Perpetual Sukuk Programme shall be carried out on a per series basis. Sukukholders holding a requisite amount under each series (to be determined under the Trust Deed) shall provide their consent for the relevant matters to be passed under the Perpetual Sukuk Programme and the consent from Sukukholders of all outstanding series shall have been obtained for any such resolution to be carried. “series” shall mean, in relation to any Sukuk Musharakah, such Sukuk Musharakah with the same issue date. 29. Permitted investments, applicable 30. Ta’widh if : The amount standing to the credit of the Sukuk Trustees’ Reimbursement Account may be invested in Shariah-compliant deposits or instruments. : In the event of any delay in payments of any amount due and payable to the Sukukholders pursuant to the Purchase Undertaking or Sale Undertaking, as the case may be, IJM as the Kafalah Provider or the Issuer, as the case may 44
  55. be , shall pay to the Sukuk Trustee for the benefit of the Sukukholders Ta’widh (compensation) on such delayed payment at the rate and manner prescribed by the SC’s Shariah Advisory Council from time to time. 31. Ibra’ : Not applicable. 32. Kafalah : Please refer to the section entitled Details of 33. Other terms and conditions : (a) Utilisation of proceeds : The proceeds from the issuance of the Sukuk (b) Upsizing of a sukuk : The Issuer has the option to upsize the limit of the programme Perpetual Sukuk Programme at any time and from time to time subject to the following being fulfilled prior to the exercise of the option to upsize by the Issuer: guarantee. Musharakah shall be utilised by the Issuer and/or its subsidiaries, associated companies and/or jointly controlled entities (“IJM Land Group”) to refinance its existing financing/debt obligations (whether in whole or in part), repayment of intercompany borrowings, and/or to finance working capital requirements, investments, capital expenditure and/or its general corporate purposes (which shall include, without limitation, the payment of fees, costs and expenses relating to the Perpetual Sukuk Programme). In any case, all utilisation of proceeds raised under the Sukuk Musharakah shall be Shariah-compliant. (i) where relevant, the consents from existing financiers/lenders of the Issuer being obtained; (ii) the compliance with the relevant requirements under Part 3 of the LOLA Guidelines; (iii) confirmation from the Rating Agency that the prevailing rating of the Perpetual Sukuk Programme will not be adversely affected upon the implementation of such upsizing; and (iv) the necessary corporate authorisations of the Issuer being obtained, and the Sukukholders shall be deemed to have consented to such upsizing of the limit of the Perpetual Sukuk Programme in the Trust Deed. No consent is required from the Sukuk Trustee, the Facility Agent and any other party under the 45
  56. Perpetual Sukuk Programme when the upsizing of the limit of Perpetual Sukuk Programme is exercised by the Issuer . (c) Status : (A) Status of the Sukuk Musharakah The Sukuk Musharakah shall constitute direct, unsecured, unconditional and subordinated obligations of the Issuer under the laws of Malaysia and shall at all times rank as follows: (i) below all present and future creditors of the Issuer; (ii) pari passu with the Parity Obligations (as defined below); and (iii) above the Junior defined below). Obligations (as Upon the declaration of an Enforcement Event, the payment obligations of the Issuer under the Sukuk Musharakah shall rank ahead of the holders of Junior Obligations of the Issuer and rank junior to the claims of all other present and future creditors of the Issuer (other than Parity Obligations of the Issuer). (B) Status of the Subordinated Guarantee The payment obligations of the Kafalah Provider under the Subordinated Guarantee shall constitute direct, unsecured, unconditional and subordinated obligations of the Kafalah Provider under the laws of Malaysia and shall at all times rank as follows: (i) below all present and future creditors of the Kafalah Provider; (ii) pari passu with the Parity Obligations of the Kafalah Provider (as defined below); and (iii) above the Junior Obligations of the Kafalah Provider (as defined below). Upon the declaration of an Enforcement Event, the payment obligations of the Kafalah Provider under the Subordinated Guarantee shall rank ahead of the holders of Junior Obligations of the Kafalah Provider and rank junior to the claims of all other present and future creditors of the Kafalah 46
  57. Provider (other than Parity Obligations of the Kafalah Provider). Definitions: "Junior Obligations" means any class of the Issuer's or Kafalah Provider’s (as the case may be) share capital including, without limitation, any ordinary shares and preference shares in the capital of the Issuer or the Kafalah Provider, as the case may be, and any other instruments or securities issued, entered into or guaranteed by the Issuer or the Kafalah Provider (as the case may be) whether by its terms or by operation of law, which are subordinated to the Sukuk Musharakah or Subordinated Guarantee (as the case may be). "Parity Obligations" means any instrument or security (other than ordinary shares or preference shares) issued, entered into or guaranteed by the Issuer or the Kafalah Provider (as the case may be) that is expressed to rank, whether by its terms or by operation or law, pari passu with the Sukuk Musharakah or Subordinated Guarantee (as the case may be). (d) Periodic Rate Distribution : The expected profit rate per annum (“Periodic Distribution Rate”) for each tranche of the Sukuk Musharakah, which may include reset of benchmark on specific intervals, shall be determined prior to each issuance of the Sukuk Musharakah, subject to the Stepped-Up Distribution Rate under the section entitled Other terms and conditions – Stepped-Up Distribution Rate and Change of Control Stepped Up below. If the Sukuk Musharakah are not redeemed by the First Call Date (as defined below), the Periodic Distribution Rate shall be stepped-up to the Stepped Up Distribution Rate. “First Call Date” for each relevant tranche of the Sukuk Musharakah shall be determined prior to each issue date and First Call Date refers to the date where the Optional Redemption may first be exercised by the Issuer. The First Call Date for each tranche of the Sukuk Musharakah shall be no earlier than the 7th anniversary from the Issue Date. For avoidance of doubt, the Periodic Distribution Rate will be on fixed basis. 47
  58. (e) Periodic Distribution : The Issuer shall pay the Expected Periodic Frequency Distribution Amount on semi-annual basis, or such other period to be agreed, in arrears from the issue date (each a “Periodic Distribution Date”), subject to the Optional Deferral of Distribution as set out below in the section entitled Other terms and conditions – Optional Deferral of Distribution . (f) Periodic Basis (g) Intention to Replace (h) Distribution : Actual/365 days. : It is the intention of the Issuer, from the issue date of the first tranche of Sukuk Musharakah (“First Issue Date”) until thirty (30) years after the First Issue Date, that: a) the Issuer maintains the relevant Sukuk Musharakah (or such other instrument that is of the same ranking or junior to such Sukuk Musharakah that provides at least the equivalent equity credit) in its capital structure; and b) any redemption pursuant to any of the Redemption Events or purchase of the relevant Sukuk Musharakah will be refinanced with such other instrument that is of the same ranking or junior to such Sukuk Musharakah that provides at least the equivalent equity credit. : (a) Stepped-Up Distribution Rate and Change of Control Stepped Up Stepped-Up Distribution Rate: The rate(s) to be determined prior to the issuance of each relevant tranche of the Sukuk Musharakah, which shall be of a certain percentage above the prevailing Periodic Distribution Rate of the Sukuk Musharakah, commencing from the Stepped-Up Distribution Date, calculated based on the Periodic Distribution Basis. Such Stepped-Up Distribution Rate shall be capped at one percent (1.0 %). "Stepped-Up Distribution Date" means the date(s) where such applicable Stepped-Up Distribution Rate applies to the Periodic Distribution Rate, as determined prior to the issuance of the Sukuk Musharakah. For the avoidance of doubt, the Stepped-up Distribution Date for all issuances shall be the periodic distribution date falling seven (7) years or more after the applicable issue date. 48
  59. (b) Change of Control Stepped Up In the event that a Change of Control (as defined in the section entitled Other terms and conditions – Change of Control below) has occurred, and if the Issuer does not elect to redeem the Sukuk Musharakah within 30 days of the occurrence of such Change of Control in accordance with the section entitled Other terms and conditions – Change of Control Redemption below, then the prevailing Periodic Distribution Rate shall be increased by three (3) per cent per annum with effect from (and including) the expiry of the 30 days of the occurrence of such Change of Control. (i) Optional Deferral of : The Issuer at its sole discretion, may opt to defer Distribution payment (in whole or in part) of the Expected Periodic Distribution Amount which is otherwise scheduled to be paid on a Periodic Distribution Date, to the next Periodic Distribution Date by giving an optional deferral notice in writing ("Optional Deferral Notice") signed by the Issuer not more than fifteen (15) nor less than five (5) business days prior to the relevant Periodic Distribution Date, to the Facility Agent and the Sukuk Trustee (for and on behalf of the Sukukholders), provided that no Issuer’s Compulsory Periodic Distribution Payment Event AND no Kafalah Provider’s Compulsory Periodic Distribution Payment Event has occurred. The Issuer may at its sole discretion, elect to further defer any outstanding Arrears of Deferred Periodic Distribution by complying with the foregoing notice requirement. The Issuer is not subject to any limit as to the number of times the Expected Periodic Distribution Amount and the Arrears of Deferred Periodic Distribution can be deferred except that the provisions on the Dividend and Capital Stopper shall be complied with until all outstanding Arrears of Deferred Periodic Distribution have been paid in full. For this purpose, each Optional Deferral Notice shall be accompanied by a certificate signed by a director and the company secretary OR a director and an authorised signatory OR two authorised signatories, as the case may be, of the Issuer and Kafalah Provider, confirming that no Issuer’s Compulsory Periodic Distribution Payment Event and no Kafalah Provider’s Compulsory Periodic Distribution Payment Event has occurred. Any such certificate shall be conclusive evidence that 49
  60. no Issuer ’s Compulsory Periodic Distribution Payment Event and no Kafalah Provider’s Compulsory Periodic Distribution Payment Event has occurred and the Facility Agent and the Sukuk Trustee shall be entitled to rely without any obligation to verify the same and without liability to any Sukukholder or any other person on any such Optional Deferral Notice or any certificate as aforementioned. Each Optional Deferral Notice shall be conclusive and binding on the Sukukholders. Payment of the Arrears of Deferred Periodic Distribution The Issuer may satisfy any Arrears of Deferred Periodic Distribution (in whole or in part) at any time calculated up to the date of payment of such Arrears of Deferred Periodic Distribution by giving notice of such election to the Facility Agent and the Sukuk Trustee (for and on behalf of the Sukukholders) not less than five (5) business days prior to the relevant payment date specified in such notice (which notice is irrevocable and shall oblige the Issuer to pay the relevant Arrears of Deferred Periodic Distribution on the payment date specified in such notice). In any event the Issuer shall satisfy any outstanding Arrears of Deferred Periodic Distribution (in whole but not in part) on the earliest of: (a) the date of redemption of the Sukuk Musharakah pursuant to any Redemption Event; (b) within fifteen (15) days after the occurrence of a breach of the Dividend and Capital Stopper (as defined below); and (c) the date such amounts becomes due under an Enforcement Event. Any partial payment of outstanding Arrears of Deferred Periodic Distribution by the Issuer shall be shared by the Sukukholders on a pro-rata basis. The deferral of any Expected Periodic Distribution Amount payment or any Arrears of Deferred Periodic Distribution payment in accordance with this paragraph shall not constitute a dissolution event or an Enforcement Event for any purpose. 50
  61. (j) Issuer’s Compulsory : If, during the six (6) month period ending on the Periodic Distribution day before the relevant scheduled Periodic Payment Event Distribution Date, either or both of the following have occurred: (a) a dividend, distribution or other payment has been declared or paid by the Issuer in respect of any of the Issuer's Junior Obligations, or Parity Obligations (except on a pro-rata basis with the Sukuk Musharakah); and (b) the Issuer's Junior Obligations, or Parity Obligations (except on a pro-rata basis with the Sukuk Musharakah) have been purchased, redeemed, reduced, cancelled, bought-back or acquired by the Issuer, an Issuer’s Compulsory Periodic Payment Event shall have occurred. (k) Distribution Kafalah Provider’s : If, during the six (6) month period ending on the Compulsory Periodic day before the relevant scheduled Periodic Distribution Payment Distribution Date, either or both of the following Event have occurred: (a) a dividend, distribution or other payment has been declared or paid by the Kafalah Provider in respect of any of the Kafalah Provider’s Junior Obligations, or Parity Obligations (except on a pro-rata basis with the Sukuk Musharakah); and (b) the Kafalah Provider’s Junior Obligations, or Parity Obligations (except on a pro-rata basis with the Sukuk Musharakah) have been purchased, redeemed, reduced, cancelled, bought-back or acquired by the Kafalah Provider, a Kafalah Provider’s Compulsory Periodic Distribution Payment Event shall have occurred. (l) Dividend and Capital : So long as (a) any Expected Periodic Distribution Stopper Amount has been deferred and any Arrears of Deferred Periodic Distribution is outstanding, or (b) where: a final and effective order is made or an effective resolution is passed for the liquidation, winding-up or dissolution of the Issuer (i.e. Issuer’s Winding Up Event), the Issuer and the Kafalah Provider shall not: 51
  62. (1) declare or pay any dividends, distributions or other payments on, and will procure that no dividend, distribution or other payment is made on any of its Junior Obligations, or its Parity Obligations (except on a pro-rata basis with the Sukuk Musharakah); or (2) redeem, reduce, cancel, or acquire and will procure that no redemption, reduction, cancellation, or acquisition is made in respect of any of its Junior Obligations, or its Parity Obligations (except on a pro-rata basis with the Sukuk Musharakah), Until, in the case of (a) above, all Expected Periodic Distribution Amount due and payable, and any outstanding Arrears of Deferred Periodic Distribution has been paid in full; and in the case of (b) above, the completion of the issuance of Replacement Perpetual Sukuk (m) Dividend and Capital : The payment by the Issuer or the Kafalah Pusher Provider, as the case may be, of any Arrears of Deferred Periodic Distribution (if any) will become due and payable within fifteen (15) days from any of the following date: (n) Optional Redemption (1) if the Issuer or the Kafalah Provider, as the case may be, has on such date declared or paid any dividends, distributions or other payments on any of its Junior Obligations, or its Parity Obligations (except on a pro-rata basis with Sukuk Musharakah); or (2) if the Issuer or the Kafalah Provider, as the case may be has on such date redeemed, reduced, cancelled, or acquired any of its Junior Obligations, or its Parity Obligations (except on a pro-rata basis with Sukuk Musharakah). : The Issuer may, at its sole discretion, redeem at par, all (and not some only) of the Sukuk Musharakah at the relevant Exercise Price on the First Call Date or any Call Date thereafter. The Issuer shall give not less than thirty (30) days and not more than sixty (60) days prior written notice (which notice shall be irrevocable) to the Facility Agent and the Sukuk Trustee (for and on behalf of the Sukukholders) for the Optional Redemption. “Call Date” means the First Call Date and each Periodic Distribution Date thereafter. 52
  63. (o) Accounting Event (p) Accounting Redemption : If as a result of any changes or amendments to the Malaysian Financial Reporting Standards ("MFRS") in Malaysia or any other accounting standards that may replace MFRS for the purposes of the Issuer's consolidated financial statements ("Relevant Accounting Standard"), the Sukuk Musharakah are no longer recorded, or will no longer be recorded entirely as "equity" pursuant to the Relevant Accounting Standard, an Accounting Event shall have occurred. Event : If at any time an Accounting Event has occurred and is continuing and the Issuer may elect to deliver to the Facility Agent and the Sukuk Trustee: (i) a certified true copy of the opinion issued by the independent auditor of the Issuer opining that an Accounting Event has occurred; and (ii) a certificate signed by a director and the company secretary OR a director and an authorised signatory OR two authorised signatories, as the case may be, of the Issuer stating that the Issuer is entitled to effect the Accounting Event Redemption and setting forth a statement of facts showing that an Accounting Event has occurred, And thereafter the Issuer may at its sole discretion, redeem the Sukuk Musharakah (in whole, but not in part) at the relevant Exercise Price. The Issuer shall give not less than thirty (30) days' and not more than sixty (60) days' prior written notice (which notice shall be irrevocable) to the Facility Agent and the Sukuk Trustee (for and on behalf of the Sukukholders) for the Accounting Event Redemption. (q) Tax Event : If:- (a) the Issuer has or will become obliged to pay additional amounts of tax ("Additional Amounts") or increase the payment of such Additional Amounts; or (b) the Expected Periodic Distribution Amount made by the Issuer would not in the immediately following Periodic Distribution Date be fully tax deductible by the Issuer for Malaysian income tax purposes, 53
  64. as a result of :(i) any change in, or amendment to, the laws (or any regulations, rulings or other administrative pronouncements of Malaysia) or any political subdivision or any authority thereof or therein having power to tax, or (ii) any change in the application or official interpretation of such laws, regulations, rulings or other administrative pronouncements, which change or amendment is made public on or after the issue date of the relevant Sukuk Musharakah; and such obligations cannot be avoided by the Issuer taking reasonable measures available to it, then a Tax Event shall have occurred. (r) Tax Redemption Event : If at any time a Tax Event has occurred and is continuing and the Issuer may elect to deliver to the Facility Agent and the Sukuk Trustee: (i) a certified true copy of the opinion issued by an independent tax adviser of reputable standing opining that a Tax Event has occurred; and (ii) a certificate signed by a director and the company secretary OR a director and an authorised signatory OR two authorised signatories, as the case may be, of the Issuer stating that the Issuer is entitled to effect the Tax Event Redemption and setting forth a statement of facts showing that a Tax Event has occurred, And thereafter the Issuer may, at its sole discretion, redeem the relevant Sukuk Musharakah (in whole, but not in part) at the relevant Exercise Price. The Issuer shall give not less than thirty (30) days' and not more than sixty (60) days' prior written notice (which notice shall be irrevocable) to the Facility Agent and the Sukuk Trustee (for and on behalf of the Sukukholders) for the Tax Event Redemption provided that no such notice shall be given earlier than ninety (90) days prior to the earliest date on which the Issuer would be obliged to pay such Additional Amounts. 54
  65. (s) Rating Event (t) Rating Redemption : If, as a result of any amendment, clarification or change in the rating methodology by the Rating Agency that results in a lower equity credit for the relevant tranche of the Sukuk Musharakah, as compared to the equity credit which was first assigned on the relevant issue date by the Rating Agency or, if equity credit is not assigned for the relevant tranche of the Sukuk Musharakah on the relevant issue date, at the date when equity credit is assigned for the first time, a Rating Event shall be deemed to have occurred. Event : If at any time a Rating Event has occurred and is continuing and the Issuer may elect to deliver to the Facility Agent and the Sukuk Trustee: (i) a written confirmation that a Rating Event has occurred issued by the Rating Agency; and (ii) a certificate signed by a director and the company secretary OR a director and an authorised signatory OR two authorised signatories, as the case may be, of the Issuer stating that the Issuer is entitled to effect the Rating Event Redemption, And thereafter the Issuer may, at its sole discretion, redeem the relevant Sukuk Musharakah (in whole, but not in part) at the Exercise Price. The Issuer shall give not less than thirty (30) days’ and not more than sixty (60) days’ prior written notice (which notice shall be irrevocable) to the Sukuk Trustee (for and on behalf of the Sukukholders) for the Rating Event Redemption. (u) Change of Control (v) Change of Redemption : Means IJM Corp cease to hold more than fifty per cent (50%) of voting shares in IJM Land or when IJM Land cease to be a subsidiary of IJM Corp, through disposal, restructuring, transfer or otherwise (“Change of Control Event”). Control : The Sukuk Musharakah may be redeemed, in whole but not in part, at the Issuer’s option, upon giving not more than sixty (60) days nor less than thirty (30) days' notice (of which such notice shall be irrevocable) to the Sukukholders following the occurrence of a Change of Control Event. 55
  66. (w) Exercise Price : Exercise Price in relation to the Purchase Undertaking In relation to the Purchase Undertaking pursuant to the following events, the Exercise Price is calculated as follows: (1) Enforcement Event The Exercise Price shall be equal to: (a) the nominal value Musharakah; plus (b) any Expected Periodic Distribution Amount payable and unpaid up to the date of winding-up of the Issuer (including any Arrears of Deferred Periodic Distribution and any Additional Periodic Distribution Amount); plus any Liquidity Facility. (c) of the Sukuk IJM Land as the Purchase Undertaking Obligor is entitled to set-off the Exercise Price with any Liquidity Facility to be repaid to IJM Land as the Manager. (2) Deferral Dissolution / Non-payment of the Expected Periodic Distribution Amount The Exercise Price shall be equal to: (a) the nominal value Musharakah; plus of the Sukuk (b) any Expected Periodic Distribution Amount payable and unpaid up to the date of dissolution (including any Arrears of Deferred Periodic Distribution and any Additional Periodic Distribution Amount). The Manager is authorised by the Sukukholders to apply such part or all of the Exercise Price towards investment in a new Musharakah Venture for and on behalf of the Sukukholders as capital contribution from the Sukukholders to the new Musharakah Venture. The book entries associated with the dissolution of the Musharakah Venture and investment into a new Musharakah Venture 56
  67. shall be made in the books of the Issuer . For avoidance of doubt, (i) a dissolution of the Musharakah Venture in this manner will not result in redemption of the Sukuk Musharakah and (ii) any investment into a new Musharakah Venture shall not increase the nominal value of the relevant Sukuk Musharakah. Exercise Price in relation to the Sale Undertaking In relation to the Sale Undertaking pursuant to the following events, the Exercise Price is calculated as follows: (1) Optional Redemption and Change of Control Redemption The Exercise Price shall be equal to: (a) the nominal value Musharakah; plus of the Sukuk (b) any Expected Periodic Distribution Amount payable and unpaid up to the date of full redemption (including any Arrears of Deferred Periodic Distribution and any Additional Periodic Distribution Amount); plus (c) any Liquidity Facility. IJM Land as the Issuer, is entitled to set off the Exercise Price with any Liquidity Facility to be repaid to IJM Land as the Manager. (2) Redemption Event (other than Optional Redemption and Change of Control Redemption) Prior to the First Call Date The Exercise Price shall be equal to: (a) the higher of (a) the nominal value of all outstanding Sukuk Musharakah or (b) the Make-Whole Amount (as defined below); plus (b) any Expected Periodic Distribution Amount payable and unpaid up to the date fixed for redemption (including any Arrears of Deferred Periodic Distribution and any Additional Periodic Distribution Amount); plus 57
  68. (c) any Liquidity Facility. IJM Land as the Issuer, is entitled to set off the Exercise Price with any Liquidity Facility to be repaid to IJM Land as the Manager. On or after the First Call Date The Exercise Price shall be equal to: (a) the nominal value Musharakah; plus of the Sukuk (b) any Expected Periodic Distribution Amount payable and unpaid up to the date fixed for redemption (including any Arrears of Deferred Periodic Distribution and any Additional Periodic Distribution Amount); plus (c) any Liquidity Facility. IJM Land as the Issuer, is entitled to set off the Exercise Price with any Liquidity Facility to be repaid to IJM Land as the Manager. "Make-Whole Amount" means the amount, equal to the sum of (a) the present value of the nominal value of the outstanding Sukuk Musharakah to be redeemed discounted from the First Call Date to the redemption date, and (b) the present value of all Expected Periodic Distribution Amount payable from the redemption date up to and including, the First Call Date, discounted to the redemption date on a semi-annual basis (assuming a 365 day year) at the relevant discount rate being the Relevant MGS Rate plus the relevant margin to be agreed between the Issuer and the PA/LA prior to the issue date of the relevant series of Sukuk Musharakah. "Relevant MGS Rate" means the rate in per cent per annum equal to the relevant Malaysian Government Securities ("MGS") rate for a tenure corresponding to the period between the relevant redemption date up to the First Call Date, or in the absence of such MGS rate, the interpolated rate based on the arithmetic mean of the 2 available closest MGS rates corresponding to the period between the relevant redemption date up to the First Call Date. 58
  69. (x) Issue Price (y) Form denomination : The Sukuk Musharakah shall be issued at par, at a premium or at a discount to the nominal value (to be determined prior to each issuance) and the Issue Price shall be calculated in accordance with PayNet Procedures and Rules (as defined below). and : Form The Sukuk Musharakah shall be issued in accordance with the: (1) Operational Procedures for Securities Services and Operational Procedures for Ringgit Settlement in the Real Time Electronic Transfer of Funds and Securities System issued by PayNet or its successorin-title or successor in such capacity ("PayNet Procedures"); and (2) Participation and Operation Rules for Payment and Securities Services issued by PayNet or its successor-in-title or successor in such capacity ("PayNet Rules") (PayNet Procedures and PayNet Rules are collectively referred to as "PayNet Procedures and Rules" as amended and/or substituted from time to time). The Sukuk Musharakah shall be represented by a global certificate (exchangeable for definitive certificates on the occurrence of certain limited events). The global certificate shall be deposited with BNM and shall be in bearer form. Denomination The denomination of the Sukuk Musharakah shall be Ringgit Malaysia One Thousand (RM1,000.00) or in multiples of Ringgit Malaysia One Thousand (RM1,000.00) thereof or such other denominations to be mutually agreed by the Issuer and the LA as may be allowed under the PayNet Procedures and Rules at the time of issuance. (z) Taxation : All payments by the Issuer and/or the Kafalah Provider shall be made without withholding or deductions for or on account of any present or future tax, duty or charge of whatsoever nature imposed or levied by or on behalf of Malaysia, or any other applicable jurisdictions, or any authority thereof or therein having power to tax, unless such withholding or deduction is required by law, in which event the payer shall be required to make such additional amount so that the payee would receive the full amount which the payee would 59
  70. have received if no such withholding or deductions are made . (aa) Transaction Documents (bb) No Set-off (cc) Positive covenants in respect of the Kafalah Provider : The Transaction Documents shall include the following: (1) the Programme Agreement; (2) the Trust Deed; (3) the Subordinated Guarantee; (4) the Securities Lodgement Form; (5) the Subscription Agreement; (6) the relevant Islamic documents; and (7) such other agreements as may be advised by the Solicitor. : Subject to applicable law, no Sukukholder may exercise, claim or plead any right of set-off, deduction, withholding or retention in respect of any amount owed to it by the Issuer in respect of, or arising under or in connection with the Sukuk Musharakah, and each Sukukholder shall, by virtue of its holding of any Sukuk Musharakah, be deemed to have waived all such rights of set-off, deduction, withholding or retention against the Issuer. Notwithstanding the above, if any of the amounts due and payable to any Sukukholder by the Issuer in respect of, or arising under or in connection with the Sukuk Musharakah is discharged by set-off, such Sukukholder shall, subject to applicable law, immediately pay an amount equal to the amount of such discharge to the Issuer (or, in the event of its winding-up or administration, the liquidator or as appropriate, administrator of the Issuer) and, until such time as payment is made, shall hold such amount in trust for the Issuer (or the liquidator or as appropriate, administrator of the Issuer) and accordingly any such discharge shall be deemed not to have taken place. To include but not limited to the following: (1) the Kafalah Provider shall maintain in full force and effect all relevant authorisations, consents, rights, licences, approvals and permits (governmental and otherwise) and will promptly obtain any further authorisations, consents, rights, licences, approvals and permits (governmental and 60
  71. otherwise ) which is or may become necessary to enable it to own its assets, to carry on its business or for the Kafalah Provider to enter into or perform its obligations under the Transaction Documents or to ensure the validity, enforceability, admissibility in evidence of the obligations of the Kafalah Provider or the priority or rights of the Sukukholders under the Transaction Documents and the Kafalah Provider shall comply with the same; (2) the Kafalah Provider shall execute all such further documents and do all such further acts reasonably necessary at any time or times to give effect to the terms and conditions of the Transaction Documents; (3) the Kafalah Provider shall exercise reasonable diligence in carrying out its business and affairs in a proper and efficient manner and in accordance with sound financial and commercial standards and practices; (4) the Kafalah Provider shall promptly perform and carry out all its obligations under all the Transaction Documents to which it is a party (including but not limited to payment of amounts due under the Sukuk Musharakah on the relevant dates on which such amounts are due and payable, subject to the Optional Deferral of Distribution as defined in the section entitled Other terms and conditions – Optional Deferral of Distribution) and ensure that it shall immediately notify the Sukuk Trustee in the event that the Kafalah Provider is unable to fulfil or comply with any of the provisions of the Transaction Documents to which it is a party; (5) the Kafalah Provider shall prepare its financial statements on a basis consistently applied in accordance with approved accounting standards in Malaysia and those financial statements shall give a true and fair view of the results of the operations of the Kafalah Provider for the period to which the financial statements are made up in line with the approved accounting standard; (6) the Kafalah Provider shall promptly comply with all applicable laws including the provisions of the CMSA and/or the notes, circulars, conditions or guidelines issued by 61
  72. the SC from time to time ; (dd) Negative covenants in respect of the Kafalah Provider (7) the Kafalah Provider shall keep proper books and accounts at all times and in the event of a breach of the Kafalah Provider's covenants, obligations or undertakings under the Perpetual Sukuk Programme or upon the occurrence of an Enforcement Event, to provide the Sukuk Trustee and any person appointed by it (e.g. auditors) access to such books and accounts to the extent permitted by law with a notice of seven (7) business days to be given in writing; (8) the Kafalah Provider shall maintain adequate Takaful/insurance where necessary for the business of such nature with reputable Takaful providers/ insurance companies and shall notify the Sukuk Trustee within seven (7) business days of any event which or may give rise to any claim or right of action under any Takaful / insurance, where such event may result in a Material Adverse Effect; (9) any other covenants as advised by the Solicitor and mutually agreed between the LA and the Kafalah Provider. To include but not limited to the following; wherein the Kafalah Provider SHALL NOT, for so long as any liability under the Perpetual Sukuk Programme remains undischarged, without the prior written consent of the Sukuk Trustee (acting on instructions of the Sukukholders): (1) other than those disclosed in writing to the PA/LA prior to the execution of the Transaction Documents, create or permit to exist any encumbrance, mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment by way of security, trust arrangement for the purpose of providing security or other security interest of any kind over the whole or any part of its property, assets or revenues (whether present or future), unless the following conditions are complied with: (i) 62 There is no Arrears of Distribution; outstanding unpaid Deferred Periodic
  73. (ii) No Enforcement Event has occurred; and (iii) The amount subject to such security interest shall not exceed the aggregate amount of Ringgit Malaysia One Hundred Million (RM100,000,000.00) at any one point in time. For the avoidance of doubt, the Kafalah Provider is allowed to give any guarantee, indemnity, undertaking, financial assistance or credit support letter including but not limited to letter of comfort or any other similar agreement or arrangement, which are not secured against any of the Kafalah Provider’s property/assets/revenues, in relation to the borrowings/financings/operations of its subsidiaries, associated companies and/or jointly controlled entities (“IJM Corporation Group”) and/or as required in the ordinary course of business of the IJM Corporation Group; (2) add, delete, amend, supplement, vary or substitute its Memorandum or Articles of Association/Constitution in a manner which may have a Material Adverse Effect and/or may be materially prejudicial to the interest of the Sukukholders; (3) enter into any transactions, whether directly or indirectly with any of its Interested Persons unless such transactions is entered into: (a) on an arms-length basis and on terms no less favourable to the Kafalah Provider than those which could have been obtained in comparable transactions from persons who are not Interested Persons; and (b) with respect to transactions involving an aggregate payment or value equal to or greater than the agreed percentage ratios as set out in the Main Market Listing Requirements, the Kafalah Provider obtains certification from an independent adviser that the transaction is carried out on fair and reasonable terms, 63
  74. Provided that the Kafalah Provider certifies to the Sukuk Trustee that the transaction complies with paragraph (a) above, that the Kafalah Provider has received the certification referred to in paragraph (b) (where applicable) and that the transaction has been approved by the board of directors of the Kafalah Provider or shareholders of the Kafalah Provider in a general meeting as the case may require. With respect to transactions constituting a recurrent related-party transaction of a revenue or trading nature (“RRPT”) which are provided for and permitted under the Main Market Listing Requirements, provided that the Kafalah Provider certifies to the Sukuk Trustee that the transaction complies with paragraph (a) above, that the Kafalah Provider has obtained or renewed, where applicable, the shareholders’ mandate in accordance with the Main Market Listing Requirements and that the Kafalah Provider furnishes at least one certificate to the Sukuk Trustee in respect of the RRPT contemplated under one shareholders’ mandate; (ee) Information covenants in respect of the Kafalah Provider (4) take steps to wind-up or dissolve itself; (5) lend any money to any party other than : (a) normal trade credit in the ordinary course of business; (b) loans to the Kafalah Provider’s directors, officers or employees as part of their terms of employment; and/or (c) intercompany loans or advances to any entity within the IJM Corporation Group; and (6) any other covenants as advised by the Solicitor and mutually agreed between the LA and the Kafalah Provider. To include but not limited to the following: (1) the Kafalah Provider shall provide to the Sukuk Trustee at least on an annual basis, a certificate confirming, executed by any two directors of the Kafalah Provider, that it has complied with all its obligations under the Transaction Documents and that there does not exist or had not existed, from the date the Sukuk Musharakah were issued or the date of the previous certificate as the case may be, any Enforcement Event, and if such is not the case, to specify the same; 64
  75. (2) the Kafalah Provider shall deliver to the Sukuk Trustee the following: (a) as soon as they become publicly available (and in any event within one hundred and eighty (180) days after the end of each of its financial years) copies of its consolidated annual financial statements for that year which shall contain the income statements and balance sheets of the Kafalah Provider and which are audited and certified without qualification by a firm of independent certified public accountants acceptable to the Sukuk Trustee; (b) as soon as they become available (and in any event within ninety (90) days after the end of the first half of each of its financial year) copies of its unaudited half yearly consolidated interim financial statements for that period which shall contain the income statements and balance sheets of the Kafalah Provider which are approved by the board of directors; (c) promptly, any relevant information as the Sukuk Trustee may from time to time reasonably request in writing in order to discharge its duties and obligations as Sukuk Trustee under the Transaction Documents to which it is a party relating to the the Kafalah Provider’s affairs to the extent permitted by law; and (d) promptly, (i) all statutory notices or other documents received by the Kafalah Provider from its shareholders which contents may materially and adversely affect the interests of the Sukukholders; and (ii) a copy of all accounts, reports, notice, statement or circular dispatched by the Kafalah Provider to its shareholders generally at the same time as these documents are dispatched to these shareholders, unless they have been made publicly available on the websites of the Kafalah Provider or Bursa Malaysia; 65
  76. (3) the Kafalah Provider shall notify the Sukuk Trustee in writing immediately in the event that the Kafalah Provider becomes aware of: (a) the occurrence of any Enforcement Event; (b) the happening of any event that has caused or could cause, one or more of the following: (i) any amount payable under the Sukuk Musharakah to become immediately payable; (ii) the Sukuk Musharakah to become immediately enforceable; or (iii) any other right or remedy under the terms, provisions or covenants of the Sukuk Musharakah or the Trust Deed to become immediately enforceable; (c) any circumstance that has occurred that would materially prejudice the Kafalah Provider; (d) any substantial change in the nature of the business of the Kafalah Provider; (e) any cessation of liability of the Kafalah Provider for the payment of the whole or part of the moneys for which it was liable under the Subordinated Guarantee; (f) any change in withholding tax position or taxing jurisdiction of the Kafalah Provider; (g) any other matter that may materially prejudice the interests of the Sukukholders ;and any other covenants as advised by the Solicitor and mutually agreed between the LA and the Kafalah Provider. 66
  77. 2 .2 Transaction Diagram and Explanatory Notes of the Perpetual Sukuk Programme Step 1 The Sukuk Trustee (on behalf of the Sukukholders) and IJM Land will enter into a master Musharakah agreement (the “Master Musharakah Agreement”) under which, the parties as partners (each a "Partner" and collectively the "Musharakah Partners") may, from time to time, enter into Musharakah agreements (each a “Musharakah Agreement”) for the purposes of undertaking a venture (the “Musharakah Venture”) consisting of Shariah-compliant investments in the business operations of the Issuer and/or its subsidiaries or part thereof identified and held on trust by IJM Land on behalf of the Sukukholders (“Business”) which are to be identified prior to the issuance of the Sukuk Musharakah. Step 2a The Issuer shall issue the Sukuk Musharakah to the Sukukholders and the Sukukholders shall participate in the Musharakah Venture via subscription of the Sukuk Musharakah issued by the Issuer. The Sukuk Musharakah shall represent the respective Sukukholders' undivided proportionate interest in the Musharakah Venture and any funds held on account of the Sukukholders. Step 2b The capital contribution of the Sukukholders (“Musharakah Capital”) to the Musharakah Venture is the proceeds raised from the Sukuk Musharakah while IJM Land shall contribute the Business as a capital contribution in kind to the Musharakah Venture. Simultaneously, the Issuer shall make a declaration that it holds on trust the Musharakah Partners' interest in the Business for the benefit of the Sukukholder(s) and itself pursuant to the Musharakah Venture. For avoidance of doubt, the value of the Business shall be valued at the point of issuance based on net book value, market value or such other valuation methods acceptable to the Shariah Adviser. 67
  78. Step 3 The Sukukholder (s) shall appoint the Issuer as the manager to manage the Musharakah Venture ("Manager"). Income from the Musharakah Venture shall be distributed to each Partner based on a profit sharing ratio of 95:5 (Sukukholder(s): Issuer). Any losses incurred in the Musharakah Venture shall be borne by each Partner in proportion to each Partner’s respective capital contribution in the Musharakah Venture. Each Musharakah Agreement will contain terms for the expected periodic distributions from that Musharakah Venture for each agreed period (each a “Distribution Period”). The expected periodic distribution amount (“Expected Periodic Distribution Amount”) on any relevant Periodic Distribution Date (to be paid on a semi-annual basis, or such other period to be agreed between the Issuer and the Sukukholder(s) from the issue date) is calculated at the prevailing Periodic Distribution Rate (as defined in the Details of the Perpetual Sukuk Programme) on the nominal value of the relevant tranche of the Sukuk Musharakah. Should the Issuer decide to dissolve or dispose of the Business, the Manager shall substitute from time to time throughout the tenure of the Sukuk Musharakah via a substitution agreement entered into between the Manager and the Sukuk Trustee (on behalf of the Sukukholders), to substitute the Business with a new business that is Shariah-compliant and approved by the Shariah Adviser. For the avoidance of doubt, the Business of the existing Musharakah Venture will be substituted with a different Business of at least equal value to the Business of such existing Musharakah Venture being replaced. Under the relevant Musharakah Venture, the Sukukholders have agreed upfront that they shall receive income generated from the relevant Musharakah Venture up to the aggregate Expected Periodic Distribution Amount. Any excess income from the relevant Musharakah Venture shall be retained by the Manager as a reserve ("Reserve") on behalf of the Sukukholders which may be utilised by the Manager from time to time for its own purposes provided that the Manager shall be required to re-credit such amounts when (a) there is a Shortfall (as defined below) and to the extent required of such Shortfall; and (b) upon the dissolution of the relevant Musharakah Venture pursuant to the Redemption Events (as defined in the Details of the Perpetual Sukuk Programme). Upon dissolution of the relevant Musharakah Venture pursuant to the Redemption Events and/or Enforcement Events and if there is positive balance in the Reserve, such amount in the Reserve will be given to the Manager as an incentive fee. In the event the income generated is insufficient to pay the Expected Periodic Distribution Amount, the Manager (i) shall utilise any amount available in the Reserve to cover the shortfall between such Expected Periodic Distribution Amount and the income generated (“Shortfall”) and (ii) may at its sole discretion provide a Shariah-compliant liquidity facility whereby it shall advance to the Sukuk Trustee (on behalf of the Sukukholders) an amount sufficient to make up the Shortfall (adjusted accordingly pursuant to any utilisation of the Reserve as referred to in (i) above, if applicable) in order to enable the Issuer to make payment in full of the said Expected Periodic Distribution Amount. Any amount 68
  79. of liquidity facility advanced by the Manager throughout the tenure of the Sukuk Musharakah will be repaid to the Manager upon redemption of the Sukuk Musharakah in full and such amount to be repaid shall be referred to as the “Liquidity Facility”. Step 4a Purchase Undertaking The Issuer, as the obligor to the Purchase Undertaking (“Purchase Undertaking Obligor”), shall issue a master purchase undertaking ("Purchase Undertaking") to the Sukuk Trustee (acting for and on behalf of the Sukukholders), where the Issuer (as the Purchase Undertaking Obligor) undertakes to purchase the Sukukholders’ interests in the relevant Musharakah Venture from the Sukuk Trustee (acting for and on behalf of the Sukukholders) at the Exercise Price (as defined in the Details of the Perpetual Sukuk Programme) upon (i) the declaration of an Enforcement Event in accordance with the terms set out herein; (ii) a Deferral Dissolution; or (iii) non-payment of the Expected Periodic Distribution Amount under the Sukuk Musharakah falling due and payable by the Issuer and the Kafalah Provider (whether by virtue of the occurrence of an Issuer's Compulsory Periodic Distribution Payment Event / Kafalah Provider's Compulsory Periodic Distribution Payment Event or a breach of the Dividend and Capital Stopper by the Issuer or the Kafalah Provider), and to execute a sale agreement for such purchase. The purchase of the Sukukholders’ undivided beneficial interests in the relevant Musharakah Venture would lead to dissolution of the said Musharakah Venture. For the avoidance of doubt: (a) in the case of Deferral Dissolution, the Exercise Price pursuant to the exercise of the Purchase Undertaking, less the amount of such portion of the Expected Periodic Distribution Amount which is not deferred shall be invested into a new Musharakah Venture; and (b) in the case of non-payment of the Expected Periodic Distribution Amount under the Sukuk Musharakah falling due and payable by the Issuer and the Kafalah Provider (whether by virtue of the occurrence of an Issuer's Compulsory Periodic Distribution Payment Event / Kafalah Provider's Compulsory Periodic Distribution Payment Event or a breach of the Dividend and Capital Stopper by the Issuer or the Kafalah Provider), the Exercise Price less the Expected Periodic Distribution Amount falling due and payable (i.e. the nominal value of the relevant Sukuk Musharakah) shall be invested into a new Musharakah Venture and is therefore not due and payable notwithstanding the exercise of the Purchase Undertaking. The Business of the new Musharakah Venture shall be different from the original Business that was part of the dissolved Musharakah Venture. The balance of the Exercise Price (if applicable) shall be distributed to the Sukukholders as Expected Periodic Distribution Amount which is not deferred. 69
  80. Step 4b Sale Undertaking The Sukuk Trustee (for and on behalf of the Sukukholders) shall issue a master sale undertaking ("Sale Undertaking") to the Issuer, where the Sukuk Trustee (for and on behalf of the Sukukholders) undertakes to sell the Sukukholders’ interests in the relevant Musharakah Venture to the Issuer at the Exercise Price, upon redemption of the Sukuk Musharakah pursuant to the relevant Redemption Events and execute a sale agreement for such sale, in accordance with the terms as set out herein. The Exercise Price shall be the sum payable by the Issuer or the Kafalah Provider pursuant to its obligations under the Subordinated Guarantee (as the case may be) to the Sukukholders pursuant to the relevant Redemption Events, Deferral Dissolution or Enforcement Events and such purchase shall be effected by the Issuer or the Kafalah Provider (as the case may be) via a sale agreement pursuant to the Sale Undertaking or the Purchase Undertaking, as the case may be. The Exercise Price shall be calculated in accordance with the formula described in the Details of the Perpetual Sukuk Programme. Step 5 Subordinated Guarantee The Kafalah Provider shall provide a guarantee based on the Shariah principle of Kafalah, as a continuing obligation, in favour of the Sukuk Trustee for and on behalf of the Sukukholders (“Subordinated Guarantee”), whereby pursuant to the Subordinated Guarantee: (A) Subordinated guarantee Distribution Payment for Non Payment of Periodic In the event of any non-payment of the Expected Periodic Distribution Amount under the Sukuk Musharakah falling due and payable (whether by virtue of the occurrence of an Issuer's Compulsory Periodic Distribution Payment Event or Kafalah Provider's Compulsory Periodic Distribution Payment Event, or a breach of the Dividend and Capital Stopper by the Issuer or the Kafalah Provider), the relevant Musharakah Venture shall be dissolved through an exercise of the Purchase Undertaking and the Exercise Price less the Expected Periodic Distribution Amount falling due and payable (i.e. the nominal value of the relevant Sukuk Musharakah) shall be invested into a new Musharakah Venture and is therefore not due and payable notwithstanding the exercise of the Purchase Undertaking and the Kafalah Provider shall pay such due and payable Expected Periodic Distribution Amount (i.e. the remaining part of the Exercise Price) within 15 days from the date where such payment notice is served by the Facility Agent (such payment notice under the Subordinated Guarantee shall be served by the Facility Agent within 2 business days from the relevant Periodic Distribution Date) to the Kafalah Provider. 70
  81. For the avoidance of doubt , any amount of Expected Periodic Distribution Amount under the Sukuk Musharakah deferred pursuant to Optional Deferral of Distribution (as defined in the Details of the Perpetual Sukuk Programme) shall NOT be deemed to be due and payable. Should there be a breach of the Dividend and Capital Stopper by the Issuer or the Kafalah Provider, the relevant Musharakah Venture shall be dissolved through an exercise of the Purchase Undertaking and the Exercise Price less the Expected Periodic Distribution Amount falling due and payable (whether by virtue of the occurrence of an Issuer's Compulsory Periodic Distribution Payment Event or Kafalah Provider's Compulsory Periodic Distribution Payment Event, or a breach of the Dividend and Capital Stopper by the Issuer or the Kafalah Provider) (i.e. the nominal value of the relevant Sukuk Musharakah) shall be invested into a new Musharakah Venture and is therefore not due and payable notwithstanding the exercise of the Purchase Undertaking and the Kafalah Provider shall pay such deferred Expected Periodic Distribution Amount including any Arrears of Deferred Periodic Distribution (if any) (i.e. the remaining part of the Exercise Price) to the Sukukholders within 15 days from the date of such breach. Once the deferred Expected Periodic Distribution Amount including any Arrears of the Deferred Periodic Distribution (if any) has been paid in full by the Kafalah Provider in accordance with the Subordinated Guarantee, the obligations of the Issuer in respect of the same shall then be extinguished. (B) Subordinated guarantee for the Exercise Price pursuant to Issuer’s Winding Up Event Following an Enforcement Event of the Issuer where there is a final and effective winding up order made on the Issuer, or when an effective resolution is passed for the winding-up or dissolution of the Issuer (“Issuer’s Winding Up Event”), the Subordinated Guarantee shall be triggered and the Exercise Price under the Sukuk Musharakah shall be due and payable in cash by the Kafalah Provider to the Sukukholders no later than 3 months from the date of Issuer’s Winding Up Event, or upon the issuance of the Replacement Perpetual Sukuk (as defined below), whichever is earlier. Hence, unless so decided otherwise by the Sukukholders by way of an extraordinary resolution that the Replacement Perpetual Sukuk (as defined below) is not required, the Kafalah Provider shall take all immediate and necessary steps to, within 3 months from the occurrence of the Issuer’s Winding Up Event, issue a replacement perpetual Sukuk mirroring the terms of the Sukuk Musharakah including, but not limited to, the same periodic distribution rates and call dates, for a nominal amount similar to that of the Sukuk Musharakah (“Replacement Perpetual Sukuk”). 71
  82. For the purposes of the issuance of the Replacement Perpetual Sukuk , the Sukukholders irrevocably authorise the Kafalah Provider to retain the Exercise Price (payable to the Sukukholders by the Kafalah Provider in cash pursuant to the Subordinated Guarantee) and invest, on behalf of the Sukukholders, part of the Exercise Price equivalent to the nominal value of the Sukuk Musharakah into the new Musharakah venture under the Replacement Perpetual Sukuk, while the Kafalah Provider shall contribute the business operation of the Kafalah Provider and/or its subsidiaries or part thereof identified and held on trust by the Kafalah Provider on behalf of the holders of the Replacement Perpetual Sukuk as a contribution in kind to the Musharakah venture under the Replacement Perpetual Sukuk. The Sukukholders also irrevocably authorise the Kafalah Provider to invest the remaining part of the Exercise Price into the Musharakah venture under the Replacement Perpetual Sukuk as additional capital, which form part of the expected periodic distribution amount under the Replacement Perpetual Sukuk and would itself be entitled to additional periodic distribution amount. For the avoidance of doubt, such additional capital shall not increase the nominal value of the Replacement Perpetual Sukuk. Any payment of such additional capital to the holders of the Replacement Perpetual Sukuk shall be deemed as a repayment of such additional capital, and not payment of profit from the Musharakah venture under the Replacement Perpetual Sukuk. Upon issuance of the Replacement Perpetual Sukuk, the Sukuk Musharakah will be deemed cancelled and there shall be no further obligations whatsoever from the Issuer, on the Sukuk Musharakah. For the avoidance of doubt, the issuance of the Replacement Perpetual Sukuk shall be subject to a new SC Lodgement and other necessary regulatory approvals as required at the time for the new issuance. The Replacement Perpetual Sukuk shall be issued to the Sukukholders in consideration of the Sukukholders’ investment of part of the Exercise Price equivalent to the nominal value of the Sukuk Musharakah (payable to the Sukukholders by the Kafalah Provider in cash pursuant to the Subordinated Guarantee) into the new Musharakah venture under the Replacement Perpetual Sukuk. Until the completion of the issuance of the Replacement Perpetual Sukuk, Dividend and Capital Stopper shall apply to the Kafalah Provider. In the event of a breach of Dividend and Capital Stopper arising from an Issuer’s Winding Up Event and completion of the issuance of the Replacement Perpetual Sukuk, the Exercise Price shall be payable by the Kafalah Provider, pursuant to the Subordinated Guarantee, within 30 days from the date of the breach of Dividend and Capital Stopper. 72
  83. In the event of a failure by the Kafalah Provider to issue the Replacement Perpetual Sukuk within 3 months from the date of Issuer ’s Winding Up Event, the Exercise Price shall be immediately due and payable by the Kafalah Provider. For the avoidance of doubt, no Replacement Perpetual Sukuk shall be issued if the Enforcement Event relates to the liquidation, winding up or dissolution of the Kafalah Provider. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 73
  84. SECTION 3 .0 INVESTMENT CONSIDERATIONS The purchase or subscription of the Sukuk Musharakah may involve substantial risk and is suitable only for investors who have the knowledge and experience in financial and business matters necessary to enable them to evaluate the risks and merits of an investment in the Sukuk Musharakah. The following is a summary of certain risk factors associated with an investment in the Sukuk Musharakah. This section does not purport to be comprehensive, exhaustive or complete and is not intended to substitute or replace an independent assessment of the risk factors that may be associated with an investment in the Sukuk Musharakah. There may be additional risk factors, which are not disclosed below, which are not presently known to IJM Land Group and IJM Corporation Group or which IJM Land Group and IJM Corporation Group currently deem to be less significant, which may materially and adversely affect IJM Land Group and IJM Corporation Group’s business, financial condition, operating results and prospects in the future. Each investor should carefully conduct his or her independent evaluation of such risks. Investors should also note that each issuance under the Perpetual Sukuk Programme will carry different risks and all potential investors are strongly encouraged to evaluate each issuance of the Sukuk Musharakah under the Perpetual Sukuk Programme on its own merit. 3.1 Risks relating to IJM Land Group (a) Competition risks IJM Land Group’s existing projects (which are currently focused in key locations in Penang, Kuala Lumpur, Selangor, Negeri Sembilan, Johor, Sabah and Sarawak and United Kingdom) face competition from various property developers, both local and foreign, including on the availability of strategically located and reasonably priced land banks. The property development market is highly competitive and any oversupply of properties due to a mismatch in supply and demand will intensify the level of competition which may, among others, affect pricing. There can be no assurance that buyers will purchase properties from IJM Land Group’s developments instead of IJM Land Group’s competitors. IJM Land Group has strong branding and an established track record and will continue to take measures to address the competition risk such as conducting market intelligence study to understand buyers’ needs, monitoring and adjusting development products and marketing strategies in response to changing economic conditions and market demand. (b) Political, economic and regulatory considerations Most of IJM Land Group’s existing property development projects are located in Malaysia, with some in and the United Kingdom. The success of IJM Land Group’s existing projects therefore heavily depends on the continued growth of the property market in Malaysia, particularly in Penang, Kuala Lumpur, Selangor, Negeri Sembilan, Johor, Sabah and Sarawak. The property industry in general is affected by the political, economic and regulatory conditions in Malaysia and there is no assurance that any such developments may not have an adverse effect on the financial prospects of property developers in Malaysia including IJM Land Group. Political and economic uncertainties include but are not limited to, changes in credit conditions, changes in labour laws, availability of labour, a switch in 74
  85. political leadership and /or changes in the regulations and government’s policies on interest rates, lending policies imposed on banks, methods of taxation and licensing regulations. Furthermore, changes in exchange rates resulting in a weakening currency may have an adverse effect on the demand for properties. The local property market is expected to remain challenging as the key issues of price affordability, the overhang of highrise homes, rising cost of living and tight financing will continue to have a dampening effect. In addition, IJM Land Group and third parties upon whom IJM Land Group depend on expect to be or continue to be subject to extensive safety, health and environmental laws and regulations and various immigration, labour and workplace related laws and regulations. The scope and extent of any new safety, health and environmental laws and regulations, including their effect on IJM Land Group’s operations, cannot be predicted. The above factors affect all players in the property industry and are generally beyond IJM Land Group’s control. However, IJM Land Group is confident that IJM Land Group’s experienced management team and proven ability to respond and adapt to the everchanging economic and regulatory environment, will put IJM Land Group in good stead to alleviate any difficulties arising from the changes in the political, economic and regulatory circumstances should they arise in the future. Whilst the Board believes that it is possible to address any fluctuations in the demand for properties arising from changes in the economic and regulatory environment by versatile planning in terms of innovative design, timing of launch, right type of products/segments and pricing points relative to competitors, there can be no assurance that IJM Land Group will be shielded from any adverse changes to the political, economic, regulatory or lending environment which may have a material adverse effect on IJM Land Group. The Issuer will leverage on its strength and experience as a property developer to manage these risks closely. (c) Dependency on licensing/approval from authorities Property developers including IJM Land Group are subject to various regulatory approvals particularly in respect of approvals for development plans and conversion of land usage. There is no assurance that any delay in obtaining these approvals may not have an adverse impact on IJM Land Group’s property development projects and/or timing of launching IJM Land Group’s property development projects and thereby affecting IJM Land Group’s future profitability. To ensure smooth implementation of IJM Land Group’s development projects, IJM Land Group conducts thorough studies on the nature and background of land to be acquired to ensure that IJM Land Group complies with procedural and documentation requirements in relation to the applications for necessary approvals. In addition, IJM Land Group monitors the progress of such applications by continuously liaising with the relevant authorities. Property developers including IJM Land Group are also subject to the terms and conditions of the property development licenses granted to them by the relevant regulatory authorities. There can be no assurance that there will not be any adverse impact on IJM Land Group’s property development projects and/or there will not be any delays in the completion 75
  86. of any property development projects or the commencement of any new property development projects if such development licenses have expired , are not renewed and/or revoked by the relevant regulatory authorities and thereby affecting IJM Land Group’s future operations and profitability. (d) Dependency on contractors and consultants Generally, the property development industry is dependent on the performance of the main/sub-contractors and consultants to ensure timely completion of the respective building and infrastructure works as per their contractual timeline. There is no assurance that any unanticipated delay due to unforeseen circumstances, unsatisfactory performance of the appointed main/sub-contractors and/or consultants may not have an adverse effect on the operations and profitability of IJM Land Group. IJM Land Group implements stringent selection criterion to ensure that only contractors and consultants with proven track record and adequate financial resources are engaged to undertake construction works and/or provide consultancy servicers in respect of IJM Land Group's development projects. It is also IJM Land Group’s current practice to award its contracts to contractors on fixed terms where any increase in cost or delays by such contractors will be absorbed and/or compensated by them. Furthermore, IJM Land Group is not dependent on any single main contractor or consultant as IJM Land Group engages the services of an array of contractors and consultants for the development of IJM Land Group’s projects and to provide consultancy services in respect of IJM Land Group’s projects, respectively. In addition, IJM Land Group will also seek to mitigate such risks by close monitoring of the contractor's and the consultant’s work progress in order to ensure the timely completion of its property development projects. (e) Dependency on key personnel IJM Land Group’s success is significantly dependent on the efforts, abilities and continuous performance of the Issuer’s directors, senior management team. Should the key personnel leaves, there is no certainty that a suitable replacement with the same skill sets and experience can be found. Taking this into consideration IJM Land continue to strive in attracting and retaining skilled personnel who have and will continue to contribute to the growth and success of IJM Land Group. As part of IJM Land Group’s effort in attracting and retaining employees with the right skills and expertise, IJM Land Group has in place human resource initiatives which include competitive remuneration packages and a human resource training and development programme for IJM Land Group’s employees in all key functions of IJM Land Group’s operations. (f) Risk of Compulsory acquisition Pursuant to the Land Acquisition Act 1960, the Government has the power to compulsorily acquire any land in Malaysia in accordance with the aforesaid Act. In the event of any compulsory acquisition of land, the amount of compensation to be awarded shall be computed on the basis prescribed in the First Schedule of the Land Acquisition Act 1960. 76
  87. If all or any portion of the lands owned by IJM Land Group is compulsorily acquired by the Government at any point in time , the amount of such compensation may be less than the market price of the lands and/or may be less than the purchase considerations. In the event of any compulsory acquisition, IJM Land Group will seek to minimise any potential losses from such transactions by invoking the relevant provisions in the Land Acquisition Act 1960 in relation to IJM Land Group’s rights to submit an objection in respect of the compensation, where necessary. (g) Availability and cost of materials The materials used in IJM Land Group’s development projects represent a significant portion of its total development costs. These materials are global commodities and their availability and prices depend on local and global market conditions. Higher cost of construction materials will affect IJM Land Group’s profit margin if it is not able to fully pass the costs on to its customers. If there is a shortage of these materials, particularly cement, steel and diesel, IJM Land Group may find it difficult to obtain the amount of materials it requires at prices it believes are commercially acceptable in a timely fashion. If IJM Land Group is not able to obtain a sufficient amount of such materials at acceptable prices, IJM Land Group’s businesses, financial condition, results of operations and prospects may be adversely affected. (h) Environmental considerations IJM Land Group’s operations are required to comply with the various environmental laws relating to, amongst others, water, air, noise, pollution and the disposal of waste materials. Although environmental protection procedures and mitigation measures are implemented, there can be no assurance that material costs and liabilities will not be incurred in the future to comply with future requirements. (i) Insurance coverage IJM Land Group’s projects are covered by property takaful/insurance which are typical for similar business operations, with policy limit specifications which IJM Land Group believes are adequate. Nonetheless, such projects may suffer losses due to risks which may be uninsurable or are not covered by the required takaful/insurance policies or for which insurance coverage is inadequate (such as losses resulting from war, terrorism, nuclear radiation, radioactive contamination, landslip, heave and coastal erosion). If an uninsured or uninsurable loss were to occur, IJM Land Group may be required to pay compensation and/or lose capital invested in such projects as well as any future revenue from such projects. Further, IJM Land Group may not have sufficient funds to effect the reconstruction or major repairs of such projects, in order to maintain the condition of such projects. 77
  88. (j) Ability to secure land bank The success of property developers such as IJM Land Group is very much dependent on the quantity, quality and location of its land bank. There is a need to ensure that property developers such as IJM Land Group have sufficient quality land bank to sustain its future operations as well as to contribute positively to its future earnings. (k) Exposure to inventory build-up IJM Land Group is exposed to an inherent risk of inventory build-up (i.e. property overhang) and low take-up of property due to various external factors such as inflation, rising interest rates, negative consumer sentiment, unattractive location of properties or oversupply of properties in the market. All these factors may have a direct impact on the operational and financial performance of IJM Land Group. To mitigate this risk, IJM Land Group seeks to appropriately-time launches of quality property developments in strategic locations and to adopt active marketing efforts to encourage a higher take-up rate of the properties. (l) IJM Land Group is subject to revenue, profit and operating cash flow volatility The revenue, profit and operating cash flow of IJM Land Group in any financial year may fluctuate as each is predominantly project-based and dependent on the sales performance, number, value and completion of the projects IJM Land Group undertakes. There is no assurance that the amount of revenue from the sale of the projects by IJM Land Group will remain comparable each year. IJM Land Group aims to manage some of this volatility by phasing the development of its projects. However, in the event that IJM Land Group undertakes fewer or no new projects in certain periods, or there are delays in the completion of its projects or sales of its projects are poor, the revenue recognized or cash flow generated in such periods may be adversely affected which will consequently have a material adverse effect on IJM Land Group’s financial position. (m) IJM Land Group may be involved in legal and other proceedings from time to time IJM Land Group may be involved, from time to time, in disputes with various parties including contractors, sub-contractors, consultants, suppliers, construction companies, purchasers and other partners involved in its business initiatives and in the development and operation of its properties. IJM Land Group may also be exposed to disputes with other third parties in relation to the subject of IJM Land Group’s development or proposed development including land acquisitions and tortious claims. These disputes may lead to legal and other proceedings and may cause IJM Land Group to suffer additional costs and delays or lead to an inability for IJM Land Group to realise its expected rate of return. Such disputes, if they 78
  89. arise , may also occupy a significant amount of management’s time and attention. In addition, IJM Land Group may, from time to time, be required to deal with issues or disputes in connection with regulatory bodies in the course of its operations which may result in IJM Land Group being subject to administrative proceedings and unfavourable orders, directives or decrees that may result in financial losses and delay the construction or completion of the projects. (n) Holding Company Structure The Issuer is an investment holding company and relies mainly on its investment income, including interest and dividends from its subsidiaries, jointly controlled entities and associate companies (if any) to meet its obligations, including obligations under the Perpetual Sukuk Programme. Its subsidiaries, jointly controlled entities and associate companies (if any) are separate legal entities and have no obligations with respect to the Perpetual Sukuk Programme. The ability of the Issuer’s subsidiaries, jointly controlled entities and associate companies (if any) to pay dividends and interest on shareholders’ advances (if any) and, to the extent that the Issuer relies on such dividends and interests to meet its obligations under the Perpetual Sukuk Programme are subject to all applicable laws and restrictions on the payment of dividends and interests contained in the articles of association of the relevant companies and in certain cases, financing or other agreements. 3.2 Risks relating to the IJM Corporation Group Like every other business, the performance of the IJM Corporation Group is also dependent on the performance and growth of the economy. Hence, it is exposed to certain risks inherent in the construction, property development, manufacturing, oil palm plantation, toll roads and port industries. These include, amongst others, changes in the general economic conditions such as government laws, regulations, rules and orders, taxation, inflation, interest rates, exchange rate of foreign currencies and changes to business conditions such as deterioration in market conditions, rising cost of raw materials, building materials, fertilisers and labour. The IJM Corporation Group is managed by a professional management team with proven skills and experience, and sufficient risk management measures to manage and mitigate these risks have been put in place. However, no assurance can be given that any change to these conditions will not have a material adverse effect on the IJM Corporation Group’s business. (a) Property Division Please refer to Section 3.1 above. 79
  90. (b) Construction Division (i) Business risk There are certain risks inherent in the design and construction of large scale projects such as shortages of construction materials and skilled workers, unavailability and inefficiency of equipment, price increase in construction materials, labour disputes, the nonperformance or unsatisfactory performance of contractors and subcontractors, inclement weather, natural disasters, accidents, change in government policies, more stringent regulatory & legislative compliance, failure or postponement in the issuance or grant of licences, permits and approvals, and unforeseen engineering or environmental problems. Construction delays, loss of revenue and cost over-runs are likely to result from such events which could in turn materially and adversely affect the construction division’s business, operations and financial performance, and in turn, affect the IJM Corporation Group’s profitability. The construction division seeks to limit these business risks through, amongst others, closely monitor the progress of the construction projects and endeavour to promptly rectify any setback in order to ensure the IJM Corporation Group’s performance is not materially and adversely affected. (ii) Competition and Reputation risk The key competitive factor for the construction division is its reputation and reliability. Any adverse change to the reputation of the IJM Corporation Group may materially affect the IJM Corporation Group’s ability to replenish the order book which may have an adverse effect on the future performance and profitability of the IJM Corporation Group. The construction division has good track record in implementation of quality projects and services. Furthermore, the hands-on and experienced key management will mitigate to a certain extent the risk as mentioned above. Notwithstanding this, there can be no assurance that the abovementioned factors will not lead to adverse change to the reputation of the IJM Corporation Group. (iii) Delays in The Completion of the Construction Projects Timely completion of construction projects is dependent on a number of factors, including, inter alia, obtaining the necessary approvals from the authorities and local councils as scheduled, securing construction materials in adequate amounts, sufficient manpower and satisfactory performance by appointed subcontractors. Any prolonged delays in the completion of a project could adversely affect the business and financial performance of the construction division, and in turn, the profitability of the IJM Corporation Group. 80
  91. It has always been the IJM Corporation Group ’s commitment to closely monitor the progress of its construction projects and endeavour to promptly rectify any setback. Notwithstanding this, there can be no assurance that the abovementioned factors will not lead to delays in the completion of any of the construction projects. (c) Industry Division (i) Business risk The industry division’s business is closely related to the construction division hence certain business risks of the industry division are the same as those currently relevant to the construction division. In addition, the piles business is sensitive to price fluctuations and availability of raw materials such as steel, sand and cement. Any adverse raw material price movements will result in lower margins, culminating to a need to increase price. There can be no assurance that any adverse raw material price movements will not have an adverse impact on the profit margins of the IJM Corporation Group in the event that the IJM Corporation Group is unable to pass on the additional cost by increasing the selling price of the products. (ii) Lease of Quarries Some of the quarries under the industry division are located on land which are under lease or licence such that its quarrying activities are subject to renewal of the said lease or licences. Although the IJM Corporation Group has been able to renew these leases or licences in the past, there can be no assurance that the industry division will be able to renew these leases or licences in the future when they fall due. In addition, there can be no assurance that the leases or licences of its quarries will not be revoked due to non-compliance with relevant rules and regulations governing the quarrying business. Notwithstanding this, the industry division has been taking the necessary precautions and constantly striving to ensure compliance. In addition, a significant quarry reserve is also important to ensure the future growth and profitability of the quarrying business. (iii) Environmental Factors In general, all quarries and ready-mixed concrete related activities generate dust and noise and it is up to the operator to monitor and control air and noise pollution caused by these activities. In addressing these environmental concerns, the industry division has taken the necessary steps to minimise the level of pollution. Air pollution caused by dust is mitigated by using water from water tankers and sprinklers with pressure pumps whereas noise pollution caused by crushing and blasting operations is mitigated by isolating the crusher plants and using proper blasting methods respectively. 81
  92. Notwithstanding this , there can be no assurance that such environmental concerns will not have an adverse effect on the future quarrying and/or ready-mixed concrete operations of the industry division, or that compliance with new legislation on environmental matters will not have a material and adverse effect on the business and prospect of the industry division, and in turn, the IJM Corporation Group’s financial performance. (d) Plantation Division (i) Price Fluctuations The price of CPO and PK are based on global prices which tend to be highly cyclical and subject to significant fluctuations. Global prices are, in turn, affected by the availability of agricultural commodities which are subject to wide fluctuations due to unpredictable factors affecting supply such as weather conditions and the demand is affected by factors such as changes in population growth, changes in standards of living, bio-diesel demand and global production of substitute and competitive crops. Prices are also affected by a variety of other factors beyond the plantation division’s control including environmental and conservation regulations, tariffs, natural disasters and forest fires. The markets for CPO and PK are also sensitive to changes in industry capacity and output levels. The plantation division would not be in a position to significantly increase the CPO and PK output to offset the effect of any decline in global prices since oil palm is a perennial crop. All these factors can have a significant impact on the plantation division’s business and financial performance, and in turn, the IJM Corporation Group’s profitability. (ii) Risk of Weather Conditions The yield of FFB is dependent on weather conditions. Excessive rainfall or extended periods of dry weather will lead to a decline in the overall yield of FFB. Excessive rainfall will also lead to poor pollination of palms and reduce the effectiveness of fertilisers, while drought results in oil palm trees forming fewer fruit bunches. However, the plantation division has implemented various measures to reduce the impact of floods and droughts by employing good agronomic and estate practices, water conservation and irrigation measures, improve water storage capacity and provide appropriate training to its cades and field staffs. Notwithstanding the above measures, these risks would not be totally eliminated. Any adverse weather conditions, especially if continued for a prolonged period, may materially and adversely affect the plantation division’s business and financial performance, and in turn, the IJM Corporation Group’s profitability. 82
  93. (iii) Risk Relating to Pests and Diseases Oil palm plantations are susceptible to pests and diseases. Outbreaks of leaf eating insects such as nettle caterpillars and bagworms are not uncommon. Pests such as rodents can also cause damage to FFB. The outbreak of pests and diseases may result in the destruction of oil palm trees and decrease in the production of FFB. The ultimate result is not only the loss of crop and lower profitability but also the high expenditure to be incurred by the plantation division to control such outbreaks. Preventive measures adopted by the plantation division to eliminate pests and reduce diseases include planting of beneficial plants to attract predators of insect pests, use of chemical baits and biological control strategies such as the use of natural predators like snakes and owls to eliminate rodents and widen drains to prevent wild boars from entering the oil palm plantation, adopting and implementing good field hygiene and integrated pest management practices. However, these measures would not be able to totally eliminate the risk. Any destruction of the oil palm trees and resultant decrease in FFB production could potentially materially and adversely affect the plantation division’s business and prospects, and in turn, the IJM Corporation Group’s profitability. (e) Infrastructure Division Tollway operations (i) Regulatory risk The IJM Corporation Group’s toll concessions are subject to regulatory risks such as toll rates adjustments and expropriation. Whilst toll rates may be increased from time to time in accordance with the provisions in the respective concession agreements, the Government may impose lower toll rates, defer increase of toll rate or abolish toll tariff. In the event the Government varies the toll rates such that toll rates fall below agreed toll rates as stipulated in the concession agreements, the Government is obliged to compensate for the difference in the manner agreed in the concession agreements. Under such circumstances, the infrastructure division’s cash flows may be materially and adversely affected due to the timing for receipts of compensation from Government. The Government may also expropriate the concession if it considers that such expropriation is in the national interest. However, should such expropriation happen, the Company will be compensated as stipulated in the concession agreement. 83
  94. (ii) Risk of Lower Traffic Volume Traffic volume is another primary determinant of the toll operation’s revenue. However, the number of vehicles using the highways is to a large extent dependent on factors beyond the infrastructure division’s control, including but not limited to the following:(a) the level of commercial, industrial and development areas served by the highways; residential (b) toll rates; (c) alternative and/or parallel toll-free routes; (d) the price of petrol and other transportation fuels; (e) the affordability of automobiles to consumers, including the availability of consumer financing; and (f) alternative modes of transportation such as public transport, rail and air. Adverse trends affecting any of these factors could have a material effect on traffic volumes, and the infrastructure division’s business and financial performance and in turn, the IJM Corporation Group’s profitability. Port operations (i) Business risk With the nature and strategic roles of ports, the infrastructure division’s port operations tend to perform in tandem with the level of economic activities in Malaysia as well as on a global scale. The ability of the ports to keep abreast with the rapid evolution and development of ship design and construction would affect the number of ships or main line operators using the ports, type of port services provided and cargo volume. The number of ships or main line operators using the ports is also dependent on the level of economic activity in the areas surrounding the port. (ii) Competition risk The infrastructure division’s port operations which are located in Kuantan is managed by the IJM Corp’s subsidiary, KPC. KPC is located along one of the major shipping routes crossing the South China Sea. The port faces competition from neighbour port in the region such as Kemaman Port. In line with the Government’s effort to develop the East Coast of Peninsular Malaysia into a regional manufacturing, oil, gas and petrochemical hub, the IJM Corporation Group is committed to further develop and transform its port into a regional multi-purpose port serving the Asia Pacific rim with the development of the NDWT 84
  95. which has increased cargo handling capacity and expects to receive approval to operate as a Free Zone Port . Whilst the port operations in Kuantan has the advantage of operating in the east region of Peninsular Malaysia, there can be no assurance that the ports can compete efficiently with other regional ports. The abovementioned risk factors are beyond the control of the infrastructure division. However, the infrastructure division seeks to limit these risks by providing ancillary facilities such as rest areas and petrol stations along the toll roads to ensure higher level of safety as well as improving connectivity to attract higher traffic volume. As for the port operations, the infrastructure division also increased the type of port services and customised the port services to meet the demands of various port users as well as carried out intensive marketing to widen the customer base and to attract other types of industries into its port hinterland. (f) Other Risks relating to IJM Corporation Group (i) Market risk Market risks refer to the risks resulting from economic and regulatory conditions and the inherent cyclical nature of the IJM Corporation Group’s businesses. In the current economic climate, the slowdown in the local and global economy may affect the construction and industry division’s order book replenishment and result in overcapacity situations in their factories. During the financial year, the industry division’s performance was affected by softening demand for its piles and quarry products and lower selling prices, while the property division continued to face challenges of a subdued and saturated market as well as stiff competition from established competitors in Malaysia affecting its sales. All of these factors affect the IJM Corporation Group’s profitability and cash flows. To mitigate such economic risks, the IJM Corporation Group has various measures in place including the following: (a) Securing long term BOT projects. During FYE 2018, the IJM Corporation Group secured the Solapur-Bijapur Section of the National Highway, NH-13 (New NH-52) (109.08 KM) BOT project in India; (b) Exploring various business and geographical diversifications including real estate investment with the acquisition of land and construction of Menara Prudential, a 27-storey office building within the Tun Razak Exchange, Kuala Lumpur; (c) Regularly reviewing the business performances to address any shortfalls; 85 plans against
  96. (d) Maintaining good relationships with vendors and negotiating for more favourable terms; (e) Maintaining existing customers and winning new customers; (f) Seeking alternative uses of available capacity for its factories; (g) Enhancing efficiency and productivity in its operations; (h) Cost reduction initiatives to contain rising production costs such as sourcing cheaper alternative raw materials; and Adopting innovative marketing strategies with appropriate product differentiation and flexibility in product offerings to suit the market demand for its properties. (i) The IJM Corporation Group has invested in emerging markets over the years such as in India, the Middle East, Indonesia and China. Whilst the IJM Corporation Group is able to tap into these markets, foreign engagements entail added risks given their different operating, economic and regulatory environments as well as intensive local and international competition. Nevertheless, the IJM Corporation Group continues to monitor these market risks associated with foreign ownership including currency, inflation, tax, political and expropriation risks, employ detailed feasibility assessments whilst continuously seeking out local as well as other international opportunities to replenish orders, diversify its business and grow earnings. (ii) Political Risk Political risks refer to the change of government, government decisions, events or conditions that may affect the performance of the IJM Corporation Group‘s businesses. With the recent change of government in Malaysia in May 2018 and their plans for institutional and political reforms, the IJM Corporation Group will closely monitor and be proactive in the management of associated risks by engaging and working with the new government in office to improve business, consumer and market sentiments. (iii) Commodity and Currency Risk Commodity risk is prevalent in the plantation division as its prices for palm products are subject to market volatility which affects its profitability. The plantation division manages such commodity risk with the following measures: (a) Constant monitoring of the commodity prices to determine the appropriate timing to transact sales; (b) Selling using the Malaysian Palm Oil Board’s average price mechanism; (c) Hedging through forward sales contracts; 86
  97. (d) Entering into crude palm oil pricing swap arrangements with financial institutions as an additional hedge; and (e) Close monitoring of the pricing trends of major oils and fats for market intelligence. The IJM Corporation Group is also exposed to foreign currency fluctuations due to its investments in foreign countries such as India, China, Indonesia and the United Kingdom which may affect its profitability due to the negative fluctuation in the functional currencies of the foreign subsidiaries. These foreign currencies mainly comprised the US Dollar, Indian Rupee, Chinese Renminbi and Pound Sterling and the exchange exposures are managed by the IJM Corporation Group with the following measures: (iv) (a) Entering into forward foreign exchange contracts or cross currency swap contracts where applicable; and (b) Keeping foreign currency denominated borrowings at an acceptable level. Regulatory Risk The IJM Corporation Group’s businesses are governed by relevant laws, regulations, standards, licenses and concession agreements. The IJM Corporation Group constantly assesses the impact of new laws and regulations affecting its businesses to ensure that its processes and infrastructure settings are able to operate under the new requirements. New laws and regulations which have an impact to the IJM Corporation Group during FY2018 includes the following: (a) LR of Bursa Securities; (b) New Malaysian Code on Corporate Governance 2017; (c) Malaysian Budget 2018; (d) Employment Insurance System Act 2017; and (e) Real Estate (Regulation and Development) Act, India. The IJM Corporation Group manages these regulatory risks with the following measures: (a) Being updated with the new laws and/or requirements by participating in seminars, conferences and trainings, both in-house and external, as presented by authorities, experts or specialists; (b) Implementing appropriate policies, procedures, guidelines, self-audit processes and contracts management practices; and 87
  98. (c) Maintaining regular communication with the authorities, industry, accounting, tax and legal experts to ensure compliance at all times. The IJM Corporation Group is also mindful of the new government’s plans for various reforms and will take cognisance of the legal and regulatory changes being implemented in due course and will make the necessary adaptations and changes to comply with the new requirements. In addition, the other policies which affect the IJM Corporation Group’s property division are the loan to value cap requirement and strict mortgage lending policies by banks resulting in lower loan approvals. Coupled with the slower project approvals from the authorities, all these factors affect the demand for the property division’s properties, slow down the progress of its developments and reduce profitability levels. To mitigate such risks, the property division carries out the following measures: (iv) (a) Liaising closely with government officials and external institutions; (b) Maintaining close working relationships with financial institutions to counter the cooling policies; (c) Developing innovative marketing strategies and negotiating for attractive interest rates for loans; (d) Adopting the industrialised building system which is less dependent on labour, whilst improving the productivity and quality of construction work; (e) Switching product focus to landed properties and/or affordable housing where demand is still resilient due to support by the younger demographics; and (f) Delaying the launch of certain high-end high rise projects where appropriate. In addition to the above, the IJM Corporation Group’s legal department provides legal input on compliance with applicable laws and regulations, including on business, contracts and operational matters. Credit And Liquidity Risk Management These risks arise from the inability to recover debts in a timely manner which may affect the IJM Corporation Group’s profitability, cash flows and funding. Such risks are more widespread in the construction and industry division’s overseas operations. The IJM Corporation Group minimises such exposures with the following measures: (a) Assessing the creditworthiness of potential customers before granting credit limits and periods; (b) Employing strict debt repayment policies; 88
  99. (iv) (c) Persistent and close monitoring of collections and overdue debts; and (d) Ensuring effective credit utilisation to keep leverage at a comfortable level. Operational Risk Management Inadequate skilled workforce risk Similar to many other companies in the same line of business the IJM Corporation Group faces a common challenge in the form of inadequate skilled workforce. This risk is more acute in the plantation division due to the difficulty in recruiting skilled workers which may slow down its harvesting operations. Various measures carried out by the plantation division to attract more skilled labour included the following: (a) Working with the industry fraternity to improve the availability of labour; (b) Upgrading the living quarters of guest workers complete with amenities including electricity and water, medical care, crèche, education centres, recreational and sports facilities, in phases; (c) Entering into partnership with NGOs such as the Borneo Child Aid to provide education to the children of guest workers with the intention of retaining the workers; (d) Encouraging local school leavers to participate in the plantation sector and to offer suitable internship programmes for undergraduates via joint ventures with universities and agricultural/labour authorities; and (e) Reviewing the remuneration benefits of workers from time to time to stay competitive. To mitigate the risk of inadequate skilled workforce within the IJM Corporation Group, it implemented various remuneration and welfare schemes to attract and retain employees to meet existing and future needs. Some of these initiatives are as follows: (a) The Long Term Incentive Plan (“LTIP”), which comprises an employee share option scheme and an employee share grant plan for qualified employees. (b) Enhancing work-life practices such as offering staggered hours, family care leave, car park space for expectant mothers and extended maternity leave; and (c) Enhancing the IJM Corporation Group’s hospitalisation and surgical plans. 89
  100. Adverse weather risk The plantation division ’s crop productivity may be affected by prolonged dry weather. To mitigate the dry weather condition and in anticipation of its recurrence in the future, the plantation division had carried out measures which included the following: (a) Employing good agronomic and estate practices as per the plantation division’s operating manual; (b) Carrying out water conservation and irrigation measures to ensure its oil palms receive adequate water; (c) Deepening reservoirs, where possible, to increase water storage capacity with the objective of irrigating the surrounding fields; and (d) Ensuring appropriate agricultural training for its cadets and field staff. Cyber Security Management Cyber security is one of the most important concerns of today. Cyber attacks can cause major damage to the bottom line, as well as loss of business reputation and stakeholder’s trust. In order to secure the critical business systems from cyber attacks, the IJM Corporation Group has built a team of certified security professionals to establish a set of IT security policies and procedures based on the relevant data security standards and industry best practices. In addition, independent enterprise wide assessments are conducted on a regular basis to ensure that the systems are robust, effective and continuously improved to enhance the IJM Corporation Group’s cyber resilience. The IJM Corporation Group is proactively monitoring and implementing layers of new controls to protect its critical business systems against the ever-evolving cyber threat landscape and challenges. Disaster Recovery Management With the advent of cyber threats and other potential hazards such as fires, floods, earthquakes and major equipment failures, amongst others, the continuity of business operations is of a major concern to the IJM Corporation Group. In line with that, the IJM Corporation Group has established a crisis management plan to deal with major incidences and crisis situations affecting its businesses, financial position, cyber security and of public concern. The IJM Corporation Group regularly reviews the crisis management plan to ensure its relevance and appropriateness. Additionally, the IJM Corporation Group has a production site for critical business systems at an external hosting centre in Cyberjaya, Selangor which is designed to be almost disaster free while the disaster recovery site has migrated from a physical 90
  101. location to Cloud as a service acting as a warm site for systems recovery in the event of a disaster . Meanwhile, the other less critical business systems continue to be maintained in Cyberjaya. 3.3 Risks relating to the Sukuk Musharakah (a) Limited remedies for non-payment under the Sukuk Musharakah (Please refer to the definitions in Section 2.0 of this Information Memorandum for all terminologies used under this Section 3.2.1). The Sukuk Musharakah do not provide for any events which would ordinarily under other sukuk issues, entitle the Sukuk Trustee or the Sukukholders to declare that any or all amounts under the Sukuk Musharakah to be immediately due and payable. There are only three (3) Enforcement Events prescribed under the terms of the Sukuk Musharakah as follows:(i) where a final and effective order is made or an effective resolution is passed for the liquidation, winding-up or dissolution of the Issuer or the Kafalah Provider, provided that a stay on such order has not been granted by the relevant court of competent jurisdiction within thirty (30) days from the date of such order; (ii) the Issuer fails to pay (a) any amount in respect of the Exercise Price as a result of a Redemption Event and (b) any amount in respect of the Sukuk Musharakah whether in respect of the due and payable Expected Periodic Distribution Amount or part thereof and any Arrears of Deferred Periodic Distribution, and such failure to pay under items (a) and (b) continues for a period of seven (7) business days or more (for this purpose, such payment of Expected Periodic Distribution Amount or part thereof and Arrears of Deferred Periodic Distribution will not be due if the Issuer has elected to defer such Expected Periodic Distribution Amount or part thereof in accordance with the Transaction Documents); and (iii) the Kafalah Provider fails to pay any amount due under the Subordinated Guarantee and such failure continues for a period of seven (7) business days or more. For the avoidance of doubt, a breach of covenant by the Issuer or the Kafalah Provider (apart from failure to pay the amounts stated under item (ii) and (iii) above) will not constitute an Enforcement Event. Upon the occurrence of an Enforcement Event under item (i) above, the Sukuk Trustee may at its discretion, and shall if so directed by an extraordinary resolution of the Sukukholders, declare that an Enforcement Event has occurred and require the Issuer to purchase the Sukukholders’ interest in the Musharakah Venture from the Sukuk Trustee (for and on behalf of the Sukukholders) at the relevant Exercise Price. Upon the occurrence of an Enforcement Event under item (ii) and (iii) above, the Sukuk Trustee may at its discretion, and shall if so directed by an extraordinary resolution of the Sukukholders, declare that an Enforcement Event has occurred and:91
  102. (a) institute winding-up proceedings against the Issuer or Kafalah Provider, as the case may be, and/or (b) prove in the winding-up of the Issuer or the Kafalah Provider (as the case may be) and/or claim in the liquidation of the Issuer or the Kafalah Provider (as the case may be) for such payment as it may think fit to enforce the obligations of the Issuer or the Kafalah Provider, under or arising from the Sukuk Musharakah and the Subordinated Guarantee (as the case may be). Without prejudice to the above, the Sukuk Trustee may at its discretion or shall, if directed to do so by an extraordinary resolution of the Sukukholders, without further notice institute such proceedings against the Issuer or the Kafalah Provider (as the case may be), as it may think fit to enforce any term or condition binding on the Issuer under the Sukuk Musharakah, or the Kafalah Provider under the Subordinated Guarantee, the Trust Deed (other than any payment obligation of the Purchase Undertaking Obligor under or arising from the Purchase Undertaking, including, without limitation, payment of the Exercise Price for the satisfaction of the nominal value, any Expected Periodic Distribution Amount and any Arrears of Deferred Periodic Distribution in respect of the Sukuk Musharakah including any damages (excluding opportunity cost) awarded for breach of any obligations), and in no event shall the Issuer, by virtue of the institution of any such proceedings, be obliged to pay any sum or sums, in cash or otherwise, sooner than the same would otherwise have been payable by them. For the avoidance of doubt, it is not allowed under the terms and conditions of the Sukuk Musharakah for acceleration of payments of all the outstanding Sukuk Musharakah, save for an Enforcement Event under item (i) above. (b) Deferral of Expected Periodic Distribution Amount (Please refer to the definitions in Section 2.0 of this Information Memorandum for all terminologies used under this Section 3.2.2). Under the terms of the Perpetual Sukuk Programme, the Issuer may at its sole discretion (provided that no Issuer’s Compulsory Periodic Distribution Payment Event and no Kafalah Provider’s Compulsory Periodic Distribution Payment Event has occurred) elect to make payment of all or some of the Expected Periodic Distribution Amount (such Expected Periodic Distribution Amount being deferred shall constitute the Arrears Of Deferred Periodic Distribution) on the Periodic Distribution Date, or elect to defer all or some of such payment by giving an Optional Deferral Notice. Such Deferred Periodic Distribution Amount shall accrue Additional Periodic Distribution Amount. Accordingly, there is a risk that the Sukukholders may not receive any Expected Periodic Distribution Amount on the Sukuk Musharakah on the relevant Periodic Distribution Dates or at all, as the Issuer has the sole discretion to decide whether or not to defer the Expected Periodic Distribution Amount to the Sukukholders. Further, any deferral of the Expected Periodic Distribution Amount will likely have an adverse effect on the market value of the Sukuk Musharakah. 92
  103. (c) Sukuk Musharakah may be subject to optional redemption by the Issuer (Please refer to the definitions in Section 2.0 of this Information Memorandum for all terminologies used under this Section 3.2.3). The Issuer may at its option redeem the Sukuk Musharakah (i) at the Optional Redemption Date(s) (which will be determined prior to each issuance) and (ii) upon the occurrence of certain Redemption Events in accordance with the terms and conditions of the Perpetual Sukuk Programme. The Sukuk Musharakah are perpetual in tenure of which there is no fixed redemption date and the Issuer shall only have the right to redeem or purchase the Sukuk Musharakah pursuant to the Redemption Events. (d) The Issuer’s and Kafalah Provider’s ability to meet its obligations under the Sukuk Musharakah The ability of the Issuer and Kafalah Provider to meet its obligations under the Sukuk Musharakah will depend upon the Issuer’s and Kafalah Provider’s operating cashflows. The Sukuk Musharakah will not be the obligations or responsibilities of any other person than the Issuer and Kafalah Provider and shall not be the obligations or responsibilities of the Lead Arranger/Lead Manager, the Sukuk Trustee, the Facility Agent or any subsidiary or affiliate thereof. (e) Suitability of investments The Sukuk Musharakah may not be a suitable investment for all investors. Each potential investor in the Sukuk Musharakah must determine the suitability of that investment in light of its own circumstances. Each potential investor should: (i) have sufficient knowledge and experience to make a meaningful evaluation of the Sukuk Musharakah, the merits and risks of investing in the Sukuk Musharakah and the information contained in this Information Memorandum; (ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Sukuk Musharakah and the impact the Sukuk Musharakah will have on its overall investment portfolio; (iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Sukuk Musharakah, including where the currency of payment is different from the potential investor's currency; (iv) understand thoroughly the terms of the Sukuk Musharakah and be familiar with the behaviour of any relevant indices and financial markets; and 93
  104. (v) (f) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic and other factors that may affect its investment and its ability to bear the applicable risks. There are no terms in the Sukuk Musharakah that limit the Issuer’s and Kafalah Provider’s ability to incur additional indebtedness There are no restrictions on the amount or number of other form of indebtedness that the Issuer and Kafalah Provider may incur. The creation and issue of further sukuk or any other form of indebtedness which rank senior to or pari passu with the Sukuk Musharakah does not require the consent of the Sukukholders. The incurrence of such indebtedness may reduce the amount recoverable by the Sukukholders in the event of dissolution or winding-up of the Issuer. (g) Each issue carries different risks The purchase of the Sukuk Musharakah may involve substantial risks and is suitable only for sophisticated investors who have the knowledge and experience in financial and business matters necessary to enable them to evaluate the risks and the mitigating factors of an investment in the Sukuk Musharakah. Each issuance of the Sukuk Musharakah will carry different risks and all potential investors are strongly encouraged to evaluate the Sukuk Musharakah on its own merit before making an investment decision. There is no assurance that the terms and risks in future issuances of the Sukuk Musharakah will be similar to the terms and risks in prior issuances of the Sukuk Musharakah. Further, the Sukuk Musharakah to be issued under the Perpetual Sukuk Programme will be unsecured. (h) No prior market for the Sukuk Musharakah The Sukuk Musharakah comprise a new issue of sukuk for which there currently is no secondary market. There can be no assurance that such secondary market will develop or, if it does develop, that it will provide the Sukukholders with the liquidity of investments or will continue for as long as the Sukuk Musharakah fully redeemed. If a market develops, the market value of the Sukuk Musharakah may fluctuate. Any sale of the Sukuk Musharakah by the Sukukholders in any secondary market which may develop, may be at a discount from the original issue price of the Sukuk Musharakah, depending on many factors, including the prevailing profit rates and the market for similar sukuk. (i) Market value of the Sukuk Musharakah may be subject to fluctuation Trading prices of the Sukuk Musharakah may also be influenced by numerous factors, including the prevailing interest rates, the market for similar securities, the operating results and/or financial condition of the IJM Corporation Group, political, economic, financial conditions and any other factors that can affect the capital markets and/or the industry in which the IJM Corporation Group is operating in. Consequently, any sale of the Sukuk Musharakah may be at prices that may be higher or lower than the initial offering price. Adverse economic developments could have a material adverse effect on the market value of the Sukuk Musharakah. 94
  105. (j) Interest/ Profit rate risk The Sukukholders may suffer unforeseen losses due to fluctuations in interest/profit rates. Although the Sukuk Musharakah are Islamic securities which do not pay interest, they are similar to fixed income securities and may therefore see their price fluctuate due to fluctuations in interest rates. Generally, the expected yield may rise in tandem to a rise in interest/profit rates and accordingly the price of the Sukuk Musharakah may fall. The Sukuk Musharakah may be similarly affected resulting in a capital loss for the Sukukholders. Conversely, when interest/profit rates fall, the expected yield may fall and the price of the Sukuk Musharakah may rise. The Sukukholders may enjoy capital gains but the profits received may be reinvested for lower returns. (k) Change of law The Perpetual Sukuk Programme is based on Malaysian laws and regulations in effect as at the date of this Information Memorandum. No assurance can be given as to the impact of any possible judicial decision or change to Malaysian laws and regulations, or administrative practice, after the date of this Information Memorandum. (l) Rating Risk RAM assigned an indicative long term rating of A2 for the Perpetual Sukuk Programme. A rating is not a recommendation to purchase, hold or sell the Sukuk Musharakah. There is no assurance that such a rating will remain in effect for any given period of time or that such a rating will not be lowered or withdrawn if circumstances in the future so warrant. Further, such a rating is not a guarantee of repayment or that there will be no default by the Issuer or Kafalah Provider under the Sukuk Musharakah. In the event that the rating initially assigned to the Proposed Programme is subsequently downgraded, suspended or withdrawn for any reason, no person or entity will be obligated to provide any additional credit enhancement with respect to the Sukuk Musharakah. Any downgrade, suspension or withdrawal of a rating may have an adverse effect on the liquidity and the market price of the Sukuk Musharakah but would not constitute an Enforcement Event by itself that warrants the Sukuk Musharakah to be immediately due and payable. (m) There is no assurance that the Sukuk Musharakah will be Shariah compliant The Shariah Adviser, by way of their shariah pronouncement dated 8 February 2019 (“Shariah Pronouncement”) has confirmed that the Sukuk Musharakah are Shariah compliant. However, the interpretation and application of Islamic Shariah is a matter of opinion and debate and may be subject to differing interpretations by Shariah scholars, Shariah supervisory and advisory boards and the courts (or any arbitral tribunal). Therefore, there can be no assurance that the transaction structure or issue and trading of the Sukuk Musharakah will be deemed to be Shariah compliant by any other Shariah board or Shariah scholars. None of the Issuer, the Principal Adviser, the Lead Arranger/Lead Manager or the Sukuk Trustee makes any representation as to the Shariah compliance of the Sukuk Musharakah and potential investors are reminded that, as with any Shariah views, differences 95
  106. in opinion are possible . Potential investors should obtain their own independent Shariah advice as to the compliance of the structure and the issue and trading of the Sukuk Musharakah with Shariah principles, if required. 3.4 Forward-looking statements Certain statements in this Information Memorandum are based on historical information, which may not be reflective of the future results, and others are forward-looking in nature, which are subject to uncertainties and contingencies. All forward-looking statements are based on forecasts and assumptions made by the IJM Corporation Group and although believed to be reasonable, are subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in such forwardlooking statements. Such factors include, inter alia, the risk factors as set out in this section. In light of these and other uncertainties, the inclusion of forwardlooking statements in this Information Memorandum should not be regarded as a representation or warranty by the Issuer that the plans and objectives of the IJM Corporation Group will be achieved. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 96
  107. SECTION 4 .0 BACKGROUND INFORMATION ON THE ISSUER AND KAFALAH PROVIDER 4.1 Corporate history and principal activities of the Issuer The Issuer was incorporated under the name of Econstates Sdn Bhd on 29 September 1989 in Malaysia under the Companies Act 1965 as a private company limited by shares. On 28 September 1990, the Issuer had converted to a public company limited by shares and assumed the name of Econstates Berhad. Subsequently, the Issuer changed its name to RB Land Holdings Berhad on 19 March 2004 and IJM Land Berhad on 19 June 2008. It was listed on the Main Market of Bursa Securities on 19 December 1991 and subsequent delisted on 15 April 2015. The Issuer is principally engaged in investment holding. The principal activities of the Issuer’s subsidiaries are property development, management services, construction activities, investment holding and hotel operations. The Issuer is one of the leading property developers in Malaysia with sprawling townships, commercial buildings and high-rise condominiums under development in key growth areas throughout the country. 4.2 Share capital of the Issuer The issued and paid-up share capital of the Issuer as at 15 January 2019 are as follows: Issued and paid-up share capital Shares Issued and Fully paid-up Ordinary Shares No. of Shares Amount (RM) ^ Cash Otherwise than cash 960,166,653 598,686,554 1,558,853,207.00 ^ excluded the share premium of RM441,046,026 which the Issuer may utilise within 24 months from the commencement of Section 74 of the Companies Act. 4.3 Substantial Shareholders of the Issuer Based on the register of substantial shareholders of the Issuer as at 15 January 2019, the substantial shareholders of the Issuer and their shareholdings are as follows: Substantial Shareholders Direct Shareholding No. of Shares % IJM Corporation Berhad (104131-A) 1,558,853,207 97 100 Indirect Direct Holdings No. of % Shares -
  108. 4 .4 Profiles of directors of the Issuer The profiles of the Directors of the Issuer as at 15 January 2019, are as follows: (a) EDWARD CHONG SIN KIAT Managing Director Mr. Edward Chong, born on 18 December 1971 was appointed Managing Director of IJM Land on 6 April 2015. Prior to this, he was the Chief Operating Officer & Chief Financial Officer of IJM Land since 1 November 2012. He graduated with a Bachelor of Business (Accountancy) degree from Royal Melbourne Institute of Technology, Australia. He is a member of the Malaysian Institute of Accountants and CPA Australia. He joined the IJM Land Group in 2000 as Assistant General Manager of Corporate Affairs and since held various positions such as General Manager of Corporate Affairs, General Manager of Finance and Chief Financial Officer prior to his appointment as the Chief Operating Officer & Chief Financial Officer. Before joining the IJM Land Group, he was attached to the corporate finance department of an investment bank and prior to that, a public accounting firm. His directorships in other public companies include ERMS Berhad and Sebana Golf and Marina Resort Berhad. (b) DATO’ SOAM HENG CHOON Director Dato’ Soam, born on 13 August 1959, was appointed Executive Director of RB Land Holdings Bhd on 25 May 2004 (now known as IJM Land) and subsequently the Managing Director on 2 October 2006. He was redesignated Chief Executive Officer and Managing Director (“CEO & MD”) of IJM Land on 1 February 2010. He stepped down as the CEO & MD on 5 April 2015. On 6 April 2015, he was appointed CEO & MD of IJM Corporation Berhad. He was the Deputy Chief Executive Officer and Deputy Managing Director from 7 June 2013 to 5 April 2015. He graduated from the University of Strathclyde, United Kingdom with a Bachelor of Science (1st Class Honours) in civil engineering. He was with the Ministry of Works for 10 years prior to joining RBH Group in 1989. He has extensive experience in construction and property development. He is a Professional Engineer (P.Eng.) and a member of the Institution of Engineers, Malaysia. He is the President of Real Estate and Housing Developers Association Malaysia. He is also a member of the Research Advisory Council of the Construction Research Institute of Malaysia. 98
  109. His directorships in other public companies include IJM Plantations Berhad , Road Builder (M) Holdings Berhad, Malaysian South-South Corporation Berhad, Construction Labour Exchange Centre Berhad and ERMS Berhad. (c) LEE CHUN FAI Director Mr. Lee, born on 19 February 1971, was appointed a Director of IJM Land on 25 May 2015 and the Deputy Chief Executive Officer & Deputy Managing Director of IJM Corporation Berhad on 6 April 2015. He graduated with a Bachelor of Accountancy (Honours) degree from University Utara Malaysia in 1995. He obtained Master of Business Administration from Northwestern University (Kellogg) and The Hong Kong University of Science & Technology in 2012. He started his career with a public accounting firm. In October 1995, he joined Road Builder (M) Holdings Bhd and was the Head of Corporate Services Division of RBH Group prior to the acquisition of RBH Group by IJM Corporation Berhad in 2007. He has extensive experience in corporate finance, privatisation projects and financial management. He is currently the Head of Corporate Strategy & Investment and Head of Information Systems Department of IJM Corporation Group. Prior to that, he was the Deputy Chief Financial Officer for the IJM Corporation Group. Mr Lee is the board representative of IJM Corporation Berhad in WCE Holdings Berhad, Scomi Group Bhd and Scomi Energy Services Bhd. His directorships in other public companies include Road Builder (M) Holdings Bhd and Sebana Golf & Marina Resort Berhad 4.5 Profiles of key management personnel of the Issuer The profiles of the key management personnel of the Issuer as at 15 January 2019 are as follows: Key Management Personnel Profile Dato’ Toh Chin Leong Dato’ Toh Chin Leong, aged 51, has Senior General Manager, Property been with the Group since 1995. He Development (Northern Region) was previously the General Manager, Property Development (Northern Region) prior to his redesignation on 1 April 2014. He holds a Bachelor of Science degree in Civil Engineering and a Master of Science degree in Geotechnical Engineering from the University of Arkansas, USA. Prior to joining the Group, he was attached to Arkansas State Highway & Transportation Department as a graduate engineer. 99
  110. Dato ’ Hoo Kim See Dato’ Hoo Kim See, aged 55, has Senior General Manager, Property been with the Group since 1991. He Development (Central Region) was previously the General Manager, Property Development (Central Region) prior to his redesignation on 1 April 2014. He graduated from University Sains Malaysia with a Bachelor of Science degree in Housing, Building and Planning. He is a member of Institute Surveyors Malaysia and a Registered Quantity Surveyor with the Board of Quantity Surveyors Malaysia. He has extensive experience in property development, project management and contract administration. Chai Kian Soon Chai Kian Soon, aged 53, has been Senior General Manager, Property with the Group since 1995. He was Development (Bandar Rimbayu) previously the General Manager, Property Management, in charge of the property management and maintenance and sales administration in central region, prior to his redesignation on 1 March 2018. He is a Chartered Accountant of the Malaysian Institute of Accountants and a Fellow of the Chartered Association of Certified Accountants. Prior to joining the Group, he was attached to a public accounting firm and a public listed construction company for more than 8 years. Roger Lee Wai Hin General Manager, Development Roger Lee Wai Hin, aged 54, joined Business the Group in December 2011 to undertake a 1,188 acres mixed development project called “Sebana Cove”. He holds a Master of Engineering from University of Auckland (NZ) as well as Bachelor of Civil Engineering (Hons) from University of Canterbury (NZ). He is a registered Professional Engineer (P.Eng.) and a member of the Institution of Engineers, Malaysia (MIEM). Prior to joining the Group, he has held senior management positions in several public listed property companies and successfully implemented many development projects over a span of more than 18 years. He has extensive experience 100
  111. in construction , project planning, property development, project management and land acquisition for development. Patrick Oye Kheng Hoon General Manager, Development (Sabah) Tan Khee Leng General Manager, Finance Patrick Oye, aged 61, has been with the Group since 2003. He is presently Property the General Manager, Property Development (Sabah). He holds a Diploma in Civil Engineering from Federal Institute of Technology. Prior to joining the Group, he held senior management positions in several property development groups for more than 21 years. He has vast experience in constructions and property development. Accounts Chai King Sing General Manager, Development (Sarawak) Tan Khee Leng, aged 50, has been & with the Group since 1997. She is presently the General Manager, Accounts and Finance. Prior to her assumption of her present role on 1 April 2013, she was the Senior Manager, Accounts & Finance. She holds a Bachelor of Accountancy degree from University Utara Malaysia. She is a Chartered Accountant of the Malaysian Institute of Accountants and a Certified Public Accountant of the Malaysian Institute of Certified Public Accountants. Before joining the Group, she was attached to a public accounting firm. Chai King Sing, aged 47, joined the Property Group in May 2012. He is presently the General Manager, Property Development (Sarawak), a position he assumed on 1 April 2013. He holds a Bachelor of Science degree in Civil Engineering from University of Oklahoma, USA. Prior to joining the Group, he has held various senior management positions in a public listed property company and prior to that, an engineering consultant firm. He has extensive experience in construction, property planning, development and management. He has successfully implemented many development projects over a span of more than 16 years. 101
  112. Leong Fook Yew Leong Fook Yew , aged 48 has been General Manager, Property with the Group since 1995. He is Development (Negeri Sembilan) presently the General Manager, Property Development (Negeri Sembilan). Prior to his assumption of his present role on 1 April 2015, he was the Senior Manager, Property Development. He holds a Bachelor of Civil & Structural degree from University Kebangsaan Malaysia. He has 24 years of extensive experience in construction and property development. Clement Pee Poh Hun Clement Pee, aged 48, has been with General Manager, Property the Group since 2011. He is presently Development (Southern Region) the General Manager, Property Development (Southern Region). Prior to his assumption of his present role in 2017, he was the Acting Head, Property Development (Southern Region). He holds a Bachelor of Science (Honours) Degree from University of Greenwich, United Kingdom. Prior to joining the Group, he has held various management positions in several public listed property companies. He has extensive experience in property development, project and property management. Yeo Yee Khim Yeo Yee Khim, aged 50, has been Acting Head, Cypress Potential Sdn with the Group since February 2009. Bhd She is presently the Acting Head of Cypress Potential Sdn Bhd. Prior to her assumption of her present role in January 2018, she was the Senior Manager, Contracts. She is Bachelor of Building from University of New South Wales. Prior to joining the Group, she was Contracts Manager with Plenitude Tebrau Sdn Bhd. She has 23 years of extensive experience in property development and contract administration. 102
  113. Christine Wong Wai Cheng Christine Wong , aged 54, has been General Manager, Group Sales & with the Group since March 1996. Marketing She is presently the General Manager of Group Sales & Marketing. Prior to her assumption of her present role in April 2018, she was the Senior Manager, Sales & Marketing. She has 23 years of extensive experience in property development. 4.6 Corporate Structure of the Issuer The corporate structure of the Issuer as at 15 January 2019 is as follows: Subsidiary companies of IJM Land Berhad Country of incorporation Effective Interest (%) Principal activities ERMS Berhad Emko Properties Sdn Bhd Malaysia Malaysia 100 100 IJM Land Management Services Sdn Bhd RB Land Sdn Bhd Malaysia 100 Malaysia 100 IJM Properties Sdn Bhd Malaysia 100 RB Development Sdn Bhd Malaysia 100 Sova Holdings Sdn Bhd Malaysia 70 Jersey 51 100 Asas Panorama Sdn Bhd Labuan F.T, Malaysia Malaysia Hotel operations Property development Management services Property development and construction activities Investment holding and property development Property development Property development Property investment Investment holding Property development Subsidiary company of ERMS Berhad Country of incorporation Effective Interest (%) Principal activities Malaysia 100 Ceased operations Subsidiary company of Emko Properties Sdn. Bhd. Country of incorporation Effective Interest (%) Principal activities Emko Management Services Sdn Bhd Malaysia 100 Property management Mintle Limited OneAce Global Limited Holiday Villa Management Sdn Bhd 103 60
  114. Subsidiary company Mintle Limited RMS (England) Limited of Country of incorporation England and Wales Effective Interest (%) 51 Principal activities Property development Subsidiary companies of RMS (England) Limited RMS (England) 1 Limited Country of incorporation England and Wales England and Wales Country of incorporation Malaysia Effective Interest (%) 51 Principal activities Dormant 51 Dormant Effective Interest (%) 100 Malaysia 100 Malaysia 100 Malaysia 100 RB Property Management Sdn Bhd Casa Warna Sdn Bhd Malaysia 100 Malaysia 100 Ikatan Flora Sdn Bhd Malaysia 100 Aras Varia Sdn Bhd Malaysia 100 Dian Warna Sdn Bhd Malaysia 100 Titian Tegas Sdn Bhd Malaysia 100 Tarikan Abadi Sdn Bhd Malaysia 100 Unggul Senja Sdn Bhd Malaysia 100 Murni Lapisan Sdn Bhd Malaysia 100 Principal activities Property management Property development Property development Property development Property development Property management Property development Property development and clubhouse operations Property development Property development Property development Property development Property development and construction activities RMS (England) 2 Limited Subsidiary companies of RB Land Sdn Bhd Seremban Two Property Management Sdn Bhd Seremban Two Holdings Sdn Bhd Seremban Two Properties Sdn Bhd Shah Alam 2 Sdn Bhd 104
  115. Subsidiary companies of IJM Properties Sdn Bhd Chen Yu Land Sdn Bhd Country of incorporation Malaysia Effective Interest (%) 100 IJM Management Services Malaysia 100 Liberty Heritage (M) Sdn Bhd Malaysia 100 Manda’rina Sdn Bhd Malaysia 100 Maxharta Sdn Bhd Malaysia 100 Preferred Accomplishment Sdn Bhd Sinaran Intisari (M) Sdn Bhd Worldwide Ventures Sdn Bhd Malaysia 100 Malaysia Malaysia 100 86 Aqua Aspect Sdn Bhd Malaysia 80 Jelutong Development Sdn Bhd IJMP – MK Joint Venture Malaysia 80 *** 70 NS Central Market Sdn Bhd Malaysia 70 Cypress Potential Sdn Bhd Malaysia 70 Radiant Pillar Sdn Bhd Malaysia 60 Jalinan Masyhur Sdn Bhd Suria Bistari Development Sdn Bhd The Light Waterfront Sdn Bhd Valencia Terrace Sdn Bhd Malaysia Malaysia 51 51 Malaysia 100 Malaysia 100 105 Principal activities Property development Providing project and construction management services and sales and marketing services Property management and car parking services Property development Property development, civil and building construction and property development Sale of electricity Dormant Property development and investment holding Property development Property development Property development Property development Property development activities and property investment Investment holding and property development Dormant Property development Dormant Property development
  116. Larut Leisure Enterprise (Hong Kong) Limited Ever Mark (M) Sdn Bhd Era Modern Hartanah Sdn Bhd Hong Kong 99 Malaysia Malaysia 100 55 Subsidiary companies of Worldwide Ventures Sdn Bhd Island Golf View Sdn Bhd Country of incorporation Effective Interest (%) Principal activities Malaysia 86 Sheffield Enterprise Sdn Bhd Malaysia 90 Property development Under member’s voluntary liquidation Country of incorporation Malaysia Effective Interest (%) 100 Panorama Jelita Sdn Bhd Malaysia 100 Eksporasi Cemerlang Sdn Bhd Malaysia 100 Subsidiary companies of Radiant Pillar Sdn Bhd Bandar Rimbayu Sdn Bhd Country of incorporation Malaysia Effective Interest (%) 60 *** 80 Subsidiary company of Larut Leisure Enterprise (Hong Kong Limited) Jilin Dingtai Enterprise Development Company Limited (“Dingtai”) Country of incorporation Effective Interest (%) China 99 Subsidiary company of Cypress Potential Sdn Bhd Sebana Golf & Marina Resort Berhad Country of incorporation Malaysia Subsidiary companies Maxharta Sdn Bhd Jelita Kasturi Sdn Bhd of IJMP-RPSB Joint Venture 106 Effective Interest (%) 70 Investment holding Dormant Dormant Principal activities Property development Property development Dormant Principal activities Property development Dormant Principal activities Property development Principal activities Operating and maintaining a proprietary club known as Sebana Golf & Marina Club
  117. Associates Country of incorporation Malaysia Effective equity interest (%) 40 Malaysia 20 Malaysia 50 Cekap Tropikal Sdn Bhd Malaysia 50 Sierra Selayang Sdn Bhd Malaysia 50 Kuantan Pahang Holding Sdn Bhd MASSCORP-Vietnam Sdn Bhd Good Debut Sdn Bhd Name IJM Management Services Sdn Bhd - Giat Bernas Sdn Bhd Joint Venture*** IJM Properties Sdn BhdDanau Lumayan Sdn Bhd Joint Venture*** IJM Properties Sdn.Bhd.-JA Manan Development Sdn Bhd Joint Venture*** Elegan Pesona Sdn Bhd Sierra Ukay Sdn Bhd Nasa Land Sdn Bhd 368 Segambut Sdn Bhd *** 4.7 Effective Interest (%) in joint ventures 70 60 Principal activities Investment holding Investment holding Property development Property development Dormant Principal activities Project and construction management services Dormant 50 Property development 50 50 50 50 Property development Property development Property development Property development The entity is an unincorporated entity. Corporate history and principal activities of the Kafalah Provider IJM Corp was formed in 1983 following the merger between three construction companies - IGB Construction Sdn. Bhd., Jurutama Sdn. Bhd. and Mudajaya Sdn. Bhd. IJM Corp was initially incorporated under the Companies Act, 1965 on 16 July 1983 in Malaysia under the name of Solidstate (M) Sdn Bhd and changed its name to IJM Engineering & Construction Sdn Bhd on 15 March 1984. On 28 February 1986, it was converted to a public company as IJM Engineering & Construction Berhad and assumed its current name on 16 December 1989. It was listed on the Main Market of Bursa Securities on 29 September 1986. Following the above mentioned merger, the IJM Corp was transformed into a professionally managed construction group that gained immediate market acceptance and had the financial capacity and repute to compete effectively against other established players. IJM Corp is principally engaged in construction and investment holding activities. The IJM Corporation Group’s principal activities are in construction, property development, manufacturing and quarrying, hotel operations, port operations, tollway operations, plantations and investment holding. 107
  118. 4 .8 Share capital of the Kafalah Provider The issued and paid-up share capital of the Kafalah Provider as at 15 January 2019 are as follows: Issued and paid-up share capital Shares No. of Shares* Cash Issued and Fully paidup Amount (RM) ^ Otherwise than cash 651,963,572 2,983,724,248 3,693,660,712.00 Ordinary Shares * inclusive of 9,836,700 shares bought back by the Kafalah Provider and retained as treasury shares as at 15 January 2019. ^ excluded the share premium of RM2,395,511,000 which the Kafalah Provider may utilise within 24 months from the commencement of Section 74 of the Companies Act. 4.9 Substantial Shareholders of the Kafalah Provider Based on the register of substantial shareholders of the Kafalah Provider as at 15 January 2019, the substantial shareholders of the Kafalah Provider and their shareholdings are as follows: Substantial Shareholders Employees Provident Fund Board Amanahraya Trustees BerhadAmanah Saham Bumiputera Urusharta Jamaah Sdn Bhd Kumpulan Wang Persaraan (Diperbadankan) 4.10 Direct Shareholding Indirect Shareholding No. of % Shares No. of Shares % 531,271,618 252,790,700 14. 652 6.972 - - 227,307,500 184,641,000 6.269 5.092 - - Profiles of directors of the Kafalah Provider The profiles of the Directors of the Kafalah Provider as at 15 January 2019, are as follows: (a) DATO’ SOAM HENG CHOON Chief Executive Officer & Managing Director Executive Committee (Chairman) Securities & Options Committee (Member) Please refer to Section 4.4 (b) for profile. 108
  119. (b) TAN SRI ABDUL HALIM BIN ALI Independent Non-Executive Chairman Audit Committee (Member) Nomination & Remuneration Committee (Member) Securities & Options Committee (Chairman) Tan Sri Abdul Halim, born on 14 July 1943, joined the Board on 25 April 2007. He was appointed the Chairman of IJM Corporation Berhad on 24 August 2011. He graduated with a Bachelor of Arts (Honours) degree from University of Malaya in 1966. He joined the Ministry of Foreign Affairs and served in the Malaysian Diplomatic Service from 1966 to 1996. During this period, he served in several diplomatic missions overseas, including ambassadorial appointments in Vietnam and Austria. He was appointed the Chief Secretary to the Government of Malaysia in 1998 and retired in 2001. After his retirement, he was made the Chairman of the Employees Provident Fund Board until January 2007. Tan Sri Abdul Halim was the Chairman of the Minority Shareholders Watchdog Group (2001 - 2012), Multimedia Development Corporation (2003 - 2016) and University of Technology Malaysia School of Professional and Continuing Education (UTMSpace) (2011 - 2017). His directorships in other public companies include Malaysia Building Society Berhad (Chairman), MBSB Bank Berhad (formerly known as Asian Finance Bank Berhad) (Chairman) and Sedania Innovator Berhad. (c) TAN SRI DATO’ TAN BOON SENG @ KRISHNAN Deputy Non-Executive Chairman Tan Sri Dato’ Tan, born on 12 December 1952, was appointed Deputy Non-Executive Chairman of IJM Corporation Berhad on 1 January 2014. He joined IJM Corporation Berhad as Financial Controller in 1983 and then was appointed to the Board as an Alternate Director on 12 June 1984, appointed as Director on 10 April 1990 and Deputy Managing Director on 1 November 1993. He was appointed Group Managing Director on 1 January 1997. He was re-designated as Chief Executive Officer and Managing Director on 26 February 2004, and stepped down as the CEO & Managing Director of IJM Corporation Berhad on 31 December 2010. He was appointed the Executive Deputy Chairman from 1 January 2011 to 31 December 2013. He was also the Chairman of IJM Land Berhad from 2007 to 2015. Prior to joining IJM Corporation Berhad, he was with Kumpulan Perangsang Selangor Berhad for seven (7) years, his last position was Group Financial Controller. He is actively involved in the promotion of Malaysia-India business ties and is the Founder President of the Malaysia-India Business Council (MIBC) and the Co-Chairman of the Malaysia India CEO Forum. He was the President of MIBC from 2008 to 2015. He also serves as a management committee member of the Olympic Council Trust and President of the Klang High School Old Boys Association. 109
  120. His directorships in other public companies include HSBC Bank Malaysia Berhad (Independent Non-Executive Chairman), Malaysia Aviation Group Berhad, Malaysia Airlines Berhad and IJM Plantations Berhad. (d) LEE CHUN FAI Deputy Chief Executive Officer & Deputy Managing Director Executive Committee (Member) Please refer to Section 4.4 (c) for profile. (e) DATUK LEE TECK YUEN Senior Independent Non-Executive Director Nomination & Remuneration Committee (Chairman) Datuk Lee, born on 2 August 1956, was appointed Director of IJM Corporation Berhad on 30 May 2007, and Senior Independent NonExecutive Director on 9 November 2012. He graduated with a Bachelor of Science (Honours) degree in Civil Engineering and Business Administration from University of Leeds, United Kingdom in 1978. He has more than 30 years‟ experience in property development. He was a Director of IJM Land Berhad from 2007 to 2015. Datuk Lee has more than 30 years’ experience in property development. His directorships in other public companies include Road Builder (M) Holdings Berhad, Malaysian South-South Corporation Berhad and Asean Business Forum. He is also currently the President of Malaysian Water Ski Federation and Honorary Secretary of Malaysian South-South Association. (f) DATUK IR. HAMZAH BIN HASAN Independent Non-Executive Director Audit Committee (Member) Nomination & Remuneration Committee (Member) Datuk Ir. Hamzah, born on 10 July 1951, was appointed Director on 16 November 2012. He graduated with a Bachelor of Science (Honours) degree in Civil Engineering from Glasgow University, United Kingdom in 1975 and obtained his Master of Science (Construction Management) from Loughborough University, United Kingdom in 1987. He is a Professional Engineer of the Board of Engineers Malaysia, Fellow of the Chartered Institute of Building, Royal Institute of Chartered Surveyors, Institution of Engineers Malaysia, Institute of Value Engineering Malaysia, ASEAN Federation of Engineering Organizations and Honorary Fellow of the Project Management Institution Malaysia. He started his career as a Civil Engineer in the Public Works Department (“JKR”) in 1975. Since then he has served JKR for 23 years until 1998. In 1998, he joined Ahmad Zaki Resources Berhad, a public listed company, as Group Managing Director until 2002. With his vast experience in both the public and private sectors, he was appointed as Chief Executive Officer 110
  121. of the Construction Industry Development Board (“CIDB”), Malaysia in 2003 and then served as the Chairman of CIDB from 2011 to February 2014. His directorships in other public companies include WCE Holdings Berhad, Philip Mutual Berhad and School of Professional and Continuing Education, University of Technology Malaysia (UTMSpace). (g) PUSHPANATHAN A/L S A KANAGARAYAR Independent Non-Executive Director Audit Committee (Chairman) Mr. Pushpanathan, born on 22 December 1951, was appointed Director on 9 November 2012. He is a member of the Institute of Chartered Accountants of Scotland, the MICPA and the MIA. He retired as a partner of Ernst & Young on 31 December 2009. He has more than 39 years of experience in providing advisory, accounting and audit services in the role of a partner-adviser for a large number of clients based in Malaysia and internationally (both private and public corporations) in a variety of industries. He was also involved in share valuations of corporations, mergers and acquisitions, restructurings, takeovers, flotations, investigations and tax planning. Mr. Pushpanathan is currently a Council Member and EXCO Member of MICPA. He also serves as the Chairman of the Listing Committee of Bursa Malaysia and a Trustee of WWF-Malaysia. He was a Board Member of the MASB (2009-2015), Honorary Secretary of the Financial Reporting Foundation (2010-2015), President of MICPA (2012-2014), a Council Member of MIA (2012-2014), Chairman of MICPA’s Financial Statements Review Committee and is currently the Project Chairman of the Insurance Standards Working Group of MASB on IFRS 17. He also headed the MICPA Working Group, which undertook a revision of the specimen financial statements of Model Insurance Berhad. He has served as an inaugural member of the International Federation of Accountants (IFAC’s) Developing Nations Permanent Taskforce for 2004/2005. He has been actively involved in the National Annual Corporate Report Awards (NACRA), which is jointly organised by MICPA, MIA and Bursa Malaysia, as Chairman of the Adjudication and/or Organising Committees from 2003 to 2009. His directorships in other public companies include IJM Plantations Berhad, Asian Institute of Finance Berhad, Sun Life Malaysia Assurance Berhad (formerly known as CIMB Aviva Assurance Berhad), Sun Life Malaysia Takaful Berhad (formerly known as CIMB Aviva Takaful Berhad), Bursa Malaysia Berhad, MICPA and Malaysian Community & Education Foundation. 111
  122. (h) GOH TIAN SUI Independent Non-Executive Director Mr Goh, was born on 5 July 1955 and was appointed Director of IJM Corporation Berhad on 20 June 2016. He graduated with a Bachelor of Science (Honours) degree in Estate Management from University of Reading, United Kingdom and is a Fellow of the RICS, Fellow of the RISM and a Registered Valuer with the Board of Valuers, Appraisers and Estate Agents, Malaysia. He has more than 30 years of experience as a Chartered Valuation Surveyor in both public and private sectors and has been involved in various real estate valuation and advisory assignments. He was appointed as a Director of C H Williams Talhar & Wong Sdn Bhd in 1989 and was made the Managing Director in 2003 until his retirement in 2010. He also served as an Independent Non-Executive Director of GLM REIT Management Sdn Bhd, the Manager of Tower Real Estate Investment Trust, from 2006 to 2010, and was a member of the RICS Malaysia Working Group from 2006 to 2012, of which he was the Chairman from 2010 to 2012. He was also an Independent Non-Executive Director of IJM Land Berhad from January 2013 until May 2015. Mr Goh’s other past appointments include Executive Committee member of the Association of Valuers & Property Consultants in Private Practice (1991-2000), Council member of RISM (1996-1999), Board member of the Board of Valuers, Appraisers and Estate Agents, Malaysia (1999-2010) and Board member of the RICS Asia Valuation Professional Group (20102016). (i) DATO’ DAVID FREDERICK WILSON Independent Non-Executive Director Securities & Options Committee (Member) Dato’ Wilson, a British citizen, born on 9 March 1945, was appointed Director of IJM Corporation Berhad on 30 May 2007 and was redesignated as Independent Non-Executive Director on 25 May 2017. He holds a Master of Arts degree in Mechanical Sciences from Cambridge University, United Kingdom. He is a Fellow of the Institution of Civil Engineers, United Kingdom and the Chartered Institution of Highways and Transportation, United Kingdom. He worked on various infrastructure and development projects in United Kingdom, Africa, Central America, the Caribbean and the Middle East before coming to Malaysia in 1980 as the Chief Resident Engineer for the construction of the Kuala Lumpur-Seremban Expressway and the implementation of the first highway toll systems in Malaysia. In 1986, he joined United Engineers (Malaysia) Berhad as General Manager - Technical Services and was Managing Director of Kinta Kellas plc from 1990 to 1994 during which time he was responsible for the management of the construction of the North-South Expressway. Subsequent appointments included Managing Director of Renong Overseas Corporation Sdn Bhd (1995-2002), Managing Director of Crest 112
  123. Petroleum Berhad (1998-2000) and President of the Construction and Engineering Division of the Renong Group (1998-2002). In 2002, he moved to Road Builder (M) Holdings Bhd initially as Non-Executive Director and later as Executive Director responsible for construction operations in India until 2007. (j) TUNKU ALINA BINTI RAJA MUHD ALIAS Independent Non-Executive Director Tunku Alina Binti Raja Muhd Alias, born on 23 November 1963 was appointed as an Independent Non-Executive Director of IJM Corporation Berhad on 1 November 2017. She graduated with a Bachelor of Laws (LL.B.) Honours degree from University of Malaya and obtained her Master of Law (LL.M.) (Corporate and Commercial Law) from King’s College, London, United Kingdom. She has a PhD in Islamic Finance from INCEIF. She was admitted as an Advocate and Solicitor of the High Court of Malaya. She is an associate Mediator of Singapore Mediation Centre. She started her career as a Legal Assistant with Skrine & Co in February 1987. After working for five (5) years with Skrine & Co, she started up and co-established a legal firm known as ‘Wong Lu Peen & Tunku Alina’ in April 1992 and served as the Managing Partner until December 2011. She was later appointed as a Consultant of the firm till to-date. She has more than 25 years of experience in leading business and community development, client negotiation, legal consultation, dispute resolution and goal setting and specialises in managing clients’ compliance and regulatory aspects for investments and development of properties in Malaysia and abroad. Tunku Alina undertakes continuing research on waqf (Islamic foundations) and volunteers as a facilitator with Soliya’s Connect Program. She was an Adjunct Professor at the School of Law, University of Miami and has also served as an Adjunct Research Fellow of INCEIF. She serves as a Council member of the Malaysian Oil Scientists’ & Technologists’ Association. Her directorships in other public companies include Malaysian Pacific Industries Berhad, Batu Kawan Berhad, MBSB Bank Berhad (formerly known as Asian Finance Bank Berhad) and Raja Alias Foundation (Trustee). (k) TAN TING MIN Independent Non-Executive Director Ms Tan Ting Min, born on 11 September 1968, was appointed as an Independent Non-Executive Director of IJM Corporation Berhad on 1 November 2017. She started her career with British American Tobacco (Malaysia) Berhad as a Research and Development Executive from 1991 to 1992. She was with Ke-zan Securities Sdn Bhd as an Investment Analyst for one (1) year prior to joining Credit Suisse Securities (Malaysia) Sdn Bhd (“Credit Suisse”) as an Investment Analyst in 1994. She was then promoted to 113
  124. Director to lead the regional plantation team with coverage in Malaysia , Singapore and Indonesia until her retirement in 2017. Subsequently, she was appointed as the Head of Research of Credit Suisse for seven (7) years (2010 - 2017). During her tenure as the Head of Research in Credit Suisse, Ms Tan led the Credit Suisse Malaysian equity research team to rank first in the Institutional Investor Poll in Malaysia for seven (7) consecutive years. She graduated with a Bachelor of Arts (Honours) (Cantab) in Natural Sciences from Cambridge University, United Kingdom and obtained her Master of Arts from Cambridge University, United Kingdom. Her directorships in other public company includes Sime Darby Plantation Berhad. 4.11 Profiles of key management personnel of the Kafalah Provider The profiles of the key management personnel of the Kafalah Provider as at 15 January 2019 are as follows: (a) JOSEPH TEK CHOON YEE Chief Executive Officer & Managing Director, IJM Plantations Berhad Mr. Joseph Tek, born on 11 January 1966, was appointed the Chief Executive Officer & Managing Director of IJM Plantations Berhad on 23 May 2010. He graduated with a Bachelor of Science (1st Class Honours) degree from Universiti Kebangsaan Malaysia. He obtained a Master’s in Philosophy (Plant Breeding) from Cambridge University, England. He also attended the ASEAN Senior Management Development Programme organised by Harvard Business School. He joined IJM Plantations Berhad in September 2004 to head the research, training and development activities of the IJM Plantations Group, and was appointed an Alternate Director on 22 May 2008 and Executive Director on 19 October 2008 besides being the General Manager – Plantations (Sabah). He was then redesignated to the position of Chief Operating Officer & Executive Director on 18 May 2009, prior to his appointment as CEO&MD of IJMP. Prior to joining IJM Plantations Berhad in 2004, he was with Sime Darby Plantations Sdn Bhd as Plant Breeder in Ebor Research (1991-1997), R&D Manager (1997-2000) and later Manager-Agritech Business (2000-2001) with Sime Aerogreen Sdn Bhd and Sime Gardentech Sdn Bhd. His last position was Head of R&D with Malaysian Palm Oil Association (MPOA) (2001-2004). He is not a director in any other public companies. 114
  125. (b) TAN BOON LENG Managing Director, Industrial Concrete Products Sdn Bhd Mr Tan, born on 11 December 1960, was appointed Managing Director of Industrial Concrete Products Sdn Bhd on 13 August 2018. He graduated with a Bachelor of Engineering in Civil Engineering degree from the University of Canterbury, New Zealand. Mr Tan joined ICP Marketing Sdn Bhd on 8 May 1991 as a Sales Engineer. He was promoted to Senior Sales Engineer in January 1993, Assistant Area Sales Manager in January 1995, Sales Manager in 2001, Senior Sales Manager in 2003 and subsequently to General Manager (Marketing) in 2008. In 2011, Mr Tan’s portfolio was further expanded when he was appointed as the General Manager (Operations) and then promoted to Senior General Manager (Operations) in 2014 before assuming the position as Chief Operating Officer of Industry Division in 2017. Prior to joining the IJM Corporation Group, he was with Southern Pipe Industry (Malaysia) Sdn Bhd from 1988 to 1991. (c) PURUSHOTHAMAN A/L KUMARAN Chief Financial Officer & Executive Director, IJM Plantations Berhad Mr Puru Kumaran, born on 28 October 1961, was appointed the Chief Financial Officer & Executive Director of IJM Plantations Berhad on 23 May 2010. He was also appointed the Chief Executive Officer for the IJM Plantations Group’s Indonesian operations on 1 January 2016. He graduated with a Bachelor of Accounting (Honours) degree from the University of Malaya. He has a Master’s in Business Administration from Anglia Polytechnic University, Cambridge, England. He is a member of the Malaysian Institute of Accountants. He joined IJM Plantations Berhad as Financial Controller on 1 January 2004. He was redesignated to General Manager - Corporate Affairs & Finance on 1 January 2007, prior to his appointment as CFO&ED. Prior to joining IJM Plantations Berhad, he was with Unilever Group for over 14 years, serving various finance and commercial positions in Malaysia, England and Indonesia. His last post was as Commercial Director of its plantation operations in Malaysia. (d) WAN SALWANI BINTI WAN YUSOFF Chief Operating Officer (Toll Division, Malaysia) Puan Wan Salwani, born on 20 February 1967, was appointed the Chief Operating Officer of Toll Division on 1 May 2013, and is responsible for the tollway operations in Malaysia. She graduated with a Bachelor of Science degree in Electrical Engineering from the University of Arizona, USA in 1989 and obtained her Master’s degree in Business Administration from Universiti Putra Malaysia in 2011. 115
  126. She worked for Enserv Sdn Bhd as an Application Engineer prior to joining Besraya (M) Sdn Bhd, a subsidiary of RBH, as Project Engineer in November 1996. When Besraya Highway commenced its operations in 1999, she was responsible for the maintenance of Electrical & Mechanical, and a year later she was appointed as Assistant Manager to assist the Head of Engineering and Maintenance Department. She was transferred to New Pantai Expressway Sdn Bhd in 2001 when RBH took over the New Pantai Highway project from Berjaya Group. She held the position of Manager (January 2003-December 2007) and later Senior Manager (January 2008-June 2009), responsible for toll operations, mechanical & electrical matters, concession monitoring, land acquisition and corporate communication before being promoted to General Manager, Toll Division on 1 July 2009. (e) WONG SOON FAH Executive Director, Kuantan Port Consortium Sdn Bhd Mr Wong, born on 22 October 1950, was appointed Director of KPC on 5 May 2017, and re-designated as Executive Director on 2 July 2018 to oversee the operations of the Port Division. He was the Managing Director of KPC from 15 August 2006 to 31 August 2009. Prior to joining KPC, he was with the Port Authority (Klang and Kuantan) for 28 years, having served the last eight (8) years as Operations and Commercial Manager for Kuantan Port Authority. He was the General Manager Operations (1998 – 2000), General Manager Marketing (2000 2004) and Chief Operating Officer (2004-2006) of KPC before assuming the position of Managing Director. He was retained as an Advisor for a year upon his retirement as Managing Director of KPC. He was then appointed on the board of the Port Klang Free Trade Zone by the Ministry of Transport from 2011 to 2015. He was involved in logistic and port development consultancy from 2016 until his appointment as the Executive Director of KPC. (f) CYRUS ERUCH DARUWALLA Chief Financial Officer Mr. Cyrus, born on 10 January in 1962, joined IJM Corporation Berhad in September 2006 as Chief Financial Officer, heading the Accounts & Finance Department for the IJM Corporation Group. He was also appointed the Country Head for IJM Corp Indian operations on 1 January 2018. He graduated with a Bachelor of Commerce (Honours) degree from University of Bombay in 1982, and was admitted as an associate member of the Association of Chartered Certified Accountants, United Kingdom in 1993. Upon graduation, Mr Cyrus completed his audit articleship with Ernst & Young, London, UK prior to joining Addmoss Taylor & Partners, London, before being appointed as Senior Accountant for Portlands of Blackheath Ltd., UK in 1987. In Malaysia, he worked as Head of Professional Programmes for Emile Woolf Far East Sdn Bhd, before being appointed as Group Financial Controller for the Sri America Group of Companies. In 116
  127. 1999 , he joined PricewaterhouseCoopers, Malaysia as Manager before assuming the position of Executive Director in 2003. His other directorship in other public company includes Road Builder (M) Holdings Bhd and several of the IJM Corporation Group’s overseas entities. (g) LEE CHUN FAI Deputy Chief Executive Officer & Deputy Managing Director Executive Committee (Member) Please refer to Section 4.4 (c) for profile. (h) EDWARD CHONG SIN KIAT Managing Director, IJM Land Berhad Please refer to Section 4.4 (a) for profile. (i) DATO’ SOAM HENG CHOON Chief Executive Officer & Managing Director Executive Committee (Chairman) Securities & Options Committee (Member) Please refer to Section 4.4 (b) for profile. (j) LIEW HAU SENG Managing Director, IJM Construction Sdn Bhd Mr. Liew, born on 11 October 1965, was re-designated as Managing Director of IJM Construction Sdn Bhd on 6 April 2015. He was the Executive Director of IJM Construction Sdn Bhd from 1 June 2012 to 5 April 2015 and was appointed to head the Construction Division with effect from 7 June 2013. He graduated with a Bachelor of Engineering (1st Class Honours) degree in Civil Engineering from Universiti Teknologi Malaysia in 1989. He obtained a Master of Business Administration from HELP University in 2011. He started his career in IJM Corporation Group in 1989 as an Engineer of GR Concrete Sdn Bhd. He held various other positions since then, namely as Senior Engineer (1995-2002), Senior Project Manager (2003-2005), Project Director (2006-2009) and Operations Director (2010-2011), prior to his appointment as Executive Director of IJM Construction Sdn Bhd and to head the construction division for local operations in 2012. (k) NG YOKE KIAN Company Secretary Ms. Ng, born on 23 August 1967, joined IJM Corporation Berhad in 1997 and was appointed as Company Secretary on 6 April 2012. She was subsequently appointed to head the Corporate Services Department on 24 September 2012. She is also the Company Secretary of IJM Plantations Berhad. 117
  128. She is an Associate of Malaysian Institute of Chartered Secretaries & Administrators (MAICSA). She started her career with a secretarial firm for about 5 years and was an Assistant Manager of the Technical and Research Department of MAICSA prior to joining IJM Corporation Berhad. She has more than 25 years’ experience in corporate secretarial work. 4.12 Corporate Structure of the Kafalah Provider The corporate structure of the Kafalah Provider as at 15 January 2019 is as follows: Name of company Subsidiary companies of IJM Corporation Berhad Country of Effective incorporation Interest (%) CIDB Inventures Sdn Bhd Malaysia 100 Emcee Corporation Sdn Bhd IJM Construction Sdn Bhd Malaysia Malaysia 100 100 IJM Construction (Middle East) Limited Liability Company IJM Highway Services Sdn Bhd United Arab Emirates Malaysia 100 IJM International Limited Hong Kong 100 IJM Investments (L) Ltd 100 100 IJM Land Berhad Federal Territory of Labuan Republic of Mauritius Malaysia IJM Overseas Ventures Sdn Bhd Malaysia 100 IJM Plantations Berhad Malaysia 56 IJM RE Sdn Bhd Malaysia 100 IJM Investments (M) Limited 118 100 100 Principal activities Infrastructure investment Dormant Civil and building construction and investment holding Construction Provision of toll operation and maintenance services Investment holding Investment holding Investment holding Investment holding Under member’s voluntary liquidation Cultivation of oil palms and investment holding Investment holding
  129. Industrial Sdn Bhd Concrete Products Malaysia 100 Kamad Quarry Sdn Bhd Kemena Industries Sdn Bhd Malaysia Malaysia 100 55 IJM Shared Services Sdn Bhd Malaysia 100 Nilai Cipta Sdn Bhd RB Manufacturing Sdn Bhd Road Builder (M) Holdings Bhd Malaysia Malaysia Malaysia 70 100 100 Vijayapura Tollway Private Limited Held by IJM Construction Sdn Bhd Commerce House Sdn Bhd India 100 Malaysia 100 IJM Building Systems Sdn Bhd Malaysia 100 IJM Construction Vietnam Co., Ltd Vietnam 100 IJM Investments J.A. Limited United Arab Emirates 100 119 Production and sale of concrete products and investment holding Dormant Manufacture and sale of ready-mixed concrete and reinforced concrete products Provision of management services and investment holding Dormant Dormant Investment holding Highway development Trading in construction materials and providing insurance agency services Construction contracts, trading and rental of aluminium formworks Provision of construction services, consulting service and installation of electrical system and mechanical system Investment holding
  130. IJM-Norwest JV ** 100 Jurutama Sdn Bhd Malaysia 100 Prebore Piling & Engineering Sdn Bhd Malaysia 100 Road Builder (M) Sdn Bhd Malaysia 100 IJM LFE Sdn Bhd Held by IJM Investments J.A. Limited IJM Construction (Pakistan) (Private) Limited IJM Gulf Limited Malaysia 70 Pakistan 100 United Arab Emirates 60 Pakistan 60 United Arab Emirates 100 ** 100 Construction 100 Investment holding Investment holding Investment holding Investment holding Investment holding Investment holding Investment holding Investment holding IM Technologies (Private) Limited Pakistan Karachi Expressway J.A. Limited Held by Road Builder (M) Sdn Bhd RBM-PATI JV Held by IJM Investments (M) Limited IEMCEE Infra (Mauritius) Limited IJM Dewas (Mauritius) Limited IJMII (Mauritius) Limited IJM Rajasthan (Mauritius) Limited IJM Rewa (Mauritius) Limited IJM Trichy (Mauritius) Ltd IJM Vijayawada (Mauritius) Ltd IJM Realty (Mauritius) Limited Held by IJM Dewas (Mauritius) Limited Republic of Mauritius Republic of Mauritius Republic of Mauritius Republic of Mauritius Republic of Mauritius Republic of Mauritius Republic of Mauritius Republic of Mauritius 120 100 100 100 100 100 100 100 Civil and building construction Construction contract Piling, engineering and other construction works Civil and building Construction Civil and building construction Under members’ voluntary liquidation Civil, building construction and property development Under member’s voluntary liquidation
  131. Dewas Bypass Tollway Private Limited (of which 26% is held directly by the Kafalah Provider) Held by IJMII (Mauritius) Limited IJM (India) Infrastructure Limited Held by IJM (India) Infrastructure Limited IJM (India) Geotechniques Private Limited India 100 Highway development India 99.9 Construction India 99.9 IJM Lingamaneni Township Private Limited Roadstar (India) Infrastructure Private Limited India 98 India 70 Swarnandhra-IJMII Integrated Township Development Company Private Limited Swarnandhra Road Care Private Limited Held by IJM Realty (Mauritius) Limited Nagpur Integrated Township Private Limited Held by IJM Rewa (Mauritius) Limited Rewa Tollway Private Limited India 51 Soil investigation & testing, foundation laying & treatment & piling Property development Under members’ voluntary Liquidation Property development India 99.9 Road maintenance India 94.9 Property development India 100 Infrastructure development Held by IJM Vijayawada (Mauritius) Ltd Vijayawada Tollway Private Limited (of which 25.51% is held directly by the Kafalah Provider) Held by IJM Land Berhad Asas Panorama Sdn Bhd India 99.9 Highway development Malaysia 60 Emko Properties Sdn Bhd Malaysia 100 ERMS Berhad Malaysia 100 IJM Land Management Services Sdn Bhd Malaysia 100 Property development Property development Hotel and recreation club Operations Provision of management services 121
  132. IJM Properties Sdn Bhd Malaysia 100 Jersey 51 Mintle Limited OneAce Global Limited Property development and investment holding Property investment Investment holding 100 RB Development Sdn Bhd Federal Territory of Labuan Malaysia RB Land Sdn Bhd Malaysia 100 Sova Holdings Sdn Bhd Malaysia 70 Malaysia 100 Property management Malaysia 100 Dormant Malaysia 80 Chen Yu Land Sdn Bhd Malaysia 100 Cypress Potential Sdn Bhd Malaysia 70 Era Moden Hartanah Sdn Bhd Ever Mark (M) Sdn Bhd IJM Management Services Sdn Bhd Malaysia Malaysia Malaysia 55 100 100 ** 70 Jalinan Masyhur Sdn Bhd Jelutong Development Sdn Bhd Malaysia Malaysia 51 80 Larut Leisure Enterprise (Hong Kong) Limited Liberty Heritage (M) Sdn Bhd Hong Kong 99 Malaysia 100 Property development Property development Property development and property investment Dormant Dormant Providing project and construction management services and sales and marketing services Property development Dormant Property development Investment holding Dormant Held by Emko Properties Sdn Bhd Emko Management Services Sdn Bhd Held by ERMS Berhad Holiday Villa Management Sdn Bhd Held by IJM Properties Sdn Bhd Aqua Aspect Sdn Bhd IJMP-MK Joint Venture 122 100 Property development Property development and construction activities Property development
  133. Manda ’rina Sdn Bhd Malaysia 100 Maxharta Sdn Bhd Malaysia 100 NS Central Market Sdn Bhd Malaysia 70 Preferred Accomplishment Sdn Bhd Radiant Pillar Sdn Bhd (of which 10.6% is held indirectly by the Kafalah Provider via WCE Holdings Berhad) Malaysia 100 Malaysia 71 Sinaran lntisari (M) Sdn Bhd Suria Bistari Development Sdn Bhd The Light Waterfront Sdn Bhd Valencia Terrace Sdn Bhd Malaysia Malaysia 100 51 Malaysia Malaysia 100 100 Worldwide Ventures Sdn Bhd Malaysia 86 Malaysia 70 Resort, marina and golf course operator Held by Cypress Potential Sdn Bhd Sebana Golf & Marina Resort Berhad Property development Investment holding Property development Sale of electricity Property development and investment holding Dormant Property development Dormant Property development Property development and investment holding Held by Larut Leisure Enterprise (Hong Kong) Limited Jilin Dingtai Enterprise Company Limited Held by Maxharta Sdn Bhd Jelita Kasturi Sdn Bhd China 99 Property development Malaysia 100 Panaroma Jelita Sdn Bhd Malaysia 100 Eksplorasi Cemerlang Sdn Bhd Held by Radiant Pillar Sdn Bhd Bandar Rimbayu Sdn Bhd (of which 10.6% is held indirectly by the Company via WCE Holdings Berhad) IJMP-RPSB Joint Venture (of which 5.3% is held indirectly by the Company via WCE Holdings Berhad) Held by Worldwide Ventures Sdn Bhd Malaysia 100 Property development Property development Domant Malaysia 71 Property development 85 Domant ** 123
  134. Island Golf View Sdn Bhd Malaysia 86 Sheffield Enterprise Sdn Bhd Malaysia 90 England and Wales 51 Property development England and Wales England and Wales 51 Domant 51 Domant Malaysia 100 Casa Warna Sdn Bhd Malaysia 100 Dian Warna Sdn Bhd Malaysia 100 Ikatan Fiona Sdn Bhd Malaysia 100 Murni Lapisan Sdn Bhd Malaysia 100 RB Property Management Sdn Bhd Seremban Two Holdings Sdn Bhd Seremban Two Property Management Sdn Bhd Seremban Two Properties Sdn Bhd Shah Alam 2 Sdn Bhd Malaysia 100 Malaysia 100 Malaysia 100 Malaysia 100 Malaysia 100 Tarikan Abadi Sdn Bhd Malaysia 100 Titan Tegas Sdn Bhd Malaysia 100 Unggul Senja Sdn Bhd Malaysia 100 Held by IJM Plantations Berhad Akrab Perkasa Sdn Bhd Berakan Maju Sdn Bhd Property development and clubhouse operations Property management Property development Property development Property development and construction activities Property development Property development Property development Property development Property development Property development Property development Property development Malaysia Malaysia 56 56 Held by Mintle Limited RMS (England) Limited Held by RMS (England) Limited RMS (England) 1 Limited RMS (England) 2 Limited Held by RB Land Sdn Bhd Aras Varia Sdn Bhd 124 Property development Under member’s voluntary liquidation Domant Cultivation of oil palms
  135. Desa Talisai Palm Oil Mill Sdn Bhd Desa Talisai Sdn Bhd Malaysia 56 Domant Malaysia 56 Dynasive Enterprise Sdn Bhd Malaysia 56 Excellent Challenger (M) Sdn Bhd Gunaria Sdn Bhd Malaysia 56 Malaysia 56 IJM Biofuel Sdn Bhd IJM Edible Oils Sdn Bhd Malaysia Malaysia 56 56 Minat Teguh Sdn Bhd Malaysia 56 Rakanan Jaya Sdn Bhd Malaysia 56 Ratus Sempurna Sdn Bhd Malaysia 56 Sabang Mills Sdn Bhd Sijas Plantations Sdn Bhd Held by Dynasive Enterprise Sdn Bhd PT Prima Alumga Malaysia Malaysia 56 56 Investment holding Investment holding Cultivation of oil palms Investment holding Domant Palm oil and kernel milling Investment holding Cultivation of oil palms Property holding Domant Domant Indonesia 53 Held by Gunaria Sdn Bhd PT Sinergi Agro Industri Cultivation of oil palms Indonesia 53 Indonesia 53 Cultivation of oil palms and milling Cultivation of oil palms Indonesia 53 Cultivation of oil palms Indonesia 48 Cultivation of oil palms and milling IJM RE Commercial Sdn Bhd Malaysia 100 Held by IJM RE Commercial Sdn Bhd Farview Valley Sdn Bhd Investment holding Malaysia 100 Property development, property investment and investment holding PT Karya Bakti Sejahtera Agrotama Held by Minat Teguh Sdn Bhd PT Primabahagia Permai Held by PT Primabahagia Permai PT Indonesia Plantation Synergy Held by IJM RE Sdn Bhd Held by Industrial Concrete Products Sdn Bhd 125
  136. Durabon Sdn Bhd Malaysia 100 ICP Investments (L) Limited Federal Territory of Labuan People’s Republic of China 100 ICP Marketing Sdn Bhd ICP Precast Products Sdn Bhd Malaysian Rock Products Sdn Bhd Malaysia Malaysia Malaysia 100 100 100 IJM IBS Sdn Bhd Malaysia 100 Held by ICP Investment (L) Limited ICPB (Mauritius) Limited Mauritius 100 Investment holding India 100 Held by IJM Concrete Products Private Limited IJM-AIKYA Joint Venture Production and supply of ready-mixed concrete India 60 Held by Malaysian Rock Products Sdn Bhd Aggregate Marketing Sdn Bhd Azam Ekuiti Sdn Bhd Crushing and marketing of building stone material Malaysia Malaysia 100 100 Malaysia United Arab Emirates Pakistan 70 60 Domant Leaseholder of quarry land Domant Investment holding ICP Jiangmen Co. Ltd Held by ICPB (Mauritius) Limited IJM Concrete Products Private Limited Bohayan Industries Sdn Bhd IJM Concrete (Private) Limited IJM Concrete Products Pakistan (Private) Limited 126 96 100 Processing and sales of steel bars Investment holding Production and sale of concrete products Domant Domant Quarrying, sale of rock products and investment holding Manufacture of industrialised building system Domant
  137. Kuang Rock Products Sdn Bhd Malaysia 100 Oriental Empire Sdn Bhd Malaysia 100 Scaffold Master Sdn Bhd Malaysia 100 Strong Mixed Concrete Sdn Bhd Malaysia 100 Warga Sepakat Sdn Bhd Malaysia 100 Pakistan Pakistan 60 60 Domant Domant Pakistan 60 Production and supply of ready-mixed concrete Malaysia 100 Property management Malaysia 100 Essmarine Terminal Sdn Bhd Malaysia 100 Gagah Garuda Sdn Bhd Malaysia 100 HMS Resource Sdn Bhd Malaysia 100 Kuantan Port Consortium Sdn Bhd (of which 30% is held directly by Essmarine Terminal Sdn Bhd) New Pantai Expressway Sdn Bhd Malaysia 60 Toll road operation Investment holding Investment holding Investment holding Port management Malaysia 100 Held by IJM Concrete (Private) Limited IJM Concrete Pakistan IJM Concrete Pakistan (Private) Limited Held by Strong Mixed Concrete Sdn Bhd SMC Islamabad (Private) Limited Held by RB Manufacturing Sdn Bhd Kuching Reverine Resort Management Sdn Bhd Held by Road Builder (M) Holdings Bhd Besraya (M) Sdn Bhd 127 Quarrying and sale of rock products Leaseholder of quarry land Sale and rental of steel scaffolding Production and supply of ready-mixed concrete Leaseholder of quarry land Design, construction, management ,operation and maintenance of New Pantai Highway
  138. NPE Property Development Sdn Bhd Held by Kuantan Port Consortium Sdn Bhd KP Port Services Sdn Bhd Malaysia 100 Property development Malaysia 60 Associates Held by the Company Bionic Land Berhad Port supporting services , stevedorage, storage handling and providing nitrogen purging and pigging services Malaysia 20 Cofreth (M) Sdn Bhd Malaysia 25 Emas Utilities Corporation Sdn Bhd Grupo Concessionario del Oeste S.A. Malaysia 40 Argentina 20 Chile 25 Malaysia 26 Investment holding and provision of management services Total facilities management , operations & maintenance, cogeneration and district cooling system/ service provider Investment holding Construction, renovation, repair, conservation and operation of Acesso Oeste highway Property development Investment holding Inversiones E Inmobillaria SurSur S.A. WCE Holdings Berhad 128
  139. Scomi Group Berhad Malaysia 21 Lebuhraya Kajang-Seremban Sdn Bhd Held by IEMCEE Infra (Mauritius) Limited GVK Gautami Power Limited Malaysia 50 India 20 Power generation Singapore 46 Highway Master Sdn Bhd Malaysia 50 Integrated Water Services (M) Sdn Bhd Malaysia 35 IJM Sunway Sdn Bhd Held by IJM Investment (L) Ltd Earning Edge Sdn Bhd Malaysia 50 Civil and building construction Road pavement construction Operation and maintenance of a water treatment plant Construction Malaysia 22 Property development Malaysia 40 Malaysia 50 368 Segambut Sdn Bhd Malaysia 50 Held by IJM Properties Sdn Bhd Cekap Tropikal Sdn Bhd Investment holding Property development Property development Malaysia 50 Good Debut Sdn Bhd Malaysia 50 MASSCORP-Vietnam Sdn Bhd Malaysia 20 Sierra Selayang Sdn Bhd Elegan Pesona Sdn Bhd Malaysia Malaysia 50 50 Sierra Ukay Sdn Bhd Malaysia 50 Held by IJM Construction Sdn Bhd Hexagon Construction Pte Limited Held by IJM Land Berhad Kuantan Pahang Holding Sdn Bhd Nasa Land Sdn Bhd Held by KP Port Services Sdn Bhd 129 Investment holding and provision of management services Toll road operations Property development Property development Investment holding Domant Property development Property development
  140. KP Depot Services Sdn Bhd Malaysia 18 Provision container depot services Malaysia 50 Under members ’ voluntary liquidation Malaysia 41 Design, construction and development of the West Coast Expressway Project and managing its toll operations Malaysia 25 Under members’ voluntary liquidation Malaysia 50 Property development Held by Malaysian Rock Products Sdn Bhd DML-MRP Resources (M) Sdn Bhd Held by Road Builder (M) Holdings Bhd West Coast Expressway Sdn Bhd (of which 21.2% is held indirectly by the Company via WCE Holdings Berhad) Held by Road Builder (M) Sdn Bhd Budi Benar Sdn Bhd Held by IJM RE Sdn Bhd IJM Perennial Development Sdn Bhd ** Unincorporated entities. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 130 of
  141. SECTION 5 .0 BUSINESS OVERVIEW PROVIDER 5.1 OF THE ISSUER AND THE KAFALAH Business Description of the Issuer and the Kafalah Provider The Issuer is principally engaged in investment holding. The principal activities of the Issuer’s subsidiaries are property development, management services, construction activities, investment holding and hotel operations. The Kafalah Provider is principally engaged in construction, property development, manufacturing and quarrying, hotel operations, port operations, tollway operations, plantations and investment holding. 5.2 Business Overview and Prospects of the Issuer Leveraging on the IJM Corporation Group’s construction expertise, IJM Corp expanded into property development and management. The IJM Corporation Group’s property development activities are spearheaded by IJM Land, a 100% (as at 15 January 2019) owned subsidiary. IJM Land is one of the leading property developers in Malaysia with sprawling townships, commercial buildings and high-rise condominiums under development in key growth areas throughout the country. Besides establishing itself as a reputable developer in Malaysia, IJM Land has also successfully undertaken overseas ventures in Singapore and the United Kingdom. IJM Land performed notably well during FY2018 by attaining the prestigious FIABCI World Prix D’Excellence Awards 2017 World Gold in Master Plan Category (Bandar Rimbayu) and the Putra Brand Awards 2017 - Bronze Award (Property Development). It also achieved the Top Developer awards in the StarProperty.my Awards 2018 – All-Star Award, The Poseidon Award (Excellence for The Light Waterfront, Penang) and The Edge Malaysia Property Excellence Awards 2017. CIDB awarded the Qlassic Excellence Award 2017 to IJM Land’s The Light Collection III, Seri Riana Residence, De’Bunga Residensi, Saujana Duta and the Fairway Golf Villas at Sebana Cove, and Best Qlassic Achievement Award 2017 in the small (less than RM20 million) residential category for De’Bunga Residensi. For the FYE 31 March 2018, the property division’s revenue dropped 13% to RM1,323.50 million from RM1,516.23 million recorded in the previous corresponding period. After removing the impact from a disposal of 32.76 acres of commercial land in Penang in the preceding year amounting to RM201.40 million, year-on-year revenue increased marginally by 1%. PBT for the FY2018 declined by 64% to RM110.56 million mainly due to the profit from the disposal of a commercial land in Penang of RM123.95 million in the previous year, as well as lower margins earned from the on-going mix of projects, and higher selling and distribution expenses incurred due to the soft property market. Consequently, PBT margin dropped to 8.4% in FY2018 from 20.0% in the prior year. However, excluding the profit from land sale recorded in FY2017, PBT actually reduced by 38% during FY2018. During the financial year FY2018, the property division continuously monitored and strategised its property launches in order to achieve the best match of its products to meet customers’ needs and affordability levels in various locations 131
  142. whilst balancing profit and prudence to create higher value for its stakeholders . The property division had also ramped up sales and marketing initiatives, rolling out innovative marketing strategies and financial schemes for all its projects. In addition, the property division intensified its efforts to reduce unsold inventories of previously-launched projects through active sales promotions and campaigns. As a result, the property division recorded sales of RM1.66 billion for the FY2018, an increase of 19% from FY2017. In responding to the increasing demand for affordable housing in the country, the property division launched strategically located products catered to the mass market, particularly mid-range landed properties and condominiums in the Klang Valley, Seremban and Johor. The property division saw good traction across the board for all of its mid-range projects such as Livia Double-Storey Link Homes in Bandar Rimbayu, Rimbun Harmoni Double-Storey Link Homes and Rimbun Ara Double-Storey Link Homes in Seremban 2 Heights, Riana South Condominiums in Cheras, Savio at Riana Dutamas in Segambut and Austin Duta Double-Storey Terrace Homes in Johor. Simultaneously, in considering the current challenges of home ownership for the mid-range products, several innovative financing schemes have been rolled out over the past year, including the launch of i.d.e.a.l. solutions, Oh Money Grow!, Set Jimat Rumah Dapat! and numerous other easy home ownership schemes which help lessen the burden of buying a home with low down payment and an affordable installment plan coupled with deferred billing and a host of other benefits. Existing township developments remain the core key revenue drivers and the property division remains cautiously optimistic on its outlook with the launches of some projects in 2018 on the strength of location, good connectivity and accessibility, the presence of amenities as well as attractive pricing. To cater to growing demand, several residential projects of a variety of affordability levels were launched in 2018, such as 3 Residence Condominium in Bandar Sri Pinang in Penang, Alam Suria Enclave 2-storey Terrace Homes in Shah Alam 2, and affordable apartment units within Pantai Sentral Park and Bandar Rimbayu whilst residential projects which are gearing up for launch include The Mezzo, the first residential project at The Light City in Penang, Swans 2-Storey Link Homes in Bandar Rimbayu, Safira Apartments in Seremban 2 and affordable apartment units within the Seremban 2 township. Please refer to Section 5.4 for further details on these key relevant projects currently undertaken by IJM Land Group. Notwithstanding the varied affordability levels of these residential properties, the focus of the property division remains in elevating customer experience and delivering quality throughout its projects. This affirms the property division‘s commitment to its stakeholders and reflects its vision for a better future while aligning the property division‘s goal to support positive development in the communities where it does business. On the international front, the property division will concentrate on the construction and completion of Phase 1 of the Royal Mint Gardens development in London, United Kingdom. For the forthcoming FY2019, IJM Land, backed by total unbilled sales of RM2.0 billion as of 30 September 2018, remains optimistic about the opportunities ahead. Although the Malaysian property market is expected to remain challenging, IJM Land remains steadfast in its efforts to grow its business, in view of the strategic locations of its properties and the brand premium that it has established. IJM Land 132
  143. will continue to be vigilant to the changes in customers ’ needs and versatile in its strategies to launch products that match the market’s demand and redirect its resources to improve operational efficiency. 5.3 Business Overview and Prospects of the Kafalah Provider IJM Corp has over 35 years of experience in the construction business, which remains its core business. The IJM Corporation Group’s operations possess significant size, core competencies and track record to yield cross-divisional strategic and operational synergies with focus on strengthening its presence in emerging markets while taking advantage of opportunities in the home base. As a recognised leader in the construction and property industries, IJM Corp has received many recognition and awards for its performance as a company, exemplary corporate governance and reporting practices, valued branding, corporate social responsibility and a dynamic workplace culture. Its most recent accomplishments include The Edge Billion Ringgit Club Corporate Awards 2017 for Highest Growth in Profit After Tax (Construction), NACRA 2017 Industry Excellence Award for Construction & Infrastructure Project Companies and the ASEAN India Business Council (AIBC) ASEAN-India Achievement and Excellence Award 2017. IJM Corporation Group’s construction division’s excellence in quality and health, safety and environment further attained the Malaysia Canada Business Council (MCBC) 25th Anniversary Business Excellence Awards – Excellence Through Quality Award, CIDB Certificate of Achievement SCORE 5-Star Rating in 2018 and National Occupational Safety and Health Award (OSH) Construction Category for Puteri Cove Residences, Johor in 2017. (i) Property Division Please refer to Section 5.2 above. In FY2018, IJM Corporation Group ventured into a real estate business with the acquisition of land and construction of Menara Prudential, a 27-storey office building in TRX, Kuala Lumpur. Menara Prudential is a Grade A, LEED Gold certified and MSC Status office building constructed over a land area of 1.18 acres with a total gross floor area of about 560,000 square feet. Leading insurer, Prudential is expected to relocate its Malaysian headquarters to Menara Prudential in 2019. The building will consolidate all of Prudential’s assurance and asset management businesses under one roof. This new business is expected to provide recurring income streams to IJM Corporation Group. In India, the development of the property division‘s second phase of Raintree Park Dwaraka Krishna Township in Vijayawada, is currently in the advanced stage of construction with scheduled delivery by April 2019. The state government of Andhra Pradesh is trying its best to build the new capital city, but it will be a while before it can start functioning from this permanent seat of power in the new state. The proposed greenfield capital city has generated unprecedented interest in the surrounding areas and the two urban centres of Vijayawada and Guntur are the biggest gainers of this immense interest. Many private companies have expressed interest in setting up facilities in and around Amaravathi and this momentum is expected to escalate. 133
  144. With the government of India making clear in its agenda for further economic liberalisation , it is expected that India will be further integrated with the world economy. This will likely translate into more businesses shifting their back office operations to India and an increase in outsourcing activities. With the real estate scenario reaching a saturation point in big cities, the new setup of knowledge based industries will be established in Tier II and Tier III cities like Nagpur, leading to an increase in demand for residential units. The First City Project is a world-class integrated township being developed in Multi-Model International Cargo Hub and Airport, Nagpur, (“MIHAN”) across a vast area of 31 acre and 11.644 acre parcels. MIHAN is the biggest economical development project currently in India in terms of investments. The project aims to exploit the central location of Nagpur and convert the present airport into a major cargo hub with integrated road and rail connectivity. The integrated township will have modern facilities such as a club house, shopping complex and school. The first phase of the project which consists of 3 buildings comprising 568 units and a club house, is planned for completion by December 2020. On 1 May 2017, the Government of India enforced the Real Estate (Regulation and Development) Act, 2016 nationwide to safeguard consumers’ interests. (ii) Construction Division The IJM Corporation Group’s construction division is spearheaded by IJM Construction Sdn Bhd (“IJMC”), a 100% (as at 15 January 2019) owned subsidiary. The construction division’s outstanding order book for FY2018 surpassed RM9.41 billion, at an all-time high. The outstanding order book comprised of road projects (41%), other infrastructure (30%) and buildings (29%). The construction division successfully bagged new projects locally and internationally worth a total of RM3.80 billion during the reporting period FY2018. The construction division achieved a better order book replenishment than expected which is a testament of its strong capability to win new projects. Local projects secured during the FY2018 include the LRT3 – Underground package from Bandar Utama in Petaling Jaya to Johan Setia in Klang (RM1,115.69 million), HSBC Office Building at TRX (RM409 million), UOB Tower 2 Office Building at Jalan Raja Laut (RM450.90 million), Damansara Uptown 8 Office Building at Damansara Jaya (RM378.23 million), Foundation work for Affin Group (RM29.87 million) and the Breakwater 2 Project at the New Deep Water Terminal Project, Kuantan Port through a joint venture with a China company with the construction division’s 60% share being RM150.19 million. Internationally, the construction division successfully secured the SolapurBijapur Tollway (RM1,260.00 million), a four-laning tollway construction project in India. During the financial year under review, the construction division performed better compared to the last financial year. It recorded a 6% higher revenue to RM2,674.39 million (FY2017: RM2,532.15 million). Profit before tax achieved a decent growth of 4% to RM226.01 million (FY2017: RM216.72 million). PBT margin averaged around 8.5%. 134
  145. The increase in revenue and net profit for the financial year was principally attributed to higher progress billings from advanced stages of construction work for various on-going projects such as the West Coast Expressway road project , New Deep Water Terminal at Kuantan Port – Phase 1 project, Equatorial Plaza project and Almas Johor Bahru project. Further to that, commenced projects such as the Bukit Bintang City Centre project, Menara Prudential project, HSBC Office Building project and Breakwater 2 Project also started to contribute revenues and profits during the financial year. On the international front, Hexacon Construction Pte Ltd in which IJM Construction Sdn Bhd has a 45.5% stake, performed well in FY2018. It generated a revenue of RM221.16 million and profit after tax of RM29.67 million for the construction division’s share during the financial year. This year marked the construction division’s fourth consecutive year into the Blue Ocean Strategy journey. The construction division has thus far launched various defined initiatives under three strategic thrusts, of which 85% of all initiatives were launched and implemented successfully. BIM system as one of its major initiatives moved up a notch higher in the construction division. BIM system has been undertaken by most of its current projects to enhance their performances including generating consistent information in digital files, creating collaboration amongst stakeholders and assisting in clash detection during construction stages. During FY2018, the construction division has successfully completed several projects. The locally completed projects included the Potpourri – Commercial Development project in Ara Damansara, Radia Phase 1 & 2 and Phase 3 & 4 – Mixed Development project in Bukit Jelutong. Besides that, the construction division completed the Breakwater 2 Project at the New Deep Water Terminal of Kuantan Port. In Central region, some new phases were completed in IJM’s townships, Bandar Rimbayu and Seremban 2. The construction division has successfully upgraded to the Environmental Management Standard ISO 14001:2015 and retained its certification to the internationally recognised Occupational Safety & Health Management Standards known as OHSAS 18001 & MS 1722 after recertification in September 2017. The management system has been adopted in all of its project sites to ensure that best practices are applied and risks and opportunities are identified for improved health, safety and environment performances. Having achieved a remarkable order book replenishment record during the reporting period, the construction division will now focus on project execution to ensure timely completion of all on-going projects and be prudent against many uncertainties in the challenging business environment. Going forward, the construction division’s performance is expected to remain satisfactory supported by the existing outstanding order book on hand for sustainable revenue and profit growth. The sluggish property market is expected to slow down future launches of private projects in the near term. The construction division expects the weak market sentiment for the property sector to continue into the coming financial year as well as limited public infrastructure projects taking off due to new Government reforms and the deferment of a few mega projects. Given the emphasis of the new Government to promote transparent 135
  146. procurement processes , the construction division stands in good stead given the construction division’s proven execution track record and ability to provide value added return. To preserve sustainable growth in its business, the construction division will prioritise the tendering of projects in overseas markets such as India and Vietnam. In addition, the construction division will align its strategy to ensure business continuity to preserve the interest of its stakeholders. (iii) Plantation Division The IJM Corporation Group’s plantation division is housed under IJMP, a 56% (as at 15 January 2019) owned subsidiary. IJMP was listed on the main board of Bursa on 2 July 2003. The journey of the plantation division dates back to 1985 when it first ventured into a mere 4,000 hectares of Desa Talisai estates in Sabah, Malaysia. As it stands today, the plantation division’s cultivated area exceeds 60,000 hectares. On top of that, the plantation division had successfully established its footprint by expanding its operation into Indonesia. During FY2018, the existing six (6) palm oil mills continued to run at a capacity of 300 mt of FFB per hour. In its Malaysian operations, four (4) palm oil mills ran at a capacity of 180 mt of FFB per hour. Whereas, the existing two (2) mills in its Indonesian operations operated at a capacity of 120 mt of FFB per hour. The third mill in Indonesia with a capacity of 60 mt of FFB per hour is under construction and expected to be commissioned in 2019. During the financial year, the industry operated in a challenging environment amidst the volatility of commodity prices and foreign exchange rates. The import duty hike in India, increased global inventories of competing vegetable oils and announcement of a plan to reduce the use of palm based biodiesel and proposed new certification standards by the EU added mounting pressures on CPO prices. Although the industry is witnessing a recovery in FFB production as the El Nino effects faded, the recovery recorded by the plantation division is slower than anticipated and its FFB production from older palms in both Malaysian and Indonesian operations continued to be affected by the previous prolonged dry weather. Notwithstanding the above challenges, volatility and crop recovery, the plantation division successfully delivered another year of positive crop performance with 8% increase in the overall FFB production to 932,950 mt (FY2017: 862,435 mt). As at 31 March 2018, the plantation division’s total planted area stood at 60,981 hectares (FY2017: 60,570 hectares) with a weighted average age of 9.9 years. It consists of 53,312 hectares (FY2017: 51,798 hectares) of mature areas of various age and 7,669 hectares (FY2017: 8,772 hectares) of immature areas. 59% of total planted area is located in Indonesia while the balance 41% is located in Sabah, Malaysia. From the total planted area, 90% of the Malaysian planted areas are mature whereas for Indonesian operations, the mature area increased to 85% as compared to 80% in the previous year. 136
  147. By geographical segment , FFB production from the Indonesian operations registered a growth of more than 16% to end the year with 462,003 mt of FFB (FY2017: 398,416 mt) as more areas attained maturity and moved into prime age. On the other hand, FFB production from the Malaysian operations increased by 1% to 470,947 mt (FY2017: 464,019 mt) net of crops reduced from areas removed for replanting. Overall, the FFB production of the plantation division for the year was 932,950 mt (FY2017: 862,435 mt), an improvement of 8% compared to the previous year. In terms of crop yield and productivity, the Malaysian operations recorded 4% increase in FFB yield to end the year with 20.8 mt per hectare (FY2017: 20.1 mt), whilst Indonesian operations recorded FFB yield of 15.0 mt per hectare (FY2017: 13.9 mt). Together with outside crops, total FFB processed by the plantation division during the year was 1,095,595 mt (FY2017: 1,010,111 mt), an increase of 8% compared to the previous year. In its Malaysian operations, a total of 698,614 mt (FY2017: 659,625 mt) of FFB inclusive of outside crop were processed by its four (4) palm oil mills. With this, a total of 140,496 mt (FY2017: 135,275 mt) of CPO and 36,303 mt (FY2017: 32,672 mt) of PK were produced by the Malaysian operations. The average OER and KER achieved by the plantation division were 20.1% (FY2017: 20.5%) and 5.2% (2017: 5.0%) respectively. FFB processed in its Indonesian operations was 396,981 mt which was 13% higher than the previous year. The higher volume of crop processed was attributed to more palms attaining maturity and moving into prime age and the commissioning of its second mill, Sinergi mill. 89,113 mt (FY2017: 76,405 mt) of CPO and 15,519 mt (FY2017: 13,676 mt) of PK were produced in the Indonesian mills. The average OER and KER achieved were 22.4% (FY2017: 21.8%) and 3.9% (FY2017: 3.9%) respectively. The plantation division’s kernel crushing plant in its Malaysian operations processed 33,531 mt (FY2017: 32,202 mt) of PK to produce 14,810 mt (FY2017: 14,669 mt) of CPKO and 16,447 mt (FY2017: 15,876 mt) PKE. The average extraction rate for CPKO was 44.2% (FY2017: 45.6%) and PKE was 49.1% (FY2017: 49.3%). Whereas at its Indonesian operations, the kernel crushing plant processed 15,423 mt (FY2017: 12,394 mt) of PK to produce 5,904 mt (FY2017: 5,206 mt) and 9,433 mt (FY2017: 7,187 mt) of CPKO and PKE respectively. As a result of external factors, compounded by FFB recovery in the industry, the MPOB’s average CPO price slumped more than 19% from RM3,045 per mt in the first quarter of 2017 to RM2,466 per mt in the 1st quarter of 2018. In line with that, the average CPO price achieved by the plantation division softened to RM2,532 per mt, as compared to RM2,695 per mt achieved in the previous financial year. Average CPO price from its Malaysian operations decreased to RM2,639 per mt (FY2017: RM2,753 per mt), whereas in its Indonesian operations, the CPO price reduced to RM2,380 per mt (FY2017: RM2,589 per mt) at end of FY2018. Hence, revenue for the current financial year was lower after considering the commodity prices and volume variances year on-year. 137
  148. The plantation division ’s cost of sales for the current financial year was 13% higher, impacted by higher costs from increased replanting activities in Malaysia, minimum wages and revision of harvesting rates in Malaysia, increase in young mature areas in Indonesia which incurred full plantation maintenance and overheads but are set against start-up yields, and additional depreciation and overheads with the commencement of the second palm oil mill in Indonesia. Aside from lower commodity prices and higher cost of sales, the plantation division’s performance was battered by increased LIBOR rate and weakening of the Indonesian Rupiah against USD during the financial year. A net unrealised foreign exchange loss of RM23.7 million on USD denominated borrowings was recorded during FY2018, as compared to a gain of RM1.8 million in FY2017. In tandem with this, the plantation division saw its PBT and PBT margin decreasing to RM77.30 million and 10.4% respectively (FY2017: RM168.51 million and 22.4%). Notwithstanding the above, the plantation division continued to achieve strong EBITDA of RM203.80 million, which exceeded the RM200 million mark. Contribution to the Sabah state sales tax, windfall profit levy to the Malaysian Customs Department and statutory payment cesses to MPOB amounted to RM26.5 million in FY2018 (FY2017: RM30.1 million). The decrease was mainly due to the drop in commodity prices compared to the previous year. The plantation division’s capital expenditure of RM83.6 million (FY2017: RM90.7 million) consists mainly of its development expenditure in Indonesia which included construction costs of the third palm oil mill and related infrastructure establishment. On plantation development expenditure, the plantation division incurred a lower spend of RM29.8 million in the current year compared to RM31.9 million in FY2017 due to lesser immature plantings. On 26 March 2018, IPS, a subsidiary, entered into a Shareholders Agreement with KL Kepong Plantation Holdings Sdn. Bhd and an individual shareholder in relation to PSS– a joint venture to establish an integrated palm oil refinery complex and a kernel crushing plant for the production and sale of refined or processed oil palm products or its derivatives. Pursuant to the agreement, IPS will subscribe 44,000 shares of Rp.1,000,000 each, representing 20% equity interest in PSS for a total cash consideration of Rp.44,000,000,000 (approximately RM13 million).The amount was paid on 15 May 2018. On the mandatory certification under the MSPO scheme, one of the plantation division’s palm oil mill Desa Talisai Palm Oil Mill and three (3) supplying estates were certified since 2015. The entire Malaysian operations will be certified under MSPO scheme by 2019. The plantation division continued with its recertification of the International Sustainability and Carbon Certification ISCC-EU scheme where premiums were derived for its CPO. Its four (4) Indonesian estates successfully achieved certification under the ISPO scheme. The plantation division will work towards the full implementation of the mandatory ISPO certification in its Indonesian operations. 138
  149. Although post-El Nino FFB recovery is expected to gain traction going into FY2019 , the performance of the plantation division remains very much dependent on commodity prices. The supply and demand for palm based commodities will continue to be exposed to various factors. The announcement of the EU’s plan to reduce the usage of palm based biodiesel, protectionism by consuming countries via import duties, fluctuating currencies, changes in weather patterns, crude petroleum prices and global inventories of vegetable oils will continue to impact global commodity prices. Going forward, input costs are expected to escalate coupled with shortage of labour, the trend of rising labour wages would continue and call for enhanced efforts in plantation mechanisation. The plantation division continues to believe that the long term prospect for the palm oil industry remains attractive in view of well-supported fundamentals including global population growth and inherent high productivity of oil palm. The plantation division will continue to plough on with continuous improvements in productivity, harnessing fitting technologies and implementing best management practices together with employment of cost effective strategies and initiatives. Looking ahead, FFB production is expected to recover in the Malaysian operations after lagged effects of the El Nino phenomenon while higher crop production is also expected from the plantation division’s Indonesian operations as more areas come into prime production age. The plantation division expects a satisfactory profitability level for the coming financial year. (iv) Industry Division The industry division is spearheaded by ICP, a 100% (as at 15 January 2019) owned subsidiary of IJM Corp. During FY2018, industry division’s revenue decreased by 7% to RM1,057.10 million while PBT decreased by 42% to RM82.48 million. PBT margin consequently dropped to 7.8% (FY2017: 12.5%). Its two main activities, pre-stressed spun concrete piles and quarrying suffered margin compressions mainly due to lower selling prices and higher operating costs. Consequently, revenue decreased by 8% and 18% respectively while PBT dropped by 42% and 31% respectively. The first half of FY2018 saw sales volume remained strong as the momentum from FY2017 continued. Major projects contributing to sales were the West Coast Expressway, Road & Bridge Works to Pengerang in Johor, Forest City Development at Tg Kupang in Johor, Ikano Shopping Mall at Johor Bahru, Alliance Factory in MCKIP, Kuantan in Pahang, New EPF HQ at Kwasa Land, Sg Buloh in Selangor, LRT3 Depot at Klang in Selangor and Affordable Housing Programme under PRIMA and PPA1M. Sales volume for the second half of FY2018 were mainly contributed by projects such as Queen Residence (Phase 2) at Jalan Cassia in Penang, West Coast Expressway, Pengerang Independent Deep-Water Terminal, Pengerang in Johor, Jambatan Bagan Datuk in Perak, Universiti Pendidikan Sultan Idris, Teluk Intan in Perak, Hospital Parit Buntar in Perak, Pegaga Jetty Upgrade at Lumut Port Industrial Park in Perak, 139
  150. Mukah Airport Extension Project in Sarawak and Pan Borneo Highway Project . Export market for FY2018 achieved a record high volume of 248,589 tonnes. This was mainly contributed by Temburong Bridge Project in Brunei, Mega Shipyard (Phase 3), Tuas in Singapore, Fertiliser Plant at Sg Liang Industrial Park in Brunei, Pulp & Paper Mill, Riao in Indonesia, Jetties and Tank Farms in Myanmar and HDB Projects in Singapore. Looking forward, in the domestic market, the industry division is targeting the following projects for FY2019: Hospital Kemaman in Terengganu, LRT3 Project, IKEA Warehouse Project at Pulau Indah in Selangor, Hospital Tanjung Karang in Selangor, Bridge Crossing Sg Pulai and Link Road from Tg Pelepas to Tg Bin in Johor, Hospital Pasir Gudang in Johor, Ultropolis Development at Batu Kawan in Penang, Commercial/Convention Center at Gelugor in Penang and Industrial Plants at MCKIP, Kuantan in Pahang. In order to boost revenue, the industry division continued its expansion programme with the construction of a new plant in Kuantan, Pahang. This plant is expected to benefit from the on-coming industrial plants at MCKIP in Kuantan, Pahang. The existing Kuala Terengganu Plant is being upgraded to increase its production capacity for the coming projects. In addressing margin compressions, the industry division is investing into more automation at various factories to reduce escalating labour costs and material wastages. At the same time, it is expected that efficiency will increase, thus reducing production time. On the overseas front, the company is looking forward to continuing the momentum gained in FY2018 through marketing efforts made in Singapore, Myanmar, Indonesia, Brunei and Bangladesh. Operational wise, production costs were adversely affected by the weak MYR/USD currency and rising prices of steel materials. The impact from these two items was approximately RM30 million. For the coming financial year, overall costs are expected to come down due to the strength of MYR vs USD and stable prices of raw materials. The industry division will continue its cost down initiatives to reduce costs further. ICPJM results improved significantly during FY2018 by recording a lower loss before tax of RM1.68 million (FY2017: Loss of RM3.75 million). Revenue increased by 30% compared to the last financial year due to higher deliveries as some projects resumed after delays. The main deliveries were made to SINOPEC-Kuwait JV Refinery Terminals Phase 1 and Phase 2, Zhanjiang Port Bulk Terminal and SINOTRANS Bulk Terminal in Jiangmen. The outlook for ICPJM is positive as more projects are expected to come on-stream and ICPJM is confident of securing some of them. ICPJM secured a supply contract to a port project in Tanzania, Africa for FY2019. DSB achieved a revenue of RM121 million, an increase of 8% from FY2017. However, PBT remained almost the same of RM4.06 million as profit margin was affected by higher costs of imported raw materials arising 140
  151. from increased prices and weak MYR /USD currency. Both local and export sales will remain challenging with the influx of cheap finished products from China. DSB will continue its cost-cutting initiatives to enhance its competitiveness. Revenue in the quarry sector fell 18% to RM150.63 million on lower sales volume which deteriorated 8% from a year ago. The drop was mainly attributed to the slowdown in property development activities, morbid Singapore market and reduction in deliveries to the Breakwater 2 Project in Kuantan which was nearing completion. As such, its quarries in Ulu Choh, Kulai, Gebeng and Pancing registered decline in sales. In tandem with the dropin revenue and margin squeeze from lower selling prices which fell by a further 5%-10% from last year, PBT shrank 31% to RM16.18 million. In its efforts to improve sales, the industry division embarked on increasing production in various quarries and sand mining by implementing new initiatives. The new quarry in Segari, Perak has commenced operations in March 2018. By having a coastal quarry, its business will no longer be limited by land transportation and its products (amour rock and crushed rock) will be able to reach customers further away by sea. This will enable the industry division to build strategic partnerships with overseas markets such as Singapore, Myanmar and Bangladesh. Meanwhile, the strategy for the long term is to operate two additional quarries at strategic locations in Malaysia and one in India and a second sand pit in a key location. Production and supply of ready mixed concrete under Strong Mixed Concrete Sdn Bhd improved by 7% attributed to full year operations of both Nusajaya and Bukit Raja plants as well as the commencement of Segambut plant which was set up to supply to the MRT Package V203 project. However, the increase was offset by lower off-takes from Kuantan Port as the breakwater and wharf projects were nearing completion. Overall, revenue dropped by 10% to RM81.5 million due to the decline in selling prices and intense pricing competition. The higher capital expenditure incurred for the three (3) new plants had resulted in higher depreciation charges and financing costs. The company was also hit by unrealised foreign exchange losses of RM0.1 million on USD loans to its overseas subsidiary in Pakistan. Consequently, with margins under pressure, a loss of RM2.8 million was incurred in FY2018. In India, the performance of the ready-mix sector of IJMCPPL has improved after the demonetisation of the Indian currency but volumes were still down when compared to the previous year. Volumes in Bangalore region were down, particularly Whitefield plant on pollution control and local issues. It registered a 10 decrease in revenue to RM71.68 million but pre-tax profit rose 115% to RM2.43 million, aided by the reversal of allowance for bad debts amounting to RM1.6 million. In order to increase revenue in the next financial year, the company is looking at growing cities like Mumbai, Hyderabad and Bangalore to set up plants with smaller capacities and optimum route haulage. 141
  152. Its quarry business did not perform well and suffered a higher pre-tax loss of RM2 .07 million (FY2017: Loss of RM1.3 million) mainly from its Jhansi and Magadi operations. Both quarries have since ceased operations. The industry division’s ready-mix plant in Islamabad, Pakistan recorded a 26% increase in revenue in its second year of operation. However, its pre-tax profit fell to RM0.05 million from RM0.69 million a year ago on lower selling prices and foreign exchange losses of RM0.18 million on an USD loan. Despite the drop in PBT, the company is confident of its future prospects and is currently identifying another location to invest in a second plant. When the CIDB Act 520 (Amendment 2011) came into force on 1 December 2015, rental of scaffoldings fell and the drop increased in the current year as the twenty-four-months grace period ended on 1 December 2017. Revenue in Scaffold Master Sdn Bhd dropped by 32% to RM10.58 million due to strict adherence to the Act where all conventional frame scaffoldings and accessories with thickness below 2.3 mm were banned and the use of new approved frames with PPS and heavy duty (shoring system) scaffoldings were slow. Coupled with lower rental rates and higher depreciation, PBT deteriorated 29% to RM4.09 million. The company is confident that the use of conforming and heavy-duty scaffoldings will pick up in the coming financial year. Kemena Industries Sdn Bhd, a 55% subsidiary in Bintulu, Sarawak is engaged in the production and sales of ready-mixed concrete and precast reinforced concrete products. Its revenue decreased by 1% to RM12.37 million and PBT rose 237% to RM1.34 million, backed by extraordinary income of RM1.58 million. Business is expected to be challenging with more intense competition from existing and new players and the continuation of a subdued property market. Nevertheless, the company foresees that more infrastructure works by the local authority can mitigate the market scenario and the company aims to serve these projects. Malaysia’s economic outlook is expected to remain strong despite the post-14th general election environment given its resilient and robust financial system. The industry division will continue to carry out its cost optimisation programmes in order to improve the bottom line. (iv) Infrastructure Division The infrastructure division’s total infrastructure assets comprised of nine toll road concessions (with four in Malaysia, four in India and one in Argentina), a port in Pahang, a power plant in India and a water treatment plant in Vietnam. The infrastructure division recorded an increased revenue by 3% to RM1,001.87 million (FY2017: RM975.52 million) mainly due to increased cargo throughput handled by the port concession. Accordingly, pre-tax profit and margin doubled to RM120.12 million and 12.0% respectively (FY2017: RM62.31 million and 6.4%) mainly due to increased port cargo throughput, higher contribution from certain associates as well as net foreign exchange gain of RM1.7 million for the current year as compared to a net foreign exchange loss of RM57.6 million in the previous year. 142
  153. Toll Roads The local toll road concessions contributed substantial results to the infrastructure division for FY2018 . Presently, there are three (3) operating toll roads being two wholly-owned urban highways, 28.9 Km Besraya and 19.6 Km NPE, and 50%-owned inter-urban highway, 44.3 Km LEKAS. These concessions hold concession periods of 44, 34 and 33 years respectively. The Government had deferred the scheduled toll rates hike for all tolled roads for the years 2016 and 2017. Toll rate increases for Class 1 vehicle of NPE’s PJS 2 Toll Plaza and Class 5 vehicle (bus) were also deferred. Pursuant to their concession agreements, LEKAS and Besraya were entitled to a toll rate increase on 1 January 2017 and 1 January 2018. All toll hike deferment had been compensated in accordance with the concession agreements. The traffic performance for these highways had improved in FY2018 with the average traffic growth rate ranging from 4% to 7% demonstrating gradual recovery from the impact of toll hikes in October 2015. Besraya contributed higher revenue of RM131.43 million for FY2018, representing an increase of 10% from the previous year. The increase was mainly due to scheduled toll rate hike on 1 January 2018 and also driven by robust traffic growth from Loke Yew Toll Plaza, which grew 12%. Correspondingly, pre-tax profit increased by 16% to RM33.36 million. In FY2018, NPE charted an increased revenue of 4% to RM170.61 million while pre-tax profit stayed similar to FY2017 of about RM94 million. Traffic growth was underpinned by the alignment of NPE highway which straddled the densely populated areas such as Bangsar, KL Sentral, Petaling Jaya, Subang Jaya, Kelana Jaya and Kuchai Lama, supported by the migration of traffic from Federal Highway which was overcrowded during peak hours after the abolishment of Batu Tiga and Sungai Rasau Toll Plazas effective 1 January 2018. LEKAS contributed a revenue of RM39.89 million in FY2018, which increased by 12% from RM35.78 million last year. The higher revenue was attributable to sturdy traffic growth of 7% and the scheduled toll rate hike on 1 January 2017. The improved connectivity to LEKAS and gradual maturing townships along the highway vicinity are contributing to the positive traffic growth. However, pre-tax losses increased by 20% to RM30.23 million in FY2018 on account of decrease in other income. In the coming years, the toll operations will continue its commitment to provide quality highway services to the road users. Relieving traffic congestion during peak hours is the main concern for toll division. Besraya had initiated and funded a new upgrading work at Kuchai Lama’s signalised junction, which include a new direction ramp linking NPE to Besraya along with upgrading and reconfiguration of the signalised interchange. Upon completion in year 2019, the project will increase the dispersal capacity at the interchange, which will result in a significant reduction in waiting time and queue length from all directions. Another capacity improvement project is the new interchange connecting the property division’s Pantai Sentral Park development to NPE’s Pantai Dalam interchange, which was completed and opened to traffic in December of 2018. The new interchange now serves as an alternative link between NPE and Kerinchi/Bangsar South, which will alleviate the congestion at Sri Pantai interchange especially during evening peak hours. 143
  154. The construction of LEKAS ’s Ulu Temiang Interchange is completed and opened to traffic in April 2018 providing a direct link from the vicinity of Seremban and Temiang to LEKAS. This strategic connection is a viable alternative to shorten the travel time upon entering and leaving Seremban and is expected to increase traffic build-up at Setul and Ampangan Toll Plaza. Traffic mitigation schemes are being undertaken and monitored from time to time to mitigate traffic congestions during peak hours. The contra flow traffic management scheme between Km 4 to Km 5 at south bound of Besraya had successfully dispersed traffic from Mines South Toll Plaza to Putrajaya during evening peak hours. NPE also deployed a traffic management scheme at the Jalan Templer junction and Old Klang Road during peak hours. Improvement plan is underway to undertake road widening from Taman Maju Jaya towards Templer Intersection at NPE which was completed in 2018. Following the successful implementation of 100% Electronic Toll Collection programme, toll division has started the implementation of Radio Frequency Identification (RFID) Toll Collection System starting from August 2017 to further improve throughput and traffic flow at toll plazas. RFID technology is the backbone for the eventual deployment of Multi Lane Free Flow (MLFF) in year 2022. A total of ten (10) RFID-SmartTag hybrid lanes have been installed in Besraya and NPE. These lanes are in operation for Government-exempted vehicles and controlled users. RFID toll lanes are slated for opening to the public in 2019. The safety of road users is toll division’s primary objective. The toll division will strictly observe all maintenance and construction procedures, to ensure road safety and minimise disruption to the traffic flow. The toll division will continuously monitor third party developments along the vicinities of its highways which may affect road safety and traffic flow. The toll division also provides timely information through socio-media to road users in order to manage the traffic flow better especially on busy stretches to mitigate congestion. Toll division is mindful of the challenging operating environment facing the industry today such as opening of new highways, tollfree alternative routes, improvements in public transportation system and toll rate disparities among competing highways, all of which may impact its tollable traffic. Notwithstanding that, the toll division is also mindful of the new Government reforms on toll concessions which are under discussions. Given the Government’s decision on deferment of toll hikes, the toll division is confident that the Government will continue to observe the terms of the concession agreements. In the coming year, the toll division expects minor cost savings following the rate adjustment of Goods and Services Tax from 6% to 0% effective 1 June 2018. Toll division will continuously be proactive in its engagement and work with the Government to achieve a win-win outcome for the country and its stakeholders. Moving forward, the ongoing developments of massive commercial and residential projects along the highways’ corridors will increase its tollable traffic volume and contribute positive revenue streams to the toll division. IJM via its investments in WCE Holdings Berhad (formerly known as Kumpulan Europlus Berhad) and WCESB has a 41% effective interest in the 233 Km West Coast Expressway project connecting Banting to Taiping. It has a 50-year concession and is currently under construction. 144
  155. In India , the toll division’s operating toll roads comprised of 99.9%-owned Chilkaluripet-Vijayawada Tollway (68 Km) and 30%-owned Swarna Tollway (145 Km). Its wholly-owned Dewas Bypass Tollway (19.8 Km) is under construction while its wholly-owned Rewa Tollway (387 Km)’s concession ended at end of 2017. The Indian tollways have concession periods ranging from 16 to 31 years. The toll division’s latest addition is wholly-owned Vijayapura Tollway (109.08 Km) which was secured in December 2017 for the fourlaning of Solapur-Bijapur section of National Highway, NH-13 (New HH-52) from km 0.00 to km 110.542 in the State of Maharashtra and Karnataka under NHDP Phase-III in BOT Toll Mode. It is the largest road BOT concession secured by IJM in India to-date valued at approximately RM1.5 billion as at FY2018 and construction work has just commenced. During FY2018, the Indian tollways contributed higher revenues by 6% to RM129.34 million (FY2017: RM121.50 million) mainly due to contributions from Swarna Tollway. Consequently, the Indian tollways pre-tax profit increased to RM11.41 million (FY2017: RM10.57 million). In Argentina, the IJM Corporation Group’s 20%-owned Grupo Concesionario del Oeste S.A. which operates a 21-year concession of the 56 Km Western Access Tollway in Buenos Aires, contributed a significantly higher revenue by 30% to RM94.48 million while its share of profit increased sharply by 122% to RM23.45 million in FY2018, mainly due to increased toll rates in January, February and August of 2017, higher financial income and containment of rising costs. Since the tollway represents the most convenient route to the city for the 3 million inhabitants of the Western zone, the demand for using the tollway has proved relatively inelastic and resistant to price increases. The outlook for 2018 is very positive. During the last quarter of FY2018, the company received another important toll increase of approximately 56% which will contribute to future revenue growth. An agreement was reached with the Highway Authority DNV and the Ministry of Transport to extend the concession period to 31 December 2030 and it has been approved by the presidential decree. Ports During the financial year, Kuantan Port recorded a revenue of RM250.79 million (FY2017: RM210.59 million). Its pre-tax profit increased by 28% to RM85.24 million (FY2017: RM66.43 million) mainly due to increased cargo throughput. Cargo throughput recorded was 17.03 million (FY2017: 15.00 million) freight weight tonnes, an increase of 14% from the previous year contributed by Alliance Steel’s cargo and increase in steel pipes, coal and manganese ore throughput. The port division also faced challenges to its business in the form of low throughput for palm oil due to the effect of ElNino and palm oil exports were affected by competition from other vegetable oils, higher import tax in particular from India and low demand. However, the palm oil throughput is slowly recovering currently. The port division also recorded lower revenue from land rentals due to fewer cargo storage. Kuantan Port has synergistic collaborations with MCKIP and both have jointly participated in the CAEXPO, an annual trade exhibition in Nanning, China last year. Strategic meetings took place every month discussing the current progress and resolution of issues. In the port division’s existing port, it is leveraging on information technology to 145
  156. enhance the efficiency and effectiveness of port operations . The dashboard in CTOS system will enable real time container operation monitoring for immediate response. Besides that, the port division is also using mobile applications for pilot booking in MTOS system which enables online booking and pilot allocation. Kuantan Port has kicked off a rebranding project in February 2018 to introduce the NDWT and increase its customer engagement. With the development of NDWT and the expected completion of Phase 1A in the third quarter of 2018 and Phase 1B in June 2019, Kuantan Port has already embarked on plans for smooth transition in operations. In terms of human capital, trainings for operators and maintenance staff are executed in stages. The conveyor belt system connecting the NDWT to Alliance Steel’s mill in MCKIP is currently under construction and it is expected to be completed by the middle of 2019. Kuantan Port expects to receive the approval to operate as a Free Zone Port by fourth quarter of 2018 which will become an important instrument for the port to become a multi-cargo transhipment hub and the main gateway for China, the Far East and beyond. Power Plant The IJM Corporation Group’s sole power plant concession in Andhra Pradesh, India, is its 20%-owned Gautami Power, a 469 MW natural gas based Combined Cycle Power Plant. The IJM Corporation Group ceased equity accounting for its share of losses in Gautami Power which has been accounted up to its investment cost since last year. The plant continues to be short of gas supply. Once the gas supply is stabilised, the investment is expected to turnaround and contribute regular income streams to the IJM Corporation Group until the year 2023. Water Treatment Plant The IJM Corporation Group’s 36%-owned associate, Binh An Water Corporation Ltd in Vietnam contributed a consistent net profit of RM4.73 million (FY2017: RM4.76 million) to the IJM Corporation Group during the financial year. The investment is expected to contribute stable income streams until the year 2019. 5.4 Key Projects of the IJM Land Group Project Type of development Location 1 Bandar Rimbayu Mixed Development Selangor 2 Pantai Sentral Park Mixed Development Kuala Lumpur 3 The Light Waterfront, Gelugor Mixed Development Penang 4 Seremban 2 and Seremban 2 Mixed Development Heights Township Negeri Sembilan 5 Sebana Cove Johor Mixed Development THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 146
  157. Brief Description of the Key Projects of the Issuer (1) Bandar Rimbayu Bandar Rimbayu is an award-winning and certified green premier township development. Set in green surroundings on a 1,879-acre site, Bandar Rimbayu is a mixed development of residential, commercial, recreational and parkland components. With an expected GDV of RM11.0 billion, the integrated township is spread over 4 precincts: Flora, Fauna, Bayu and Commercial Hub. Bandar Rimbayu’s strategic location with accessibility via 4 major highways to Kuala Lumpur City Centre, Subang, Petaling Jaya, Damansara, Puchong, Shah Alam and Klang Valley gives the township connectivity. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 147
  158. (2) Pantai Sentral Park Pantai Sentral Park is a 58 acre integrated city development with an expected GDV of RM2.5 billion and is located next to a 200-acre forest of Bukit Kerinchi. Fringing the side of Pantai Sentral Park is a 1.5km linear forest walk, which directly connects the development with the 200-acre forest. It is connected via a direct flyover from the New Pantai Expressway (NPE) and is linked to other major highways including the Federal Highway, LDP, KL-Putrajaya Expressway, MRR2 and trunks roads such as Jalan Kerinchi and Jalan Templer. Its accessibility is also likely to be boosted in the future with close proximity to the upcoming Circle Line MRT and other existing stations nearby. Between the residential and commercial parcels of Pantai Sentral Park are strategically placed green connectors which enable pedestrian usage. The overall landscape masterplan of Pantai Sentral Park adopts the Crime Prevention Through Environmental Design (CPTED) approach. A waterfront site where numerous activities like lakeside jogging, cycling and alfresco dining will be made available. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 148
  159. (3) The Light Waterfront (“The Light”), Gelugor The Light is one of IJM Land’s iconic projects. The waterfront concept is inspired by cities around the world located close to water, namely Singapore, Hong Kong, Sydney and San Francisco. As the Pearl of the Orient, Penang attracts many foreign and local tourists, IJM Land created a development to capture the old charms of Penang in a modern development. Spanning on a 152-acre site of prime freehold land, The Light is strategically located on the eastern coast of Penang island, being the perfect centralized location with calm waters and is protected from the tsunami as the east coast faces the mainland on the Peninsular Malaysia. There are many choices of accessibility to The Light. Global and regional connections by air are easy and frequent via Penang International Airport, which is serviced by regional and international airlines. From Peninsular Malaysia, one can choose to travel from the North South Highway and cross over via the bridge or ferry. Located just a stone’s throw away from Penang Bridge and close to the second Penang Bridge, The Light Waterfront Penang is easily connected via both bridges. The Light is a Green Development Township, having obtained the Green Building Index certification. A “Green Building” is a structure that is designed, built, operated in an ecological and resource-efficient manner. The project is also equipped with fibre optic infrastructure, which is currently being used by the residential phases for home automation, as well as implementing other innovative technological solution to provide its residents with easy connectivity and modern safety features. The Light is Penang’s first integrated leisure, retail, entertainment, business and cultural destination with an upmarket and luxurious waterfront enclave. 149
  160. Phase I houses the residential component (42 acres), Phase II will house the commercial/retail/residential sector (103 acres) and Phase III the Seafront Park (7 acres).Phase I’s luxurious waterfront living enclave consists of six parcels of highend waterfront abodes made up of The Light Linear, The Light Point and The Light Collection I, II, III and IV, with a total of 1,177 units and an estimated GDV of RM1.97 billion. Phase II is an integrated mixed-use waterfront development has an estimated GDV of RM4.5 billion and is now being branded as The Light City. Positioned as Penang’s premier integrated waterfront precinct, The Light City will have a total gross floor area of approximately 4.1 million square feet and comprise a retail mall, Penang’s largest convention centre, Penang Waterfront Convention Centre, a 4-star and 5-star hotel which will be operated by renowned hotel brands, an office tower, as well as two premium residential projects, named The Mezzo and The Essence. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 150
  161. (4) Seremban 2 and Seremban 2 Heights Township (“S2H”) Seremban 2 and S2H, IJM Land's flagship development in Negeri Sembilan is a 2,300 acres self-contained township. To date, Seremban 2 has emerged as one of the most progressive and successful development in Negeri Sembilan and the development are currently at 70% completion with population of 62,000. Seremban 2 is strategically located 1 km from the Seremban toll plaza and 4 km from Seremban town. Accessibility to the township via the North-South Highway, ELITE and LEKAS highways have brought Seremban 2 closer to key locations such as Kuala Lumpur City Centre (60 kilometres), Kuala Lumpur International Airport (30 kilometres), Putrajaya and Cyberjaya (40 kilometres). Seremban 2 will serve as the gateway to the Greater Klang Valley under the recent National Structure Plan which gazetted 30% of Negeri Sembilan including Port Dickson, Nilai and Labu. This is part of the Federal Government’s efforts to bring development to the region. Seremban 2 and S2H offers a wide selection of homes ranging from affordable apartments to terrace houses and from super linked and semi-detached houses to gated bungalows. To date, Seremban 2 and S2H comprises 9 residential communities, 7 schools and 2 colleges, a 15-acre City Lake Park and a 30 acre Hill Park, a Sports Complex, a modern Shopping Centre, a Medical Centre and Commercial Business Parks. Seremban 2 and S2H are also home to the state government and local authorities. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 151
  162. (5) Sebana Cove Resort Sebana Cove Resort is a 1,188-acre integrated resort township development that boasts of two lifestyles – Marina & Golf, the only such development in Johor. The township has a 220 acres 18-hole golf course, resort hotel, club house and marina facilities. Upon its completion, the township will comprise of approximately 9,000 units residential and commercial properties with an estimated GDV of RM4.8billion. The integrated resort township comprises of 10 exclusive thematic precincts planned to complement the characteristics of the land and surrounding environment, and of products to cater for the surrounding upcoming economies. Located next to an oil & gas industry development, Pengerang Integrated Peroleum Complex (“PIPC”), an upcoming purpose-built economic region in eastern Johor spearheaded by the Government, the township will cater for the demand for housing and commercial activities. It is also near to tourism spots like Desaru Coast, allowing Sebana Cove to reap the benefits of a large and affluent catchment market, translating to a great potential for growth and investment. The township is easily accessible by road from Johor Bahru and Iskandar Puteri cia the Senai-Desaru Highway and by sea via a ferry from Tanjung Belungkor to Singapore’s Changi Point. A proposed second access from completed Pularek Highway connecting to Sebana Cove will shorten the travelling distance to PIPC dramatically, making Sebana Cove the nearest township from PIPC. The current resort facilities consist of a 60.5 acres Marina which offer 100 walk-on berths that can accommodate luxury yachts and boats of up to 80m in length, a 18-hold championship golf course designed by Ted Parslow of E&G Parslow & Associate, a resort hotel with the marina view consisting of 40 executive rooms and 20 suites and various other clubhouse facilities, such as banquet halls, conference rooms, restaurants, coffee house, business centre, bar, free-form swimming pool, children wading pool, children playground, tennis courts & outdoor basketball court, gymnasium, bar and sauna. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 152
  163. 5 .5 Key Projects of IJM Corporation Group Project Type of project 1 Uptown 8 Office Tower 2 3 HSBC Headquarters at TRX City LRT 3 Underground Package 4 West Coast Expressway Infrastructure 5 New Deep Water Terminal Development 6 Menara Prudential 7 Bukit Bintang City Centre 8 Vijayapura Tollway (SolapurBijapur) MRT Package 2 9 10 UOB Tower 2 11 Affin Bank Tower Construction of Office Tower Construction of Office Tower Infrastructure Works Location Petaling Jaya, Selangor Kuala Lumpur From Bandar Utama to Johan Setia From Taiping to Banting Kuantan Development of Office Tower Development of Retail Mall Infrastructure Kuala Lumpur Infrastructure Works Kuala Lumpur Development of Office Tower Development of Office Tower Kuala Lumpur Kuala Lumpur India Kuala Lumpur THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 153
  164. (1) Uptown 8 Office Tower, Damansara Uptown IJM Construction Sdn Bhd, has accepted the Letter of Acceptance from Damansara Uptown Retail Centre Sdn Bhd for the design, construction, completion and commissioning of the proposed 31-storey office tower with three (3) levels basement car park (Uptown 8 corporate office tower) on Lot PT 207, Jalan SS 21/60, Damansara Utama, Mukim Sungai Buloh, Daerah Petaling, Petaling Jaya, Selangor Darul Ehsan (“the Project”) for a contract sum of RM378.23 million. The completion period of the Project is 39 months. The Project includes three (3) levels of basement car park, one (1) level of ground floor, eight (8) levels of podium (consist of one (1) level of commercial space and seven (7) levels of car park) and 22 levels of office space including mechanical floors. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 154
  165. (2) HSBC Headquarters at TRX City IJM Construction Sdn Bhd had signed an Agreement with HSBC Bank Malaysia Berhad (“HSBC”) for the appointment as the contractor to undertake the design, construction and completion of an office building of HSBC at Jalan Tun Razak, Kuala Lumpur, Wilayah Persekutuan (“the Project”) for a contract sum of approximately RM409 million (including excavation works). The contract sum is not inclusive of the lifts and facade works which will be procured directly by HSBC. The completion period of the Project is 37.5 months THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 155
  166. (3) LRT 3 Underground Package IJM Construction Sdn Bhd, has accepted the Letter of Acceptance from Prasarana Malaysia Berhad for the underground package of the Light Rail Transit Line 3 (LRT 3) from Bandar Utama to Johan Setia (“the Project”) for a contract sum of RM1,115,688,160. The completion period of the Project is 31 months. The Project involves design, construction and completion of underground tunnel, stations, ancillary buildings and other associated works. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 156
  167. (4) West Coast Expressway IJM Construction Sdn Bhd (IJMC)-Kumpulan Europlus Bhd (KEB) joint venture (“JV”) has in year 2014, accepted the letter of award (LOA) from WCESB to appoint the JV as the engineering, procurement and construction (EPC) contractor to undertake and complete the construction works for the West Coast Expressway (“WCE”) from Taiping to Banting for a contract sum of RM5.0 billion. The construction period of the project is five years. The JV awarded to IJMC the construction works for Packages 3, 4, 5, 8 and 9 of the WCE for an amount not exceeding RM2.828 billion. WCE is designed to have 20 toll plazas and 21 interchanges and runs a total length of 315.8km. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 157
  168. (6) New Deep Water Terminal In tandem with the escalating economic development of the East Coast Economic Region, IJM Corp’s subsidiary, KPC, the operator of Kuantan Port, is building a RM3 billion new deepwater terminal (“NDWT”) for the berthing of vessels. The NDWT comprises of 2 phases and upon completion of both phases, the cargo capacity of Kuantan Port will double to 52 million freight weight tonnes. Catering to bigger ships and higher traffic, the NDWT will also be able to accommodate bulk carriers of up to 150,000 dead weight tonnes and container ships of up to 18,000 TEU. Phase 1A of the NDWT was completed in August 2018, whilst Phase 1B of the NDWT is scheduled to be completed by June 2019. The development of Phase 2 to be based on capacity requirements and future demand. Kuantan Port is an important gateway for goods and raw materials to reach the east coast for industrial and value-adding activities, and for export of finished goods. The port aims to facilitate closer collaboration between China and Asean countries. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 158
  169. (6) Menara Prudential IJM Construction Sdn Bhd is building the RM500 million Menara Prudential office tower, which will be the new Malaysian headquarters of the leading insurance company in the prestigious Tun Razak Exchange (TRX) Kuala Lumpur. The Grade A, LEED Gold-certified office building, which is built over a land area of 1.18 acres has an approximate gross floor area of 560,000 sq ft. The building will be completed with interior fit-outs and services ready to be handed over to its anchor tenant in 2019. The commercial tower, owned by Fairview Valley Sdn Bhd, a wholly owned subsidiary of IJM Corporation Berhad, is strategically located adjacent to TRX’s main pedestrian gateway from the Bukit Bintang area. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 159
  170. (7) Phase 1 of Bukit Bintang City Centre Development, Kuala Lumpur IJM Construction Sdn Bhd has accepted the Letter of Award from MFBBCC Retail Mall Sdn Bhd for the Design and Build for Retail Mall Substructure and Superstructure Works with Associated Local Infrastructure and Landscaping Works (Parcel 1, Phase 1 of Bukit Bintang City Centre Development) at Jalan Hang Tuah/Jalan Pudu, Kuala Lumpur for a contract sum of approximately RM1.16 billion. The construction period of the project is 40 months. The project includes one (1) block of 7-storey retail mall including 1 level lower ground and 1 level of mechanical room on top of 6-level car park comprising 2 levels of lower ground and 4 levels of basement. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 160
  171. (8) Vijayapura Tollway (Solapur-Bijapur) IJM Corp has on 22 November 2017 accepted the letter of award from the National Highways Authority of India for the “Four-laning of Solapur-Bijapur section of National Highway, NH-13 (New NH-52) from km 0.00 to km 110.542 (approximate length 109.08 km) in the State of Maharashtra and Karnataka under National Highways Development Project (NHDP) Phase-III, to be executed in BOT (Toll) Mode on Design, Build, Finance, Operate and Transfer Basis. The concession period is 20 years. The project cost is INR2,325 Crores (approximately RM1.4 billion). THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 161
  172. (9) MRT SSP Line Package 2 IJM Construction Sdn Bhd, has accepted the Letter of Acceptance from Mass Rapid Transit Corporation Sdn Bhd for Package V203 of the Projek Mass Rapid Transit Laluan 2: Sungai Buloh - Serdang - Putrajaya (SSP) for a contract sum of RM1.47 billion. The Package V203 involves the construction and completion of viaduct guideway and other associated works from Jinjang to Jalan Ipoh North Portal. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 162
  173. (10) UOB Tower 2, Jalan Raja Laut, Kuala Lumpur, IJM Construction Sdn Bhd has accepted the letter of award from UOB Properties (KL) Bhd for the design, construction and completion of the proposed office development (UOB Tower 2) at Jalan Raja Laut, Kuala Lumpur for a contract sum of RM450,898,000.00. The construction of this project commenced in August 2017 with a completion period of forty (40) months. The project includes five (5) levels of basement car park, one (1) level of lower ground floor, two (2) levels of podium for a banking hall and 27 levels of office space including a green lounge reception, a sky lounge and mechanical floors. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 163
  174. (11) Affin Bank Tower IJM Construction Sdn Bhd has accepted the Letter of Award from Affin Bank Berhad for the construction and completion of the superstructure works of the proposed 47-storey office building (Package 4- Main Building Works) at Tun Razak Exchange, Jalan Tun Razak, Kuala Lumpur, Wilayah Persekutuan for a contract sum of RM505.0 million. The completion period of the Project is twenty six (26) months, which is expected to be completed by 2020. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 164
  175. 5 .6 Business Strategies of the Issuer and Kafalah Provider IJM Corporation Group’s 5-year strategic blueprint, a result of its BOS co-creation process, was kicked off in 2016. Various initiatives have been launched across all divisions in the areas of business growth, operational excellence, technology, innovation, sustainability, branding and human capital. Property Division The property division comprising the IJM Land Group and spearheaded by the Issuer, will be focusing on affordable housing, development of investment property, innovation in sales and marketing and enhancing customer experience. Construction Division The construction division aspires to focus on operational excellence, sharpening competencies, process improvement through digitisation, adoption of latest construction technologies and continuous development in enhancing the application of BIM in major projects. Besides that it will also tap into business growth in Asia, focusing on India. Industry Division Focusing on driving efficiency and business growth, the industry division has launched innovation projects to enhance customer relationship management and improve efficiency of batching system. The industry division’s other initiatives are to develop Industrialised Building System. Plantation Division The plantation division seeks to focus on land banking expansion, cattle farming, bio gas capturing and sales of seedlings. Infrastructure Division Toll Toll operations will be focusing on improvement and expansion of expressways to enhance efficiency, non-toll revenue and marketing activities to promote expressways. Port Port operations will be focusing on building strategic partnerships through establishment of sister ports in the region, expansion of facilities with the New Deep Water Terminal, enhancement of marketing and branding activities and process digitisation. 165
  176. 5 .7 Future Plans (a) Future Plans of the Issuer The local property market is expected to remain challenging as the key issues of price affordability, the overhang of high-rise homes, rising cost of living and tight financing will continue to have a dampening effect. Nonetheless, the property division spearheaded by the Issuer, will continue to focus its efforts to grow its business in view of the strategic locations of its properties and the brand premium that it has established while intensifying the marketing and sale of completed unsold units. With unbilled sales of about RM2.0 billion as of 30 September 2018, the property division is expected to maintain its performance in the coming financial year. (b) Future Plans of the Kafalah Provider For the coming years, the IJM Corporation Group will continue to pursue its long term strategies of strengthening its regional footprint, growing its recurrent income base, pursuing its domestic business agenda, and continue reviewing its asset portfolio. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 166
  177. SECTION 6 .0 INDUSTRY OVERVIEW AND FUTURE PROSPECTS 6.1 Overview of the Malaysian economy The Malaysian economy grew by 4.7% in the fourth quarter of 2018 (3Q 2018: 4.4%), supported by continued expansion in domestic demand and a positive growth in net exports. Private sector expenditure remained the main driver of domestic demand, while a rebound in real exports of goods and services (+1.3%; 3Q 2018: -0.8%) contributed towards the positive growth of net exports. On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 1.4% (3Q 2018: 1.6%). For 2018 as a whole, the economy expanded by 4.7% (2017: 5.9%). Domestic demand expanded at a more moderate pace of 5.6% (3Q 2018: 6.9%) during the quarter. Growth was weighed down by a moderation in gross fixed capital formation. Private consumption growth remained robust at 8.5% (3Q 2018: 9.0%), despite the frontloading of purchases during the tax holiday period in the previous quarter. Income and employment growth continued to drive household spending. Government measures to alleviate cost of living, such as special payments to civil servants and pensioners, also provided some support to consumer spending. Private investment growth moderated to 4.4% (3Q 2018: 6.9%), attributed to slower capital spending across major economic sectors. However, ongoing multiyear projects particularly in the manufacturing sector continued to provide support to overall growth. Public consumption expanded at a slower pace of 4.0% (3Q 2018: 5.2%), attributable to a more moderate growth in supplies and services. Public investment remained in contraction during the quarter (-4.9%; 3Q 2018: 5.5%), due mainly to a decline in capital spending by public corporations. Gross fixed capital formation (GFCF) expanded marginally by 0.3% (3Q 2018: 3.2%), as private sector capital expenditure moderated amid a contraction in public sector investment. By type of assets, capital spending on structures expanded by 0.8% (3Q 2018: 1.8%), while investment in machinery and equipment declined (-1.5%; 3Q 2018: 5.9%). On the supply side, major sectors continued to expand, while growth in the commodity-related sectors improved. In the services sector, the wholesale and retail trade subsector remained supported by continued strength in consumer spending. The information and communications subsector benefitted from continued demand for data communication services and the positive impact on fixed broadband demand following the implementation of the Mandatory Standard Access Pricing (MSAP) mechanism. Growth in the transport and storage subsector improved marginally in line with better trade activity. Activity in the finance and insurance subsector expanded at a moderate pace as higher growth in insurance claims and lower fee-based income weighed on the performance of the subsector. 167
  178. Growth in the manufacturing sector remained driven by continued strength in the electronics and electrical (E&E) and transport-related production. Relatively strong growth in the E&E cluster was attributed to the front loading of exports globally in anticipation of higher trade tariffs between the US and PR China. Growth in the transport-related production was supported by the manufacture of passenger cars and auto parts, as a result of aggressive promotional campaigns by car dealers as well as the replenishment of vehicle stocks after the end of the tax holiday. These improvements were offset by the slower performance in the primary- and construction-related clusters amidst slowing regional demand for resource-based manufactures such as chemicals, refined palm oil products and basic iron and steel products. Performance of the mining sector rebounded, supported by higher oil and natural gas production following the maintenance shutdown in the previous quarter. Despite weak palm oil harvesting and rubber tapping activities due to adverse weather conditions, the agriculture sector recorded a smaller decline. The construction sector registered lower growth due to a moderation in the civil engineering and special trade subsectors. The civil engineering subsector was impacted by near completion of large petrochemical projects and delays in highway construction. Support from early works activity on the special trade 1 subsector waned, as projects transitioned to mid-phase. Growth in the nonresidential sub-sector improved slightly, while growth in the residential subsector remained weak amid the high number of unsold residential properties. Headline inflation, as measured by the annual percentage change in the Consumer Price Index (CPI), declined to 0.3% in the fourth quarter of 2018 (3Q 2018: 0.5%). For 2018 as a whole, headline inflation averaged at 1.0% (2017: 3.7%), its lowest level since 2009. The decline in headline inflation was due mainly to transport inflation turning negative (4Q 2018: -1.2%; 3Q 2018: 3.0%), reflecting the fixed domestic RON95 petrol and diesel prices during the quarter compared to the higher fuel prices in the base period of 4Q 2017. The combined outcome of the zerorisation of the Goods and Services Tax (GST) and the implementation of the Sales and Services Tax (SST) continued to exert an overall downward impact to headline inflation during the quarter. The percentage of items in the CPI basket that had inflation of more than 2% remained low at around 9% in 4Q 2018 (3Q 2018: 9%). Core inflation, excluding the impact of consumption tax policy changes, edged up to 1.6% (3Q 2018: 1.4%). Demand-driven inflationary pressures in the economy remained contained in the absence of excessive wage pressure and some degree of spare capacity in the capital stock. During the fourth quarter, labour market conditions remained supportive of economic activity. Employment continued to expand albeit at a more moderate pace (2.4%, 3Q 2018: 2.6%), amid stable unemployment rate (3.3%; 3Q 2018: 3.4%). Stronger net employment gains were recorded in the services sector. 1 Includes works such as land reclamation, site preparation, electrical installation, and works for specialized projects such as solar panels. 168
  179. Manufacturing sector wage growth remained firm at 9 .8% (3Q 2018: 9.6%). Wage growth in exportoriented industries (10.8%; 3Q 2018: 10.9%) continued to outpace that of domestic-oriented industries (6.6%; 3Q 2018: 6.1%). The current account surplus widened to RM10.8 billion (3Q 2018: RM3.8 billion) in the fourth quarter. This was due to a larger goods surplus2 and a smaller income deficit, which more than offset the higher services deficit. The goods surplus increased to RM33.0 billion (3Q 2018: RM26.6 billion) due to stronger manufactured exports in both the E&E and non-E&E segments, amid a smaller contraction in commodity exports. The services account, however, registered a larger deficit of RM4.3 billion (3Q 2018: -3.3 billion), owing mainly to a smaller surplus in the travel account (RM7.4 billion; 3Q 2018: RM8.0 billion) and higher net payments to foreign providers for architectural and engineering services, as well as use of intellectual property. In the income accounts, a smaller deficit in the primary income account (-RM12.9 billion; 3Q 2018: -RM15.0 billion) was attributable to the higher income generated by Malaysian firms investing abroad and lower profits accrued to foreign investors in Malaysia. The secondary income deficit remained sizeable at RM4.9 billion (3Q 2018: -RM4.5 billion), on account of continued outward remittances by foreign workers. The financial account registered a net outflow of RM6.1 billion (3Q 2018: Net inflow of RM2.3 billion). This was due to higher net outflows in the portfolio and other investment accounts, which more than offset the net inflows of direct investment during the quarter. The direct investment account registered a higher net inflow of RM2.1 billion (3Q 2018: net inflow of RM0.5 billion). During the quarter, foreign direct investments (FDI) improved, registering a larger net inflow of RM12.9 billion (3Q 2018: net inflow of RM4.3 billion). FDI inflows were channeled mainly into the manufacturing sector, and the non-financial services sectors. Meanwhile, direct investments abroad (DIA) by Malaysian companies also recorded a higher net outflow of RM10.8 billion (3Q 2018: net outflow of RM3.8 billion). DIA outflows were channeled primarily into the mining and non-financial services sectors. The portfolio investment account registered a net outflow of RM5.8 billion (3Q 2018: marginal net inflow of RM1.0 billion). This reflected a turnaround in residents’ portfolio asset transactions, following higher purchases of equity securities abroad (4Q 2018: net outflow RM3.3 billion; 3Q 2018: net inflow RM4.4 billion.) Non-residents recorded a smaller outflow of portfolio investments, amounting to RM2.5 billion (3Q 2018: net outflow RM3.6 billion). This was due to a net liquidation of equity securities, amid heightened global financial market volatility. 2 . The difference between the goods surplus and trade surplus may arise from the exclusion of goods for processing, storage and distribution in the goods accounts as per the 6th edition of the Balance pf Payments and International Investment Position Manual (BPM6) by the IMF 169
  180. The other investment account recorded a net outflow of RM1 .8 billion (3Q 2018: net inflow of RM1.0 billion). This was attributable to outflows following the maturity of interbank deposits within the domestic banking sector and trade credits, which were partly offset by the inflows from the maturity of currency & deposits and the repayment of trade credits to the private sector. Net errors and omissions amounted to -RM10.8 billion, or -2.2% of total trade. The international reserves of Bank Negara Malaysia amounted to USD101.4 billion as at end-December 2018, compared to USD103.0 billion as at end-September 2018. Malaysia’s external debt stood lower at RM924.9 billion, or 64.7% of GDP as at end December 2018 (end-September 2018: RM933.3 billion or 65.3% of GDP). The lower external debt reflects net repayment of interbank borrowing and trade credits, as well as some liquidation of domestic debt securities by nonresident investors. There was also the refinancing of several loans with equity capitalisation by related companies during the quarter. These were partially offset by the increase in non-resident deposits as well as a net issuance of bonds and notes offshore. The country’s external debt remains manageable, given its currency and maturity profiles, and the presence of large external assets. Close to one-third of external debt is denominated in ringgit (31.1%; end-September: 31.3%), mainly in the form of non-resident holdings of domestic debt securities (62.7% share) and in ringgit deposits (17.9% share) in domestic banking institutions. As such, these liabilities are not subjected to valuation changes from the fluctuations in the ringgit exchange rate. The remaining external debt of RM637.4 billion or 68.9% of total external debt is denominated in foreign currency (FC) and comprised offshore borrowing predominantly. As at end-December 2018, offshore borrowing declined to RM566.9 billion or 39.7% of GDP (end-September: RM570.3 billion or 39.9% of GDP). The corporate sector accounted for slightly more than half of FCdenominated external debt. Of which, about three-quarters were hedged, either by FC-denominated revenue streams or financial instruments. Of the total FC-denominated external debt, 38.9% (or RM248.2 billion) represents interbank borrowing and FC deposits in the domestic banking system. 75.5% of interbank borrowing was intragroup borrowing, largely reflecting banks’ centralised liquidity and funding management practices. During the quarter, banks’ FCdenominated short-term external debt declined following net repayment of interbank borrowing, amid sustained growth in stable FC funding sources. Foreign exchange risk, measured in net open position of FC denominated exposures3 remained low at 5.8% of banks’ total capital, reflecting banks’ continued vigilance in managing foreign exchange risks. Long-term bonds and notes issued offshore stood at RM152.7 billion as at endDecember 2018, accounting for 24.0% of total FC denominated external debt. These were mainly by non-financial corporations and channeled primarily to finance asset acquisitions abroad. Intercompany loans, which amount to RM103.2 billion and account for 16.2% of FC-denominated external debt, are typically on flexible and concessionary terms. About 80% of these intercompany loans were obtained by multinational corporations (MNCs) from parent or affiliate companies abroad. 3 Refers to the aggregated sum of the net short or long foreign currency positions for all currencies across banks. 170
  181. From a maturity perspective , 56.2% of the total external debt is skewed towards medium- to longterm tenure (end-September: 56.1%), suggesting limited rollover risks. Short-term external debt accounted for the remaining 43.8% of external debt. As at 31 January 2019, international reserves stood at USD102.1 billion, sufficient to finance 7.4 months of retained imports, and is 1.0 time the shortterm external debt (For detailed description of the composition of external debt, please refer to the Box Article entitled ‘Profile of Malaysia’s External Debt’ in Bank Negara Malaysia’s Quarterly Bulletin 3Q 2018). Of importance, reserves are not the only means for banks and corporations to meet their external obligations. The progressive liberalisation of foreign exchange administration rules has resulted in greater decentralisation of reserves. In particular, banks and corporations held roughly three-quarters of Malaysia’s RM1.7 trillion external assets, which can be drawn down to meet their RM733.3 billion external debt obligations, without creating a claim on international reserves. While the flexible exchange rate remains the first line of defense, adequate international reserves and availability of substantial foreign currency external assets by banks and corporations continues to serve as important policy buffers against potential external shocks. The ringgit appreciated marginally against the US dollar during the fourth quarter of 2018, despite cautious investor sentiments in global financial markets and nonresident portfolio outflows from the domestic bond and equity markets. These outflows were driven mainly by expectations for a faster pace of US monetary policy normalisation, prior to the US Federal Reserve’s (Fed) downward revision of its policy rate projection for 2019 in December 2018. In addition, uncertainties surrounding the moderating momentum of global growth and global trade also led to the unwinding of non-resident investments from regional financial markets, including Malaysia. However, these outflows were offset by resident inflows, mainly from goods and services, leading to the marginal appreciation of the ringgit. Going forward, lingering uncertainties on global trade and the trajectory of monetary policy normalisation in the US will continue to influence the performance of regional currencies, including the ringgit. Domestic bond yields increased only marginally during the quarter despite nonresident outflows due to continued support from domestic institutional investors. Non-resident outflows from the MGS market were driven mainly by expectations for a faster pace of US monetary policy normalisation. This led to international investors rebalancing their portfolio investments in EMEs towards US financial assets. During the period, the 3-year, 5-year and 10-year MGS yields increased by 2.8, 1.9 and 0.9 basis points, respectively. The FBM KLCI reversed its gain in the third quarter, declining by 5.7% in the fourth quarter to close at 1,690.6 points as at end-December (end-September 2018: 1793.2 points). During the period, heightened risk-off sentiments in global financial markets were driven by concerns on the pace of monetary policy normalisation in the US, expectations of moderating global growth and lower corporate earnings. This led to the unwinding of non-resident holdings from global equity markets, including Malaysia. . 171
  182. Nominal interest rates in the wholesale and retail markets were stable throughout the fourth quarter of 2018 . The benchmark 3-month KLIBOR remained unchanged at 3.69%, while interbank rates across other maturities also remained unchanged. In the retail market, both the weighted average base rate (BR) and the weighted average lending rate (ALR) on outstanding loans were stable at 3.91% (3Q 2018: 3.90%) and 5.42% (3Q 2018: 5.43%) respectively. Real fixed deposit (FD) rates continued to increase in the fourth quarter of 2018, albeit at a moderating pace due to the marginally lower headline inflation. In particular, the real 3-month and 12-month FD rate increased by 10 basis points to 2.95% (3Q 2018: 2.85%) and 3.13% (3Q 2018: 3.03%), respectively. In the banking system, liquidity conditions remained sufficient at both the institutional and system-wide levels. The level of surplus liquidity placed with the Bank remained relatively stable during the quarter, reflecting a moderation of net outflows. At the institutional level, most banks continued to maintain surplus liquidity positions. In the fourth quarter, net financing expanded by 5.8% on an annual basis (3Q 2018: 6.5%). The moderation mainly reflected the lower growth in outstanding corporate bonds4 of 8.0% (3Q 2018: 10.8%), in part due to the high base effect during the same period in 2017. Outstanding loan5 growth was stable during the quarter at 5.1% (3Q 2018: 5.1%). Outstanding business loans continued increasing steadily to 4.6% (3Q 2018: 3.6%), driven mainly by the higher loan growth for the wholesale and retail trade, restaurants and hotels; manufacturing; and finance, insurance and business services sectors. Despite a lower growth in outstanding loans for SMEs6 (4Q 2018: 0.6%; 3Q 2018: 2.4%), the amount of loans disbursed was higher during the quarter (4Q 2018: RM80.8 billion; 3Q 2018: RM77.2 billion). Outstanding household loans during the period grew by 5.2% (3Q 2018: 5.5%), supported mainly by loans for the purchase of residential properties; purchase of securities; and personal use. (Source: BNM Quarterly Bulletin 4Q 2018) 6.2 Overview and Outlook of the Industry in Malaysia (a) Property sector Overview of the Property Market The Malaysia economy expanded 4.9% in the first half 2018, as compared to 5.7% during the same period last year. Services and manufacturing sectors remained as the key players contributing to the GDP growth with a share of 55.3% and 23.6% respectively. The property market recorded a marginal decline in the first half of 2018 in line with a challenging economic and financial situation. A total of 149,889 transactions worth RM67.74 billion were recorded, each showing a decrease of 2.4% and 0.1% compared to the same period last year which recorded 153,526 transactions worth RM67.83 billion. On the demand-side, mixed trends are also seen in the indicators of residential and non-residential property demand. 4 5 6 . Corporate bonds exclude issuance by Cagamas and non-residents. Loans extended by the banking system and development financial institutions (DFIs). Party reflects an ongoing reclassification exercise of SMEs to non-SMEs by financial institutions 172
  183. demand . The amount of loans applied for the purchase of residential property decreased by 3.1% as compared to H1 2017 while the approved loan fell by 0.2%. However, the situation differs for non-residential property where loans applied for and approved for this purpose indicate an increase of 14.2% and 6.6% respectively. The Consumer Sentiment Index jumped 132.9 points, while the Business Conditions Index hit 116.3 points. The upsurge was due to anticipation of higher growth in jobs and wages, lower inflation and an increase in household disposable income with the zero-rated GST. The manufacturing sector grew 4.9% supported by electrical and electronic, petroleum, chemical, rubber and plastic products; as well as transport equipment. However, the agricultural sector declined 2.5% weighed down by lower production of crude palm oil (CPO) and rubber. Meanwhile, the construction sector increased 4.7% mainly led by civil engineering and special trade segments. However, growth of the residential and non-residential segments declined due to oversupply as well as completion of projects. The leisure sub-sector is also less encouraging as the number of tourist arrivals to Malaysia in 2018 (January - April 2018) fell 3.4% from 8.78 million to 8.48 million in the same period of 2017 as reported by Tourism Malaysia. The Malaysian economy is expected to continue on a steady growth path, with strong fundamentals supported by positive domestic and external outlook. Completed residential unsold situation continued to increase where condominiums and apartments formed the bulk of the completed unsold units. Engagements between public and private sector must be effectively conducted to overcome overhang situation, which is still a perennial problem for the Malaysian property market. Property market activity is expected to improve in H2 2018 or the first half of next year, as household sentiment and business environment look positive. This positive indication gives opportunities to the new Government to initiate a more sustainable economy through structural reforms, which should give priority in improving household income, and home ownership, which ultimately benefits all Malaysians. (Source: Overview of the Property Market Report First Half 2018 http://napic.jpph.gov.my/portal) Property Market Activity Market activity recorded a total of 149,889 transactions valued at RM67.74 billion, down by 2.4% in the number and 0.1% in value compared to H1 2017. The residential sub-sector continued to lead the overall market, with a contribution of 62.8% and 46.7% in volume and value respectively. However, this sub-sector recorded a slight decrease of 0.8% and 3.6% in the number and value respectively. Commercial and industrial sub-sectors recorded upward movements in the volume, increased by 3.5% and 3.8% respectively. 173
  184. (Source: Overview of the Property Market Report First Half 2018 http://napic.jpph.gov.my/portal) Residential Property There were 94,202 transactions worth RM31.66 billion recorded during the review period, a slight drop of 0.8% in the number and 3.6% in value. States’ performance was mixed. Major states namely Johor and Pulau Pinang increased by 14.2% and 5.4% respectively in market activity. On other hand, Kuala Lumpur and Selangor decreased marginally by 4.8% and 0.5% respectively. (Source: Overview of the Property Market Report First Half 2018 http://napic.jpph.gov.my/portal) Commercial Property The commercial sub-sector recorded a slight increase in market activity. There were 10,759 transactions worth RM15.82 billion recorded in H1 2018, a 3.5% increase in volume and a higher 31.8% surge in value. Selangor led market activities, with 2,345 transactions (21.8%), followed by Kuala Lumpur and Johor, each with 1,775 (16.5%) and 1,716 (16.0%) transactions. Major states recorded mixed movements with Kuala Lumpur and Johor recorded an increase of 21.7% and 20.8% respectively as compared to the first half of 2017. Selangor and Pulau Pinang were less encouraging, which saw a drop of 6.3% and 10.0% respectively. In terms of value, Kuala Lumpur increased significantly by more than double, while Johor experienced a decrease of 18.7%. (Source: Overview of the Property Market Report First Half 2018 http://napic.jpph.gov.my/portal) Shop Sub-sector Shop sub-sector dominated 51.4% of the commercial property transactions and 27.4% of total value. However, shop market activity declined by 5.2% in volume and 5.3% in value, recording 5,530 transactions worth RM4.37 billion. Johor continued to drive the market with 18.3% market share despite recording a decrease of 6.0%. By type, two to two and a-half storey shops accounted for 53.3% of shop market share. (Source: Overview of the Property Market Report First Half 2018 http://napic.jpph.gov.my/portal) Shopping Complex Three shopping complex transactions worth RM160.20 million were recorded during the review period; each in Johor, Terengganu and Kelantan. The main transaction was Mydin Mall in Wakaf Tembesu which transacted at RM155.0 million in 2017 but concluded in 2018. (Source: Overview of the Property Market Report First Half 2018 http://napic.jpph.gov.my/portal) 174
  185. Purpose-Built Office Nineteen office buildings transactions worth at RM485 .47 million were recorded during the review period. Kuala Lumpur and Selangor each recorded six transactions, which included Wisma Megah in Jalan Tun HS Lee, Wisma UOA Pantai in Bangsar South and ECM Libra in Jalan Damansara Endah, which dated in 2017 but concluded in the review period. Other transactions were three in Pulau Pinang, two in Johor and each in Perak and Sabah. (Source: Overview of the Property Market Report First Half 2018http://napic.jpph.gov.my/portal) Leisure Property Nine hotel transactions were recorded in the review period worth RM523.27 million. Among the major sales were the Sunway - Clio Hotel in Bandar Sunway, Geo Hotel in Jalan Hang Kasturi and Nova Hotel Off Jalan Bukit Bintang, each at a consideration of RM340 million, RM85.5 million and RM93.9 million. (Source: Overview of the Property Market Report First Half 2018http://napic.jpph.gov.my/portal) Industrial Property The industrial sub-sector recorded 2,514 transactions worth RM7.41 billion an increase of 3.8% and 37.4% in volume and value respectively. Selangor continued to dominate the market, with 33.4% of total, followed by Johor and Perak, with 12.7% and 11.9% market share respectively. (Source: Overview of the Property Market Report First Half 2018http://napic.jpph.gov.my/portal) Agriculture Property The agriculture sub-sector recorded 33,565 transactions worth RM6.79 billion. Although the market volume decreased by 7.2%, the value showed an increase of 4.8%. The sub-sector maintained its second position in terms of contribution to the overall market with 22.4% share, after the residential subsector. Perak and Kedah held higher market volume each with 16.1% and 14.2% shares followed by Sarawak with 14.0%. Generally, performance by states was mixed. By type, vacant land formed the bulk of the transactions with 43.8% contribution, followed by oil palm (15.3%), paddy (15.2%), and rubber (14.3%). (Source: Overview of the Property Market Report First Half 2018http://napic.jpph.gov.my/portal) 175
  186. (b) Construction sector The construction sector is expected to record a stronger growth. This will be driven primarily by large new and existing multi-year civil engineering projects. These projects are mainly in the transportation and utilities segment. (Source: BNM Annual Report 2017) (c) Agriculture sector Export prices of major commodities are expected to diverge in 2018, after the synchronous and strong rebound in 2017. Mineral prices will continue to increase, but at a smaller magnitude compared to 2017. The relatively smaller price increase will contribute to slower crude oil export growth. Similarly, slower increase in LNG price will also result in a more moderate expansion in LNG exports. In contrast, major agriculture export prices, particularly crude palm oil (CPO) is likely to decline reflecting elevated inventory levels as the recovery in CPO output continues post-El Niño. The slower growth in commodity prices will also be reflected in the lower exports of resource-based manufactured exports (e.g. petrochemicals and oleochemicals) and intermediate imports (e.g. fuel and lubricants) which use these raw commodities as feedstock. (Source: BNM Annual Report 2017) (d) Industry sector Growth in the manufacturing sector is projected to be sustained. In the export-oriented industries, growth will be supported mainly by continued demand for chemical-related products in the primary-related cluster. Production of E&E products will be sustained, in line with the expected normalisation in global semiconductors demand. Growth will also be supported by new production capacity in the resource-based industries such as petrochemicals and rubber gloves. In the domestic-oriented industries, growth will be driven by higher production of constructionrelated materials for new and on-going infrastructure projects as well as continued strength in demand for food-related products. (Source: BNM Annual Report 2017) (e) Infrastructure sector Public investment is projected to decline by 3.2% due to lower capital spending by public corporations following the near completion of largescale projects. Investment by the General Government is expected to increase, reflecting mainly higher investment to improve public infrastructure and transportation network. (Source: BNM Annual Report 2017) THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 176
  187. SECTION 7 .0 7.1 OTHER MATERIAL INFORMATION Material contracts The Issuer, the Kafalah Provider, the IJM Land Group and the IJM Corporation Group have not entered into material contracts outside the ordinary course of business during the two (2) years preceding 15 January 2019. 7.2 Material litigation Save as disclosed below, neither the Issuer, the Kafalah Provider, the IJM Land Group and the IJM Corporation Group are engaged in any material litigation, claims or arbitration either as plaintiff or defendant, and the Board is not aware of any proceedings pending or threatened against the Issuer, the Kafalah Provider, the IJM Land Group and the IJM Corporation Group or of any facts likely to give rise to any proceedings which may materially and adversely affect the financial position or business of the Issuer and/or the IJM Corporation Group: (a) H.C.A No. D-156 (Karachi Metropolitan Corporation v IJM Corporation Berhad) before the Honourable High Court of Sindh between IJM Corporation Berhad (“IJM Corp”) and Karachi Metropolitan Corporation (“KMC”), formally City District Government Karachi (“Respondent”). The dispute amongst the parties arose from a contract dated 1 March 2006 (subsequently modified on 2 March 2006), for construction of an elevated expressway running along Shahrah-e-Faisal from Quidabad intersection to Jinnah Bridge, Karachi (“Contract”). IJM Corp successfully completed Phase I of the Contract (feasibility study of the project under the Contract), however, Phase II of the Contract (the actual construction under the Contract) could not materialize. Therefore, IJM Corp claimed by way of liquidated damages 10% of the total cost of the Project (i.e. USD 35,000,000/-) in accordance with the Contract. Since KMC did not make payment, IJM Corp filed an application for appointment of arbitrator and a Sole Arbitrator was appointed. As per the award, KMC is, inter alia, liable to pay an amount of USD 35,000,000/- plus an interest at the rate of 12% from 12 February 2010. It is, inter alia, contended by KMC that the Contract between the parties was invalid and unenforceable as IJM Corp is not registered under the Pakistan Engineering Council Act, 1976; as such, the award is a nullity. On the other hand, IJM Corp contends that the non-registration merely prevented it from making recovery on the Contract; such bar was removed upon the subsequent registration of IJM Corp with the Pakistan Engineering Council. These proceedings are meant to challenge the order of the court pronouncing judgment in terms of the Award. In the event the Appeal is allowed, IJM Corp may lose the benefit of the Award, however, the Company would not incur liability as a result of these proceedings. 177
  188. (b) Execution No.24 of 2018 (IJM Corporation Berhad versus Karachi metropolitan Corporation) before the Honourable High Court of Sindh between IJM Corporation Berhad (“IJM Corp”) and Karachi Metropolitan Corporation (“KMC”), formally City District Government Karachi (“Respondent”) This application for execution has been filed by IJM Corp against the KMC for the execution of decree dated 26 February 2015, passed in Suit No. 1362 of 2013 (as discussed in section 7.1.2 above). In addition to an amount of USD 35.0 million plus interest at the rate of 12% from 12 February 2010 till the amount is paid, IJMC has also sought payment of the amount of costs awarded to it by the Sole Arbitrator in the Award. The matter is currently fixed for, inter alia, hearing of the Execution Application. In the event IJM Corp is unsuccessful in the proceedings, it may lose the benefit of the decree, however, the Company would not incur liability as a result of these proceedings. (c) In the matter of an Arbitration between IJM Construction Sdn Bhd (Claimant) (“IJMC”) and Lingkaran Luar Butterworth (Penang) Sdn Bhd (Respondent) (“LLB”) The arbitration is a composite arbitration comprising all of Sections 1,2 and 3 disputes and claims of the Butterworth Outer Ring Road Project, Package 1B, Contracts in Section 1 (precast segments), Section 2 (bridge) and Section 3 (at grade works) (“Project”). In Section 2 Works, there was an internal joint venture arrangement between IJMC and Zublin International (Malaysia) Sdn Bhd. IJMC claims in Section 1 Works for RM4,856,252.00 as the unpaid balance of the certified value of works done, losses and expenses/ additional costs totalling RM5,403,838.74, Values of variation works totalling RM41,926.76, Values of re-casting 12 segments: RM727,251.24, declaration that LLB is not entitled to impose LAD of RM8980000.00, release of retention money of RM1,782,533.10 and Interests and costs. LLB’s main line of defence is the alleged delay in completion of Section 1 Works and LLB counterclaims for LAD. Further, IJMC’s claims in Section 2 Works are for payment of the sum of RM21,611395.00 being the total amount of unpaid balance of certified works ,values of variation works, release of retention money and losses/ expenses, extension of time, damages for breach of contracts and Interest and costs. LLB’s main line of defence is the alleged delay in completion of Section 2 Works, cross-setoff under another contract and LLB counterclaims for LAD. In section 3 Works, IJMC’s claims are for release of retention money of RM927500.00, RM9920167.29 as unpaid value of the lump sum items of original works done, RM961738.72 as the value of remeasurement items of the original works done, extension of time, values of variation works (recognised in principle) totalling RM1528710.60,loss/ expense: RM12562903.82 and interests and costs. LLB’s mainline of defence is the alleged delay in completion of Section 3 Works, and LLB counterclaims for LAD. 178
  189. The IJMC solicitors are of the opinion that :(i) IJMC has a strong case to claim for the unpaid values of the works clone in Sections 1, 2 and 3 and also to claim for the release of the retention monies. LLB’s defence of delay in completion of Sections 1 and 3 works is likely to fail because of delays caused or contributed by LLB. (ii) LLB’s counterclaim for LAD is unlikely to succeed because LLB’s own acts, omissions and/ or breaches caused or contributed to the inability to complete the works by the original date for completion and LLB did not suffer actual loss/; damage due to late completion except for MR1000000/= of LAD imposed and charged by the Government. (iii) Barring unforeseen circumstance and if IJMC’s witnesses’ evidence on the claims and facts as depicted in the project documents is accepted by the tribunal IJMC has a strong case to obtain arbitration award for:-(i) Unpaid value of works done in Sections 1 and 3, (ii) Values of variation works in Sections 1 and 3, (iii) Release of retention monies in Sections 1 and 3. Federal Court Civil Application No. 08(f)-274-05/2018(B) This is an application for leave to appeal against the Court of Appeal’s decision which refused to order LLB to set aside retention monies (being trust monies in the construction contracts which form the subject matters of the arbitration between IJMC and LLB in separate trust account. The subject matter of this appeal is ancillary to the arbitration between IJMC and LLB as stated in section 7.1.3 above. The amounts of retention monies sought to be set aside in separate trust accounts are: Section 1: RM1782533.10; Section 2: RM1704250.00; and Section 3: RM927500.00. The IMJC solicitors are of the view that there are questions of law which have not been decided by the Federal Court before or which are in the public advantage for the Federal Court to decide and therefore is reasonable prospect of getting the leave to appeal. (d) Adjudication between IJM Construction Sdn Bhd (“IJMC”) v Pearl Discovery Development (“PDD”) AIAC’s Adjudication Reference: AIAC/D/ADJ-1889-2018 Due to non-payment by PDD prior to launching of the adjudication, IJMC has commenced on adjudication against PDD for a total sum of RM20,564,718.51 plus GST plus interest comprising of:-certified sums pursuant to interim certificate of payment No.38-40 amounting to RM18,906,436.03 plus GST plus interest, under certification of variation orders No.23,30,31,32,34,38,46 and 49 amounting to RM204,230.03 plus GST, Non-certification of variation orders No. 15, 22,29,33,39,43 and 50 amounting to RM1,157,045.36 plus GST, outstanding late payment interest under interim certificate payment No.30-33 due to Nominated Sub179
  190. Contractor (Design Studio for the Common Area Works) amounting to RM38,000.51 as at 14 May 2018 and Outstanding late payment interest under Interim Certificate of Payment No.30-33 due to Nominated SubContractor (Design Studio for the Joinery Works) amounting to RM190,113.48 as at 10 May 2018. Subsequently, PDD has made partial payments of the sums claimed in the Payment Claim. The remaining amounts in dispute is for RM17,356,660.10 as at the time of Adjudication Claim dated 07 October 2018. IJMC solicitors have reasonable prospects to succeed in this claim against PDD subject to the evidence. (e) Ad-Hoc Arbitration between IJM-Norwest JV (“IJMNJV”) v Ircon International Ltd (“Ircon”) IJMNJV is an unincorporated joint venture between IJM Construction Sdn Bhd and Norwest Holdings Sdn Bhd. IJMBJV issued a notice of arbitration on 19 June 2015, submitting various issues in dispute to arbitration. The issues include, amongst others, claims for among others, loss and expense due to extension of time, increased costs due to acceleration of the works, variation works and invalid back charges amounting to RM45,585,237.88. Ircon has a counterclaim for RM20,646,629.116 against IJMNJV for issues arising out of, amongst others, the repayment of the historical deductions, arithmetical error/shortfall measurement to be deducted from the revised final bill No.53, non-approved non-scheduled items to be deducted from the revised final bill No. 53, overpayment for Fiberail relocation works, balance cost incurred for carrying out maintenance works at Section 1A and Section 1B, and the cost of rectification of defective works due to IJMNJV’s failure to undertake to repair the defective works during the defects liability and maintenance period. Parties are currently in the midst of the arbitration hearing. IJMC will be pursuing against this claim and defending against Ircon’s counterclaim. IJMC solicitors have reasonable prospects to succeed in this claim against Ircon and to defend against Ircon’s counterclaim subject to evidence and performance of witnesses during the arbitration hearing. (f) In the matter between IJM Construction Berhad (Claimant) (“IJMC”) and Lingkaran Luar Butterworth (Penang) Sdn Bhd (“LLB”) and Rayston Consortium Sdn Bhd (in liquidation) (“Rayston”) (“Respondent”) at Shah Alam High Court Civil Suit No.: BA-23NCvC9-04/2016. LLB and Rayston filed an action against IJMC seeking inter alia: (i) to set aside a Consent Judgment entered into on 17 October 2013 (under the Shah Alam High Court Civil Suit No.: 22NCvC-29003/2013); and (ii) for damages to be assessed. 180
  191. LLB and Rayston had not made payment under the Consent Judgment for RM13 ,500,000.00 and RM15,500,000.00 plus interest and costs. As the Judgment sum was not settled, IJMC presented a winding-up petition against LLB on 29 February 2016 and obtained an order to wind up on 29 August 2018 which Order is presently stayed. The matter has been fixed for trial on 28 February 2019 and 1 March 2019. 7.3 Related party transactions As at 15 January 2019, the Issuer and the Kafalah Provider have not entered into any related party transactions outside the ordinary course of business save and except those which have been (i) disclosed in the audited financial statements for the FYE 31 March 2018 of the Issuer and the Kafalah Provider (attached herein as Appendix I and II respectively), (ii) disclosed in the quarterly report for the financial period ended 30 September 2018 of the Kafalah Provider (attached herein as Appendix II) and (iii) duly announced on Bursa Malaysia and is made available thereto. 7.4 Contingent liabilities and capital commitments As at 15 January 2019, there are no contingent liabilities and capital commitments incurred or known to be incurred by the IJM Land Group and IJM Corporation Group which upon being enforceable, may have a material impact on the financial condition of the IJM Land Group and IJM Corporation Group save and except for those which have been (i) disclosed in the audited financial statements for the FYE 31 March 2018 of the Issuer and the Kafalah Provider (attached herein as Appendix I and II respectively), (ii) disclosed in the quarterly report for the financial period ended 30 September 2018 of the Kafalah Provider (attached herein as Appendix II) and (iii) duly announced on Bursa Malaysia and is made available thereto. 7.5 Potential Conflict of Interests and appropriate mitigating measures (a) CIMB As at the date hereof and after making enquiries as were reasonable in the circumstances, CIMB is not aware of any circumstances which may potentially give rise to conflict-of-interest or potential conflict-of-interest situation in its capacity as the Principal Adviser, the Lead Arranger, the Lead Manager, and the Facility Agent in respect of the Perpetual Sukuk Programme, save and except as disclosed below:Potential conflict-of-interest situations: CIMB Bank Berhad (“CIMB Bank”) has, within its ordinary course of business, granted to the Issuer a Revolving Credit Facility of RM30.0 million (“RC 1”) of which RM11,752,000.00 is outstanding as at 15 January 2019 and a Revolving Credit Facility of RM50.0 million (“RC 2”) of which RM31,881,000.00 is outstanding as at 15 January 2019. Part of the proceeds from the issuance of the Sukuk Musharakah under the Perpetual Sukuk Programme is proposed to be utilised to refinance the RC1 and RC2. 181
  192. CIMB Bank and CIMB are entities within the same group of companies . CIMB Bank is99.99% owned by CIMB Group Sdn Bhd (“CIMB Group”) and CIMB Group is in turn a wholly-owned subsidiary of CIMB Group Holdings Berhad. CIMB is a wholly-owned subsidiary of CIMB Group. Appropriate mitigating measures: In order to mitigate and address the potential conflict-of-interest situation set out above, the following measures have been taken: (b) a. CIMB is a licensed investment bank and its appointment as Principal Adviser, Lead Arranger, Lead Manager and the Facility Agent in respect of the Perpetual Sukuk Programme is in the ordinary course of its business and on arms-length basis; b. CIMB is one of the leading arrangers and managers in the Malaysian corporate bonds and Islamic securities markets and is committed to upholding its integrity and responsibilities in relation to the Perpetual Sukuk Programme; c. a due diligence review pursuant to the Perpetual Sukuk Programme has been undertaken together with other independent professional advisers; d. the conduct of CIMB is regulated by BNM and the SC and governed under, inter alia, the Financial Services Act 2013, the CMSA and by its own internal controls and checks; and e. the Board of Directors of the Issuer is fully aware of the potential conflict-of-interest situation set out above and are agreeable to proceed on this basis. Messrs Adnan Sundra & Low As at the date hereof and after making enquiries as were reasonable in the circumstances, Messrs Adnan Sundra & Low confirms that, to the best of its knowledge and belief, there is no existing or potential conflict-of-interest in its capacity as the legal counsel to the Principal Adviser, Lead Arranger and Lead Manager in respect of the Perpetual Sukuk Programme. (c) UTM As at the date hereof and after making enquiries as were reasonable in the circumstances, Universal Trustees (Malaysia) Berhad is not aware of any circumstances that would give rise to a conflict of interest in its capacity as the Sukuk Trustee in relation to the Perpetual Sukuk Programme. 182
  193. (d) CIMB Islamic As at the date hereof and after making enquiries as were reasonable in the circumstances, CIMB Islamic is not aware of any circumstances which may potentially give rise to conflict-of-interest or potential conflict-of-interest situations in its capacity as the Shariah Adviser in respect of the Perpetual Sukuk Programme. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 183
  194. APPENDIX I LATEST DIRECTORS ’ REPORT AND AUDITED FINANCIAL STATEMENTS OF THE ISSUER FOR THE FINANCIAL YEAR ENDED 31 MARCH 2018 184
  195. APPENDIX II LATEST AUDITED FINANCIAL STATEMENTS OF THE KAFALAH PROVIDER FOR THE FINANCIAL YEAR ENDED 31 MARCH 2018 AND THE LATEST QUARTERLY REPORT FOR THE FINANCIAL PERIOD ENDED 30 SEPTEMBER 2018 OF THE KAFALAH PROVIDER 185
  196. FINANCIAL STATEMENTS & OTHERS
  197. 180 365 369 373 Financial Statements List of Material Properties Notice of Annual General Meeting Form of Proxy Corporate Information
  198. DIRECTORS ’ REPORT AND STATEMENT The Directors have pleasure in submitting their report and statement together with the audited financial statements of the Group and of the Company for the financial year ended 31 March 2018. PRINCIPAL ACTIVITIES 01 The Company is principally engaged in construction and investment holding activities. The Group’s principal activities are in construction, property development, manufacturing and quarrying, hotel operations, port operations, tollway operations, plantations and investment holding. 02 03 Summary Information for Shareholder There have been no significant changes in these principal activities during the financial year. 04 Business Review & Reports financial results 05 Sustainability Statement 06 Financial Statements & others The Group The Company RM’000 RM’000 Net profit for the financial year 390,689 385,246 Attributable to: Owners of the Company Non-controlling interests 349,809 40,880 385,246 – 390,689385,246 DIVIDENDS Dividends paid since the end of the previous financial year are as follows: RM’000 A single tier second interim dividend of 4.5 sen per share, paid on 21 July 2017 163,195 In respect of the financial year ended 31 March 2017: In respect of the financial year ended 31 March 2018: A single tier first interim dividend of 3 sen per share, paid on 28 December 2017 108,848 272,043 On 30 May 2018, the Directors have declared a single tier second interim dividend in respect of the financial year ended 31 March 2018 of 3.0 sen per share to be paid on 20 July 2018 to every member who is entitled to receive the dividend as at 5:00 pm on 29 June 2018. The Directors do not recommend the payment of any final dividend for the financial year ended 31 March 2018. RESERVES AND PROVISIONS All material transfers to or from reserves and provisions during the financial year are disclosed in the financial statements. 180 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  199. ISSUE OF SHARES During the financial year , the number of issued and paid-up ordinary shares of the Company was increased from 3,613,386,720 to 3,628,678,020 by way of the issuance of:(i) 7,166,300 new ordinary shares arising from the vesting of shares under the Employee Share Grant Plan (“ESGP”); (ii) 5,325,000 new ordinary shares arising from the exercise of options under the Employee Share Option Scheme (“ESOS”) at the following issue prices; and Number of shares issued units 1,358,700 2,842,400 747,300 376,600 5,325,000 ESOS exercise price RM/share Award of options under ESOS (“ESOS Award”) 2.16 2.54 2.91 3.03 First ESOS Award Second ESOS Award Third ESOS Award Fourth ESOS Award (iii) 2,800,000 new ordinary shares arising from the subscription of new shares under the shares held under trust at the following issue prices: Number of shares issued units 300,000 1,600,000 500,000 300,000 100,000 2,800,000 ESOS exercise price RM/share Award of options under ESOS (“ESOS Award”) 2.16 2.54 2.91 3.03 2.93 First ESOS Award Second ESOS Award Third ESOS Award Fourth ESOS Award Fifth ESOS Award The new ordinary shares issued rank pari passu in all respects with the existing ordinary shares of the Company. TREASURY SHARES During the financial year, the Company repurchased 794,700 of its ordinary shares from the open market on Bursa Malaysia Securities Berhad (“Bursa Malaysia”) for RM2,094,011. The average price paid for the shares repurchased was approximately RM2.63 per share. Details of the treasury shares are set out in Note 14(C) to the financial statements. LONG TERM INCENTIVE PLAN At an Extraordinary General Meeting held on 19 October 2012, the Directors were authorised to proceed with the establishment and administration of the Long Term Incentive Plan (“LTIP”), which comprises an ESOS and an ESGP. The Directors have appointed a committee (“Committee”) to administer the LTIP. The Directors and/or the Committee have also established trusts which are administered by a trustee in accordance with the trust deeds dated 20 December 2012 for the LTIP. 181 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  200. DIRECTORS ’ REPORT AND STATEMENT (cont’d) LONG TERM INCENTIVE PLAN (cont’d) The main features of the ESOS are as follows: (a) The ESOS was implemented on 24 December 2012, to be in force for a period of five years until 23 December 2017. On 24 November 2015, the Board of Directors had extended the scheme period of the ESOS for another five years effective from 24 December 2017 to 23 December 2022 pursuant to the By-Laws of the LTIP. 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others (b) Eligible employees are determined at the absolute discretion of the Committee subject to the employee, Executive Director (holding office in a full time executive capacity) and a Person Connected to an Executive Director, collectively known as “Group Employee”, having been confirmed in the employment or appointment of the Company and its subsidiaries (save for any subsidiaries which are dormant or incorporated outside Malaysia) on or up to the date of the ESOS award (“ESOS Award”) and has attained the age of eighteen (18) years. An Executive Director shall only be eligible if he is on the payroll and involved in the day-to-day management of the Company and his participation in the Scheme is specifically approved by the shareholders of the Company in a general meeting. (c) In respect of a Group Employee, the employee who is a Malaysian citizen, has been in employment with the Company and its subsidiaries for a period of at least 3 consecutive years prior to and up to the date of the ESOS Award; the employee who is a non-Malaysian citizen, has been in employment with the Company and its subsidiaries on a full-time contract for a period of at least 4 consecutive years prior to and up to the date of the ESOS Award. (d) The option price shall be the volume-weighted average market price of the Company’s shares as shown in the Daily Official List of Bursa Malaysia for the five market days immediately preceding the date of the ESOS Award with an allowance for a discount of not more than ten per centum (10%) therefrom. (e) Vesting dates for the First, Second, Third, Fourth, Fifth and Sixth ESOS Awards and percentage for each vesting date are as follows: Vesting Dates First Second Third Fourth Fifth Sixth ESOS Award ESOS Award ESOS Award ESOS Award ESOS Award ESOS Award Percentage (%) 24/12/13 24/12/1424/12/15 24/12/16 24/12/1730/03/19 24/12/14 24/12/1524/12/16 24/12/17 24/12/1830/03/20 24/12/15 24/12/1624/12/17 24/12/18 24/12/1930/03/21 40 30 30 On 24 December 2012, the first award of options under the ESOS of 29,640,600 options (“First ESOS Award”) was awarded to the Group Employee at an option price of RM4.44 per ordinary share. The vesting of the options was contingent upon the acceptance of the First ESOS Award by the eligible Group Employee and fulfilment of the relevant vesting conditions as at the relevant vesting dates. The vesting conditions include the tenure and performance of the eligible Group Employee who had accepted the First ESOS Award. The ESOS exercise price had been adjusted to RM4.37 on 13 June 2014, following the declaration of a single tier special dividend of 10 sen per share for the financial year ended 31 March 2014 on 27 May 2014. The ESOS exercise price was adjusted to RM2.18 on 11 September 2015, following the 1:1 Bonus Issue. The ESOS exercise price was further adjusted to RM2.16 on 25 June 2016, following the declaration of a single tier special dividend of 3 sen per share for the financial year ended 31 March 2016 on 26 May 2016. 182 ANNUAL REPORT 2018 IJM CORPORATION BERHAD On 24 December 2013, the second award of options under the ESOS of 31,729,600 options (“Second ESOS Award”) was awarded to the Group Employee at an option price of RM5.22 per ordinary share. The vesting of the options was contingent upon the acceptance of the Second ESOS Award by the eligible Group Employee and fulfilment of the relevant vesting conditions as at the relevant vesting dates. The vesting conditions include the tenure and performance of the eligible Group Employee who had accepted the Second ESOS Award. The ESOS exercise price had been adjusted to RM5.14 on 13 June 2014, following the declaration of a single tier special dividend of 10 sen per share for the financial year ended 31 March 2014 on 27 May 2014. The ESOS exercise price was adjusted to RM2.57 on 11 September 2015, following the 1:1 Bonus Issue. The ESOS exercise price was further adjusted to RM2.54 on 25 June 2016, following the declaration of a single tier special dividend of 3 sen per share for the financial year ended 31 March 2016 on 26 May 2016.
  201. LONG TERM INCENTIVE PLAN (cont’d) On 24 December 2014, the third award of options under the ESOS of 10,651,000 options (“Third ESOS Award”) was awarded to the Group Employee at an option price of RM5.88 per ordinary share. The vesting of the options will be contingent upon the acceptance of the Third ESOS Award by the eligible Group Employee and fulfilment of the relevant vesting conditions as at the relevant vesting dates. The vesting conditions include the tenure and performance of the eligible Group Employee who have accepted the Third ESOS Award. The ESOS exercise price was adjusted to RM2.94 on 11 September 2015, following the 1:1 Bonus Issue. The ESOS exercise price was further adjusted to RM2.91 on 25 June 2016, following the declaration of a single tier special dividend of 3 sen per share for the financial year ended 31 March 2016 on 26 May 2016. On 24 December 2015, the fourth award of options under the ESOS of 19,605,100 options (“Fourth ESOS Award”) was awarded to the Group Employee at an option price of RM3.06 per ordinary share. The vesting of the options will be contingent upon the acceptance of the Fourth ESOS Award by the eligible Group Employee and fulfilment of the relevant vesting conditions as at the relevant vesting dates. The vesting conditions include the tenure and performance of the eligible Group Employee who have accepted the Fourth ESOS Award from the date of the Fourth ESOS Award. The ESOS exercise price had been adjusted to RM3.03 on 25 June 2016, following the declaration of a single tier special dividend of 3 sen per share for the financial year ended 31 March 2016 on 26 May 2016. On 24 December 2016, the fifth award of options under the ESOS of 16,034,000 options (“Fifth ESOS Award”) was awarded to the Group Employee at an option price of RM2.93 per ordinary share. The vesting of the options will be contingent upon the acceptance of the Fifth ESOS Award by the eligible Group Employee and fulfilment of the relevant vesting conditions as at the relevant vesting dates. The vesting conditions include the tenure and performance of the eligible Group Employee who have accepted the Fifth ESOS Award from the date of the Fifth ESOS Award. On 30 March 2018, the sixth award of options under the ESOS of 79,522,700 options (“Sixth ESOS Award”) was awarded to the Group Employee at an option price of RM2.70 per ordinary share. The vesting of the options will be contingent upon the acceptance of the Sixth ESOS Award by the eligible Group Employee and fulfilment of the relevant vesting conditions as at the relevant vesting dates. The vesting conditions include the tenure and performance of the eligible Group Employee who have accepted the Sixth ESOS Award from the date of the Sixth ESOS Award. The number of outstanding options is set out in Note 14(D) to the financial statements. The main features of the ESGP are as follows: (a) The ESGP was implemented on 24 December 2012, and shall be in force for a period of ten years and expires on 23 December 2022. (b) ESGP comprises a retention share plan (“RSP”) and a performance share plan (“PSP”). (i) The RSP is a share plan for selected middle to senior management employees of the Group who are holding job grades 1 to 8 or such rank or position as may be designated by the Committee from time to time. (ii) The PSP is a performance share plan for selected senior management employees of the Group who are holding job grades 1 to 3 or such rank or position as may be designated by the Committee from time to time. (c) On 15 April 2013, the first award of shares under the ESGP (“First ESGP Award”) was made to the eligible Group Employee and once accepted was vested to the eligible Group Employee at no consideration over a period of up to three (3) years, subject to the fulfilment of vesting conditions. (d) On 15 April 2014, the second award of shares under the ESGP (“Second ESGP Award”) was made to the eligible Group Employee and once accepted will be vested to the eligible Group Employee at no consideration over a period of up to three (3) years, subject to the fulfilment of vesting conditions. (e) On 15 April 2015, the third award of shares under the ESGP (“Third ESGP Award”) was made to the eligible Group Employee and once accepted will be vested to the eligible Group Employee at no consideration over a period of up to three (3) years, subject to the fulfilment of vesting conditions. 183 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  202. DIRECTORS ’ REPORT AND STATEMENT (cont’d) LONG TERM INCENTIVE PLAN (cont’d) The main features of the ESGP are as follows: (cont’d) (f) 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others On 15 April 2016, the fourth award of shares under the ESGP (“Fourth ESGP Award”) was made to the eligible Group Employee and once accepted will be vested to the eligible Group Employee at no consideration over a period of up to three (3) years, subject to the fulfilment of vesting conditions. (g) On 15 April 2017, the fifth award of shares under the ESGP (“Fifth ESGP Award”) was made to the eligible Group Employee and once accepted will be vested to the eligible Group Employee at no consideration over a period of up to three (3) years, subject to the fulfilment of vesting conditions. (h) On 15 April 2018, the sixth award of shares under the ESGP (“Sixth ESGP Award”) was made to the eligible Group Employee and once accepted will be vested to the eligible Group Employee at no consideration over a period of up to three (3) years, subject to the fulfilment of vesting conditions. The provisional number of shares awarded under the First, Second, Third, Fourth, Fifth and Sixth ESGP Awards are as follows: First ESGP ESGPAward Provisional Number of Shares Awarded Second ESGP Third ESGP Fourth ESGP Fifth ESGP Award Award Award Award Sixth ESGP Award PSP1,516,100*11,357,100*11,429,000*13,701,400*13,379,200*13,169,000*1 RSP4,559,300*25,034,400*2 5,321,900*2 11,552,800*211,605,800*211,600,600*2 *1 The quantum of shares to be vested may vary from 0% to 200% of the provisional number of shares awarded. *2 The quantum of shares to be vested may vary from 0% to 150% of the provisional number of shares awarded. The total number of new Company’s shares which may be made available under the LTIP shall not exceed ten per centum (10%) of the total issued and paid-up share capital (excluding treasury shares) comprising ordinary shares of the Company at any time during the duration of the LTIP. The aggregate maximum allocation of the options and shares to the Directors and senior management of the Group shall not be more than 50% of the Company’s shares available under the LTIP. As at 31 March 2018, the total number of options (ESOS) and shares (ESGP) allocated to the Directors and senior management of the Group is 16.32% of the shares available under the LTIP. Whereas, the total number of options (ESOS) and shares (ESGP) allocated to the Directors and senior management of the Group during the financial year is 5.21% of the shares available under the LTIP. DIRECTORS The Directors in office during the financial year and during the period from the end of the financial year to the date of this report and statement are: Tan Sri Abdul Halim bin Ali #*@, Independent Non-Executive Chairman Tan Sri Dato’ Tan Boon Seng @ Krishnan, Deputy Non-Executive Chairman Dato’ Soam Heng Choon @, Chief Executive Officer (“CEO”) & Managing Director (“MD”) Mr Lee Chun Fai, Deputy CEO & Deputy MD Datuk Lee Teck Yuen *, Senior Independent Non-Executive Director Datuk Ir. Hamzah bin Hasan #*, Independent Non-Executive Director Mr Pushpanathan a/l S A Kanagarayar #, Independent Non-Executive Director Mr Goh Tian Sui, Independent Non-Executive Director Dato’ David Frederick Wilson @, Independent Non-Executive Director Tunku Alina Binti Raja Muhd Alias, Independent Non-Executive Director (appointed on 1 November 2017) Ms Tan Ting Min, Independent Non-Executive Director (appointed on 1 November 2017) # members of the Audit Committee 184 ANNUAL REPORT 2018 IJM CORPORATION BERHAD * members of the Nomination and Remuneration Committee @ members of the Securities and Options Committee
  203. DIRECTORS ’ SHAREHOLDING According to the Register of Directors’ Shareholdings required to be kept under Section 59 of the Companies Act 2016, particulars of interests of Directors who held office at the end of the financial year in shares and options over ordinary shares of the Company and its related corporations during the financial year are as follows: IJM Corporation Berhad Name of Directors Number of ordinary shares Balance at 1.4.2017 Acquired Disposed Tan Sri Abdul Halim bin Ali Direct interest 30,000 – Balance at 31.3.2018 30,000 – Tan Sri Dato’ Tan Boon Seng @ Krishnan Direct interest Indirect interest 6,043,066 – 321,972(1)50,000 – 6,043,066 – 371,972(1) Dato’ Soam Heng Choon Direct interest 1,261,200 – Lee Chun Fai Direct interest Indirect interest 300,600 359,800 164,500 100,000 424,300 250,000(1)– – 250,000(1) Datuk Lee Teck Yuen Direct interest 11,764,692 Goh Tian Sui Indirect interest – 11,764,692 – 10,000(1)– – 10,000(1) Options over ordinary shares (“Options”) under Employee Share Option Scheme (“ESOS”) Provisional Number of Options+ Name of Directors 1,561,800 At 1.4.2017 At 31.3.2018 Number of Options At 1.4.2017 Vested Exercised At 31.3.2018 First ESOS Award on 24.12.2012 Lee Chun Fai – –376,400 – – 376,400 Second ESOS Award on 24.12.2013 Lee Chun Fai – –378,500 – – 378,500 Third ESOS Award on 24.12.2014 Dato’ Soam Heng Choon Lee Chun Fai 280,500 – 654,500280,500 – 935,000 49,500 – 113,30049,500 – 162,800 Fourth ESOS Award on 24.12.2015 Dato’ Soam Heng Choon 792,000 396,000 528,000396,000 – 924,000 Lee Chun Fai 231,000 115,500 154,000115,500 – 269,500 Sixth ESOS Award on 30.03.2018 Dato’ Soam Heng Choon – 1,320,000 –– – – Lee Chun Fai – 660,000 –– – – 185 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  204. DIRECTORS ’ REPORT AND STATEMENT (cont’d) DIRECTORS’ SHAREHOLDING (cont’d) IJM Corporation Berhad (cont’d) 01 Number of ordinary shares (“Shares”) under Employee Share Grant Plan (“ESGP”) Performance Share Plan++ Retention Share Plan+++ 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others Name of Directors +Provisional Number at 1.4.2017 +Provisional +Provisional +Provisional Number at 31.3.2018 Vested Number at 1.4.2017 Number at 31.3.2018 Vested Second ESGP Award on 15.4.2014 Lee Chun Fai 48,500 –48,500 19,400 –29,100 Third ESGP Award on 15.4.2015 Dato’ Soam Heng Choon 393,000 196,50098,300 101,200 50,60075,900 Fourth ESGP Award on 15.4.2016 Dato’ Soam Heng Choon 550,600 471,60079,000 153,000 121,40047,400 Lee Chun Fai 347,600 268,60039,500 139,000 107,40047,400 Fifth ESGP Award on 15.4.2017 Dato’ Soam Heng Choon – 471,600– – 121,400– Lee Chun Fai – 189,600– –75,800– IJM Plantations Berhad (a subsidiary) Name of Directors Tan Sri Abdul Halim bin Ali Direct interest Tan Sri Dato’ Tan Boon Seng @ Krishnan Direct interest Indirect interest Number of ordinary shares Balance at 1.4.2017 Acquired Disposed 20,000 – Balance at 31.3.2018 – 20,000 716,060 – – 716,060 481,033(1)– – 481,033(1) Notes:(1) Through a family member + The vesting of the Options and/or Shares to the eligible Director is subject to the fulfilment of the relevant vesting conditions as at the relevant vesting dates. ++ The quantum of shares to be vested may vary from 0% to 200% of the number of shares provisionally awarded +++ The quantum of shares to be vested may vary from 0% to 150% of the number of shares provisionally awarded Except as disclosed above, the Directors in office at the end of the financial year do not have any direct or indirect interests in the shares or Options of the Company and its related corporations during the financial year. 186 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  205. DIRECTORS ’ BENEFITS AND REMUNERATION Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than the fees and other emoluments shown under Directors’ Remuneration in the financial statements) by reason of a contract made by the Company or by a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest. Details of the Directors’ Remuneration are set out in Note 7 to the financial statements. Except as disclosed above, neither during nor at the end of the financial year was the Company or any of its subsidiaries a party to any arrangement whose object was to enable the Directors to acquire benefits through the acquisition of shares in, or debentures of, the Company or any other body corporate, other than the shares or Options of the Company. INDEMNITY AND INSURANCE FOR DIRECTORS AND OFFICERS The Company maintains a liability insurance for the Directors and officers of the Group throughout the financial year, which provides appropriate insurance cover for the Directors and officers of the Group. The amount of insurance premium paid for the financial year 2018 was RM278,985. OTHER STATUTORY INFORMATION Before the financial statements of the Group and of the Company were prepared, the Directors took reasonable steps: (a) to ascertain the action taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts; and (b) to ensure that any current assets, other than debts, which were unlikely to be realised in the ordinary course of business including the value of current assets as shown in the accounting records of the Group and of the Company had been written down to an amount which the current assets might be expected so to realise. At the date of this report and statement, the Directors are not aware of any circumstances: (a) which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts of the Group and of the Company inadequate to any substantial extent and the values attributed to current assets of the Group and of the Company misleading; or (b) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate; or (c) not otherwise dealt with in this report and statement or in the financial statements that would render any amount stated in the financial statements of the Group and of the Company misleading. At the date of this report and statement, neither any charge on the assets of the Group and the Company has arisen since the end of the financial year which secures the liability of any other person nor any contingent liability of the Group and the Company. In the interval between the end of the financial year and the date of this report and statement, no item, transaction or other events of a material and unusual nature has arisen which, in the opinion of the Directors, would substantially affect the results of the operations of the Group and of the Company for the current financial year. No contingent or other liability of any company in the Group has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may affect the ability of the Company and its subsidiaries to meet their obligations when they fall due. 187 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  206. DIRECTORS ’ REPORT AND STATEMENT (cont’d) OTHER STATUTORY INFORMATION (cont’d) In the opinion of the Directors: (a) other than as disclosed in the financial statements, the results of the operations of the Group and of the Company during the financial year have not been substantially affected by any item, transaction or event of a material and unusual nature; and 01 02 (b) the financial statements of the Group and of the Company set out on pages 190 to 358 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 March 2018 and of the results and cash flows of the Group and of the Company for the financial year ended on that date in accordance with the Financial Reporting Standards in Malaysia and the provisions of the Companies Act 2016. 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement LIST OF DIRECTORS OF SUBSIDIARIES 06 Financial Statements & others Pursuant to Section 253 of the Companies Act 2016, the list of Directors of the subsidiaries during the financial year and up to the date of this report and statement is as follows: Dato’ Sri Haji Abd Rahim bin Abdul Tuan Haji Adam bin Abdul Hamid Tengku Ahmad Rithauddeen bin Tengku Ismail A.V. Sunil Kumar Aw Soon Lee Dato’ Azahari bin Muhammad Yusof Aziz Bin Bahaman B Rajagopala Rao Bendi Chai Kian Soon Chan Kai Leong Chan Kok Keong Chang Cheen Ying Chen Silu Choo Lai Fong Datuk Dr Choo Yuen May Chow Man Fui Chua Lay Hoon Cyrus Eruch Daruwalla Dato’ David Frederick Wilson Deepak Das Gupta Devananda Naraidoo Edward Chong Sin Kiat Fatimah Binti Merican Fong Wah Sin Gan Chin Giap Goh Chee Huat Harjeet Singh Daya Singh Dato’ Hoo Kim See Hu Hai Shan James Ponniah a/l Joseph Jenny Pascaline Anna John Patrick Griffin John Lee Yow Meng Joseph Tek Choon Yee 188 ANNUAL REPORT 2018 IJM CORPORATION BERHAD Dato’ Josphine Juliana A/P S Arulanandam Dato’ Haji Khasbullah bin A Kadir Khor Kar Buan Dato’ Khor Kiem Teoh Khoo Choom Kwong K. Ravi Kumar Lau Liang See Lee Chun Fai Lee Hong Chai Datuk Lee Teck Yuen Leong Yew Kuen Liew Hau Seng Liew Kiam Woon Low Hong Imm Lu, Yong Marie Cindhia Veronique Magny-Antoine Mark Andrew Lahiff Ma, Zhengguo Dato’ Md Naim bin Nasir Dato’ Mohamed Feisal bin Ibrahim M. Ramachandran a/l V. D. Nair Muhammed Rafiq Haji Abdul Rahim Muhammad Umair Najeeb Amin Natarajan Thulasidas Nicholas James Terry Ong Teng Cheng Ong Wah Cheong Pang Chwee Hoon Tan Sri Datuk Wira Pang Tee Chew P.K. Venugopal a/l Krishna Poduval Pook Fong Fee Purushothaman a/l Kumaran Pushpanathan a/l S A Kanagarayar Ramakrishnan Karikal Valaven Ravi Kumar Kandala Rodziah binti Morshidi Sachidananda Payandee Govinda Sandra Segran a/l Kenganathan Datuk Seri Hj. Saripuddin Bin Hj. Kasim Dato’ Soam Heng Choon S S Chakraborthy Syed Sarfaraz Haider Rizvi Tan Boon Leng Tan Sri Dato’ Tan Boon Seng @ Krishnan Tan Khee Leng Tan Khuan Beng Tan Kiam Choon Tang King Hua Tang Kwong Hieng Tharamangalam Sundaramurthy Subramanyam Dato’ Toh Chin Leong T. Vijay Kumar Tong Wai Yong Venkata Sunil Kumar Aripirala Venkatesen Saminada Chetty Wan Salwani binti Wan Yusoff Tan Sri Dato’ Wong See Wah Wong Soon Fah Yong Juen Wah Zabidin bin Abu Samah
  207. SUBSIDIARIES Details of subsidiaries are set out in Note 54 to the financial statements . AUDITORS’ REMUNERATION Details of auditors’ remuneration are set out in Note 8 to the financial statements. AUDITORS The Auditors, PricewaterhouseCoopers PLT (LLP0014401-LCA & AF 1146), have expressed their willingness to continue in office. PricewaterhouseCoopers PLT (LLP0014401-LCA & AF 1146) was registered on 2 January 2018 and with effect from that date, PricewaterhouseCoopers (AF1146), a conventional partnership was converted to a limited liability partnership. This report and statement was approved by the Board of Directors on 30 May 2018. Signed on behalf of the Board of the Directors: TAN SRI ABDUL HALIM BIN ALI DIRECTOR DATO’ SOAM HENG CHOON DIRECTOR Petaling Jaya 189 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  208. STATEMENTS OF COMPREHENSIVE INCOME for the financial year ended 31 March 2018 Note Operating revenue 4 ,13 Cost of sales 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others The Group 2018 2017 RM’000 RM’000 The Company 2018 2017 RM’000 RM’000 6,026,9486,065,335 486,561298,059 (4,788,194)(4,638,326) (404)(1,962) Gross profit 1,238,7541,427,009 486,157296,097 Other operating income 208,503259,779 104,77799,882 Tendering, selling and distribution expenses (182,875)(200,149) –– Administrative expenses (365,614)(339,015)(44,329)(38,177) Other operating expenses (79,073)(66,015) (63,702)(13,531) 5 9 819,6951,081,609 482,903344,271 (185,674)(144,670)(81,277)(70,170) Operating profit after finance cost Share of profits of associates Share of (losses)/profits of joint ventures 634,021936,939 401,626274,101 5,54056,403 –– (10,002)16,668 –– 13 10 629,5591,010,010 401,626274,101 (238,870)(243,206)(16,380)(14,630) Net profit for the financial year 390,689766,804 385,246259,471 Operating profit before finance cost Finance cost Profit before taxation Income tax expense Other comprehensive income (net of tax): Items that will not be reclassified to profit or loss: Actuarial gain on defined benefit plan 1,643– –– Share of other comprehensive losses of associates (3,449)––– Revaluation gains on property, plant and equipment –20,562 –– Others (38)––– (1,844)20,562 –– Items that may be reclassified subsequently to profit or loss: Currency translation differences of foreign operations Share of other comprehensive (losses)/ income of associates (19,029)4,095 –– Realisation of other comprehensive income arising from disposal of a foreign associate –(4,890) –– Realisation of other comprehensive loss arising from dilution of interests in an associate 190 ANNUAL REPORT 2018 IJM CORPORATION BERHAD (180,359)138,237 4,129(4,201) 1,873– –– (197,515)137,442 4,129(4,201) (199,359)158,004 4,129(4,201) Total comprehensive income for the financial year 191,330924,808 389,375255,270
  209. Note The Group 2018 2017 RM ’000 RM’000 Net profit attributable to: Owners of the Company Non-controlling interests 349,809653,773 385,246259,471 40,880113,031 –– Net profit for the financial year 390,689766,804 385,246259,471 Total comprehensive income attributable to: Owners of the Company Non-controlling interests 206,509770,202 389,375255,270 (15,179)154,606 –– Total comprehensive income for the financial year 191,330924,808 389,375255,270 Earnings per share for net profit attributable to owners of the Company: - Basic - Fully diluted 11(a) 11(b) 9.65 Sen 9.62 Sen The Company 2018 2017 RM’000 RM’000 18.16 Sen 17.94 Sen 191 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  210. CONSOLIDATED BALANCE SHEET as at 31 March 2018 Note 2018 RM ’000 2017 RM’000 CAPITAL AND RESERVES ATTRIBUTABLE TO OWNERS OF THE COMPANY 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others Share capital 14(A) Treasury shares 14(C) Shares held under trust 14(E) Revaluation reserve Exchange translation reserve Share-based payment reserve Other reserves 15 Retained profits 6,074,3496,022,651 (2,104)(10) (1,521)(4,016) 91,72191,759 (186,254)(44,550) 85,04880,138 51,09248,399 3,376,5813,302,903 9,488,9129,497,274 NON-CONTROLLING INTERESTS 1,276,4111,319,406 TOTAL EQUITY 10,765,32310,816,680 NON-CURRENT LIABILITIES 16 17 18 19 22 23 24 25 1,910,0001,950,000 940,1502,121,809 125,715154,474 290802 682,177669,456 696,690701,402 19,41010,511 117,087109,705 26 Deferred income 4,491,5195,718,159 70,35573,063 15,327,19716,607,902 Bonds Term loans Government support loans Hire purchase and lease payables Deferred tax liabilities Trade and other payables Retirement benefits Provisions NON-CURRENT ASSETS Property, plant and equipment Land use rights Investment properties Concession assets Associates Joint ventures Available-for-sale financial assets Long term receivables Intangible assets Deferred tax assets Land held for property development Plantation development expenditure 27 28 29 30 32 33 34 35 36 22 37(a) 38 192 ANNUAL REPORT 2018 IJM CORPORATION BERHAD 1,990,1351,989,646 150,668165,831 498,60168,867 3,342,3863,097,066 829,134901,392 708,425754,783 2,1552,155 251,352176,699 101,596102,618 304,147297,762 663,465514,788 1,107,8481,201,570 9,949,9129,273,177
  211. Note 2018 RM ’000 2017 RM’000 CURRENT ASSETS Property development costs 37(b) Inventories 39 Trade and other receivables 40 Financial assets at fair value through profit or loss 41 Derivative financial instruments 21 Tax recoverable Deposits, cash and bank balances 42 Assets held for sale 43 6,128,3405,587,380 1,334,2431,421,961 1,952,3132,031,003 311,079299,164 1,0552,909 150,041129,329 1,467,6532,147,777 124– 11,344,84811,619,523 Less: CURRENT LIABILITIES Trade and other payables 44 Current tax liabilities Derivative financial instruments 21 Provisions 25 Borrowings 45 - Bank overdrafts 45 - Others 3,020,3592,518,205 34,46512,979 5,858– 2,76410,718 5,967,5634,284,798 32,30944,514 2,871,8081,698,382 NET CURRENT ASSETS 5,377,2857,334,725 15,327,19716,607,902 193 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  212. COMPANY BALANCE SHEET as at 31 March 2018 Note 2018 RM ’000 2017 RM’000 CAPITAL AND RESERVES ATTRIBUTABLE TO OWNERS OF THE COMPANY 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others Share capital 14(A) Treasury shares 14(C) Shares held under trust 14(E) Exchange translation reserve Share-based payment reserve Retained profits 6,074,3496,022,651 (2,104)(10) (1,521)(4,016) 1,920(2,209) 85,04880,138 298,160184,957 TOTAL EQUITY 6,455,852 6,281,511 NON-CURRENT LIABILITIES 16 17 44 1,300,0001,300,000 –176,940 852,537948,028 2,152,5372,424,968 8,608,389 Bonds Term loans Trade and other payables 8,706,479 NON-CURRENT ASSETS Property, plant and equipment Investment properties Subsidiaries Associates Joint ventures Available-for-sale financial assets Deferred tax assets 27 29 31 32 33 34 22 1,8402,430 7,4407,312 7,107,7567,038,258 332,800371,800 232,819225,700 2,0502,050 1,9412,132 7,686,646 7,649,682 CURRENT ASSETS Trade and other receivables 40 Financial assets at fair value through profit or loss 41 Deposits, cash and bank balances 42 Tax recoverable 43 Assets held for sale 1,999,5621,357,059 18,74020,807 85,316230,397 –2,196 124– 2,103,7421,610,459 Less: CURRENT LIABILITIES Trade and other payables 44 Current tax liabilities Derivative financial instruments 21 Borrowings 45 - Bank overdraft 45 - Others 331,882342,564 778– 5,858– –1,098 843,481210,000 1,181,999553,662 NET CURRENT ASSETS 921,7431,056,797 194 ANNUAL REPORT 2018 IJM CORPORATION BERHAD 8,608,3898,706,479
  213. 48 ,399 3,302,903 9,497,274 1,319,40610,816,680 – – – Share of reserves in an associate – – – – Dilution of interest in an associate ––– – Issuance of ESOS and ESGP – –– – – – – (141,704) (141,704) – – – 1,652 1,041 1,041 1,360 1,873 2,766 347,210 (2,599) 4,418 206,509 (143,300) (3,449)(22,478) – 1,873 – (15,179) (56,059) 4,418 191,330 (199,359) – (22,478) – (180,359) – –35,769 ––35,769 –35,769 – ––– (1,843) (1,843) – (1,843) – (38) (38) – (319) (56,852) – (20,389) – (123,507) – 2,192 – – – – – – – (123,507) – ––– 349,809 349,809 40,880 390,689 – – 80,138 Total comprehensive (losses)/income for the financial year (44,550) – 91,759 – (4,016) (10) – – – – – 850 850 793 1,643 – (38) ––– – (38) – (38) - Total equity RM’000 Comprehensive income: Net profit for the financial year ––– Other comprehensive income Currency translation differences arising from translation of net investment in foreign operations – – – Realisation of other comprehensive income arising from dilution of interest in an associate – – – Share of other comprehensive (losses)/income of associates – – – Actuarial gain on defined benefit plan – – – Others ––– At 1 April 2017 6,022,651 Sharebased Nonpayment Other Retained controlling reserve reserves profits Total interests RM’000 RM’000 RM’000 RM’000 RM’000 Attributable to owners of the Company Shares Exchange Share Share Treasury held Revaluation translation Note capital premium shares under trust reserve reserve The Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 STATEMENTS OF CHANGES IN EQUITY for the financial year ended 31 March 2018 ANNUAL REPORT 2018 195 IJM CORPORATION BERHAD
  214. 196 ANNUAL REPORT 2018 IJM CORPORATION BERHAD 12 Single tier first interim dividend : - Year ended 31 March 2018 – – – – – – – – – – – – – (108,848) (163,195) (2,412) (108,848) (163,195) (2,412) – – 1,608 (108,848) (163,195) (804) (2,104) – At 31 March 20186,074,349 (1,521) 91,721 (186,254) 85,048 – (30,859) 51,092 3,376,581 9,488,912 – (274,455)(253,215) 1,276,41110,765,323 (27,816)(281,031) –23,334 – 2,495 –23,334 – (2,094) – Total transactions with owners 51,698 – (6,513) – –– – –– –– – – – – – (2,094) – (2,094) – –– (24,346) –– –– – – –– – ––420 420 – –– – –– (29,844) (29,844) – – – Total equity RM’000 Issuance of shares: - Vesting of shares under ESGP 14(A) 24,346 – –– - Exercise of ESOS 14(A),(E)19,983 – – 9,864 - Shares held under trust 14(A),(E) 7,369–– (7,369) Shares buy back 14(C) – – (2,094) – Dividends paid by subsidiaries to non-controlling shareholders ––– – Issuance of shares by a subsidiary to non-controlling shareholders––– – – – 12 Single tier second interim dividend: - Year ended 31 March 2017 – Financial Statements & others – 06 – Sustainability Statement – 05 – Business Review & Reports – 04 Accretion of interest in a subsidiary Summary Information for Shareholder Transactions with owners: 02 Sharebased Nonpayment Other Retained controlling reserve reserves profits Total interests RM’000 RM’000 RM’000 RM’000 RM’000 Attributable to owners of the Company 01 Shares Exchange Share Share Treasury held Revaluation translation Note capital premium shares under trust reserve reserve The Group (cont’d) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 03 STATEMENTS OF CHANGES IN EQUITY (cont’d) for the financial year ended 31 March 2018
  215. Attributable to owners of the Company – – – – – – – – Total comprehensive income for the financial year Share of reserves in an associate Accretion of interest in an associate Issuance of ESOS and ESGP – – – – – – – – – – – – Comprehensive income: Net profit for the financial year Other comprehensive income Currency translation differences arising from translation of net investment in foreign operations Realisation of other comprehensive income arising from disposal of a foreign associate Share of other comprehensive income/(losses) of associates Revaluation gains on property, plant and equipment At 1 April 2016 3,584,805 2,349,079 – – – – – – – – – – (3) – – – – – – – – – – (3,812) (4,890) 96,662 – (138,432) – – – 20,562 20,562 20,562 – – – – 93,480 93,480 39,560 – – – – – Total equity RM’000 – – – – (4,890) 96,662 – – – (821) 3,726 3,726 – – (1,229) 722 652,434 (1,339) 20,562 39,560 (1,229) (99) 770,202 116,429 (4,890) 138,237 – – – 154,606 41,575 – 39,560 (1,229) (99) 924,808 158,004 20,562 –4,095 – 41,575 – 653,773653,773 113,031766,804 45,494 3,042,082 9,028,359 1,208,04510,236,404 –3,726 (1,339)4,095 – – – 77,949 – 1,708 – – – 71,197 Share Shares Exchange based Non Share Share Treasury held Revaluation translation payment Other Retained controlling Note capital premium shares under trust reserve reserve reserve reserves profits Total interests The Group (cont’d) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 ANNUAL REPORT 2018 197 IJM CORPORATION BERHAD
  216. Attributable to owners of the Company 01 02 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others 198 ANNUAL REPORT 2018 IJM CORPORATION BERHAD – – – – – – in subsidiaries Single tier second interim dividend: - Year ended 31 March 2016 Single tier special dividend: - Year ended 31 March 2016 12 Single tier first interim dividend: - Year ended 31 March 2017 Dividends paid by subsidiaries to non-controlling shareholders Issuance of shares by a subsidiary to non-controlling shareholders Acquisition of additional interests Transactions with owners: – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 402 – – – – – – – – – – – – – – (108,087) (107,975) (143,967) (31,077) – – (108,087) (107,975) (143,967) (30,675) 5,900 (35,375) – – – (13,770) Share Shares Exchange based Non Share Share Treasury held Revaluation translation payment Other Retained controlling Note capital premium shares under trust reserve reserve reserve reserves profits Total interests The Group (cont’d) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 03 5,900 (35,375) (108,087) (107,975) (143,967) (44,445) Total equity RM’000 STATEMENTS OF CHANGES IN EQUITY (cont’d) for the financial year ended 31 March 2018
  217. Attributable to owners of the Company – – (10) – At 31 March 20176,022,651 – (7) 14(A),(B) 2,395,511(2,395,511) (4,016) (204) – – – 91,759 14(C) – –(7) – – – – – 402 – 80,138 (37,371) – – – – – – – 51,192 – (391,106) – (339,519) – (43,245) – (382,764) – – (7) – (7) – – 51,192 – Total equity RM’000 48,399 3,302,903 9,497,274 1,319,40610,816,680 – – – – – – –(12,884) –(24,487) (44,550) – – – 30,924 (31,128) – – – Total transactions with owners 2,437,846 (2,349,079) Transition to no-par value regime on 31 January 2017 Shares buy back Issuance of shares: - Vesting of shares under ESGP 14(A),(B) 8,289 16,198 - Exercise of ESOS 14(A),(B),(E)15,311 17,841 - Shares held under trust 14(A),(B),(E) 18,735 12,393 Transactions with owners: (cont’d) Share Shares Exchange based Non Share Share Treasury held Revaluation translation payment Other Retained controlling Note capital premium shares under trust reserve reserve reserve reserves profits Total interests The Group (cont’d) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 ANNUAL REPORT 2018 199 IJM CORPORATION BERHAD
  218. 200 ANNUAL REPORT 2018 IJM CORPORATION BERHAD – – (2,209) – 80,138 – – Sharebased payment Other reserve reserves RM’000 RM’000 Total RM’000 385,246 385,246 184,9576,281,511 Retained profits RM’000 6,074,349 24,346 19,983 7,369 – – 12 14(A) 14(A),(E) 14(A),(E) 14(C) – – – 12 At 31 March 2018 Issuance of shares: - Vesting of shares under ESGP - Exercise of ESOS - Shares held under trust Shares buy back Single tier second interim dividend: - Year ended 31 March 2017 Single tier first interim dividend: - Year ended 31 March 2018 Transactions with owners: Total comprehensive income for the financial year Issuance of ESOS and ESGP – – – – – – – – – (2,104) – – – (2,094) – – – – (1,521) – 9,864 (7,369) – – – – – 1,920 – – – – – – 4,129 – 85,048 (24,346) (6,513) – – – – – 35,769 – – – – – – – – – – 23,334 – (2,094) (108,848) (163,195) 389,375 35,769 298,1606,455,852 – – – – (108,848) (163,195) 385,246 – Currency translation differences arising from translation of foreign projects–– – – 4,129– – – 4,129 Other comprehensive income: – Financial Statements & others – 06 – Sustainability Statement Net profit for the financial year 05 Comprehensive income: Business Review & Reports (4,016) 04 (10) Summary Information for Shareholder – 03 At 1 April 2017 6,022,651 02 Non-distributable Distributable 01 Shares Exchange Share Share Treasury held under translation Note capital premium shares trust reserve The Company RM’000 RM’000 RM’000 RM’000 RM’000 STATEMENTS OF CHANGES IN EQUITY (cont’d) for the financial year ended 31 March 2018
  219. ANNUAL REPORT 2018 201 IJM CORPORATION BERHAD At 31 March 2017 Issuance of shares : - Vesting of shares under ESGP - Exercise of ESOS - Shares held under trust Shares buy back Transition to no-par value regime on 31 January 2017 6,022,651 2,395,511 14(A),(B) – – – (2,395,511) 16,198 17,841 12,393 – – – 8,289 15,311 18,735 – – 14(A),(B) 14(A),(B),(E) 14(A),(B),(E) 14(C) Single tier second interim dividend: - Year ended 31 March 2016 Single tier special dividend: - Year ended 31 March 2016 Single tier first interim dividend: - Year ended 31 March 2017 12 – – – – – – – Transactions with owners: – Total comprehensive income for the financial year Issuance of ESOS and ESGP – Currency translation differences arising from translation of foreign projects Other comprehensive income: Net profit for the financial year Comprehensive income: At 1 April 2016 3,584,805 2,349,079 (10) – – – – (7) – – – – – – – (3) (4,016) – – 30,924 (31,128) – – – – – – – – (3,812) 80,138 – (24,487) (12,884) – – – – – – 39,560 – – 77,949 – – – – – – – – – – – – – – Total RM’000 – – 51,192 – (7) (108,087) (107,975) (143,967) 255,270 39,560 (4,201) 259,471 184,9576,281,511 – – – – – (108,087) (107,975) (143,967) 259,471 – – 259,471 285,5156,295,525 Retained profits RM’000 Non-distributable Distributable Sharebased payment Other reserve reserves RM’000 RM’000 (2,209) – – – – – – – – (4,201) – (4,201) – 1,992 Shares Exchange Share Share Treasury held under translation Note capital premium shares trust reserve The Company (cont’d) RM’000 RM’000 RM’000 RM’000 RM’000
  220. CONSOLIDATED CASH FLOW STATEMENTS for the financial year ended 31 March 2018 Note 2018 RM ’000 2017 RM’000 OPERATING ACTIVITIES Receipts from customers 6,185,0356,559,858 Payments to contractors, suppliers and employees (5,084,466)(4,806,887) Income tax paid (226,422)(261,807) 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others Net cash flow from operating activities 874,147 1,491,164 INVESTING ACTIVITIES Acquisition of subsidiaries Investments in associates Additional investment in a joint venture Acquisition of financial assets at fair value through profit or loss Subscription of Redeemable Unsecured Murabahah Stocks in an associate Purchase of land held for property development Purchase of property, plant and equipment, land use rights and investment properties Cost incurred on concession assets Additions to plantation development expenditure Additions to port infrastructure 36 Quarry development expenditure incurred Disposal of property, plant and equipment, land use rights and investment properties Disposal of an associate Disposal of available-for-sale financial assets Disposal of financial assets at fair value through profit or loss Redemption of preference shares of an associate Proceeds from liquidation of an associate Dividends received from associates Dividends received from other investments Dividends received from a joint venture Income from unit trusts Interest received Advances to associates Repayments from associates Advances to joint ventures Repayments from joint ventures –(361) (51)(3,402) –(500) (787,392)(377,317) (27,100)(16,200) (159,725)(69,540) (541,863)(235,303) (43,899)(47,161) (21,164)(22,451) (425,579)(233,645) (2,710)(4,488) 8,17617,666 –79,678 –60 777,788498,497 1,0201,628 –62 35,10727,412 683510 58,000– 452483 87,45080,828 (68,986)– 17359 (63,971)(96,165) 7,49040,831 Net cash flow used in investing activities (1,166,257)(358,519) 202 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  221. Note 2018 RM ’000 2017 RM’000 FINANCING ACTIVITIES Issuance of shares by the Company: - Exercise of share options Issuance of shares by subsidiaries to non-controlling shareholders Drawdown of bonds Repayment of bonds Proceeds from bank borrowings Repayments of bank borrowings Repayment of government support loans Repayments to hire purchase and lease creditors Interest paid Dividends paid by subsidiaries to non-controlling shareholders Dividends paid by the Company 14(C) Re-purchase of treasury shares (Placement)/uplifting of restricted deposits Acquisition of additional interests in a subsidiary 23,33451,192 4205,900 –100,000 (30,000)(140,000) 880,340523,168 (604,349)(359,737) (34,000)(36,202) (709)(152) (248,635)(249,976) (29,844)(35,375) (272,043)(360,029) (2,094)(7) (5,125)45,326 (804)(44,445) Net cash flow used in financing activities (323,509) (500,337) NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS DURING THE FINANCIAL YEAR (615,619) 632,308 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR 2,077,331 1,423,749 FOREIGN EXCHANGE DIFFERENCES ON OPENING BALANCES (54,711) 21,274 1,407,001 2,077,331 CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR 49 Reconciliation of liabilities arising from financing activities: A reconciliation between the opening and closing balances in the balance sheets for liabilities arising from financing activities is as follows: * Borrowings RM’000 The Group: At 1 April 2017 5,992,436 Cash flow: Net drawdown of borrowings 211,282 Non-cash changes: (298,250) Foreign exchange movement Others9,378 At 31 March 2018 5,914,846 *Borrowings of the Group include bonds, term loans, government support loans, hire purchase and lease payables, other short term borrowings and advances from the State Government. 203 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  222. COMPANY CASH FLOW STATEMENTS for the financial year ended 31 March 2018 Note 2018 RM ’000 2017 RM’000 OPERATING ACTIVITIES 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others Receipts from customers Payments to contractors, suppliers and employees Income tax paid 73,95016,058 (72,602)(27,874) (13,215)(11,858) Net cash flow used in operating activities (11,867) (23,674) INVESTING ACTIVITIES Purchase of property, plant and equipment Disposal of property, plant and equipment Acquisition of financial assets at fair value through profit or loss Acquisition of shares in subsidiaries Acquisition of shares in an associate Proceeds from liquidation of an associate Disposal of financial assets at fair value through profit or loss Dividends received from subsidiaries Dividends received from associates Dividends received from other investments Interest received Repayments from subsidiaries Repayments from associates Repayments from joint ventures Advances to subsidiaries Advances to associates Advances to joint ventures Net cash flow (used in)/from investing activities (635)(850) 2133 (4,313)(51) (44,269)(30,932) –(3,321) –62 17020,370 439,527249,128 16,33617,300 536363 8,3307,493 479,835455,496 2352 144158 (1,088,138)(488,919) (3)(5) (75)(154) (192,551) 226,623 FINANCING ACTIVITIES Issuance of shares by the Company: - Exercise of share options Drawdown of bonds Proceeds from bank borrowings Repayments of bank borrowings Repayment to a subsidiary Interest paid Dividends paid by the Company 14(C) Re-purchase of treasury shares 23,33451,192 –100,000 574,994310,000 (75,000)(190,000) (95,491)– (81,277)(70,170) (272,043)(360,029) (2,094)(7) Net cash flow from/(used in) financing activities 72,423(159,014) 204 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  223. Note 2018 RM ’000 2017 RM’000 NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS DURING THE FINANCIAL YEAR (131,995) 43,935 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR 229,299 173,043 FOREIGN EXCHANGE DIFFERENCES ON OPENING BALANCES (11,988) 12,321 CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR 85,316 229,299 49 Reconciliation of liabilities arising from financing activities: A reconciliation between the opening and closing balances in the balance sheets for liabilities arising from financing activities is as follows: * Borrowings RM’000 Amount owing to a subsidiary RM’000 The Company: At 1 April 2017 1,686,940 948,028 499,994 – – (95,491) Cash flow: Net drawdown of borrowings Net repayment of balances Non-cash changes: Foreign exchange movement At 31 March 2018 (43,453) – 2,143,481852,537 *Borrowings of the Company include bonds, term loans and other short term borrowings. 205 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  224. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES for the financial year ended 31 March 2018 The following accounting policies have been applied consistently to all the years presented in dealing with items which are considered material in relation to the financial statements , unless otherwise stated. 01 1 BASIS OF PREPARATION The financial statements of the Group and the Company have been prepared in accordance with the Financial Reporting Standards (“FRS”) and the requirements of the Companies Act 2016 in Malaysia. The Group includes transitioning entities and has elected to continue to apply FRS during the financial year. The Group will be adopting the new IFRS-compliant framework, Malaysian Financial Reporting Standards (“MFRS”) for annual period beginning on 1 April 2018. In adopting the new framework, the Group will be applying MFRS 1 “First-time adoption of MFRS”. In presenting its first MFRS financial statements, the Group and the Company will be required to restate the comparative financial statements to amounts reflecting the application of MFRS Framework. Adjustments required on transition, if any, will be made retrospectively against opening retained earnings in accordance with MFRS 1 “First-time adoption of MFRS”. Based on the assessment performed, transitional adjustments required in accordance with MFRS 1 upon transitioning to the MFRS Framework will not have any material impact on the Group’s and the Company’s financial position, financial performance and cash flows, except for the optional exemption for fair value or previous revaluation as deemed cost. The Group as first time adopter may elect to use a previous GAAP revaluation of an item of property, plant and equipment at, or before, the date of transition to MFRSs as deemed cost. Any revaluation reserve arising from the revaluation at the date of transition is transferred to retained profits. The financial statements have been prepared under the historical cost convention, unless otherwise indicated in this summary of significant accounting policies. The preparation of financial statements in conformity with FRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. It also requires Management to exercise their judgement in the process of applying the Group’s and the Company’s accounting policies. Although these estimates and judgements are based on the Management’s best knowledge of current events and actions, actual results may differ from those estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 2 to the financial statements. The Group and the Company adopted the following Standards, Amendments and Annual interpretation to Standards. 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others (a) Amendments to published standards that are effective The amendments to published standards that are effective for the Group’s and the Company’s financial year beginning on 1 April 2017 and applicable to the Group and the Company are as follows: • Amendments to FRS 107 “Statement of Cash Flows” – “Disclosure Initiative” introduce an additional disclosure on changes in liabilities arising from financing activities. • Amendments to FRS 112 “Income Taxes” – “Recognition of Deferred Tax Assets for Unrealised Losses” clarify the requirements for recognising deferred tax assets on unrealised losses arising from deductible temporary differences on assets carried at fair value. In addition, in evaluating whether an entity will have sufficient taxable profits in future periods against which deductible temporary differences can be utilised, the amendments require an entity to compare the deductible temporary differences with future taxable profits that exclude tax deductions resulting from the reversal of those temporary differences. 206 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  225. 1 BASIS OF PREPARATION (cont’d) (a) Amendments to published standards that are effective (cont’d) The amendments to published standards that are effective for the Group’s and the Company’s financial year beginning on 1 April 2017 and applicable to the Group and the Company are as follows: (cont’d) • Annual improvements to FRSs 2014 – 2016 Cycle, which include Amendments to FRS 12 “Disclosure of Interests in Other Entities” The adoption of the Amendments to FRS 107 has required additional disclosure of changes in liabilities arising from financing activities. Other than that, the adoption of these amendments did not have any impact on the current financial year or any prior financial year and is not likely to affect future financial years. (b) Standards, amendments to published standards and interpretations that are applicable to the Group and the Company, but are not yet effective and have not been early adopted (i) The new standards, amendments to published standards and interpretation that are mandatory for the Group’s and the Company’s financial year beginning on 1 April 2018 and the Group and the Company have not early adopted are as follows*: • Amendments to MFRS 140 “Classification on ‘Change in Use’ – Assets transferred to, or from, Investment Properties” clarify that to transfer to, or from investment properties there must be a change in use. A change in use would involve an assessment of whether a property meets, or has ceased to meet, the definition of investment property. The change must be supported by evidence that the change in use has occurred and a change in management’s intention in isolation is not sufficient to support a transfer of property. The amendments clarify the same principle that applies to assets under construction. • IC Interpretation 22 “Foreign Currency Transactions and Advance Consideration” applies when an entity recognises a non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. MFRS 121 requires an entity to use the exchange rate at the “date of the transaction” to record foreign currency transactions. It provides guidance on how to determine “the date of transaction” when a single payment/receipt is made, as well as for situations where multiple payments/receipts are made. The date of transaction is the date when the payment or receipt of advance consideration gives rise to the non-monetary asset or non-monetary liability when the entity is no longer exposed to foreign exchange risk. If there are multiple payments or receipts in advance, the entity should determine the date of the transaction for each payment or receipt. The Group will apply IC Interpretation 22 prospectively. • MFRS 9 “Financial Instruments” MFRS 9 “Financial Instruments” will replace MFRS 139 “Financial Instruments: Recognition and Measurement”. MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss (“FVTPL”) and fair value through other comprehensive income (“OCI”). The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are always measured at fair value through profit or loss with an irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. 207 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  226. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d) for the financial year ended 31 March 2018 1 BASIS OF PREPARATION (cont’d) (b) Standards, amendments to published standards and interpretations that are applicable to the Group and the Company, but are not yet effective and have not been early adopted (cont’d) (i) 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others The new standards, amendments to published standards and interpretation that are mandatory for the Group’s and the Company’s financial year beginning on 1 April 2018 and the Group and the Company have not early adopted are as follows*: (cont’d) • MFRS 9 “Financial Instruments” (cont’d) For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main changes are that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income and; when a financial liability measured at amortised cost is modified without resulting in derecognition, a gain or loss, being the difference between the original contractual cash flows and the modified cash flows discounted at the original effective interest rate, should be recognised immediately in profit or loss. MFRS 9 introduces an expected credit loss model on impairment that replaces the incurred loss impairment model used in FRS 139. The expected credit loss model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. The Group has reviewed the classification and measurement of its financial assets and liabilities and is expecting the following impact from the adoption of the new standard from 1 April 2018. Classification and measurement (a) Unquoted investments currently classified as available-for sale (“AFS”) financial assets The Group’s financial instruments currently classified as AFS will satisfy the conditions for classification as financial assets at fair value through OCI as these investments are held for long term purposes and are not held for trading. The Group will elect to present these financial instruments as financial assets at fair value through OCI. These investments of which their fair values cannot be measured reliably are currently measured at cost less impairment. (b) The other financial assets held by the Group as below will continue to be measured on the same basis under MFRS 9: - Quoted investments and derivative financial instruments currently measured as financial assets at FVTPL - Financial assets currently classified as loans and receivables at amortised cost. (c) There will be no impact on the Group’s accounting for financial liabilities, as the new requirement only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities. The derecognition rules have been transferred from FRS 139 “Financial Instruments: Recognition and Measurement” and have not been changed. Accordingly, the Group does not expect the new standard to affect the classification and measurement of these financial assets. However, gains or losses arising from the disposal of financial assets at fair value through OCI will no longer be transferred to profit or loss, but instead be reclassified below the line from the fair value through OCI reserve to retained profits. 208 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  227. 1 BASIS OF PREPARATION (cont’d) (b) Standards, amendments to published standards and interpretations that are applicable to the Group and the Company, but are not yet effective and have not been early adopted (cont’d) (i) The new standards, amendments to published standards and interpretation that are mandatory for the Group’s and the Company’s financial year beginning on 1 April 2018 and the Group and the Company have not early adopted are as follows*: (cont’d) • MFRS 9 “Financial Instruments” (cont’d) Impairment The new impairment model requires the recognition of impairment provisions based on an expected credit loss model (“ECL”) rather than only incurred credit losses as is the case under FRS 139. It applies to financial assets classified at amortised cost, trade receivables and lease receivables. Based on our group’s preliminary assessment undertaken to date, the Group does not expect any significant impact arising from adopting the ECL model under MFRS 9. MFRS 9 also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature and extent of the Group’s disclosures about its financial instruments particularly in the year of adoption of the new standard. The Group will apply the new rules retrospectively from 1 April 2018, with the short term exemptions permitted under MFRS 1 and that comparatives for 2018 will not be restated. • MFRS 15 “Revenue from Contracts with Customers” MFRS 15 “Revenue from contracts with customers” replaces MFRS 118 “Revenue”, MFRS 111 “Construction Contracts” and related interpretations. It deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. Transfer of control is not the same as transfer of risks and rewards as currently considered for revenue recognition. A company would recognise revenue when (or as) it satisfies a performance obligation by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). A performance obligation may be satisfied at a point in time (typically for promises to transfer goods to a customer) or over time (typically for promises to transfer services to a customer). Extensive disclosures are required to provide greater insight into both revenue that has been recognised, and revenue that is expected to be recognised in the future from existing contracts. Significant management judgments and changes in those judgments that management made to determine revenue are also required to be disclosed. The group has assessed the effects of applying the new revenue standard on the Group’s financial statements and based on the analysis of the recognition of various revenue sources, no significant differences with existing accounting principles were identified except for the following: Accounting for separate performance obligations arising from the sale of properties The application of MFRS 15 resulted in the identification of various separate performance obligations which previously had been bundled as a sale of property. The performance obligation is separated if the performance obligation is capable of being distinct and if they are distinct within the context of the contract. Among the performance obligations to be identified separately are goods, common facilities, free maintenance fees, legal and stamp duties paid on behalf of house buyers. Revenue will then be allocated to the respective performance obligations and recognised when controls in relation to the performance obligations have been transferred. This could affect the timing of the recognition of revenue going forward. 209 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  228. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d) for the financial year ended 31 March 2018 1 BASIS OF PREPARATION (cont’d) (b) Standards, amendments to published standards and interpretations that are applicable to the Group and the Company, but are not yet effective and have not been early adopted (cont’d) (i) 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others The new standards, amendments to published standards and interpretation that are mandatory for the Group’s and the Company’s financial year beginning on 1 April 2018 and the Group and the Company have not early adopted are as follows*: (cont’d) • MFRS 15 “Revenue from Contracts with Customers” (cont’d) Determining the transaction price In determining the transaction price, the Group assesses the estimated transaction price based on the most likely amount, constrained up to the amount that is highly probable that would not reverse in the future. Timing of recognition for the sales of properties Revenue from property development is recognised as and when the control of the asset is transferred to the customer and it is probable that the Group will collect the consideration to which it will be entitled in exchange for the asset that will be transferred to the customer. Control of the asset may transfer over time or at a point in time. For properties sold in accordance with the Housing Development (Control and Licensing) Act 1966 (“HDA”), control of the asset is transferred over time as the Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date. Therefore revenue from sale of properties under HDA, without a secured financing arrangement is recognised when it is probable that the Group will collect the consideration of the sale of the property to which it is entitled. Sale of properties that is not governed under HDA, will be assessed on a contract by contract basis, to establish the Group’s enforceable right to payment for performance completed to date. Accounting for the obligation to develop affordable housing on involuntary basis FRSIC Consensus 17 “Development of Affordable Housing” requires upfront recognition of provision for foreseeable losses on the development of affordable housing on an involuntary basis when a developer meets certain conditions. However, MFRS 15 requires accounting to be done on a contract basis and hence, the principles used in FRSIC Consensus 17 is no longer relevant. Accounting for incremental costs of obtaining a contract The Group’s existing accounting policy is to expense off costs in obtaining a contract, which mainly include legal fees and sales commissions, to obtain the contracts. Under MFRS 15, these costs are recognised as an asset as the Group expects to recover those costs. Classification of land held for property development and property development costs Upon withdrawal of FRS 201, Property Development Activities, land held for property development and property development costs will be reclassified as inventories as these assets are in the process of production for sale. These inventories will be carried at the lower of cost or net realisable value. Presentation of contract assets and contract liabilities in the balance sheet 210 ANNUAL REPORT 2018 IJM CORPORATION BERHAD MFRS 15 requires separate presentation of contract assets and contract liabilities in the balance sheet. This will result in some reclassifications as of 1 April 2018, as they are currently included in other balance sheet line items. Contract assets identified are mainly the right to consideration for goods or services transferred to the customers. In the case of property development and construction contracts, contract asset is the excess of cumulative revenue earned over cumulative billings to-date and contract liability is the obligation to transfer goods or services to the customers for which the Group or the Company has received the consideration or has billed the customers.
  229. 1 BASIS OF PREPARATION (cont’d) (b) Standards, amendments to published standards and interpretations that are applicable to the Group and the Company, but are not yet effective and have not been early adopted (cont’d) (i) The new standards, amendments to published standards and interpretation that are mandatory for the Group’s and the Company’s financial year beginning on 1 April 2018 and the Group and the Company have not early adopted are as follows*: (cont’d) • MFRS 15 “Revenue from Contracts with Customers” (cont’d) The Group has conducted a preliminary assessment on the different types of existing contracts with customers and the impact is still being assessed. The Group anticipates more extensive disclosures will be required from the year of adoption in view of the requirements of MFRS 15 to provide information about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Group will adopt the standard retrospectively and will restate the comparatives for the financial year ended 31 March 2018. • Amendments to MFRS 116 “Property, Plant and Equipment” and MFRS 141 “Agriculture: Bearer Plants” introduce a new category of biological assets i.e. bearer plants. A bearer plant is a living plant that is used in the production and supply of agricultural produce, is expected to bear produce for more than one period, and has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales. Bearer plants are accounted for under MFRS 116 as an item of property, plant and equipment. Agricultural produce growing on bearer plants continue to be measured at fair value less costs to sell under MFRS 141, with fair value changes recognised in profit or loss as the produce grows. Currently, all new planting expenditure incurred from land clearing, planting, field upkeep and maintenance to the point of maturity is capitalised under plantation development expenditure and is not amortised. Replanting expenditure which represents cost incurred in replanting old planted areas, is charged to profit or loss when incurred. Agricultural produce, which form part of the bearer plants are not recognised and identified separately. With the adoption of the Amendments to MFRS 116 and MFRS 141, bearer plants are classified as property, plant and equipment. New planting expenditure and replanting expenditure are also accounted for as property, plant and equipment in accordance with MFRS 116 and measured at cost and depreciated on a straight line basis over its useful life from the date of maturity. The adoption of the amendments to MFRS 116 and MFRS 141 will result in additional depreciation charge on property, plant and equipment and replanting expenditure that is currently charged to profit or loss which will be reversed and capitalised under property, plant and equipment. The agriculture produce which is measured at fair value will be recognised on the Balance Sheet upon the adoption of the amendments. Subsequent changes on fair value less costs to sell of the agriculture produce will be recognised in profit or loss. The Group will adopt the standard retrospectively and will restate the comparatives for the financial year ended 31 March 2018. 211 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  230. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d) for the financial year ended 31 March 2018 1 BASIS OF PREPARATION (cont’d) (b) Standards, amendments to published standards and interpretations that are applicable to the Group and the Company, but are not yet effective and have not been early adopted (cont’d) (ii) The new standard and interpretation that are mandatory for the Group’s and the Company’s financial year beginning on 1 April 2019 and the Group and the Company have not early adopted are as follows*: 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others • MFRS 16 “Leases” supersedes MFRS 117 “Leases” and the related interpretations. Under MFRS 16, a lease is a contract (or part of a contract) that conveys the right to control the use of an identified asset for a period of time in exchange for consideration. MFRS 16 eliminates the classification of leases by the lessee as either finance leases (on balance sheet) or operating leases (off balance sheet). MFRS 16 requires a lessee to recognise a “right-of-use” of the underlying asset and a lease liability reflecting future lease payments for most leases. The right-of-use asset is depreciated in accordance with the principle in MFRS 116 “Property, Plant and Equipment” and the lease liability is accreted over time with interest expense recognised in the income statement. For lessors, MFRS 16 retains most of the requirements in MFRS 117. Lessors continue to classify all leases as either operating leases or finance leases, and account for them differently. MFRS 16 is likely to have a significant impact on lessees that have significant number of off balance sheet operating leases under MFRS 117. • Amendments to MFRS 128 “Long term interests in Associates and Joint Ventures” clarify that an entity should apply MFRS 9 “Financial Instruments” (including the impairment requirements) to long term interests in an associate or joint venture, which in substance form part of the entity’s net investment, for which settlement is neither planned nor likely to occur in the foreseeable future. In addition, such long term interests are subject to loss allocation and impairment requirements in MFRS 128. The amendments shall be applied retrospectively. • Amendments to MFRS 123 “Borrowing Costs” clarify that if a specific borrowing remains outstanding after the related qualifying asset is ready for its intended use or sale, it becomes part of general borrowings. • IC Interpretation 23 “Uncertainty over income tax treatments” provides guidance on how to recognise and measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment. If an entity concludes that it is not probable that the tax treatment will be accepted by the tax authority, the effect of the tax uncertainty should be included in the period when such determination is made. An entity shall measure the effect of uncertainty using the method which best predicts the resolution of the uncertainty. *These new standards, amendments to published standards and interpretation will be adopted on the respective effective dates upon the adoption of the MFRS framework. The Group and the Company have started a preliminary assessment on the effects of the above new standards, amendments to published standards and interpretation and the impact is still being assessed. 212 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  231. 2 ECONOMIC ENTITIES IN THE GROUP (a)Subsidiaries Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the relevant activities of the entity. The existence and effect of potential voting rights are considered when assessing whether the Group controls another entity. In assessing whether potential voting rights contribute to control, the Group examines all facts and circumstances (including the terms of exercise of the potential voting rights and any other contractual arrangements whether considered individually or in combination) that affect potential voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are deconsolidated from the date that control ceases. Subsidiaries are consolidated using the acquisition method of accounting, except for business combinations involving entities or businesses under common control, which are accounted for using the predecessor basis of accounting. Under the acquisition method of accounting, the consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement and fair value of any pre-existing equity interest in the subsidiary. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the date of acquisition. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recognised as goodwill – See accounting policy 3 on goodwill. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in profit or loss. If the business combination is achieved in stages, the carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the subsequent acquisition dates, any gains or losses arising from such remeasurement are recognised in profit or loss. Under the predecessor basis of accounting, assets and liabilities acquired are not restated to their respective fair values but at the carrying amounts in the consolidated financial statements of the ultimate holding company of the Group and adjusted to ensure uniform accounting policies of the Group. The difference between any consideration given and the aggregate carrying amounts of the assets and liabilities (as of the date of transaction) of the acquired entity is recognised as an adjustment to equity. No additional goodwill is recognised. The acquired entity’s results, assets and liabilities are consolidated as if both the acquirer and the acquiree had always been combined. Consequently, the consolidated financial statements reflect both entities’ full year’s results. The comparative information is restated to reflect the combined results of both entities. Non-controlling interest represents that portion of profit or loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the Company. It is measured on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets at the date of acquisition and the non-controlling interests’ share of changes in the subsidiaries’ equity since that date. All earnings and losses of the subsidiary are attributed to the owners of the Company and the non-controlling interests, even if the attribution of losses to the non-controlling interests results in a debit balance in the total equity. 213 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  232. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d) for the financial year ended 31 March 2018 2 ECONOMIC ENTITIES IN THE GROUP (cont’d) (a)Subsidiaries (cont’d) 01 02 All inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated except for contracted finished goods which are stated at net realisable value. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group. 03 Summary Information for Shareholder (b) Changes in ownership interests in subsidiaries without change of control 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others Transactions with non-controlling interests that do not result in loss of control are accounted for as transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in equity attributable to owners of the Group. (c) Disposal of subsidiaries When the Group ceases to consolidate because of a loss of control, any retained interest in the entity is re-measured to its fair value, with the change in carrying amount recognised in profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets and liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. Gains or losses on the disposal of subsidiaries include the carrying amount of goodwill relating to the subsidiaries sold. (d)Associates 214 ANNUAL REPORT 2018 IJM CORPORATION BERHAD Associates are all entities over which the Group has significant influence but not control or joint control, generally accompanying a shareholding of between 20% and 50% of the voting rights. The existence and the effect of potential voting rights are considered when assessing whether the group exercises significant influence over another entity. Significant influence is the power to participate in the financial and operating policy decisions of the associates but not the power to exercise control over those policies. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and adjusted thereafter to recognise the investor’s share of the profit or loss of the associate in profit or loss, and the Group’s share of movements in other comprehensive income of the associate in other comprehensive income. Dividends received or receivable from an associate are recognised as a reduction in the carrying amount of the investment. The Group’s investment in associates includes goodwill identified on acquisition. The Group’s share of its associates’ post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in reserves is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interests in the associate, including any long-term interests that, in substance, form part of the Group’s net investment in the associate, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. An impairment is recognised for the amount by which the carrying amount of the associate exceeds its recoverable amount and recognises the amount as a separate line item in profit or loss.
  233. 2 ECONOMIC ENTITIES IN THE GROUP (cont’d) (d)Associates (cont’d) Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Where necessary, in applying the equity method, adjustments are made to the financial statements of associates to ensure consistency of accounting policies with those of the Group. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate. For incremental interest in an associate when significant influence is retained, the date of acquisition is the purchase date at each stage and goodwill is calculated at each purchase date based on the fair value of assets and liabilities identified. The previously held interest is not re-measured. Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair value. The fair value of the retained interest shall be regarded as its fair value on initial recognition as a financial asset. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. (e) Joint arrangements A joint arrangement is an arrangement of which there is contractually agreed sharing of control by the Group with one or more parties, where decisions about the relevant activities relating to the joint arrangement require unanimous consent of the parties sharing control. The classification of a joint arrangement as a joint operation or a joint venture depends upon the rights and obligations of the parties to the arrangement. A joint venture is a joint arrangement whereby the joint venturers have rights to the net assets of the arrangement. A joint operation is a joint arrangement whereby the joint operators have rights to the assets and obligations for the liabilities, relating to the arrangement. (i) Joint ventures The Group’s interest in a joint venture is accounted for in the financial statements by the equity method of accounting. Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses of the joint venture in profit or loss, and the Group’s share of movements in other comprehensive income of the joint venture in other comprehensive income. Dividends received or receivable from a joint venture are recognised as a reduction in the carrying amount of the investment. When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in substance, form part of the Group’s net investment in the joint ventures), the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures. The Group determines at each reporting date whether there is any objective evidence that the investment in the joint venture is impaired. An impairment is recognised for the amount by which the carrying amount of the joint venture exceeds its recoverable amount and recognises the amount as a separate line item in profit or loss. Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the assets transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group. 215 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  234. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d) for the financial year ended 31 March 2018 2 ECONOMIC ENTITIES IN THE GROUP (cont’d) (e) Joint arrangements (cont’d) 01 (i) Joint ventures (cont’d) When the Group ceases to equity account its joint venture because of a loss of joint control, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate or financial asset. In addition, any amount previously recognised in other comprehensive income in respect of the entity is accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. If the ownership interest in a joint venture is reduced but joint control is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate. 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others (ii) Joint operations In relation to the Group’s interest in the joint operations, the Group recognises its direct right to the assets, liabilities, revenues and expenses of joint operations and its share of any jointly held or incurred assets, liabilities, revenues and expenses. These have been incorporated in the financial statements under the appropriate headings. 3GOODWILL Goodwill arises from a business combination and represents the excess of the aggregate of fair value of consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of any previously held equity interest in the acquiree over the fair value of the net identifiable assets acquired and liabilities assumed on the acquisition date. If the fair value of consideration transferred, the amount of non-controlling interest and the fair value of previously held interest in the acquiree are less than the fair value of the net identifiable assets of the acquiree, the resulting gain is recognised in profit or loss. Goodwill on acquisition of subsidiaries is included in the balance sheet as intangible assets. Goodwill is not amortised but it is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and carried at cost less accumulated impairment. Any impairment is recognised immediately as an expense and is not subsequently reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units (“CGUs”), or groups of CGUs, that is expected to benefit from the synergies of the business combination in which the goodwill arose. The Group allocates goodwill to each business segment in each country in which it operates. See accounting policy 25 on impairment of non-financial assets. Goodwill on acquisitions of joint ventures and associates is included in investments in joint ventures and associates respectively. Such goodwill is tested for impairment as part of the total carrying value. 4INVESTMENTS 216 ANNUAL REPORT 2018 IJM CORPORATION BERHAD In the Company’s separate financial statements, investments in subsidiaries, joint ventures and associates are carried at cost less accumulated impairment. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. See accounting policy 25 on impairment of non-financial assets. On disposal of investments in subsidiaries, joint ventures and associates, the difference between disposal proceeds and the carrying amounts of the investments are recognised in profit or loss.
  235. 4INVESTMENTS (cont’d) Long term investments are classified as available-for-sale financial assets. These are initially measured at fair value plus transaction costs and subsequently, at fair value except for investment in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured. These are measured at cost and are included in non-current assets unless management intends to dispose of the investment within 12 months of the reporting date. Changes in fair values of available-for-sale equity securities are recognised in other comprehensive income. A significant or prolonged decline in the fair value of the investment below its cost is considered as an indicator that the asset is impaired. See accounting policy 22(d)(ii) on impairment of available-for-sale financial assets. Short term investments in marketable securities are classified as financial assets at fair value through profit or loss and measured at fair value on the date a transaction is entered into and are subsequently re-measured at fair value with changes in fair value recognised in profit or loss. Market value is calculated by reference to stock exchange quoted selling prices at the close of business on the balance sheet date. On disposal of an investment, the difference between net disposal proceeds and its fair value is recognised in profit or loss. 5FOREIGN CURRENCIES (a)Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The financial statements are presented in Ringgit Malaysia, which is the Company’s functional and presentation currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss, except that exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs are classified as borrowing costs. Exchange differences are deferred in other comprehensive income when they are attributable to items that form part of the net investment in a foreign operation. (c) Group companies The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • Assets and liabilities for each balance sheet presented are translated at the closing rates at the date of that balance sheet; • Income and expenses for each statement of comprehensive income presented are translated at the average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rates on the dates of the transactions); and • All resulting exchange differences are recognised as a separate component of other comprehensive income. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the closing rate at the date of the balance sheet. Exchange differences arising are recognised in other comprehensive income. 217 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  236. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d) for the financial year ended 31 March 2018 5FOREIGN CURRENCIES (cont’d) (c) Group companies (cont’d) 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others 218 ANNUAL REPORT 2018 IJM CORPORATION BERHAD On consolidation, exchange differences arising from the translation of any net investment in foreign operations are recognised in other comprehensive income. On the disposal of a foreign operation (that is, a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a joint venture that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences relating to that foreign operation recognised in other comprehensive income and accumulated in the separate component of equity are reclassified to profit or loss, as part of the gain or loss on disposal. In the case of a partial disposal that does not result in the Group losing control over a subsidiary that includes a foreign operation, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (that is, reductions in the Group’s ownership interest in associates or joint ventures that do not result in the Group losing significant influence or joint control) the proportionate share of the accumulated exchange difference is reclassified to profit or loss. 6 PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION All property, plant and equipment are stated at cost or at valuation less accumulated depreciation and accumulated impairment except for freehold land and capital work-in-progress which are not depreciated. Freehold land is not depreciated as it has an infinite life. Depreciation on capital work-in-progress commences when the assets are ready for their intended use. The cost is net of the amount of goods and services tax (“GST”), except where the amount of GST incurred is not recoverable from the government. When the amount of GST incurred is not recoverable from the government, the GST is recognised as part of the cost of acquisition of the property, plant and equipment. The cost of an item of property, plant and equipment initially recognised includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Cost also includes borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance costs are recognised as expenses in profit or loss during the financial year in which they are incurred. Hotel properties comprise leasehold land, hotel buildings and related fixed plant and equipment. Hotel properties are initially stated at cost and are subsequently revalued periodically by independent professional valuers at an interval not exceeding 5 years with additional revaluations in the intervening years where market conditions indicate that the carrying values of the revalued properties materially differ from the market values. The Group amortises plantation infrastructure in equal annual instalments over the period of the respective leases ranging from 21 to 81 years. Leasehold lands classified as finance leases are amortised in equal instalments over the period of the respective leases that range from 60 to 883 years. Other property, plant and equipment are depreciated on a straight-line basis to write-off the cost of the assets, or their revalued amounts, to their residual values over their estimated useful lives. The annual rates of depreciation are: Buildings, including hotel properties Plant, machinery, equipment and vehicles Office equipment, furniture and fittings and renovations Other than hotel properties, the Directors have applied the transitional provisions of International Accounting Standard (“IAS”) 16 “Property, Plant and Equipment”, which have been adopted by the Malaysian Accounting Standards Board (“MASB”), which allows for the assets to be stated at their last revalued amounts less accumulated depreciation and accumulated impairment. Accordingly, these valuations have not been updated. 2 to 10.0% 4 to 33.3% 5 to 33.3%
  237. 6 PROPERTY , PLANT AND EQUIPMENT AND DEPRECIATION (cont’d) When an asset’s carrying amount is increased as a result of a revaluation, the increase is recognised in other comprehensive income as a revaluation surplus reserve. When the asset’s carrying amount is decreased as a result of a revaluation, the decrease is recognised in other comprehensive income to the extent of any credit balance existing in the revaluation surplus reserve of that asset; all other decreases are recognised in profit or loss. Each year, the difference between depreciation based on the revalued carrying amount of the asset charged to profit or loss and depreciation based on the asset’s original cost, net of tax, is reclassified from the property, plant and equipment revaluation surplus to retained earnings. The residual values and useful lives of property, plant and equipment are reviewed, and adjusted as appropriate, at each balance sheet date. The effects of any revision of the residual values and useful lives are included in profit or loss for the financial year in which the changes arise. At each balance sheet date, the Group assesses whether there is any indication of impairment. Where an indication of impairment exists, the carrying value of the asset is assessed and written down immediately to its recoverable amount. See accounting policy 25 on impairment of non-financial assets. Gains and losses on disposals are determined by comparing proceeds with carrying amounts and are included in profit or loss. On disposal of revalued assets, amounts in the revaluation reserve relating to those assets are transferred to retained earnings. Where applicable, the fair values of property, plant and equipment at the date of acquisition of subsidiaries is carried forward in place of cost. 7 INVESTMENT PROPERTIES Investment properties, comprising principally land and buildings, are held for long term rental yields or for capital appreciation or both, and are not occupied by the Group. Investment property is measured initially at its cost, including related transaction costs and borrowing costs if the investment property meets the definition of a qualifying asset. After initial recognition, investment property is stated at cost less accumulated depreciation and accumulated impairment. Freehold land is not depreciated as it has an infinite life. Leasehold land is amortised on a straight line basis over the respective lease periods between 15 and 99 years. Depreciation on buildings is calculated so as to write off the cost of the assets less residual values on a straight-line basis over the expected useful lives. The annual depreciation rate for buildings is 2%. Subsequent expenditure is capitalised to the asset’s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised. Investment property is derecognised either when it has been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount is recognised in profit or loss in the period of the retirement or disposal. At each balance sheet date, the Group assesses whether there is any indication of impairment. Where an indication of impairment exists, the carrying value of the asset is assessed and written down immediately to its recoverable amount. See accounting policy 25 on impairment of non-financial assets. 219 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  238. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d) for the financial year ended 31 March 2018 8 CONCESSION ASSETS Items classified as concession assets comprise expressway development expenditure and port infrastructure. (a) Expressway development expenditure 01 Expressway Development Expenditure (“EDE”) comprises the costs of construction (inclusive of the cost of reconstruction, widening and rehabilitation) of the concession assets. EDE is measured at cost less accumulated amortisation and accumulated impairment. Where the Group provides construction services in exchange for the concession assets, the revenue and profits relating to the construction services are recognised in accordance with accounting policy 9(a) on revenue and profit recognition for construction contracts. Upon completion of the construction works and commencement of road tolling operations, the EDE are amortised over the concession periods based on the following formula: Cumulative traffic volume to-date Projected total traffic volume for the entire concession period The projected total traffic volume for the entire concession period is determined by a traffic survey carried out by a firm of independent traffic consultants and Directors’ annual re-assessment of the projected total traffic volume. All interest and fees incurred during the period of construction are capitalised in the EDE which in turn are amortised in profit or loss in accordance with the formula above. Interest and fees incurred after the completion of construction are charged to profit or loss. Compensation received relating to variations in terms of concession agreements are recognised as deferred income and are credited to profit or loss over the expected lives of the related assets, on bases consistent with amortisation of the related assets. 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others X EDE (b) Port infrastructure 220 ANNUAL REPORT 2018 IJM CORPORATION BERHAD Port infrastructure consists of buildings, berths, storage facilities and inner harbour basins. It is stated at cost less accumulated amortisation and accumulated impairment. The cost of port infrastructure is amortised on a straight-line basis over the concession period. At each balance sheet date, the Group assesses whether there is any indication of impairment. Where an indication of impairment exists, the carrying value of the asset is assessed and written down immediately to its recoverable amount. See accounting policy 25 on impairment of non-financial assets. 9 REVENUE AND PROFIT RECOGNITION Revenue is measured at the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of goods and services tax and discounts and after eliminating sales within the Group. The Group recognises revenue when the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the entity as well as specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.
  239. 9 REVENUE AND PROFIT RECOGNITION (cont’d) (a) Construction contracts A construction contract is a contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and functions or their ultimate purpose or use. When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associated with the construction contract are recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the balance sheet date. The stage of completion of a construction contract is determined based on the proportion that the contract costs incurred for work performed to-date bear to the estimated total costs for the contract. Costs incurred during the financial year in connection with future activity on a contract are excluded from costs incurred to-date when determining the stage of completion of a contract. Such costs are shown as amounts due from/(to) customers on construction contracts within trade and other receivables on the balance sheet unless it is not probable that such contract costs are recoverable from the customers, in which case such costs are recognised as an expense immediately. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that is probable will be recoverable. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. Contract revenue comprises the initial amount of revenue agreed in the contract and variations in the contract work and claims that can be measured reliably. A variation or a claim is only included in contract revenue when it is probable that the customer will approve the variation or negotiations have reached an advanced stage such that it is probable that the customer will accept the claim. (b) Property development activities When the outcome of the development activity can be estimated reliably and the sale of the development unit is effected, property development revenue and costs are recognised as revenue and expenses respectively by reference to the stage of completion of development activity at the balance sheet date. The stage of completion is determined based on the proportion that the property development costs incurred to-date bear to the estimated total costs for the property development. When the outcome of a development activity cannot be estimated reliably, property development revenue is recognised only to the extent of property development costs incurred that is probable to be recoverable and the property development costs on the development units sold are recognised as an expense when incurred. Irrespective of whether the outcome of a property development activity can be estimated reliably, when it is probable that total property development costs will exceed total property development revenue, the expected loss is recognised as an expense in the period in which the loss is identified. (c) Sale of goods Sales are recognised upon delivery of products and customer acceptance, and performance of after-sales services, if any, net of goods and services tax (“GST”) or sales tax and discounts and after eliminating sales within the Group. 221 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  240. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d) for the financial year ended 31 March 2018 9 REVENUE AND PROFIT RECOGNITION (cont’d) (d) Concession revenue Concession revenue from the operation of toll roads and port operations is recognised as and when the services are performed. Pursuant to the relevant Concession Agreements, the Government of Malaysia reserves the right to restructure or to restrict the imposition of unit toll rate increases, and in such event, the Government shall compensate for any reduction in toll revenue, subject to negotiation and other considerations that the Government may deem fit. Toll compensation is recognised in profit or loss over the period in which the compensation relates to based on the arrangements as disclosed in Note 30 to the financial statements. 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others (e) Hotel and club operations revenue Hotel revenue represents income derived from room rentals, sales of food and beverage and other hotel related income. Room rental income is accrued on a daily basis on customer-occupied rooms. Sales of food and beverage are recognised upon delivery to customers. Hotel revenue is recognised net of GST and discounts. Revenue from clubhouse operations represents income derived from membership subscription fees and sales of services. Membership subscription fees are recognised on an accrual basis as and when they are due. Revenue from sales of services is recognised upon performance of services. (f) Other revenue Dividend income is recognised when the Group’s right to receive payment is established. Interest income is recognised using the effective interest method, taking into account the principal outstanding and the effective rate over the period to maturity, unless collectibility is in doubt, in which case it is recognised on a cash receipt basis. When a loan and receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans and receivables are recognised using the original effective interest rate. Rental income is recognised on an accrual basis unless collectibility is in doubt, in which case the recognition of such income is suspended. Revenue from management services is recognised upon performance of services. 10 BORROWINGS AND BORROWING COSTS 222 ANNUAL REPORT 2018 IJM CORPORATION BERHAD Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the initial recognised amount and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method, except for borrowing costs incurred for the acquisition, construction or production of any qualifying assets. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.
  241. 10 BORROWINGS AND BORROWING COSTS (cont’d) General and specific borrowing costs, including exchange differences to the extent that they are regarded as an adjustment to interest costs, directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Borrowing costs incurred on borrowings directly associated with property development activities and construction contracts up to completion are capitalised and included as part of property development costs and construction contract costs. Borrowing costs incurred on borrowings to finance the plantation expenditure, construction of concession assets and property, plant and equipment during the period that is required to complete and prepare the asset for its intended use are capitalised as part of the cost of the asset. All other borrowing costs are charged to profit or loss in the period in which they are incurred. 11 LAND HELD FOR PROPERTY DEVELOPMENT AND PROPERTY DEVELOPMENT COSTS Land held for property development consists of land held for future development where no significant development work has been undertaken or where development activities are not expected to be completed within the normal operating cycle. Such land is classified as non-current asset and is stated at cost or at valuation less accumulated impairment. Land held for property development is transferred to property development costs (under current assets) when development activities, including activities associated with obtaining approvals prior to commencement of physical development, have commenced and the development is expected to be completed within the normal operating cycle. Costs associated with the acquisition of land includes the purchase price of the land, professional fees, stamp duties, commissions, conversion fees and other relevant levies. Where the Group had previously recorded the land at revalued amount, it continues to retain this amount as its deemed cost as allowed by FRS 2012004 on “Property Development Activities”. Where an indication of impairment exists, the carrying amount of the asset is assessed and written down immediately to its recoverable amount. See accounting policy 25 on impairment of non-financial assets. Property development costs comprise costs associated with the acquisition of land and all costs directly attributable to development activities or that can be allocated on a reasonable basis to these activities. Property development costs not recognised as an expense are recognised as an asset and are stated at the lower of cost and net realisable value. Cost includes cost of land, all direct building costs, and other related development expenditure, including interest expenses incurred during the period of active development. Where revenue recognised in profit or loss exceeds billings to purchasers, the balance is shown as accrued billings under trade and other receivables (within current assets). Where billings to purchasers exceed revenue recognised in profit or loss, the balance is shown as progress billings under trade and other payables (within current liabilities). Where applicable, the fair value of land at the date of acquisition of subsidiaries is carried forward in place of cost. 223 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  242. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d) for the financial year ended 31 March 2018 12INVENTORIES (a) Completed buildings, vacant industrial and bungalow lots Units of completed development properties, vacant industrial and bungalow lots held for sale are stated at the lower of cost and net realisable value. The cost comprises proportionate cost of land and related development and construction expenditure. Where applicable, the fair value of completed buildings at the date of acquisition of subsidiaries is carried forward in place of cost. 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others (b)Finished goods, quarry and manufactured products, raw materials, construction materials, crude palm oil, crude palm kernel oil, palm kernel expellers, stores and spares Inventories are stated at the lower of cost and net realisable value, other than contracted crude palm oil, crude palm kernel oil and palm kernel expellers which are stated at net realisable value. Cost is determined on a weighted average basis. The costs of raw materials, oil palm nurseries, stores and spares comprise the original cost of purchase plus the cost of bringing the inventories to their present location and for finished goods and quarry products, it consists of direct materials, direct labour, direct charges and production overheads. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and applicable variable selling expenses. 13 AMOUNTS DUE FROM/(TO) CUSTOMERS ON CONSTRUCTION CONTRACTS Where the amounts of construction contract costs incurred plus recognised profits (less recognised losses) exceed progress billings, the net balance is shown as amounts due from customers on construction contracts under trade and other receivables. Where the progress billings exceed the sum of construction contract costs incurred and recognised profits (less recognised losses), the net balance is shown as amounts due to customers on construction contracts under trade and other payables. 14 TRADE AND OTHER RECEIVABLES (a) Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business and include retention monies withheld by principals. Other receivables generally arise from transactions outside the usual operating activities of the Group. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Trade and other receivables are recognised initially at fair value. After recognition, trade and other receivables are subsequently measured at amortised cost using the effective interest method, less provision for impairment (see accounting policy 22(d) on impairment of financial assets). (b) Advances for plasma schemes represent accumulated plantation development cost including borrowing costs and indirect overheads less repayments to date and provisions for impairment, which are recoverable from plasma farmers (see accounting policy 22(d) on impairment of financial assets). 224 ANNUAL REPORT 2018 IJM CORPORATION BERHAD In the event the Group provides a corporate guarantee to the plasma scheme for obtaining loans from financial institutions, it will be accounted for as a financial guarantee contract (see accounting policy 30 on financial guarantee contracts).
  243. 15LEASES A lease is an agreement whereby the lessor conveys to the lessee in return for a payment , or series of payments, the right to use an asset for an agreed period of time. (a) Accounting by lessee Finance leases Leases of property, plant and equipment where the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased assets and the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in borrowings. Each lease payment is allocated between the liability and finance charges so as to achieve a periodic constant rate of interest on the lease principal outstanding. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases are depreciated over the shorter of the useful life of the assets and the lease terms if there is no reasonable certainty that the Group will obtain ownership at the end of the lease terms. Initial direct costs incurred by the Group in negotiating and arranging finance leases are added to the carrying amount of the leased assets and recognised as an expense in profit or loss over the lease term on the same basis as the lease expense. Operating leases Leases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to profit or loss on the straight line basis over the lease periods. (b) Accounting by lessor Finance leases When assets are leased out under a finance lease, the present value of the lease payments is recognised as a receivable. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income. Lease income is recognised over the term of the lease using the net investment method so as to reflect a constant periodic rate of return on the balance outstanding. Operating leases When assets are leased out under an operating lease, the asset is included in property, plant and equipment in the balance sheet. Lease income (net of any incentives given to lessees) is recognised over the term of the lease on a straight-line basis. 225 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  244. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d) for the financial year ended 31 March 2018 16 QUARRY DEVELOPMENT 01 Expenses incurred on the development of quarry faces are capitalised and amortised based on actual production volume over the estimated reserves available from the quarry faces developed, which is based on the higher of the existing or new quarry development phases. The criteria that the Group uses to determine the recognition of overburden removal costs in the development of a quarry face as deferred expenditure is if all the following conditions are met: 02 03 Summary Information for Shareholder • It is probable that the future economic benefit (improved access to the quarry face) associated with the overburden removal activity will flow to the entity; 04 Business Review & Reports • The entity can identify the component of the quarry face for which access has been improved; and 05 Sustainability Statement 06 Financial Statements & others • The costs relating to the overburden removal activity associated with that component can be measured reliably. Where an indication of impairment exists, the carrying value of the asset is assessed and written down immediately to its recoverable amount. See accounting policy 25 on impairment of non-financial assets. 17 LAND USE RIGHTS Land use rights where a significant portion of the risks and rewards of ownership is not expected to pass to the lessee by the end of the lease term is treated as an operating lease. Land use rights are carried at cost or surrogate carrying amount and are amortised on a straight line basis over the lease terms. Land use rights are amortised over the land use rights periods ranging from 15 to 99 years. 18 INCOME TAXES 226 ANNUAL REPORT 2018 IJM CORPORATION BERHAD The income tax expense for the period comprises current and deferred tax. The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or directly in equity, respectively. Current tax expense is determined according to the tax laws of each jurisdiction in which the Group operates and includes all taxes based upon the taxable profits. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. This liability is measured using the single best estimate of the most likely outcome. Deferred tax is recognised, using the liability method, on temporary differences arising between the amounts attributed to assets and liabilities for tax purposes and their carrying amounts in the financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit. Deferred tax is determined using tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses or unused tax credits can be utilised. Deferred tax is recognised on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
  245. 18 INCOME TAXES (cont’d) Deferred tax is recognised in profit or loss, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also charged or credited directly to equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is adjusted against goodwill on acquisition. Deferred tax and income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. 19 EMPLOYEE BENEFITS (a) Short term employee benefits Wages, salaries, bonuses and non-monetary benefits are accrued in the period in which the associated services are rendered by employees of the Group. The Group recognises a liability and an expense for bonuses based on a formula that takes into consideration the profit attributable to the owners of the Company after certain adjustments. The Group recognises a provision where there is a contractual obligation or where there is a past practice that has created a constructive obligation. (b) Post-employment benefits The Group has various post-employment benefit schemes in accordance with local conditions and practices in the countries in which it operates. These benefit plans are either defined contribution or defined benefit plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee services in the current and prior periods. A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependant on one or more factors such as age, years of service and compensation. (i) Defined contribution plan The Group’s contributions to a defined contribution plan are charged to profit or loss in the period to which they relate. Once the contributions have been paid, the Group has no further payment obligations. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. As required by law, companies in Malaysia make contributions to the national pension scheme, the Employees Provident Fund (“EPF”), which is a defined contribution plan. (ii) Defined benefit plan The liability recognised in the balance sheet in respect of a defined benefit plan is the present value of the defined benefit obligation at the balance sheet date, less the fair value of plan assets, together with adjustments for its actuarial gains/losses and past service costs. The defined benefit obligation, calculated using the projected unit credit method, is determined by independent actuaries, by discounting the estimated future cash outflows using market yields at the balance sheet date on government bonds which have tenure and terms to maturity approximating the terms of the related liability. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised directly in other comprehensive income in the period in which they arise. The actuarial gains and losses are not subsequently reclassified to profit or loss in subsequent periods. 227 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  246. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d) for the financial year ended 31 March 2018 19 EMPLOYEE BENEFITS (cont’d) (b) Post-employment benefits (cont’d) (ii) Defined benefit plan (cont’d) 01 The current service cost of the defined benefit plan reflects the increase in the defined benefit obligation resulting from employee service in the current year. It is recognised in the profit or loss in employee benefit expense, except where included in the cost of an asset. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the income statement. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service costs. 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others 228 ANNUAL REPORT 2018 IJM CORPORATION BERHAD (c) Share-based compensation The Group operates a number of equity-settled share-based compensation plans under which the entity receives services from employees as consideration for equity instruments of the Group. The fair values of the share options and share grants granted in exchange for the employee services received are recognised as employee benefit expense in profit or loss over the vesting period of the grant, with a corresponding increase in share-based payment reserve within equity. The total amount to be expensed over the vesting period is determined by reference to the fair value of the share options and share grants granted, excluding the impact of any non-market performance vesting conditions. Non-market vesting conditions are included in assumptions about the number of options and grants that are expected to vest. At each balance sheet date, the Group reviews, and adjusts as appropriate, its estimates of the number of share options and share grants that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the profit or loss, with a corresponding adjustment to share-based payment reserves in equity. The proceeds received net of any directly attributable transaction costs are credited to share capital when the share options and share grants are exercised. When share options and share grants are not exercised and lapsed, the share-based payment reserves are transferred to retained earnings. If the terms of equity-settled share-based compensation plans are modified, at a minimum an expense is recognised as if the terms had not been modified. An additional expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification. In the separate financial statements of the Company, the grant by the Company of share options and share grants over its equity instruments to the employees of subsidiaries in the Group is treated as a capital contribution to the subsidiary. The fair value of share options and share grants granted to employees of the subsidiary in exchange for the services of the employees to the subsidiary are recognised as investment in subsidiary, with a corresponding credit to equity of the Company. When the Company subsequently charges the subsidiaries for the costs of share options and share grants, the Company recognises a return of the capital contribution by the subsidiaries as a decrease in investment in subsidiaries.
  247. 20 CASH AND CASH EQUIVALENTS For the purpose of cash flow statements , cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. Cash and cash equivalents comprise cash in hand, deposits held at call with financial institutions, other short term, highly liquid investments with original maturities of three months or less that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value, less bank overdrafts. Bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents in the statement of cash flows. In the balance sheet, bank overdrafts are shown within borrowings in current liabilities. 21 SHARE CAPITAL (i) Classification Ordinary shares are classified as equity. (ii) Share issue costs Incremental costs directly attributable to the issue of new shares are deducted against the share capital account. In other cases, they are charged to the profit or loss when incurred. (iii) Dividends Liability is recognised for the amount of any dividends declared, being appropriately authorised and no longer at the discretion of the Group, on or before the end of the reporting period but not distributed at the end of the reporting period. Distributions to holders of an equity instrument are recognised directly in equity. (iv) Purchase of own shares Where the Company purchases its equity share capital, the consideration paid, including any directly attributable incremental external costs, net of tax, is deducted from equity attributable to the owners of the Company as treasury shares until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, the cost of treasury shares is reversed from the treasury share account and the realised gain or loss on disposal or reissue, net of any directly attributable incremental transaction costs, is recognised in the capital reserve account. Where such shares are subsequently cancelled, the cost of treasury shares is deducted against the retained profits of the Company. (v) Shares held under trust Shares issued by the Company under the ESOS Trust Funding Mechanism (“ETF mechanism”) are recorded as shares held under trust in the balance sheet. The subscription amounts of the shares are included in equity attributable to owners of the Company as shares held under trust and are reduced upon the exercise of options under the ETF mechanism. 229 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  248. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d) for the financial year ended 31 March 2018 22FINANCIAL INSTRUMENTS 01 Financial instruments are contracts that give rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset from another enterprise, a contractual right to exchange financial instruments with another enterprise under conditions that are potentially favourable, or an equity instrument of another enterprise. A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another enterprise, or to exchange financial instruments with another enterprise under conditions that are potentially unfavourable. 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others Financial Assets: (a)Classification The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables and available-for-sale. The classification depends on the nature of the asset and the purpose for which the financial assets were acquired. Management determines the classification at initial recognition. (i) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if it is acquired or incurred principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are expected to be sold within 12 months; otherwise, they are classified as non-current assets. (ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are presented as current assets, except for those expected to be realised later than 12 months after the balance sheet date which are presented as non-current assets. The Group’s loans and receivables comprise ‘long term receivables’, ‘trade and other receivables’ (other than amounts due from customers on construction contracts, accrued billings in respect of property development, prepayments and GST receivables) and ‘deposits, cash and bank balances’ in the balance sheet. (iii) Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are either designated in this category or not classified in any of the other categories. They are presented as non-current assets unless the management intends to dispose of the assets within 12 months after the balance sheet date. Investment in unquoted equity instruments which are classified as available-for-sale and whose fair value cannot be reliably measured are measured at cost. These investments are assessed for impairment at each reporting date. (b) Recognition and initial measurement 230 ANNUAL REPORT 2018 IJM CORPORATION BERHAD Regular purchases and sales of financial assets are recognised on the trade-date, the date on which the Group commits to purchase or sell the asset. Financial assets are initially recognised at fair value plus transaction costs except for financial assets at fair value through profit or loss, which are recognised at fair value. Transaction costs for financial assets at fair value through profit or loss are expensed in profit or loss.
  249. 22FINANCIAL INSTRUMENTS (cont’d) Financial Assets: (cont’d) (c) Subsequent measurement – gains and losses Financial assets, both available-for-sale and at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method. Changes in the fair values of financial assets at fair value through profit or loss, including the effects of currency translation, interest and dividend income, are recognised in profit or loss in the period in which the changes arise. Changes in the fair value of available-for-sale financial assets are recognised in other comprehensive income, except for impairment (see accounting policy Note 22(d)(ii) on impairment of available-for-sale financial assets) and foreign exchange gains and losses on monetary assets. The exchange differences on monetary assets are recognised in profit or loss, whereas exchange differences on non-monetary assets are recognised in other comprehensive income as part of fair value change. Interest and dividend income on available-for-sale financial assets are recognised separately in profit or loss. Dividend income on available-for-sale equity instruments are recognised in profit or loss when the Group’s right to receive payments is established. (d) Subsequent measurement – impairment of financial assets The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets is impaired and recognises an allowance for impairment when such evidence exists. A financial asset or a group of financial assets is impaired and impairment is incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. If any such evidence exists, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The asset’s carrying amount is reduced and the amount of the loss is recognised in profit or loss. The carrying amount of the financial assets is reduced by the impairment directly for all financial assets with the exception of trade and other receivables, where the carrying amount is reduced through the use of an allowance account. (i) Loans and receivables Significant financial difficulties of the debtor, probability that the debtor will enter into bankruptcy, and default or significant delay in payments are objective evidence that these financial assets are impaired. When a receivable is uncollectible, it is written off against the related allowance account. Such receivables are written off after all the necessary procedures have been completed and the amount of the loss has been determined. If ‘loans and receivables’ have a variable interest rate, the discount rate for measuring any impairment is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price. If, in a subsequent period, the amount of the impairment decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss. 231 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  250. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d) for the financial year ended 31 March 2018 22FINANCIAL INSTRUMENTS (cont’d) Financial Assets: (cont’d) (d) Subsequent measurement – impairment of financial assets (cont’d) 01 (ii) Available-for-sale financial assets 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others In addition to the objective evidence of impairment described in Note 22(d)(i) above, a significant or prolonged decline in the fair value of the equity investment below its cost is also considered as an indicator that the asset is impaired. If any such evidence exists, the cumulative loss that had been recognised directly in equity is removed from equity and recognised in profit or loss. The amount of cumulative loss that is reclassified to profit or loss is the difference between the acquisition cost and the current fair value, less any impairment of that financial asset previously recognised in profit or loss. Impairment recognised in profit or loss on equity instruments classified as availablefor-sale is not reversed through profit or loss in subsequent periods. (e)Derecognition Financial assets are de-recognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. When available-for-sale financial assets are sold, the accumulated fair value adjustments recognised in other comprehensive income are reclassified to profit or loss. (f) Derivative financial instruments Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. (g)Fair value estimation The fair value of publicly traded derivatives and securities is based on quoted market prices at the balance sheet date. The fair value of interest rate swap contracts is calculated as the present value of the estimated future cash flows. The fair value of crude palm oil (“CPO”) pricing swap contracts is based on quoted market prices at the balance sheet date. In assessing the fair value of non-traded derivatives and financial instruments, the Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Quoted market prices or dealer quotes for the specific or similar instruments are used for long term debt. Other techniques and bases, such as discounted value of future cash flows and the underlying net asset base of the instrument, are used to determine fair value for the remaining financial instruments. In particular, the fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate available to the Group for similar financial instruments. The carrying values of financial assets and financial liabilities with a maturity period of less than one year are assumed to approximate their fair values. (h) Offsetting financial instruments 232 ANNUAL REPORT 2018 IJM CORPORATION BERHAD Financial assets and liabilities are offset and the net amount presented in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy.
  251. 22FINANCIAL INSTRUMENTS (cont’d) Financial Liabilities: (a)Classification The Group classifies its financial liabilities as financial liabilities at fair value through profit or loss and other financial liabilities. The classification depends on the nature of the liabilities and the purpose for which the financial liabilities were incurred. Management determines the classification at initial recognition. (i) Financial liabilities at fair value through profit or loss The Group classifies financial liabilities at fair value through profit or loss if they are held for trading. They are presented as current liabilities if they are expected to be settled within 12 months after the end of the reporting period; otherwise they are presented as non-current liabilities. Derivatives are also categorised as held for trading unless they are designated as hedges. (ii) Other financial liabilities Other financial liabilities of the Group comprise ‘bonds’, ‘term loans’, ‘government support loans’, ‘trade and other payables’ (other than amounts due to customers on construction contracts, progress billings in respect of property development, retirement benefits payable and GST payables) and ‘borrowings’ in the balance sheet. (b) Recognition, initial measurement and subsequent measurement When other financial liabilities are recognised initially, they are measured at fair value plus directly attributable transaction costs. Subsequent to initial recognition, other financial liabilities are measured at amortised cost using the effective interest method. Gains and losses are recognised in the statement of comprehensive income when the other financial liabilities are derecognised, and through the amortisation process. (c)Derecognition Financial liabilities are derecognised when the obligation specified in the contract is discharged or cancelled or expired. 23 TRADE AND OTHER PAYABLES Trade and other payables represent liabilities for goods or services provided to the Group prior to the end of financial year which are unpaid. They are classified as current liabilities if payment is due within one year, or in the normal operating cycle of the business if longer. Otherwise, they are presented as non-current liabilities. Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. 24 GOVERNMENT GRANTS Grants from the government are recognised at their fair values where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants relating to the acquisition of assets and operational maintenance of the concession assets are classified as non-current and are credited to the statement of comprehensive income over the expected lives of the related assets, on bases consistent with the depreciation of the related assets. 233 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  252. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d) for the financial year ended 31 March 2018 24 GOVERNMENT GRANTS (cont’d) The Group also treats the benefit of a government loan at a below market rate of interest as a government grant. In accordance with the transitional provision of the amendments to FRS 120 “Accounting for Government Grants and Disclosure of Government Assistance”, loans received on or after 1 April 2010 are recognised and measured initially at their fair value. The benefit of the government loan at below market rate of interest is measured as the difference between the initial carrying value of the loan and the proceeds received, and is recognised as a government grant, which will be credited to the statement of comprehensive income over the expected lives of the related assets on bases consistent with the depreciation of the related assets for which the loan was granted to the Group. Government support loans obtained prior to 1 April 2010 are recognised and measured initially based on proceeds received, and hence do not give rise to a government grant. 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others 25 IMPAIRMENT OF NON-FINANCIAL ASSETS Assets (including goodwill or intangible assets not ready for use) that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Other non-financial assets (including those which are subject to amortisation) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying values may not be recoverable. An impairment is recognised for the amount by which the carrying value of the asset exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. The impairment is charged to profit or loss unless it reverses a previous revaluation, in which case it is charged to the revaluation surplus. Impairment of goodwill are not reversed. In respect of other assets, any subsequent increase in recoverable amount is recognised in profit or loss unless it reverses an impairment of a revalued asset, in which case it is taken to revaluation surplus reserve. 26PROVISIONS Provisions are recognised when: • the Group has a present legal or constructive obligation as a result of past events; • it is probable that an outflow of resources will be required to settle the obligation; and • a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed by another party, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. Provisions are not recognised for future operating losses. Provisions are measured at the present value of management’s best estimate of the expenditure expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as finance cost. 27 SEGMENTAL INFORMATION 234 ANNUAL REPORT 2018 IJM CORPORATION BERHAD Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker (“CODM”). The Executive Committee (“EXCO”), which is responsible for allocating resources and assessing performance of the operating segments, has been identified as the CODM.
  253. 27 SEGMENTAL INFORMATION (cont’d) Segment revenue, expenses, assets and liabilities are those amounts resulting from the operating activities of a segment that are directly attributable to the segment and the relevant portion that can be allocated on a reasonable basis to the segment. Segment revenue, expenses, assets and liabilities are determined before intragroup balances and intragroup transactions are eliminated as part of the consolidation process. 28 CONTINGENT LIABILITIES The Group does not recognise contingent liabilities other than those arising from business combinations, but discloses their existence in the financial statements. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare circumstance where there is a liability that cannot be recognised because it cannot be measured reliably. Contingent liabilities do not include financial guarantee contracts. In the acquisition of subsidiaries by the Group under a business combination, the contingent liabilities assumed are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The Group recognises separately the contingent liabilities of the acquirees as part of allocating the cost of a business combination where their fair values can be measured reliably. Where the fair values cannot be measured reliably, the resulting effect will be reflected in the goodwill arising from the acquisitions and the information about the contingent liabilities acquired are disclosed in the notes to the financial statements. Subsequent to the initial recognition, the Group measures the contingent liabilities that are recognised separately at the date of acquisition at the higher of the amount that would be recognised in accordance with the provisions of FRS 137 “Provisions, Contingent Liabilities and Contingent Assets” and the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with FRS 118 “Revenue”. 29 PLANTATION DEVELOPMENT EXPENDITURE Plantation development expenditure comprises new planting expenditure, estate administration, finance cost relating to qualifying expenditure, depreciation of property, plant and equipment, amortisation of land use rights and upkeep of plantation up to its maturity and are stated at cost or valuation. All expenditure incurred subsequent to maturity, replanting expenditure and upkeep and maintenance expenditure including fertilising costs are charged to profit or loss when incurred. Certain plantation expenditure of the subsidiaries of the Company had been revalued in 1997. The Directors have not adopted a policy of regular revaluations of such assets and no later valuation has been recorded. 30FINANCIAL GUARANTEE CONTRACTS Financial guarantee contracts are contracts that require the Group or Company to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of the debt instrument. Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value and subsequently at the higher of the amount determined in accordance with FRS 137 “Provisions, contingent liabilities and contingent assets” and the amount initially recognised less cumulative amortisation, where appropriate. The fair value of a financial guarantee is determined as the present value of the difference in net cash flows between the contractual payments under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that would be payable to a third party for assuming the obligations. 235 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  254. NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 March 2018 1 GENERAL INFORMATION The Company is principally engaged in construction and investment holding activities . The Group’s principal activities consist of construction, property development, manufacturing and quarrying, hotel operations, tollway operations, port operations, plantations and investment holding. The principal activities of the subsidiaries and associates are described in Note 54 to the financial statements. The Company is a public limited liability company, incorporated and domiciled in Malaysia and listed on the Main Market of Bursa Malaysia Securities Berhad (“Bursa Malaysia”). The address of the registered office of the Company is 2nd Floor, Wisma IJM, Jalan Yong Shook Lin, 46050 Petaling Jaya, Selangor Darul Ehsan, Malaysia. The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on 30 May 2018. 2 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continually evaluated by the Directors and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below. 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others (a) Income taxes The Group is subject to income taxes in numerous jurisdictions. Due to the complexity of transactions entered into by the Group, significant judgement is required in determining capital allowances, deductibility of certain expenses and the chargeability of certain income during the estimation of the provision for income taxes. In determining the tax treatment, the Directors have relied upon industry practice and experts opinions. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred income tax provisions in the period in which such determination is made. (b) Deferred tax assets Deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. This involves judgement regarding the future financial performance of the particular entity in which the deferred tax asset has been recognised. (c) Construction contracts 236 ANNUAL REPORT 2018 IJM CORPORATION BERHAD The Group recognises contract profits based on the stage of completion method. The stage of completion of a construction contract is determined based on the proportion that the contract costs incurred for work performed to-date bear to the estimated total costs for the contract. When it is probable that the estimated total contract costs of a contract will exceed the total contract revenue of the contract, the expected loss on the contract is recognised as an expense immediately. Significant judgement is required in the estimation of total contract costs. Where the actual total contract costs is different from the estimated total contract costs, such difference will impact the contract profits/ (losses) recognised. The Group has estimated total contract revenue based on the initial amount of revenue agreed in the contract and variations in the contract work and claims that can be measured reliably based on the latest available information, and in the absence of such, the Directors’ best estimates derived from reasonable assumptions, experience and judgement. Where the actual approved variations and claims differ from the estimates, such difference will impact the contract profits/(losses) recognised.
  255. 2 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (cont’d) (d) Property development The Group recognises property development profits by reference to the stage of completion of the development activity at the balance sheet date. The stage of completion is determined based on the proportion that the property development costs incurred to-date bear to the estimated total costs for the property development. Where it is probable that total property development costs of a development phase will exceed total property development revenue of the development phase, the expected loss on the development phase is recognised as an expense immediately. Significant judgement is required in determining the completeness and accuracy of the total property development costs as estimates of future property development costs are inherently uncertain, which involve management’s estimation of future cost to completion of the development. Substantial changes in cost estimates in future periods may affect the profitability of the respective property development projects. Where the actual total property development costs are different from the estimated total property development costs, such difference will impact the property development profits/(losses) recognised. There is no estimation required in determining the transaction prices as revenue from property development are based on fixed contracted selling prices. (e) Plantation expenditure There are certain parcels of land use rights where the remaining periods are less than 25 years. The assumption of further extension of the land use rights periods to be granted on those lands involve judgement on the future decision by the local authority and the explicit terms and conditions imposed on the land titles. Based on their assessment of the assumed extension of the land use rights, management is of the view that there is no impairment indicator of the plantation expenditure. (f) Amortisation of expressway development expenditure The expressway development expenditure of the Group are amortised over the concession period based on the following formula: Cumulative traffic volume to-date Projected total traffic volume for the entire concession period In order to determine the projected total traffic volume for the entire concession period, the Group relies on the traffic survey carried out by a firm of independent traffic consultants and Directors’ annual re-assessment of the current and future years’ projected total traffic volume. Any changes in the projected total traffic volume for the entire concession period will impact the amortisation charge for the year. X Expressway development expenditure (g) Allowance for impairment of receivables The Group recognises an allowance for impairment of receivables when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant judgement is required in the assessment of the recoverability of receivables. If there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’), significant judgement is required to estimate the amount and timing of future cash flows to determine the impairment amount required. To the extent that actual recoveries deviate from management’s estimates, such variances may have a material impact on the profit or loss. Based on their assessment, management believes that the current level of allowance for impairment of receivables is adequate. In addition, management is also rigorously monitoring the recoverability of these receivables. 237 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  256. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 2 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (cont’d) (h) Impairment of assets 01 02 The Group determines whether an asset is impaired by evaluating the extent to which the recoverable amount of an asset is less than its cost. This evaluation is subject to changes such as market performance, economic and political situation of the country. A variety of methods are used to determine the recoverable amount, such as valuation reports and discounted cash flows. For discounted cash flows, significant judgement is required in the estimation of the present value of future cash flows generated by the assets, which involve uncertainties and are significantly affected by assumptions used and judgements made regarding estimates of future cash flows and discount rates. Changes in assumptions could significantly affect the results of the Group’s test for impairment of assets. 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 3FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES 06 Financial Statements & others The Group’s activities expose it to market (including foreign currency exchange, interest rate and price risks), credit and liquidity risks. The Group’s overall financial risk management objective is to minimise any potential adverse effects from the unpredictability of financial markets on the Group’s financial performance in order to ensure the Group creates value for its shareholders. Financial risk management is carried out through risk reviews, internal control systems, insurance programmes and adherence to the Group’s financial risk management policies. The management regularly reviews these risks and approves the treasury policies, which covers the management of these risks. The Group uses derivative financial instruments such as forward foreign exchange contracts and CPO pricing swap contracts to hedge certain financial risk exposures. (a) Market risk 238 ANNUAL REPORT 2018 IJM CORPORATION BERHAD (i) Currency risk Entities within the Group primarily transact in their respective functional currencies except for certain transactions and borrowings which were denominated in currencies other than their respective functional currencies. Foreign exchange exposures in transactional currencies other than functional currencies of the operating entities are managed by entering into forward foreign exchange contracts, cross currency swap contracts and the borrowing amounts are kept to an acceptable level. Currency risks arise on account of monetary assets and liabilities being denominated in a currency that is not the functional currency of the entity. The currency exposure profile of the Group’s and the Company’s financial assets and financial liabilities is disclosed in the respective notes to the financial statements.
  257. 3FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d) (a) Market risk (cont’d) (i) Currency risk (cont’d) As at the balance sheet date, the Group’s and Company’s Ringgit Malaysia (“RM”) functional currency entities had United States Dollar (“USD”), Argentine Peso (“AP”), Singapore Dollar (“SGD”) and Chinese Yuan Renminbi (“CNY”) denominated net monetary (liabilities)/assets. The effects to the Group’s and the Company’s profit after tax if the USD and AP; SGD and CNY had strengthened/weakened by 5% and 1% respectively against RM are as follows: Net monetary liabilities denominated in USD The Group 2018 2017 RM’000 RM’000 The Company 2018 2017 RM’000 RM’000 (809,390)(475,305) (559,632)(102,265) Effects to profit after tax if the USD had strengthened/weakened by 5% against RM: - strengthened - weakened (30,351)(18,062) (21,266)(3,886) 30,35118,062 21,2663,886 Net monetary assets denominated in AP 13,15813,825 13,15813,825 Effects to profit after tax if the AP had strengthened/weakened by 5% against RM: - strengthened - weakened 500525 500525 (500)(525) (500)(525) The Group 2018 2017 RM’000 RM’000 Net monetary assets denominated in SGD 14,55426,633 Effects to profit after tax if the SGD had strengthened/weakened by 1% against RM: - strengthened - weakened 111202 (111)(202) Net monetary liabilities denominated in CNY (8,408)(35,547) Effects to profit after tax if the CNY had strengthened/weakened by 1% against RM: - strengthened - weakened (64)(270) 64270 239 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  258. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 3FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d) (a) Market risk (cont’d) 01 (i) Currency risk (cont’d) As at the balance sheet date, the Group’s Indian Rupee (“INR”) functional currency entities had United States Dollar (“USD”) denominated net monetary liabilities. The effects to the Group’s profit after tax if the USD had strengthened/weakened by 5% against INR are as follows: 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others The Group 2018 2017 RM’000 RM’000 Net monetary liabilities denominated in USD (176,761)(234,808) Effects to profit after tax if the USD had strengthened/weakened by 5% against INR: - strengthened - weakened (7,019)(9,323) 7,0199,323 Net monetary liabilities denominated in USD (685,681)(705,761) Effects to profit after tax if the USD had strengthened/weakened by 5% against IDR: - strengthened - weakened (25,713)(26,466) 25,71326,466 This sensitivity analysis ignores any offsetting foreign exchange factors and has been determined assuming that the change in foreign exchange rates had occurred at the balance sheet date. The stated change represents management’s assessment of reasonably possible changes in foreign exchange rates over the period until the next annual balance sheet date. As at balance sheet date, there are no other significant monetary balances held by the Group and the Company that are denominated in non-functional currency. Differences resulting from the translation of financial statements into the Group’s presentation currency are not taken into consideration. (ii) Cash flow interest rate risk 240 ANNUAL REPORT 2018 IJM CORPORATION BERHAD Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s interest bearing assets are primarily short-term bank deposits with financial institutions. The interest rates on these deposits are monitored closely to ensure that they are maintained at favourable rates. The Group considers the risk of significant changes to interest rates on deposits to be unlikely. Interest rate exposure arises mainly from the Group’s borrowings. The Group manages its interest rate exposure by maintaining a prudent mix of fixed and floating rate borrowings.
  259. 3FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d) (a) Market risk (cont’d) (ii) Cash flow interest rate risk (cont’d) If the Group’s borrowings at variable rates on which effective hedges have not been entered into changes by the following basis points, with all other variables being held constant, the effects on profit after tax would be as follows: The Group 2018 2017 RM’000 RM’000 The Company 2018 2017 RM’000 RM’000 Borrowings based on cost of funds (“COF”): - increase by 25 basis points - decrease by 25 basis points (1,415)(1,721) 1,4151,721 Borrowings based on London interbank offered rate (“LIBOR”): - increase by 50 basis points - decrease by 50 basis points (5,494)(5,291) (1,836)(673) 5,4945,291 1,836673 Borrowings based on Marginal cost of lending rate (“MCLR”): - increase by 25 basis points - decrease by 25 basis points - increase by 50 basis points - decrease by 50 basis points –– –– –(419) –– –419 –– (750)––– 750– –– (iii) Price risk The Group is exposed to quoted securities price risk arising from investments held which are classified on the balance sheet as fair value through profit or loss and price volatility risk due to fluctuation in the palm products commodity market. Investments in quoted securities comprise mainly quoted unit trusts as an alternative to bank deposits. The Group considers the impact of changes in prices of equity securities on profit after tax to be insignificant. To manage and mitigate the risk on price volatility, the Group monitors the fluctuation of crude palm oil price daily and enters into physical forward selling commodity contracts or crude palm oil (“CPO”) pricing swap arrangements in accordance with the guidelines set by the Board of Directors. The CPO swap contracts are offered by certain reputable banks in Malaysia, which can be net settled during the period of the contracts. 241 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  260. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 3FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d) (a) Market risk (cont’d) (iii) Price risk (cont’d) 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others If average prices of crude palm oil change by 10% with all other variables being held constant, the effects on profit after tax would have been: The Group 2018 2017 RM’000 RM’000 Physical Forward Selling Commodity Contracts Effects to profit after tax if crude palm oil price: - increase by 10% - decrease by 10% 17,56218,391 (17,562)(18,422) CPO Swap Contracts Effects to profit after tax if crude palm oil price: - increase by 10% - decrease by 10% (687)(2,221) 6872,221 (b) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk arises from credit exposures to customers, including outstanding receivables, as well as deposits, cash and bank balances and derivative financial instruments with financial institutions. For trade and other receivables, the Group controls these risks by the application of credit approvals, limits and monitoring procedures. The Group also minimises its exposure through analysing the counterparties’ financial condition prior to entering into any agreements/contracts and obtaining sufficient collaterals where appropriate to mitigate credit risk. Trade receivables are monitored on an ongoing basis via Group management reporting procedures. For other financial assets (deposits, cash and bank balances with financial institutions, quoted unit trusts and derivative financial instruments), the Group adopts the policy of dealing only with counterparties of high credibility (i.e. banks and financial institutions). The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet after deducting any impairment allowance and the financial guarantee contracts as disclosed in Note 3(c) to the financial statements. See Notes 33 and 40 for further disclosure on credit risk. (c) Liquidity risk 242 ANNUAL REPORT 2018 IJM CORPORATION BERHAD The Group treasury actively monitors and manages its debt maturity profile, operating cash flows and the availability of funding (comprising undrawn borrowing facilities and cash and cash equivalents) so as to ensure that all refinancing, repayment and funding needs are met. As part of its overall prudent liquidity management, the Group maintains sufficient levels of cash or cash convertible investments (Note 49) to meet its working capital requirements. In addition, the Group strives to maintain available banking facilities of a reasonable level to its overall debt position. As far as possible, the Group raises committed funding from both capital markets and financial institutions and prudently balances its portfolio with some short term funding so as to achieve overall cost effectiveness.
  261. 3FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d) (c) Liquidity risk (cont’d) The tables below analyse the financial liabilities of the Group and the Company into relevant maturity groupings based on the remaining periods from the balance sheet date to the contractual maturity dates. The amounts disclosed in the table are the contractual undiscounted cash flows. Less than 1 year RM’000 Between 1 and 5 years RM’000 Over 5 years RM’000 The Group At 31 March 2018 Bonds Term loans Government support loans Trade and other payables Short term borrowings* Hire purchase and lease payables Financial guarantee contracts** Provisions Derivative financial instruments 132,876 1,312,385970,610 1,734,933 938,17147,107 34,000 90,71450,798 2,576,310 399,868401,986 1,233,079 –– 637 297– 1,418 8,17918,611 2,764 –– 5,858 –– 5,721,875 2,749,6141,489,112 At 31 March 2017 Bonds Term loans Government support loans Trade and other payables Short term borrowings* Hire purchase and lease payables Financial guarantee contracts** Provisions 124,559 1,034,1821,381,689 832,919 2,070,614 85,947 34,000 114,715 60,798 2,035,579 383,972 419,539 1,055,309 – – 760 837 – 1,055 8,980 17,026 10,718 –– 4,094,899 3,613,3001,964,999 * As at 31 March 2018, short term borrowings of the Group include bankers’ acceptances, revolving credits, revolving loans, letters of credit and bank overdrafts. **A subsidiary of the Group provided corporate guarantees for a bank loan facility amounting to RM40.0 million (2017: RM47.3 million) to a cooperative in Indonesia in respect of plasma development. As at 31 March 2018, RM28.2 million (2017: RM27.0 million) has been drawn down. 243 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  262. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 3FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d) (c) Liquidity risk (cont’d) 01 Less than 1 year RM’000 Between 1 and 5 years RM’000 Over 5 years RM’000 The Company 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others At 31 March 2018 Bonds Term loans Short term borrowings (revolving credits and revolving loans) Trade and other payables Derivative financial instruments 61,713 978,856538,277 494,569 –– 372,396 –– 330,943852,537 – 5,858 –– 1,265,479 1,831,393538,277 At 31 March 2017 Bonds Term loans Short term borrowings (revolving credits and bank overdrafts) Trade and other payables 212,200 341,714 619,685 1,835,306869,025 61,729 4,042 709,821869,025 177,457 – – 948,028 – – The exposure of the borrowings of the Group and the Company to interest rate changes and the contractual repricing dates at the balance sheet dates are disclosed in Notes 16, 17, 44 and 45 to the financial statements. (d) Capital risk The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and to maintain an optimal capital structure so as to maximise shareholders value. In order to maintain or achieve an optimal capital structure, the Group may adjust the dividend payment, return capital to shareholders, issue new shares, buy back issued shares, obtain new financing facilities or dispose assets to reduce borrowings. Management monitors capital based on the Group’s and the Company’s gearing ratio. The Group and the Company are also required by the banks to maintain certain gearing ratios. The Group’s and the Company’s strategies are to maintain a gearing ratio of not greater than 1 time. The gearing ratio is calculated as net debt divided by equity capital. Net debt is calculated as total borrowings (excluding trade and other payables) less cash and cash equivalents. Equity capital is equivalent to capital and reserves attributable to owners of the Company. The Group is subject to certain externally imposed capital requirements in the form of loan covenants. The Group and the Company monitor compliance with loan covenants based on the terms of the respective loan agreements. As at 31 March 2018, the Group has not complied with a financial covenant on certain of its borrowings amounting to RM1.2 billion. Subsequent to the reporting date of 31 March 2018, the Group has successfully obtained waivers/indulgence from the relevant financial institutions. In accordance with FRS 101, the portion of the non-current liabilities of the borrowings of RM259.4 million have been reclassified as current liabilities as at 31 March 2018. 244 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  263. 3FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d) (e)Fair value measurements The following table presents assets and liabilities measured at fair value and classified by levels of the following fair value measurement hierarchy: (i) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); (ii) inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (Level 2); and (iii) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3). Level 1 RM’000 Level 2 RM’000 Level 3 RM’000 Total RM’000 2018 The Group Assets: Financial assets at fair value through profit or loss Available-for-sale financial assets Derivative financial instruments 311,079 – –311,079 – –2,155 2,155 –1,055 – 1,055 Total assets 311,079 1,055 2,155314,289 Liabilities: Derivative financial instruments –5,858 – 5,858 Total liabilities – – 5,858 5,858 The Company Assets: Financial assets at fair value through profit or loss Available-for-sale financial assets 18,740 – – –18,740 –2,050 2,050 Total assets 18,740 –2,050 20,790 Liabilities: Derivative financial instruments –5,858 – 5,858 Total liabilities – 5,858 – 5,858 Assets: Financial assets at fair value through profit or loss Available-for-sale financial assets Derivative financial instruments 299,164 – – – – 2,909 – 2,155 – 299,164 2,155 2,909 Total assets 299,164 2,909 2,155 304,228 2017 The Group 245 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  264. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 3FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d) (e)Fair value measurements (cont’d) The Company 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others 4 Level 1 RM’000 Level 2 RM’000 Level 3 RM’000 Total RM’000 Assets: Financial assets at fair value through profit or loss Available-for-sale financial assets 20,807 – – – – 2,050 20,807 2,050 Total assets 20,807 – 2,050 22,857 The fair values of financial instruments traded in active markets (such as trading securities) are based on quoted market prices at the balance sheet date. The quoted market prices used for financial assets held by the Group and the Company are the closing prices. These instruments are included in Level 1. The fair values of financial instruments that are not traded in an active market (for example, CPO swap contracts) are determined by using a valuation technique. The fair value of CPO swap contracts is calculated based on the differences between fixed CPO prices as per the swap contracts and the average future CPO prices quoted on the Bursa Malaysia Derivative Exchange for the specific contracted periods. These instruments are classified as Level 2. If a valuation technique for the instruments is based on significant unobservable inputs, such instruments are classified as Level 3. OPERATING REVENUE The Group 2018 2017 RM’000 RM’000 The Company 2018 2017 RM’000 RM’000 Construction contract revenue Property development revenue Sale of quarry and manufactured products Sale of goods Toll concession revenue Port revenue Sale of crude palm oil and plantations related products Management services Dividend income Rental of properties Rendering of other services 2,286,5022,104,740 1,208,1541,396,938 1,054,0161,133,423 31,55628,670 401,305379,598 250,794208,797 –973 –– –– –– –– –– 6,026,9486,065,335 486,561298,059 747,217753,711 –– 15,18722,652 29,82529,932 536362 456,399266,791 217243 337363 31,46436,201 –– Supplementary information on operating revenue of the Group inclusive of the Group’s share of revenue of associates and joint ventures are as follows: 2018 RM’000 2017 RM’000 Operating revenue of the Group 6,026,9486,065,335 Share of operating revenue of: Associates 563,572641,572 Joint ventures 216,393210,832 246 ANNUAL REPORT 2018 IJM CORPORATION BERHAD 6,806,9136,917,739
  265. 5 OPERATING PROFIT BEFORE FINANCE COST (a) The following expenses (excluding finance cost and income tax expense) by nature have been debited in arriving at operating profit before finance cost: Note The Group 2018 2017 RM’000 RM’000 The Company 2018 2017 RM’000 RM’000 Construction contract costs 2,130,1001,989,764 4041,962 Property development costs* 858,947918,472 –– Cost of quarry and manufactured products sold 918,126932,564 –– Cost of plantation products sold 519,274458,572 –– Toll operation costs 226,903221,606 –– Port operation costs 134,844117,348 –– Property, plant and equipment: - depreciation 27 149,624136,345 481504 - written off 27 1,7921,170 –– - loss on disposal 1,4712,142 –– Land use rights: - amortisation 28 5,6495,380 –– Investment properties: 29 672672 173165 - depreciation Rental of land and buildings 8,9168,756 2,1772,067 Hire of plant and equipment 8,7968,502 –– Auditors’ remuneration: - statutory audit 8 Current year 4,0323,864 426426 Under accrual in respect of prior years 142217 –– Foreign exchange losses/(gains) (net) 3,721(30,117) (6,591)(13,870) Fair value loss: - financial assets held for trading 7,139556 6,210– - derivative financial instruments 5,858– 5,858– Concession assets: - amortisation 30 162,900163,042 –– - written off 30 81284 –– Amortisation of quarry development expenditure 36 3,7323,776 –– Allowance for impairment of receivables 40 5,1528,329 –– Bad debts written off 1,1601,751 –– Impairment of investment in an associate –– 39,000– *During the financial year impairment of property development costs of RM21,869,000 (2017: Nil) (Note 37(b)) has been included in costs of sales. Direct operating expenses from investment properties that generated rental income for the Group and the Company during the financial year amounted to RM215,000 (2017: RM220,000) and RM188,000 (2017: RM169,000) respectively. Direct operating expenses from investment properties that did not generate rental income for the Group and the Company during the financial year amounted to RM283,000 (2017: RM98,000) and RM41,000 (2017: RM97,000) respectively. 247 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  266. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 5 OPERATING PROFIT BEFORE FINANCE COST (b) The following amounts have been credited in arriving at operating profit before finance cost: Note 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others 248 ANNUAL REPORT 2018 IJM CORPORATION BERHAD The Group 2018 2017 RM’000 RM’000 The Company 2018 2017 RM’000 RM’000 Gross dividends received from: – subsidiaries (quoted) –– 34,58124,301 (unquoted) –– 404,946224,827 – associates (quoted) –– 11,8098,114 (unquoted) –– 4,5279,186 – other investments 683510 536363 (quoted) Interest income: – bank deposits 42,21243,038 3,2272,965 – loans and receivables from related parties 31,40626,614 85,24972,596 – loans and receivables from non-related parties 19,12314,848 –2,530 – amortised costs on trade and other receivables and amounts due from joint ventures 6,47715,058 –– – others 20,35515,046 5,1031,998 2,6441,462 –– Profits from Islamic placements Profits from Redeemable Unsecured Murabahah Stocks 2,432313 –– Gain on disposal of property, plant and equipment 4,69212,285 128 Reversal of impairment of: – Property development costs 37(b) –34 –– Rental income 10,4159,741 337363 Bad debts recovered 2,529– –– Write back of allowance for 40 4,9383,650 –– impairment of receivables Write back of allowance for impairment of amounts owing by joint ventures 33 193– –– Write back of building stocks –33 –– Write back of impairment of property, plant and equipment27 –5,312 –– Amortisation of government grants 26 2,5536,172 –– Income from quoted unit trusts 9,44612,227 –191 Fair value gains: – financial assets held for trading 4561,955 –1,780 – derivative financial instruments 9725,237 –– Gain on disposal of an associate –4,553 ––
  267. 6 EMPLOYEE BENEFITS COST Note The Company 2018 2017 RM ’000 RM’000 Wages, salaries and bonus Defined contribution retirement plan Defined benefit retirement plan 24 Other employee benefits Share-based payments 437,622422,970 25,54623,570 50,12245,094 3,7393,373 12,9892,029 –– 31,10630,905 2,7162,670 35,71139,426 8,0124,754 567,550540,424 40,01334,367 Less expenses capitalised into: – Concession assets – Property development costs – Plantation development expenditure – Construction contract work in progress 7 The Group 2018 2017 RM’000 RM’000 30 37(b) 38(b) 46 (594)– –– (132)(131) –– (16,734)(17,773) –– (92,898)(98,528) –– 457,192423,992 40,01334,367 DIRECTORS’ REMUNERATION The Group 2018 2017 RM’000 RM’000 The Company 2018 2017 RM’000 RM’000 Directors of the Company: Fees Defined contribution retirement plan Other emoluments Share-based payments 1,5821,524 1,2231,109 852723 852723 5,8615,024 5,8395,000 2,9233,324 2,9233,324 11,21810,595 10,83710,156 The estimated monetary value of benefits-in-kind provided to the Directors of the Group and of the Company by way of usage of the Group’s and the Company’s assets and the provision of other benefits during the financial year amounted to RM130,000 (2017: RM181,000) and RM130,000 (2017: RM181,000) respectively. 8 AUDITORS’ REMUNERATION – STATUTORY AUDIT The Group 2018 2017 RM’000 RM’000 The Company 2018 2017 RM’000 RM’000 PricewaterhouseCoopers Malaysia * Other member firms of PricewaterhouseCoopers International Limited * Other auditors of subsidiaries 2,6052,635 4,174 854423 7151,023 426426 –– –– 4,081426426 *PricewaterhouseCoopers PLT Malaysia and other member firms of PricewaterhouseCoopers International Limited are separate and independent legal entities. 249 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  268. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 9FINANCE COST Note 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others Interest expenses arising from: - Bank borrowings - Hire purchase and leasing - Bonds - Amortisation of government support loan - Amortised costs on financial liabilities - Accretion of liabilities - Discounting of long term receivables - Others Less interest capitalised into: - Investment properties - Concession assets - Land held for property development - Property development costs - Plantation development expenditure 29 30 37(a) 37(b) 38(b) The Group 2018 2017 RM’000 RM’000 The Company 2018 2017 RM’000 RM’000 153,850146,195 19,53710,951 11227 –– 94,58588,16061,74059,219 5,2416,195 –– 10,32416,998 5,7615,751 –– –– –5,865 2,4942,202 –– –– 272,367271,393 81,27770,170 (670)––– (40)––– (697)(4,113) (106,846)(120,711) –– –– (1,900)(3,263) –– (110,153)(128,087) –– 162,214143,306 81,27770,170 Foreign exchange losses Less foreign exchange losses capitalised into: - Plantation development expenditure 38(b) 26,2111,548 –– (2,751)(184) –– 23,4601,364 –– 185,674144,670 81,27770,170 10 INCOME TAX EXPENSE 250 ANNUAL REPORT 2018 IJM CORPORATION BERHAD The Group 2018 2017 RM’000 RM’000 The Company 2018 2017 RM’000 RM’000 Current tax: - Malaysian income tax - Overseas taxation 216,711292,892 16,18914,242 13,235(11,920) –– Deferred taxation (Note 22) 229,946280,972 16,18914,242 8,924(37,766) 191388 238,870243,206 16,38014,630
  269. 10 INCOME TAX EXPENSE (cont’d) Current tax: - Current year - Benefits from previously unrecognised temporary differences - (Over)/under accrual in prior years (net) The Group 2018 2017 RM’000 RM’000 The Company 2018 2017 RM’000 RM’000 232,203282,073 16,08114,487 (822)(1,075) –– (1,435)(26) 108(245) Deferred taxation: - Origination and reversal of temporary differences 229,946280,972 16,18914,242 238,870243,206 16,38014,630 8,924(37,766) 191388 The explanation of the relationship between income tax expense and profit before taxation is as follows: Profit before taxation Tax calculated at the Malaysian tax rate of 24% (2017: 24%) Tax effects of: - Different tax rates in other countries - Expenses not deductible for tax purposes - Income not subject to tax - Utilisation of tax incentives - Current year’s deferred tax assets derecognised or not recognised on unused tax losses and unutilised deductible temporary differences - Recognition of deferred tax assets on unused tax losses which was previously not recognised - Utilisation of previously unrecognised tax losses - Utilisation of previously unrecognised deductible temporary differences - Share of results of associates and joint ventures - Reduction in tax rate due to increase in chargeable income - Others (Over)/under accrual in prior years (net) Income tax expense The Group 2018 2017 RM’000 RM’000 The Company 2018 2017 RM’000 RM’000 629,5591,010,010 401,626274,101 151,094242,402 96,39065,784 (3,757)8,894 –– 134,76563,18638,92418,639 (39,712)(43,492) (119,042)(69,548) (1,095)(3,658) –– 35,4295,752 –– (37,208)––– (32)(809) –– (790)(266) –– 4,089(18,485) –– (2,257)(10,248) –– (221)(44) –– (1,435)(26) 108(245) 238,870243,206 16,38014,630 251 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  270. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 10 INCOME TAX EXPENSE (cont’d) 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others The tax (charge)/credit in relation to the components of other comprehensive income are as follows: The Group 20182017 Tax Tax Before(charge)/ After Before(charge)/ After tax credit tax tax credit tax RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Revaluation gains on property, plant and equipment – –– 27,056 (6,494)20,562 – –– 27,056 (6,494)20,562 Current tax Deferred taxation (Note 22) – – –6,494 –6,494 There is no tax charge/credit in relation to the components of other comprehensive income of the Company. 11 EARNINGS PER SHARE (a)Basic The basic earnings per share for the financial year has been calculated based on the Group’s net profit attributable to owners of the Company for the financial year and the weighted average number of ordinary shares in issue during the financial year excluding ordinary shares purchased by the Company and held as treasury shares (Note14(C)). The weighted average number of ordinary shares in issue is derived after taking into account the issuance of shares pursuant to the exercise of ESOS and vesting of ESGP (2017: issuance of shares pursuant to the exercise of ESOS and vesting of ESGP). The Group 2018 2017 RM’000 RM’000 Net profit attributable to owners of the Company 349,809653,773 eighted average number of ordinary shares in issue W Basic earnings per share (sen) 252 ANNUAL REPORT 2018 IJM CORPORATION BERHAD ’000 ’000 3,625,7193,600,319 9.6518.16
  271. 11 EARNINGS PER SHARE (cont’d) (b)Fully diluted The fully diluted earnings per share of the Group is calculated by dividing the Group’s net profit attributable to owners of the Company for the financial year of RM349,809,000 (2017: RM653,773,000) by the weighted average number of ordinary shares in issue, adjusted to assume the conversion of all dilutive potential ordinary shares, i.e. the ESOS and ESGP (2017: the ESOS and ESGP). A calculation is done to determine the number of shares that could have been acquired at market price (determined as the weighted average annual share price of the Company’s shares) based on the monetary value of the subscription rights attached to the outstanding ESOS and ESGP (2017: outstanding ESOS and ESGP). The Group 2018 2017 RM’000 RM’000 Net profit attributable to owners of the Company 349,809653,773 ’000 ’000 Weighted average number of ordinary shares in issue 3,625,7193,600,319 Adjustments for ESOS Adjustments for ESGP 7,65112,529 3,43331,464 Weighted average number of ordinary shares for diluted earnings per share 3,636,8033,644,312 Diluted earnings per share (sen) 9.6217.94 12DIVIDENDS Dividends declared and paid in respect of the current financial year are as follows: The Company 2018 2017 Dividend Amount of Dividend Amount of per share dividend per share dividend SenRM’000 Sen RM’000 Single tier first interim dividend Single tier second interim dividend 3.00108,848 3.00108,087 3.00* 4.50163,195 6.00108,848 7.50271,282 *The amount of dividend will be determined based on the number of shareholders entitled to receive the dividend as at 5:00pm on 29 June 2018. On 30 May 2018, the Directors have declared a single tier second interim dividend in respect of the financial year ended 31 March 2018 of 3.0 sen per share to be paid on 20 July 2018 to every member who is entitled to receive the dividend as at 5:00pm on 29 June 2018. The second interim dividend has not been recognised in the Statement of Changes in Equity as it was declared subsequent to the financial year end. The Directors do not recommend the payment of any final dividend for the financial year ended 31 March 2018 (2017: Nil). 253 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  272. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 13 SEGMENTAL REPORTING Management has determined the operating segments based on the reports reviewed by the Executive Committee (“EXCO”) that are used for allocating resources and assessing performance. The EXCO considers the business from the business segment perspective and assesses the performance of the operating segments based on a measure of profit before taxation and earnings before interest, tax, depreciation and amortisation. The Group has the following principal business segments: 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others (a) Construction - Construction activities (b) Property development - Development of land into vacant lots, residential, commercial and/or industrial buildings (c) Manufacturing and quarrying - Production and sale of concrete products, and quarrying activities - Cultivation of oil palms, milling of fresh fruit bunches and trading of (d) Plantation crude palm oill (e) Infrastructure - Tollway and port operations Other operations of the Group comprise mainly investment holding. The segment information provided to the EXCO for the reportable segments for the financial year ended 31 March 2018 is as follows: Construc- tion RM’000 REVENUE: Total revenue Less: Inter-segment revenue Less: Share of operating revenue of associates and joint ventures Revenue from external customers RESULTS: Profit before taxation Depreciation and amortisation (A) * Finance cost (B) Earnings before interest, tax, depreciation and amortisation Property develop- ment RM’000 Manu- facturing & Planta- Infra- quarrying tion structure RM’000 RM’000 RM’000 3,310,372 1,323,504 (635,980) – 2,674,392 1,323,504 (348,505) (78,605) 2,325,887 1,244,899 226,014 110,559 10,721 11,815 57,717 14,126 294,452 136,500 Investment & others RM’000 Group RM’000 1,076,247 747,217 1,001,873 488,6377,947,850 (19,150) – – (485,807)(1,140,937) 1,057,097 747,217 1,001,873 (3,081) – (349,774) 1,054,016 747,217 652,099 2,8306,806,913 –(779,965) 2,8306,026,948 82,479 77,304 120,115 13,088629,559 48,234 79,937 169,317 6,256 46,556 61,019 136,969 203,797 350,451 –320,024 –185,674 13,0881,135,257 *It comprises depreciation and amortisation of property, plant and equipment, land use rights, investment properties, concession assets, intangible assets and government grants. 254 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  273. 13 SEGMENTAL REPORTING (cont’d) The segment information provided to the EXCO for the reportable segments for the financial year ended 31 March 2018 is as follows: (cont’d) Construc- tion RM’000 Property develop- ment RM’000 Manu- facturing & Planta- Infra- quarrying tion structure RM’000 RM’000 RM’000 Investment & others RM’000 Group RM’000 Other than (A) and (B), profit before taxation also includes: - Interest income - Impairment of property development costs - Share of profits/(losses) of associates - Share of profits/(losses) of joint ventures 66,897 41,574 – (21,869) 28,661 2,884 26,344 (6,119) 1,245 5,722 – – (310) – 6,585 2,626124,649 – –(21,869) – (24,478)(1,217) 5,540 – (30,227) –(10,002) Inter-segment revenue comprises rendering of construction services to the property development and infrastructure segments and the sale of manufacturing and quarrying products to the construction segment. These transactions are transacted on agreed terms between the segments. The revenue from external customers reported to the EXCO is measured in a manner consistent with that in the statement of comprehensive income. Revenue by product and services is disclosed in Note 4 to the financial statements. Construc- tion RM’000 ASSETS: Segment assets Property develop- ment RM’000 Manu- facturing & Planta- Infra- quarrying tion structure RM’000 RM’000 RM’000 1,714,001 10,277,492 1,461,472 2,603,587 4,633,362 Investment & others RM’000 Group RM’000 150,65820,840,572 Unallocated assets: - Deferred tax assets - Tax recoverable 304,147 150,041 Consolidated total assets 21,294,760 Segment assets include: - Investment in associates 244,217 22,114 - Investment in joint ventures 173,250 397,739 - Additions to non-current assets* (other than financial instruments and deferred tax assets) 6,392 563,621 1,817 – – 517,954 43,032829,134 – 137,214 62,663 117,603 584,139 222708,425 –1,334,418 255 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  274. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 13 SEGMENTAL REPORTING (cont’d) The segment information provided to the EXCO for the reportable segments for the financial year ended 31 March 2018 is as follows: (cont’d) Construc- tion RM’000 01 02 Property develop- ment RM’000 Manu- facturing & Planta- Infra- quarrying tion structure RM’000 RM’000 RM’000 Investment & others RM’000 Group RM’000 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement Unallocated liabilities: - Deferred tax liabilities - Current tax liabilities 06 Financial Statements & others Consolidated total liabilities 10,529,437 LIABILITIES: Segment liabilities 3,418,193 3,818,833 280,734 836,609 1,447,500 10,9269,812,795 682,177 34,465 *Non-current assets comprise property, plant and equipment, land use rights, investment properties, concession assets, intangible assets, land held for property development and plantation development expenditure. The amounts provided to the EXCO with respect to total assets and total liabilities are measured in a manner consistent with that of the financial statements. These assets and liabilities are allocated based on the operations of the segment. The segment information provided to the EXCO for the reportable segments for the financial year ended 31 March 2017 is as follows: Construc- tion RM’000 REVENUE: Total revenue Less: Inter-segment revenue Less: Share of operating revenue of associates and joint ventures Revenue from external customers RESULTS: Profit before taxation Depreciation and amortisation (A) * Finance cost (B) Earnings before interest, tax, depreciation and amortisation 256 ANNUAL REPORT 2018 IJM CORPORATION BERHAD Property develop- ment RM’000 Manu- facturing & Planta- Infra- quarrying tion structure RM’000 RM’000 RM’000 Investment & others RM’000 Group RM’000 3,034,697 1,516,225 1,164,398 753,711 975,515 300,007 7,744,553 (502,551) – (27,784) – – (296,479) (826,814) 2,532,146 1,516,225 1,136,614 (380,690) (78,481) (3,191) 2,151,456 1,437,744 216,715 303,277 11,869 11,508 53,401 6,927 281,985 321,712 753,711 975,515 3,528 6,917,739 – (387,120) (2,922) (852,404) 1,133,423 753,711 588,395 606 6,065,335 142,417 168,514 62,313 116,774 1,010,010 46,943 66,031 166,692 4,750 23,821 55,771 194,110 258,366 284,776 –303,043 –144,670 116,774 1,457,723
  275. 13 SEGMENTAL REPORTING (cont’d) The segment information provided to the EXCO for the reportable segments for the financial year ended 31 March 2017 is as follows: (cont’d) Construc- tion RM’000 Property develop- ment RM’000 Manu- facturing & Planta- Infra- quarrying tion structure RM’000 RM’000 RM’000 Investment & others RM’000 Group RM’000 Other than (A) and (B), profit before taxation also includes: - Interest income - Share of profits/(losses) of associates - Share of profits/(losses) of joint ventures 62,515 35,374 687 6,975 10,358 470 116,379 36,254 (2,043) 54 – (7,388) 29,526 56,403 27,095 14,688 – – (25,115) – 16,668 *It comprises depreciation and amortisation of property, plant and equipment, land use rights, investment properties, concession assets, intangible assets and government grants. Inter-segment revenue comprises rendering of construction services to the property development and infrastructure segments and the sale of manufacturing and quarrying products to the construction segment. These transactions are transacted on agreed terms between the segments. Construc- tion RM’000 ASSETS: Segment assets 2,212,505 Property develop- ment RM’000 9,315,317 Manu- facturing & Planta- Infra- quarrying tion structure RM’000 RM’000 RM’000 1,450,689 2,950,654 4,449,784 Investment & others RM’000 Group RM’000 86,660 20,465,609 Unallocated assets: - Deferred tax assets - Tax recoverable 297,762 129,329 Consolidated total assets 20,892,700 Segment assets include: - Investment in associates 232,359 - Investment in joint ventures 170,934 - Additions to non-current assets* (other than financial instruments and deferred tax assets) 20,928 18,321 2,202 – 585,160 63,350 901,392 422,862 – – 160,734 253 754,783 88,552 73,329 146,678 299,981 – 629,468 257 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  276. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 13 SEGMENTAL REPORTING (cont’d) The segment information provided to the EXCO for the reportable segments for the financial year ended 31 March 2017 is as follows: (cont’d) Construc- tion RM’000 01 02 Property develop- ment RM’000 Manu- facturing & Planta- Infra- quarrying tion structure RM’000 RM’000 RM’000 Investment & others RM’000 Group RM’000 2,128 9,393,585 669,456 12,979 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement Unallocated liabilities: - Deferred tax liabilities - Current tax liabilities 06 Financial Statements & others Consolidated total liabilities 10,076,020 LIABILITIES: Segment liabilities 2,941,973 3,429,409 290,585 1,025,789 1,703,701 *Non-current assets comprise property, plant and equipment, land use rights, investment properties, concession assets, intangible assets, land held for property development and plantation development expenditure. The amounts provided to the EXCO with respect to total assets and total liabilities are measured in a manner consistent with that of the financial statements. These assets and liabilities are allocated based on the operations of the segment. Geographical information: Revenue from externalNon-current* customers assets RM’000 RM’000 2018 Malaysia 5,426,7345,890,521 205,691583,766 India 328,8541,331,515 Indonesia Other countries 65,66948,897 6,026,9487,854,699 2017 Malaysia5,513,365 5,036,465 India214,938 540,364 Indonesia286,3621,509,165 Other countries 50,670 54,392 6,065,335 7,140,386 *Non-current assets comprise property, plant and equipment, land use rights, investment properties, concession assets, intangible assets, land held for property development and plantation development expenditure. Revenue is based on the country in which the customers are located. Non-current assets are determined according to the country where these assets are located. 258 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  277. 14 SHARE CAPITAL , SHARE PREMIUM, TREASURY SHARES, SHARE-BASED PAYMENTS AND SHARES HELD UNDER TRUST (A) SHARE CAPITAL The Group and the Company 2017 Number of shares Amount ’000RM’000 Authorised: At 1 April 2016 Abolishment of the concept of authorised share capital on 31 January 2017 * 5,000,000 5,000,000 (5,000,000) (5,000,000) At 31 March – – The Group and the Company 2018 2017 Number Number of shares Amount of shares Amount ’000RM’000 ’000 RM’000 Issued and fully paid: At 1 April 2017/2016 (ordinary shares of RM1.00 each) Issuance of shares arising from: - Vesting of shares under ESGP - Exercise of share options - Shares held under trust (Note 14(E)) Transition to no-par value regime on 31 January 2017 (Note 14(B)) At 31 March – ordinary shares with no par value 3,613,3866,022,6513,584,805 3,584,805 7,16724,3468,289 8,289 5,32519,9838,197 15,311 2,8007,36912,095 18,735 –– 3,628,678 –2,395,511 6,074,3493,613,386 6,022,651 *The new Companies Act 2016 (the “Act”), which came into operation on 31 January 2017, abolished the concept of authorised share capital and par value of share capital. Consequently, the amounts standing to the credit of the share premium account of RM2,395,511,000 became part of the Company’s share capital pursuant to the transitional provisions set out in Section 618 (2) of the Act. There was no impact on the numbers of ordinary shares in issue or the relative entitlement of any of the members as a result of this transition. 259 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  278. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 14 SHARE CAPITAL, SHARE PREMIUM, TREASURY SHARES, SHARE-BASED PAYMENTS AND SHARES HELD UNDER TRUST (cont’d) (A) SHARE CAPITAL (cont’d) 01 02 During the financial year, the number of issued and paid-up ordinary shares of the Company was increased from 3,613,386,720 to 3,628,678,020 by way of the issuance of:(i) 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others 7,166,300 new ordinary shares arising from the vesting of shares under the Employee Share Grant Plan (“ESGP”); (ii) 5,325,000 new ordinary shares arising from the exercise of options under the Employee Share Option Scheme (“ESOS”) at the following issue prices; and Number of shares ESOS issued exercise price units RM/share 1,358,700 2,842,400 747,300 376,600 5,325,000 2.16 2.54 2.91 3.03 Award of options under ESOS (“ESOS Award”) First ESOS Award Second ESOS Award Third ESOS Award Fourth ESOS Award (iii) 2,800,000 new ordinary shares arising from the subscription of new shares under the shares held under trust at the following issue prices: Number of shares ESOS issued exercise price units RM/share 300,000 1,600,000 500,000 300,000 100,000 2,800,000 2.16 2.54 2.91 3.03 2.93 Award of options under ESOS (“ESOS Award”) First ESOS Award Second ESOS Award Third ESOS Award Fourth ESOS Award Fifth ESOS Award The new ordinary shares issued rank pari passu in all respects with the existing ordinary shares of the Company. 260 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  279. 14 SHARE CAPITAL , SHARE PREMIUM, TREASURY SHARES, SHARE-BASED PAYMENTS AND SHARES HELD UNDER TRUST (cont’d) (B) SHARE PREMIUM The Group and the Company 2017 RM’000 At 1 April 2016 Arising from: - Vesting of shares under ESGP - Exercise of share options - Shares held under trust (Note 14(E)) Transition to no-par value regime on 31 January 2017 under the Companies Act 2016 * (Note 14(A)) (2,395,511) At 31 March – 2,349,079 16,198 17,841 12,393 * Prior to 31 January 2017, the application of the share premium account was governed by Sections 60 and 61 of the Companies Act 1965. In accordance with the transitional provisions set out in Section 618 (2) of the new Companies Act 2016 (the “Act”), on 31 January 2017 any amount standing to the credit of the Company’s share premium account had become part of the Company’s share capital (Note 14(A)). Notwithstanding this provision, the Company may within 24 months from the commencement of the Act, use the amount standing to the credit of its share premium account of RM2,395,511,000 for purposes as set out in Section 618(3) of the Act. (C) TREASURY SHARES The Group and the Company 2018 2017 Number Number of shares Amount of shares Amount ’000RM’000 ’000 RM’000 At 1 April 2017/2016 Shares buy back 3101 3 7952,0942 7 At 31 March 7982,1043 10 The shareholders of the Company had approved an ordinary resolution at the Annual General Meeting held on 23 August 2017 for the Company to repurchase its own shares up to a maximum of 10% of the issued and paid-up capital of the Company. The Directors of the Company were committed to enhancing the value of the Company and believed that the repurchase plan was being applied in the best interest of the Company and its shareholders. On 12 December 2017, the Company repurchased 219,700 of its ordinary shares from the open market on Bursa Malaysia Securities Berhad (“Bursa Malaysia”) for RM604,473. The average price paid for the shares repurchased was approximately RM2.75 per share. On 7 March 2018, the Company repurchased another 275,000 of its ordinary shares from the open market on Bursa Malaysia for RM714,800. The average price paid for the shares repurchased was approximately RM2.60 per share. On 9 March 2018, the Company repurchased another 300,000 of its ordinary shares from the open market on Bursa Malaysia for RM774,738. The average price paid for the shares repurchased was approximately RM2.58 per share. The repurchase transactions were financed by internally generated funds. The shares repurchased are being held as treasury shares as allowed for under Section 127 of the Companies Act 2016. The Company has the right to reissue these shares at a later date. As treasury shares, the rights attached as to voting, dividends and participation in other distribution are suspended. 261 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  280. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 14 SHARE CAPITAL, SHARE PREMIUM, TREASURY SHARES, SHARE-BASED PAYMENTS AND SHARES HELD UNDER TRUST (cont’d) (D) SHARE-BASED PAYMENTS 03 Summary Information for Shareholder At an Extraordinary General Meeting held on 19 October 2012, the Directors were authorised to proceed with the establishment and administration of the Long Term Incentive Plan (“LTIP”), which comprises an Employee Share Option Scheme (“ESOS”) and an Employee Share Grant Plan (“ESGP”). The Directors have appointed a committee (“Committee”) to administer the LTIP. The Directors and/or the Committee have also established trusts which are administered by a trustee in accordance with the trust deeds dated 20 December 2012 for the LTIP. 04 Business Review & Reports (i) Share options 05 Sustainability Statement 06 Financial Statements & others Share options were granted to executive directors and employees (collectively known as “Group Employee”), which is subject to eligibility criteria, under the Company’s Employee Share Option Scheme (“ESOS”), which became operative on 24 December 2012. The exercise price of the options is determined based on volume-weighted average market price of the Company’s ordinary shares as shown in the Daily Official List of Bursa Malaysia Securities Berhad for the five market days immediately preceding the Offer Date with an allowance for a discount of not more than ten per centum (10%) therefrom. The vesting of the options is conditional upon acceptance of the offer and fulfilment of the relevant vesting conditions as at the relevant vesting dates as follows: First Second Third Fourth Fifth Sixth ESOSESOSESOSESOSESOSESOS Percentage Award Award Award Award Award Award (%) 24 December 24 December 24 December 24 December 24 December 30 March 2013 2014 2015201620172019 40 24 December 24 December 24 December 24 December 24 December 30 March 201420152016 201720182020 30 24 December 24 December 24 December 24 December 24 December 30 March 2015 20162017201820192021 30 The vesting conditions include the tenure and performance of the eligible Group Employee who have accepted the Offer from the date of the Offer. Once the options are vested, the options are exercisable up to the expiry date of the ESOS, which was initially on 23 December 2017. On 24 November 2015, the Board of Directors had extended the scheme period of the ESOS for another five years effective from 24 December 2017 to 23 December 2022 pursuant to the By-Laws of the LTIP. 01 02 (a) On 24 December 2012, the first award of options under the ESOS of 29,640,600 options (“First ESOS Award”) was awarded to the Group Employee at an exercise price of RM4.44 per ordinary share. The exercise price of the First ESOS Award had been adjusted to RM4.37 (*) on 13 June 2014 and to RM2.18 (**) on 11 September 2015. On 25 June 2016, the exercise price of the First ESOS Award had been further adjusted to RM2.16 (***). 262 ANNUAL REPORT 2018 IJM CORPORATION BERHAD The first tranche of ESOS under the First ESOS Award amounting to 10,525,800 options had been vested and were exercisable as at 24 December 2013. The second tranche of ESOS under the First ESOS Award amounting to 7,215,700 options had been vested and were exercisable as at 24 December 2014. The third tranche of ESOS under the First ESOS Award amounting to 13,641,100 options had been vested and were exercisable as at 24 December 2015.
  281. 14 SHARE CAPITAL , SHARE PREMIUM, TREASURY SHARES, SHARE-BASED PAYMENTS AND SHARES HELD UNDER TRUST (cont’d) (D) SHARE-BASED PAYMENTS (cont’d) (i) Share options (cont’d) (a) Movements in the number of share options outstanding for the First ESOS Award are as follows: Number of share options over ordinary shares Balance Balance Grant Expiry Exercise at at Date Date Price 1.4.2017 Forfeited Exercised 31.3.2018 RM/share ’000 ’000 ’000 ’000 24 December 23 December 4.44/4.37*/ 2012 2022 2.18**/2.16*** 7,318 – (1,904) 5,414 As at 31 March 2018, out of the 5,413,800 (2017: 7,318,000) outstanding options from the First ESOS Award, 5,413,800 (2017: 7,318,000) options are exercisable. The weighted average quoted price of shares of the Company at the time when the options were exercised was RM3.46 (2017: RM3.46). (b) On 24 December 2013, the second award of options under the ESOS of 31,729,600 options (“Second ESOS Award”) was awarded to the Group Employee at an exercise price of RM5.22 per ordinary share. The exercise price of the Second ESOS Award had been adjusted to RM5.14 (*) on 13 June 2014 and to RM2.57 (**) on 11 September 2015. On 25 June 2016, the exercise price of the Second ESOS Award had been further adjusted to RM2.54 (***). The first tranche of ESOS under the Second ESOS Award amounting to 11,279,900 options had been vested and were exercisable as at 24 December 2014. The second tranche of ESOS under the Second ESOS Award amounting to 16,300,500 options had been vested and were exercisable as at 24 December 2015. The third tranche of ESOS under the Second ESOS Award amounting to 15,110,100 options had been vested and were exercisable as at 24 December 2016. Movements in the number of share options outstanding for the Second ESOS Award are as follows: Number of share options over ordinary shares Balance Balance Grant Expiry Exercise at at Date Date Price 1.4.2017 Forfeited Exercised 31.3.2018 RM/share ’000 ’000 ’000 ’000 24 December 23 December 5.22/5.14*/ 2013 2022 2.57**/2.54*** 25,249 – (4,696) 20,553 As at 31 March 2018, out of the 20,553,400 (2017: 25,248,700) outstanding options from the Second ESOS Award, 20,553,400 (2017: 25,248,700) options are exercisable. The weighted average quoted price of shares of the Company at the time when the options were exercised was RM3.45 (2017: RM3.42). (c) On 24 December 2014, the third award of options under the ESOS of 10,651,000 options (“Third ESOS Award”) was awarded to the Group Employee at an exercise price of RM5.88 per ordinary share. The exercise price of the Third ESOS Award had been adjusted to RM2.94 (*) on 11 September 2015. On 25 June 2016, the exercise price of the Third ESOS Award had been further adjusted to RM2.91 (**). The first tranche of ESOS under the Third ESOS Award amounting to 7,869,700 options had been vested and were exercisable as at 24 December 2015. The second tranche of ESOS under the Third ESOS Award amounting to 5,418,700 options had been vested and were exercisable as at 24 December 2016. The third tranche of ESOS under the Third ESOS Award amounting to 4,948,300 options have been vested and were exercisable as at 24 December 2017. 263 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  282. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 14 SHARE CAPITAL, SHARE PREMIUM, TREASURY SHARES, SHARE-BASED PAYMENTS AND SHARES HELD UNDER TRUST (cont’d) (D) SHARE-BASED PAYMENTS (cont’d) (i) 01 Share options (cont’d) (c) Movements in the number of share options outstanding for the Third ESOS Award are as follows: 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others Number of share options over ordinary shares Balance Balance Grant Expiry Exercise at at Date Date Price 1.4.2017 Forfeited Exercised 31.3.2018 RM/share ’000 ’000 ’000 ’000 24 December 23 December 2014 2022 5.88/2.94* 2.91**14,568(1,242)(1,444)11,882 As at 31 March 2018, out of the 11,881,600 (2017: 14,568,365) outstanding options from the Third ESOS Award, 11,881,600 (2017: 8,377,700) options are exercisable. The weighted average quoted price of shares of the Company at the time when the options were exercised was RM3.45 (2017: RM3.43). (d) On 24 December 2015, the fourth award of options under the ESOS of 19,605,100 options (“Fourth ESOS Award”) was awarded to the Group Employee at an exercise price of RM3.06 per ordinary share. The exercise price of the Fourth ESOS Award had been adjusted to RM3.03 (*) on 25 June 2016. The first tranche of ESOS under the Fourth ESOS Award amounting to 7,012,100 options had been vested and were exercisable as at 24 December 2016. The second tranche of ESOS under the Fourth ESOS Award amounting to 4,768,800 options have been vested and were exercisable as at 24 December 2017. Movements in the number of share options outstanding for the Fourth ESOS Award are as follows: Number of share options over ordinary shares Balance Balance Grant Expiry Exercise at at Date Date Price 1.4.2017 Forfeited Exercised 31.3.2018 RM/share ’000 ’000 ’000 ’000 24 December 23 December 2015 2022 3.06/3.03* 16,947(896)(975) 15,076 As at 31 March 2018, out of the 15,075,820 (2017:RM16,947,440) outstanding options from the Fourth ESOS Award, 9,410,200 (2017: 5,616,200) options are exercisable. The weighted average quoted price of shares of the Company at the time when the options were exercised was RM3.45 (2017: RM3.40). (e) On 24 December 2016, the fifth award of options under the ESOS of 16,034,000 options (“Fifth ESOS Award”) has been awarded to the Group Employee at an exercise price of RM2.93 per ordinary share. 264 ANNUAL REPORT 2018 IJM CORPORATION BERHAD The first tranche of ESOS under the Fifth ESOS Award amounting to 5,338,900 options have been vested and were exercisable as at 24 December 2017.
  283. 14 SHARE CAPITAL , SHARE PREMIUM, TREASURY SHARES, SHARE-BASED PAYMENTS AND SHARES HELD UNDER TRUST (cont’d) (D) SHARE-BASED PAYMENTS (cont’d) (i) Share options (cont’d) (e) Movements in the number of share options outstanding for the Fifth ESOS Award are as follows: Number of share options over ordinary shares Balance Balance Grant Expiry Exercise at at Date Date Price 1.4.2017 Forfeited Exercised 31.3.2018 RM/share ’000 ’000 ’000 ’000 24 December 23 December 2016 2022 2.93 16,034 (1,107) (47) 14,880 As at 31 March 2018, out of the 14,880,280 outstanding options from the Fifth ESOS Award, 5,291,800 options are exercisable. The weighted average quoted price of shares of the Company at the time when the options were exercised was RM3.11. (f) On 30 March 2018, the sixth award of options under the ESOS of 79,352,700 options (“Sixth ESOS Award”) has been awarded to the Group Employee at an exercise price of RM2.70 per ordinary share. Movements in the number of share options outstanding for the Sixth ESOS Award are as follows: Number of share options over ordinary shares Balance Balance Grant Expiry Exercise at at Date Date Price 1.4.2017 Granted Exercised 31.3.2018 RM/share ’000 ’000 ’000 ’000 30 March 23 December 20182022 2.70– 79,353– 79,353 As at 31 March 2018, none of the options are vested under the Sixth ESOS Award. Note 6 to the financial statements which discloses the total expenses recognised in profit or loss arising from transactions accounted for as equity-settled share-based payment transactions include the expense arising from the offer of ESOS. 265 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  284. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 14 SHARE CAPITAL, SHARE PREMIUM, TREASURY SHARES, SHARE-BASED PAYMENTS AND SHARES HELD UNDER TRUST (cont’d) (D) SHARE-BASED PAYMENTS (cont’d) 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others (i) Share options (cont’d) The fair value of share options offered was estimated using the Trinomial Valuation Model, taking into account the terms and conditions upon which the options were offered. The assumptions used for the valuation were as follows: First Second Third Fourth Fifth Sixth ESOSESOSESOSESOSESOSESOS Award Award Award Award Award Award Fair value at the date of offer (RM) 1.08/ 0.54** 1.02/ 0.51** 1.08/ 0.54** 0.73 0.73 0.47 4.98 5.80 6.60 3.40 3.25 2.68 4.44/4.37*/ 5.22/5.14*/ 5.88/ 3.06/ 2.18**/ 2.57**/2.94**/3.03*** 2.16*** 2.54*** 2.91*** 2.93 2.70 Share price at the date of offer (RM) Exercise price (RM) Expected volatility 25.918.416.519.021.224.6 (%) Expected life (years) 543764 *The ESOS exercise price had been adjusted to RM4.37 and RM5.14 on 13 June 2014, following the declaration of a single tier special dividend of 10 sen per share for the financial year ended 31 March 2014 on 27 May 2014. ** The ESOS fair value and exercise price had been adjusted on 11 September 2015 following the 1:1 Bonus Issue. *** The ESOS exercise price had been adjusted on 25 June 2016, following the declaration of a single tier special dividend of 3 sen per share for the financial year ended 31 March 2016 on 26 May 2016. The expected life of the options was based on historical data, therefore it is not necessarily indicative of exercise patterns that may occur. The expected volatility reflected the assumption that the historical volatility was indicative of future trends, which may also not necessarily be the actual outcome. No other features of the options offered were incorporated into the measurement of fair value. The fair value of the ESOS had been further adjusted on 3 December 2015 (refer to the table below), following the approval of the extension of ESOS scheme period on 24 November 2015 for another five years to 23 December 2022, pursuant to the By-Laws of the LTIP. FirstSecond Third ESOS Award ESOS Award ESOS Award Incremental fair value as a result of modification (RM) Share price at the date of modification (RM) Exercise price (RM) Expected volatility (%) Expected life (years) 0.04 3.40 2.18 18.7 2.5 - 3.5 0.10 3.40 2.57 18.7 3 - 4 0.16 3.40 2.94 18.7 3.5 - 4.5 There was no change to Fourth, Fifth and Sixth ESOS Award because these were awarded to the Group Employee on the respective dates, which were after the modification date. 266 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  285. 14 SHARE CAPITAL , SHARE PREMIUM, TREASURY SHARES, SHARE-BASED PAYMENTS AND SHARES HELD UNDER TRUST (cont’d) (D) SHARE-BASED PAYMENTS (cont’d) (ii) Share grants The ESGP has been implemented on 24 December 2012 and shall be in force for a period of ten years and expires on 23 December 2022. On 15 April 2013, the first award of shares under the ESGP (“First ESGP Award”) had been made to the eligible Group Employee and once accepted will be vested to the eligible Group Employee at no consideration over a period of up to three years, subject to the fulfilment of vesting conditions. As at 31 March 2018 and 31 March 2017, there are no outstanding share grants under the First ESGP Award. On 15 April 2014, the second award of shares under the ESGP (“Second ESGP Award”) had been made to the eligible Group Employee and once accepted will be vested to the eligible Group Employee at no consideration over a period of up to three years, subject to the fulfilment of vesting conditions. Movements in the number of share grants outstanding are as follows: Number of share grants Balance Balance at at Grant Date 1.4.2017Forfeited Issued 31.3.2018 ’000 ’000 ’000 ’000 15 April 2014 On 15 April 2015, the third award of shares under the ESGP (“Third ESGP Award”) had been made to the eligible Group Employee and once accepted will be vested to the eligible Group Employee at no consideration over a period of up to three years, subject to the fulfilment of vesting conditions. Movements in the number of share grants outstanding are as follows: 3,656 (136) (3,520) – Number of share grants Balance Balance at at Grant Date 1.4.2017Forfeited Issued 31.3.2018 ’000 ’000 ’000 ’000 15 April 2015 On 15 April 2016, the fourth award of shares under the ESGP (“Fourth ESGP Award”) had been made to the eligible Group Employee and once accepted will be vested to the eligible Group Employee at no consideration over a period of up to three years, subject to the fulfilment of vesting conditions. Movements in the number of share grants outstanding are as follows: 13,372 (6,508) (3,433) 3,431 Number of share grants Balance Balance at at Grant Date 1.4.2017Forfeited Issued 31.3.2018 ’000 ’000 ’000 ’000 15 April 2016 15,011 – (213) 14,798 267 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  286. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 14 SHARE CAPITAL, SHARE PREMIUM, TREASURY SHARES, SHARE-BASED PAYMENTS AND SHARES HELD UNDER TRUST (cont’d) (D) SHARE-BASED PAYMENTS (cont’d) (ii) Share grants (cont’d) 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others On 15 April 2017, the fifth award of shares under the ESGP (“Fifth ESGP Award”) has been made to the eligible Group Employee and once accepted will be vested to the eligible Group Employee at no consideration over a period of up to three years, subject to the fulfilment of vesting conditions. Movements in the number of share grants outstanding are as follows: Number of share grants Balance Balance at at 1.4.2017 Granted Issued 31.3.2018 Grant Date ’000 ’000 ’000 ’000 15 April 2017 The fair value of ESGP offered was based on the closing market price of the shares that was quoted on Bursa Malaysia at the date of the offer. Note 6 to the financial statements which discloses the total expenses recognised in profit or loss arising from transactions accounted for as equity-settled share-based payment transactions include the expense arising from the offer of ESGP. – 14,717 – 14,717 (E) SHARES HELD UNDER TRUST The Group Employee can elect to fund the exercise of the options themselves or through an ESOS Trust Funding Mechanism (“ETF mechanism”). To facilitate the ETF mechanism, the Company provides funding to the trustee to subscribe for new shares of the Company which are held under a trust and managed by a trustee. Shares issued by the Company under the ETF mechanism are recorded as shares held under trust in the financial statements. The shares issued under the ETF mechanism rank pari passu in all respects with the existing ordinary shares of the Company. The movement of shares held under trust during the financial year is as follows: 268 ANNUAL REPORT 2018 IJM CORPORATION BERHAD The Group and the Company 2018 2017 RM’000 RM’000 At 1 April 2017/2016 Subscription of new shares (Notes 14(A),(B)) Exercise of share options via ETF mechanism 4,0163,812 7,36931,128 (9,864)(30,924) At 31 March 1,5214,016
  287. 15 OTHER RESERVES The Group 2018 2017 RM ’000 RM’000 (a) Capital reserve At 1 April 2017/2016 Share of capital reserve in an associate 32,94033,761 1,652(821) At 31 March 34,59232,940 (b)Fair value reserve At 1 April 2017/2016 Share of fair value reserve in an associate 2,786786 3,5142,000 At 31 March 6,3002,786 (c) Redemption reserve At 1 April 2017/2016 / At 31 March 10,200*10,200* (d) Hedge reserve At 1 April 2017/2016 Realisation of other comprehensive income arising from dilution of interest in an associate Share of hedge reserve in an associate (319)– (2,154)1,726 At 31 March –2,473 At 31 March 51,09248,399 2,473747 *This represents consolidation adjustment on the capitalisation of retained earnings equivalent to the nominal value of the redeemable cumulative preference shares redeemed by a subsidiary of the Company. 16BONDS Unsecured Sukuk Sukuk Murabahah Mudharabah Notes (a) Notes (b) RM’000 RM’000 Secured Junior Bai Bithaman Ajil Notes (c) RM’000 Total RM’000 The Group 2018 At 1 April 20171,300,000 680,000 Redeemed during the year – (30,000) –1,980,000 –(30,000) At 31 March1,300,000 650,000 Less: Amount redeemable within – (40,000) 12 months (Note 45) –1,950,000 1,300,000 610,000 –(40,000) – 1,910,000 269 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  288. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 16BONDS (cont’d) Unsecured Sukuk Sukuk Murabahah Mudharabah Notes (a) Notes (b) RM’000 RM’000 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others Secured Junior Bai Bithaman Ajil Notes (c) RM’000 Total RM’000 The Group (cont’d) 2017 At 1 April 20161,200,000 Drawdown during the year 100,000 Redeemed during the year – Reversal – 700,000 – (20,000) – 137,774 – (120,000) (17,774) 2,037,774 100,000 (140,000) (17,774) At 31 March1,300,000 680,000 – 1,980,000 – – – – (17,774) 17,774 (17,774) 17,774 1,300,000 Less: Amount redeemable within 12 months (Note 45) – 680,000 – 1,980,000 (30,000) – (30,000) 1,300,000 650,000 – 1,950,000 Less: Amortisation of fair value Reversal Unsecured Sukuk Murabahah Notes (a) RM’000 Total RM’000 The Company 2018 Non-current: At 1 April 2017/At 31 March 1,300,0001,300,000 2017 270 ANNUAL REPORT 2018 IJM CORPORATION BERHAD Non-current: At 1 April 2016 Drawdown during the year 1,200,000 100,000 1,200,000 100,000 At 31 March 1,300,000 1,300,000
  289. 16BONDS (cont’d) A. Maturity profile of Bonds The Group Carrying Note amount < 1 year 1 – 2 years 2 – 3 years 3 – 4 years 4 – 5 years > 5 years RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 2018 Unsecured Sukuk Murabahah Notes(a) 1,300,000 – 200,000 150,000150,000300,000 500,000 Secured Sukuk Mudharabah Notes(b) 650,000 40,000 55,000 60,00060,00060,000 375,000 1,950,00040,000 255,000 210,000210,000360,000 875,000 2017 Unsecured Sukuk Murabahah Notes (a) 1,300,000 Secured Sukuk Mudharabah Notes (b) 680,000 30,000 40,000 55,00060,00060,000 435,000 – – 200,000150,000150,000 800,000 1,980,00030,000 40,000 255,000210,000210,000 1,235,000 The Company Carrying Note amount < 1 year 1 – 2 years 2 – 3 years 3 – 4 years 4 – 5 years > 5 years RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 2018 Unsecured Sukuk Murabahah Notes(a) 1,300,000 – 200,000 150,000150,000300,000 500,000 2017 Unsecured Sukuk Murabahah Notes (a) 1,300,000 – – 200,000150,000150,000 800,000 271 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  290. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 16BONDS (cont’d) B. Principal features of Bonds (a) Sukuk Murabahah Notes 01 On 10 March 2014, the Company established an unsecured Sukuk Murabahah Programme (“Programme”) of up to RM3.0 billion in nominal value with a tenure of up to 20 years from the first issuance date. The Programme contains covenants which require the Group to maintain its net debt to equity ratio of not more than 1.25 times. On 10 April 2014, the Company made its first issuance pursuant to the Programme for the amount of RM500,000,000 at nominal value and carrying a profit rate ranging from 4.60% to 4.85% per annum. It is repayable in 3 annual instalments, commencing 5 years after the issue date. On 12 June 2014, the Company issued a second tranche of RM300,000,000 pursuant to the Programme at its nominal value that carries a profit rate of 4.83% per annum. It is repayable in full 8 years after the issue date. On 21 April 2015, the Company issued a third tranche of RM200,000,000 pursuant to the Programme at its nominal value that carries a profit rate of 4.90% per annum. It is repayable in full 10 years after the issue date. On 4 June 2015, the Company issued a fourth tranche of RM200,000,000 pursuant to the Programme at its nominal value that carries a profit rate of 4.64% per annum. It is repayable in full 8 years after the issue date. On 17 October 2016, the Company issued a fifth tranche of RM100,000,000 pursuant to the Programme at its nominal value that carries a profit rate of 4.60% per annum. It is repayable in full 8 years after the issue date. 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others (b) Sukuk Mudharabah Notes (i) A subsidiary, Besraya (M) Sdn Bhd (“Besraya”), issued RM700,000,000 secured Sukuk Mudharabah (“Sukuk”), an Islamic Securities Programme on 28 July 2011. The RM700,000,000 Sukuk was issued at its nominal value. It is repayable in 13 annual instalments, commencing 5 years after the issue date. As at 31 March 2018, the profit rate of the Sukuk is 4.96% (2017: 4.96%) per annum. (ii) The Sukuk is secured by the following: • a debenture creating a first ranking fixed and floating charge over all present and future assets, rights and interests of the issuer; • a first ranking assignment of all of the issuer’s rights, interests, titles and benefits under the Project Agreements, including without limitation the right to demand, collect and retain toll, liquidated damages and all proceeds arising therefrom; • an assignment of all rights, interests, titles and benefits in all performance and/or maintenance bonds issued to and/or in favour of the issuer, save for those assigned or to be assigned to the Government of Malaysia pursuant to the Concession Agreement; • a first ranking assignment of all rights, interests, titles and benefits in all relevant insurance/ takaful policies of the issuer and/or in respect of the Besraya Extension Expressway Project, subject to the insurance provisions under the Concession Agreement and the Supplemental Concession Agreement; and • a first ranking charge and assignment of all rights, interests, titles and benefits in all Designated Accounts and the credit balances. 272 ANNUAL REPORT 2018 IJM CORPORATION BERHAD (iii) The Sukuk contains covenants which require Besraya to maintain a financial service cover ratio of at least 1.25 times and debt equity ratio of not greater than 80:20.
  291. 16BONDS (cont’d) B. Principal features of Bonds (cont’d) (c) Junior Bai Bithaman Ajil (“BBA”) Notes The principal features of the Junior BBA Notes were as follows: (i) A subsidiary, New Pantai Expressway Sdn Bhd (“NPE”), issued RM250,000,000 secured Junior BBA Notes on 27 October 2003. The RM250,000,000 Junior BBA Notes were issued at its nominal value and carried a profit rate ranging from 7.45% to 7.75% per annum. It was repayable in 4 semi-annual instalments, commencing 11 1/2 years after the issue date. The RM250,000,000 Junior BBA Notes were fully repaid in the preceding financial year. (ii) The Junior BBA Notes were secured by the following: • a debenture creating a fixed and floating charge over all assets, rights and interests, both present and future of the issuer; • assignment of all contractual rights of the issuer, being its rights arising under the Project Agreements (as defined in the Junior BBA Notes Trust Deeds); • a charge and an assignment over the Designated Accounts (as defined in the Junior BBA Notes Trust Deeds); and • an assignment of all the issuer’s interests in all relevant insurances required to be undertaken in respect of the New Pantai Highway Project. (iii) The Junior BBA Notes contained covenants which required NPE to maintain a financial service cover ratio of at least 1.25 times and debt equity ratio of not greater than 75:25. 17 TERM LOANS Note The Group 2018 2017 RM’000 RM’000 The Company 2018 2017 RM’000 RM’000 Current: Secured45 232,856232,985 –– Unsecured45 1,441,918455,717483,188– 1,674,774688,702483,188– Non-current: Secured 460,903613,651 Unsecured 479,2471,508,158 940,1502,121,809 –176,940 2,614,9242,810,511 483,188176,940 A. Currency profile of term loans The currency exposure profile of term loans is as follows: –– –176,940 The Group 2018 2017 RM’000 RM’000 The Company 2018 2017 RM’000 RM’000 United States Dollar Chinese Yuan Renminbi 1,470,3391,424,555 483,188176,940 8,40835,547 –– 1,478,747 1,460,102483,188 176,940 273 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  292. Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others 274 ANNUAL REPORT 2018 IJM CORPORATION BERHAD 04 Secured Term loan 1 Term loan 2 Term loan 3 Term loan 4 Term loan 5 Term loan 6 Term loan 7 Term loan 8 Term loan 9 Term loan 10 Term loan 11 Term loan 12 Term loan 13 5.3 4.9 5.1 3.1 4.6 4.6 4.9 5.0 5.1 5.0 5.0 5.0 9.3 41,000 100,000 193,590 143,064 16,218 30,444 6,735 16,875 31,963 27,891 26,109 51,851 8,019 – 39,982 –– –– – RM(a) –– 41,000–– – –– –– – RM(b) 100,000 –– –– – –– –– – RM(c) 55,52055,52055,52027,030 – –––––– GBP(d) – – 143,064 – – –––––– RM(e)9,2806,938 – – – –––––– RM(f) 18,80011,644 – – – –––––– RM(g)4,4902,245 – – – –––––– RM(h) 16,875 – – – – –––––– RM(i) – – – – – 31,963 –– –– – RM(j) 27,891 – – – – – –– –– – RM(k) – 20,5515,558 – – –––––– RM(l) – 38,20013,651 – – –––––– INR(m) – – – – – 8,019 –– –– – 693,759 232,856135,098258,793 27,030 2018 Floating interest rate Fixed interest rate Effective interest rate as Total at year carrying < 11-22-33-44-5 > 5 < 11-2 2-33-4 4-5 The Group endamount Currency Note yearyearsyearsyearsyears years yearyears yearsyears years % p.a RM’000 RM’000RM’000RM’000RM’000RM’000 RM’000 RM’000RM’000 RM’000RM’000 RM’000 At 31 March 2018 Summary Information for Shareholder 02 The net exposure of term loans to interest rate cash flow risk and the periods in which the borrowings mature or reprice are as follows: 01 03 B. Effective interest rate and maturity profile of term loans 17 TERM LOANS (cont’d) NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018
  293. ANNUAL REPORT 2018 275 IJM CORPORATION BERHAD At 31 March 2018 (cont’d) – –– – Total term loans 2,614,924 1,504,774 339,160 423,43396,08523,193 45,779170,00012,500 – 7.5 8,408CNY 3,058 3,058 2,292–– – –– –– – 5.3 160,000 RM ––––– – 160,000– –– – 5.2 50,000 RM 50,000–– –– – –– –– – 2.8 67,645USD 18,55418,55418,55411,983 – – –– –– – 3.1 154,618USD 57,982 57,982 38,654–– – –– –– – 3.1 154,618USD 57,982 57,982 38,654–– – –– –– – 3.295,283USD 24,73924,73924,73921,066 – –– –– –– 2.8 67,645USD 18,55418,55418,55411,983 – –– –– –– 3.2 115,962USD 17,39323,19323,19323,19323,193 5,797 – –– –– 2.9 154,620USD 154,620–– –– – –– –– – 2.7 173,948USD 173,948–– –– – –– –– – 3.6 154,620USD 154,620–––– – –– –– – 5.1 830RM ––– 830– – –– –– – 3.3 154,620USD 154,620–––– – –– –– – 8.5 158,598INR 158,598–––– – –– –– – 8.5 50,490 INR 50,490–––– – –– –– – 3.9 176,760USD 176,760–––– – –– –– – 4.9 22,500 RM ––– –– – 10,000 12,500 –– – Term loan 15 Term loan 16 Term loan 17 Term loan 18 Term loan 19 Term loan 20 Term loan 21 Term loan 22 Term loan 23 Term loan 24 Term loan 25 Term loan 26 Term loan 27 Term loan 28 Term loan 29 Term loan 30 Term loan 31 Term loan 32 – Unsecured 1,921,165 1,271,918 204,062 164,64069,05523,193 5,797170,00012,500 2018 Floating interest rate Fixed interest rate Effective interest rate as Total at year carrying < 11-22-33-44-5 > 5 < 11-2 2-33-4 4-5 The Group endamount Currency yearyearsyearsyearsyears years yearyears yearsyears years % p.a RM’000 RM’000RM’000RM’000RM’000RM’000 RM’000 RM’000RM’000 RM’000RM’000 RM’000 The net exposure of term loans to interest rate cash flow risk and the periods in which the borrowings mature or reprice are as follows: (cont’d) B. Effective interest rate and maturity profile of term loans (cont’d) 17 TERM LOANS (cont’d)
  294. Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others 276 ANNUAL REPORT 2018 IJM CORPORATION BERHAD 04 – – – Term loan 1 5.2 7,799RM (a) –––– 7,799 – –– –– – Term loan 2 4.7 200,000RM (b) 100,000 100,000––– – –– –– – Term loan 3 4.9 221,132 RM (c) 27,76055,52055,52055,52026,812 – – – – – – Term loan 4 3.0 17,896 GBP (d) ––– 17,896– – –– –– – Term loan 5 4.6 25,461RM (e) 9,280 9,280 6,901–– – –– –– – Term loan 6 4.6 51,475RM (f) 18,800 18,800 13,875–– – –– –– – Term loan 7 4.6 11,225RM (g) 4,490 4,490 2,245–– – –– –– – Term loan 8 4.8 39,375RM (h) 22,500 16,875––– – –– –– – Term loan 9 4.7 124,451RM (i) ––– 24,451 50,000 50,000 –– –– – Term loan 105.0 41,278RM (j) 12,383 28,895––– – –– –– – Term loan 114.7 19,000RM (k) –– 19,000–– – –– –– – Term loan 124.9 49,772RM (l) – 9,700 36,800 3,272– – –– –– – Term loan 148.5 37,772 CNY (n) ––––– – 37,772– –– – – Secured 846,636 195,213243,560134,341101,139 84,611 50,000 37,772 2017 Floating interest rate Fixed interest rate Effective interest rate as Total at year carrying < 11-22-33-44-5 > 5 < 11-2 2-33-4 4-5 The Group endamount Currency Note yearyearsyearsyearsyears years yearyears yearsyears years % p.a RM’000 RM’000RM’000RM’000RM’000RM’000 RM’000 RM’000RM’000 RM’000RM’000 RM’000 At 31 March 2017 Summary Information for Shareholder 02 The net exposure of term loans to interest rate cash flow risk and the periods in which the borrowings mature or reprice are as follows: (cont’d) 01 03 B. Effective interest rate and maturity profile of term loans (cont’d) 17 TERM LOANS (cont’d) NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018
  295. ANNUAL REPORT 2018 277 IJM CORPORATION BERHAD At 31 March 2017 (cont’d) –– Total term loans2,810,511610,9301,027,126391,513309,924150,077 83,169 77,772 80,000 80,000 – Term loan 159.4 11,972 CNY 3,193 3,193 3,193 2,393– – –– –– – Term loan 165.3 200,000RM– –––– – 40,000 80,000 80,000– – Term loan 175.0 50,000RM– 10,000 20,000 20,000– – –– –– – Term loan 182.0 108,353 USD 30,958 77,395––– – –– –– – Term loan 192.5 176,903 USD– 66,339 66,339 44,225– – –– –– – Term loan 202.5 176,903 USD– 66,339 66,339 44,225– – –– –– – Term loan 212.4 132,677 USD 49,754 66,339 16,584–– – –– –– – Term loan 222.0 108,353 USD 30,958 77,395––– – –– –– – Term loan 23 2.4 132,677 USD – 19,90326,53526,53526,535 33,169 – – – – – Term loan 263.0 176,940 USD– 176,940––– – –– –– – Term loan 27 5.0 8,996 RM – –3,4603,7501,786 – – – – – – Term loan 282.8 176,940 USD– 176,940––– – –– –– – Term loan 298.8 221,991INR 221,991 –––– – –– –– – Term loan 308.8 20,460INR 20,460 –––– – –– –– – Term loan 31 3.7 234,809 USD32,502 42,78354,72267,65737,145 – – – – – – Term loan 339.4 23,575 CNY 23,575 –––– – –– –– – Term loan 344.8 2,326RM 2,326 –––– – –– –– – – Unsecured 1,963,875415,717 783,566257,172208,785 65,466 33,169 40,000 80,000 80,000 2017 Floating interest rate Fixed interest rate Effective interest rate as Total at year carrying< 1 1-22-33-44-5 > 5 < 11-2 2-33-4 4-5 The Group endamount Currencyyear yearsyearsyearsyears years yearyears yearsyears years % p.a RM’000RM’000 RM’000RM’000RM’000RM’000 RM’000 RM’000RM’000 RM’000RM’000 RM’000 The net exposure of term loans to interest rate cash flow risk and the periods in which the borrowings mature or reprice are as follows: (cont’d) B. Effective interest rate and maturity profile of term loans (cont’d) 17 TERM LOANS (cont’d)
  296. Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others 278 ANNUAL REPORT 2018 IJM CORPORATION BERHAD 04 At 31 March 2017 2017 Unsecured Term loan 263.0 176,940 USD – 176,940––– – –– –– – –––– – –– –– – 2.9 2.7 3.6 483,188 483,188 Term loan 24 Term loan 25 Term loan 26 –––– – –– –– – –––– – –– –– – –––– – –– –– – Unsecured 154,620USD 154,620 173,948USD 173,948 154,620USD 154,620 2018 Floating interest rate Fixed interest rate Effective interest rate as Total The at year carrying < 11-22-33-44-5 > 5 < 11-2 2-33-4 4-5 Company endamount Currency yearyearsyearsyearsyears years yearyears yearsyears years % p.a RM’000 RM’000RM’000RM’000RM’000RM’000 RM’000 RM’000RM’000 RM’000RM’000 RM’000 At 31 March 2018 Summary Information for Shareholder 02 The net exposure of term loans to interest rate cash flow risk and the periods in which the borrowings mature or reprice are as follows: (cont’d) 01 03 B. Effective interest rate and maturity profile of term loans (cont’d) 17 TERM LOANS (cont’d) NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018
  297. 17 TERM LOANS (cont’d) C. Principal features of secured term loans (a) Term loan 1 of RM41,000,000 (2017: RM7,799,000) and revolving credit of RM11,607,000 (2017: Nil) (Note 45(A)(e)) is secured by way of: (i) a facility agreement for the sum of RM300,000,000; (ii) a debenture incorporating a fixed and floating charge over all present and future assets of a subsidiary of IJM Land Berhad (“IJML”), a subsidiary of the Company; (iii) an assignment over the current and future proceeds of a subsidiary of IJML; (iv) a legal charge over the Designated Accounts of a subsidiary of IJML; and (v) a corporate guarantee by IJML. (b) Term loan 2 of RM100,000,000 (2017: RM200,000,000) is secured by way of: (i) facility agreements for the sum of RM250,000,000; (ii) a first legal charge created under the National Land Code, 1965 over certain properties and parcels of land of the subsidiaries of IJML (Notes 27 and 37); and (iii) letter of awareness or comfort from the Company. (c) Term loan 3 of RM193,590,000 (2017: RM221,132,000) is secured by way of: (i) a facility agreement for the sum of RM222,089,000; (ii) a registered first party first legal charge over 67 parcels of adjoining land of a subsidiary of IJML (Note 37); and (iii) a proportionate corporate guarantee by IJML and a corporate shareholder of a subsidiary of IJML. (d) Term loan 4 of RM143,064,000 (2017: RM17,896,000) is secured by way of: (i) a first ranking debenture by way of a fixed and floating charge over all present and future assets of a subsidiary of IJML; (ii) a first party legal charge over one (1) parcel of land of a subsidiary of IJML (Note 37); (iii) a legal charge over the entire equity interest in a subsidiary of IJML; (iv) a first party charge over the Designated Accounts of a subsidiary of IJML; (v) a third party Deed of Assignment by a subsidiary of IJML over all its rights, title and interest over the land; (vi) a first party Deed of Assignment by a subsidiary of IJML over all contracts awarded by the subsidiary and over all insurance proceeds relating to the project; (vii) an irrevocable letter of undertaking by the subsidiary of IJML to deposit proceeds of sales of the development into the Designated Accounts; and (viii) a corporate guarantee by IJML. (e) Term loan 5 of RM16,218,000 (2017: RM25,461,000) is secured by way of: (i) a facility agreement for the sum of RM27,880,000; (ii) a first party first legal charge over two parcels of freehold land of a subsidiary of IJML (Note 37); and (iii) a corporate guarantee by IJML. 279 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  298. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 17 TERM LOANS (cont’d) C. Principal features of secured term loans (cont’d) (f) Term loan 6 of RM30,444,000 (2017: RM51,475,000) is secured by way of: 01 (i) 02 (ii) a first party first legal charge over one parcel of freehold land of a subsidiary of IJML (Note 37); and 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others a facility agreement for the sum of RM56,360,000; (iii) a corporate guarantee by IJML. (g) Term loan 7 of RM6,735,000 (2017: RM11,225,000) is secured by way of: (i) a facility agreement for the sum of RM13,470,000; (ii) a first party first legal charge over two parcels of freehold land of a subsidiary of IJML (Note 37); and (iii) a corporate guarantee by IJML. (h) Term loan 8 of RM16,875,000 (2017: RM39,375,000) is secured by way of: (i) a facility agreement for the sum of RM45,000,000; (ii) a first party first legal charge over one parcel of freehold land of a subsidiary of IJML (Note 37); and (iii) a corporate guarantee by a subsidiary of IJML. (i) Term loan 9 of RM31,963,000 (2017: RM124,451,000) and revolving credit of RM29,849,000 (2017: RM13,349,000) (Note 45(A)(c)) is secured by way of: (i) a facility agreement for the sum of RM460,000,000; (ii) a first party first legal charge over certain parcels of leasehold land of a subsidiary of IJML (Note 37); and (iii) a letter of support from IJML and an associate of the Company. (j) Term loan 10 of RM27,891,000 (2017: RM41,278,000) is secured by way of: (i) a facility agreement for the sum of RM44,625,000; (ii) a first party first legal charge over 10% ordinary shares of a subsidiary of IJML; and (iii) a corporate guarantee by IJML. (k) Term loan 11 of RM26,109,000 (2017: RM19,000,000) is secured by way of: (i) a facility agreement for the sum of RM125,000,000; (ii) a first party first legal charge over 2,013 parcels of adjoining freehold land of a subsidiary of IJML (Note 37); and (iii) a corporate guarantee by IJML. (l) Term loan 12 of RM51,851,000 (2017: RM49,772,000) is secured by way of: (i) a first legal charge over 115 parcels of land and completed units of inventories of a subsidiary of IJML (Note 37); and (ii) a corporate guarantee by IJML. 280 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  299. 17 TERM LOANS (cont’d) C. Principal features of secured term loans (cont’d) (m) Term loan 13 of RM8,019,000 is secured by first charge on all the assets (except for the concession assets) and 26% equity shares of an Indian tollway subsidiary of the Company, together with all the rights, title, interest, benefits, claims and demands whatsoever to and in respect of such equity share capital. (n) Term loan 14 of RM37,772,000 was secured by way of an irrevocable standby letter of credit issued on behalf of IJML of CNY60,000,000. The loan was fully repaid during the financial year. 18 GOVERNMENT SUPPORT LOANS Note Government Support Loans: - Government Support Loan 1 - Government Support Loan 2 (a) (b) The Group 2018 2017 RM’000 RM’000 78,169102,625 80,65084,953 158,819187,578 (33,104)(33,104) Less: Payable within 12 months (Note 44) 125,715154,474 A. Maturity profile of Government Support Loans Total carrying <1 1–2 2–3 3–4 4–5 >5 amount year yearsyearsyearsyearsyears RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 2018 Government Support Loan 1 Government Support Loan 2 78,169 26,153 25,016 27,000––– 80,650 6,951 6,7219,2818,9748,676 40,047 158,81933,10431,737 36,2818,9748,676 40,047 2017 Government Support Loan 1 Government Support Loan 2 102,625 84,953 26,153 6,951 25,286 6,720 24,186 6,497 27,000 8,974 – 8,676 – 47,135 187,578 33,104 32,00630,68335,974 8,67647,135 281 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  300. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 18 GOVERNMENT SUPPORT LOANS (cont’d) B. Principal features of Government Support Loans 01 The principal features of Government Support Loans of subsidiaries of Road Builder (M) Holdings Bhd (“RBH”), a subsidiary of the Company, are as follows: (a) Government Support Loan 1 - Unsecured 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others On 26 March 1996, New Pantai Expressway Sdn Bhd (“NPE”), a subsidiary of RBH, entered into a Land Cost Supplemental Agreement with the Government of Malaysia (“the Government”) for an interest-free loan provided by the Government in making available the concession area to NPE as Reimbursable Land Cost for the construction of the New Pantai Expressway. As amended by a second Supplemental Concession Agreement dated 7 October 2003, the Government Support Loan 1 is reimbursable to the Government in 5 annual instalments, with the first instalment commencing on 11 September 2016. (b) Government Support Loan 2 – Secured The Government Support Loan 2 is in respect of an agreement between Kuantan Port Consortium Sdn Bhd, a subsidiary of RBH and the Government of Malaysia (“the Government”) in connection with the reimbursable infrastructure cost for the purpose of financing the dredging of the new harbour basin. In financial year 2007, the instalment payments were re-scheduled to commence on 15 June 2006 and are repayable over 22 yearly variable instalments, which are interest-free. The Government Support Loan 2 is secured by a negative pledge and by a deed of assignment over: (i) the balance of the revenue from the scheduled leases, tenancies and new sub leases and tenancies granted after the commencement date of the Privatisation Agreement after deducting the amounts payable to the Kuantan Port Authority; and (ii) all other revenue received from the Kuantan port operations. 19 HIRE PURCHASE AND LEASE PAYABLES The Group 2018 2017 RM’000 RM’000 Minimum lease payments: - Payable within 1 year - Payable between 1 and 5 years 637760 297837 9341,597 Less: Future finance charges (45)(110) Present value of hire purchase and lease liabilities 8891,487 resent value of hire purchase and lease liabilities: P - Payable within 1 year (Note 44) - Payable between 1 and 5 years (included in non-current liabilities) 599685 290802 8891,487 282 ANNUAL REPORT 2018 IJM CORPORATION BERHAD Hire purchase and lease liabilities are effectively secured as the rights to the leased assets revert to the financier in the event of default. As at the balance sheet date, the effective interest rate was 6.12% (2017: 6.22%) per annum.
  301. 20FINANCIAL INSTRUMENTS BY CATEGORY Loans and Note receivables RM ’000 Assets at fair value through the profit and loss RM’000 Availablefor-sale financial assets RM’000 Total RM’000 The Group At 31 March 2018 Assets as per balance sheet: Non-current assets: Associates * Joint ventures ** Available-for-sale financial assets Long term receivables Current assets: Derivative financial instruments Trade and other receivables *** Financial assets at fair value through profit or loss Deposits, cash and bank balances 32 33 34 35 12,724 589,477 – 251,352 – – – – –12,724 –589,477 2,1552,155 –251,352 21 40 – 1,737,751 1,055 – –1,055 –1,737,751 41 42 – 1,467,653 311,079 – Total 4,058,957 312,134 –311,079 –1,467,653 2,1554,373,246 Other Liabilities financial at fair value liabilities through the at amortised Note profit and loss costs RM’000 RM’000 Total RM’000 Liabilities as per balance sheet: Non-current liabilities: Bonds Term loans Government support loans Trade and other payables **** 16 17 18 23 Current liabilities: Derivative financial instruments Trade and other payables ***** Borrowings 21 5,858 –5,858 44 – 2,610,0132,610,013 45 – 2,904,1172,904,117 – 1,910,0001,910,000 – 940,150940,150 – 125,715125,715 – 541,229541,229 Total 5,858 * 9,031,2249,037,082 Associates comprise amount owing by an associate. ** Joint ventures comprise Redeemable Convertible Secured Islamic Debt Securities (“RCSIDS”) and amounts owing by joint ventures. *** Trade and other receivables exclude amounts due from customers on construction contracts, accrued billings in respect of property development, prepayments and GST receivables. **** Trade and other payables exclude deposits. *****Trade and other payables exclude amounts due to customers on construction contracts, progress billings in respect of property development, retirement benefits payable and GST payables. 283 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  302. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 20FINANCIAL INSTRUMENTS BY CATEGORY (cont’d) Loans and Note receivables RM’000 01 Assets at fair value through the profit and loss RM’000 Availablefor-sale financial assets RM’000 Total RM’000 The Group 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others At 31 March 2017 Assets as per balance sheet: Non-current assets: Associates * Joint ventures ** Available-for-sale financial assets Long term receivables 32 33 34 35 11,816 552,997 – 176,699 – – – – – – 2,155 – 11,816 552,997 2,155 176,699 21 40 – 1,773,443 2,909 – – – 2,909 1,773,443 41 42 – 2,147,777 299,164 – – – 299,164 2,147,777 Total 4,662,732 302,073 2,155 4,966,960 Current assets: Derivative financial instruments Trade and other receivables *** Financial assets at fair value through profit or loss Deposits, cash and bank balances Other financial liabilities at amortised Note costsTotal RM’000 RM’000 Liabilities as per balance sheet: Non-current liabilities: Bonds Term loans Government support loans Trade and other payables **** 16 17 18 23 1,950,0001,950,000 2,121,809 2,121,809 154,474 154,474 542,988 542,988 Current liabilities: Trade and other payables ***** Borrowings 44 45 2,069,368 2,069,368 1,742,8961,742,896 Total 8,581,5358,581,535 * Associates comprise amount owing by an associate. ** Joint ventures comprise Redeemable Convertible Secured Islamic Debt Securities (“RCSIDS”) and amounts owing by joint ventures. *** Trade and other receivables exclude amounts due from customers on construction contracts, accrued billings in respect of property development, prepayments and GST receivables. **** Trade and other payables exclude deposits. *****Trade and other payables exclude amounts due to customers on construction contracts, progress billings in respect of property development, retirement benefits payable and GST payables. 284 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  303. 20FINANCIAL INSTRUMENTS BY CATEGORY (cont’d) Loans and Note receivables RM’000 Assets at fair value through the profit and loss RM’000 Availablefor-sale financial assets RM’000 Total RM’000 The Company At 31 March 2018 Assets as per balance sheet: Non-current assets: Subsidiaries * Joint ventures ** Available-for-sale financial assets Current assets: Trade and other receivables *** Financial assets at fair value through profit or loss Deposits, cash and bank balances 31 33 34 40 41 42 844,735 81,514 – – – – 1,999,176 – 85,316 – –1,999,176 18,740 – Total 3,010,741 18,740 –844,735 –81,514 2,0502,050 –18,740 –85,316 2,0503,031,531 Other Liabilities financial at fair value liabilities through the at amortised Note profit and loss costs RM’000 RM’000 Total RM’000 Liabilities as per balance sheet: Non-current liabilities: Bonds Trade and other payables 16 44 Current liabilities: Derivative financial instruments Trade and other payables **** Borrowings 21 5,858 –5,858 44 – 330,900330,900 45 – 843,481843,481 – 1,300,0001,300,000 – 852,537852,537 Total 5,858 * Subsidiaries include amounts owing by subsidiaries. ** Joint ventures include RCSIDS and amounts owing by joint ventures. 3,326,9183,332,776 *** Trade and other receivables exclude prepayments. **** Trade and other payables exclude amounts due to customers on construction contracts and GST payable. 285 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  304. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 20FINANCIAL INSTRUMENTS BY CATEGORY (cont’d) Loans and Note receivables RM’000 01 Assets at fair value through the profit and loss RM’000 Availablefor-sale financial assets RM’000 Total RM’000 The Company 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others At 31 March 2017 Assets as per balance sheet: Non-current assets: Subsidiaries * Joint ventures ** Available-for-sale financial assets Current assets: Trade and other receivables *** Financial assets at fair value through profit or loss Deposits, cash and bank balances 31 33 34 817,196 74,395 – – – – – – 2,050 817,196 74,395 2,050 40 1,355,466 – – 1,355,466 41 42 – 230,397 20,807 – – – 20,807 230,397 Total 2,477,454 20,807 2,0502,500,311 Other financial liabilities at amortised Note costsTotal RM’000 RM’000 Liabilities as per balance sheet: Non-current liabilities: Bonds Term loans Trade and other payables 16 17 44 Current liabilities: Trade and other payables **** Borrowings 44 45 Total * Subsidiaries include amounts owing by subsidiaries. ** Joint ventures include RCSIDS and amounts owing by joint ventures. 1,300,0001,300,000 176,940 176,940 948,028 948,028 341,670 341,670 211,098211,098 2,977,7362,977,736 *** Trade and other receivables exclude amounts due from customers on construction contracts and prepayments. **** Trade and other payables exclude amounts due to customers on construction contracts and GST payable. 286 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  305. 21 DERIVATIVE FINANCIAL INSTRUMENTS Note The Group Assets Liabilities RM ’000 RM’000 The Company Assets Liabilities RM’000 RM’000 At 31 March 2018 Current: Crude palm oil (“CPO”) swap contracts(a) 1,055 –– – Forward foreign exchange contracts(b) –3,920 – 3,920 Cross currency swap (c) –1,938 – 1,938 1,0555,858 – 5,858 At 31 March 2017 Current: Crude palm oil (“CPO”) swap contracts (a)2,909 – – – (a) Crude palm oil (“CPO”) swap contracts IJM Plantations Berhad, a subsidiary of the Company, has entered into CPO swap contracts to mitigate the exposure of fluctuations in the price of CPO. The change in fair value is due to the differences between fixed CPO prices as per the swap contracts and the average future CPO prices quoted on the Bursa Malaysia Derivative Exchange for the specific contracted periods. As at 31 March 2018, the outstanding CPO swap contracts are made up of notional amounts of 3,750 metric tonnes (2017: 11,250 metric tonnes) with contracted prices ranging from RM2,645 to RM2,710 per metric tonne (2017: ranging from RM2,775 to RM2,925 per metric tonne) commencing within the period from 1 January 2018 to 30 September 2018 (2017: 1 January 2017 to 31 March 2018). (b)Forward foreign exchange contracts During the financial year, the Company has entered into forward foreign exchange contracts to hedge its foreign exchange exposure in the borrowings that was denominated in foreign currency. As at 31 March 2018, the outstanding notional value of the contract and its contractual exchange rate are as follows: Settlement date Currency Amount in foreign to be currency to be Contractual paid paid rate US Dollar US Dollar 09.04.18 19.06.18 20,000,000 20,000,000 4.013 3.914 Amount to be paid RM80,260,000 RM78,280,000 (c) Cross currency swap During the financial year, the Company has entered into structured cross currency swap contracts to swap USD floating rate liability into MYR floating rate liability, thus hedging the USD/MYR currency and interest rate risks. As at 31 March 2018, the outstanding notional value of the contract is USD 35 million. 287 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  306. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 21 DERIVATIVE FINANCIAL INSTRUMENTS (cont’d) (d) Maturity profile of derivative financial instruments Total fair value of derivative financial assets/ < 1 year 1 – 3 years > 3 years (liabilities) Types of derivative RM’000 RM’000 RM’000 RM’000 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others At Group As at 31 March 2018 (i) CPO swap contracts (ii) Forward foreign exchange contracts (iii) Cross currency swap 1,055 –– (3,920) –– (1,938) –– 1,055 (3,920) (1,938) (4,803) As at 31 March 2017 (i) CPO swap contracts At Company As at 31 March 2018 (i) Forward foreign exchange contracts (ii) Cross currency swap 2,909 – – (3,920) –– (1,938) –– 2,909 (3,920) (1,938) (5,858) 22 DEFERRED TAXATION Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The following amounts, determined after appropriate offsetting, are shown in the balance sheet. 288 ANNUAL REPORT 2018 IJM CORPORATION BERHAD The Group 2018 2017 RM’000 RM’000 The Company 2018 2017 RM’000 RM’000 Deferred tax assets Deferred tax liabilities 304,147297,762 1,9412,132 (682,177)(669,456) –– (378,030)(371,694) 1,9412,132
  307. 22 DEFERRED TAXATION (cont’d) At 1 April 2017/2016 Credited/(charged) to income statement (Note 10) The Group 2018 2017 RM’000 RM’000 The Company 2018 2017 RM’000 RM’000 (371,694)(401,280) 2,1322,520 - Property, plant and equipment 5,293(5,711) 23(35) -Concession assets (32,138)(25,101) – – - Post–employment benefit (276)(313) –– - Intangible assets 250(175) –– - Plantation development expenditure 25,094(4,685) –– - Tax losses (28,920)(16,935) –– - Payables 8,88530,095 (214)(353) - Development properties 13,02056,839 –– - Construction contracts (1,429)1,546 –– - Borrowings 1,257(618) –– - Investment properties 1,197230 –– 353(3,135) –– - Derivative financial instruments - Share-based payment (465)4,692 –– - Others (1,045)1,037 –– Revaluation reserve (Note 10) Acquisition of a subsidiary (Note 48(b)(i)) Exchange differences At 31 March (8,924)37,766 (191)(388) –(6,494) –– –(1,904) –– 2,588218 –– (378,030)(371,694) 1,9412,132 Subject to income tax Deferred tax assets (before offsetting) - Property, plant and equipment 1,068938 –– - Development properties 127,885125,872 –– - Post-employment benefit 9341,210 –– - Payables 154,774145,889 1,9852,199 - Tax losses 62,600100,292 –– - Construction contracts 1,3392,768 –– - Borrowings 108108 –– - Investment properties 8,5237,326 –– - Concession assets 7,1337,263 –– - Share-based payment 10,84211,307 –– - Others 1,3542,394 –– 376,560405,367 1,9852,199 Offsetting (72,413)(107,605) (44)(67) Deferred tax assets (after offsetting) 304,147297,762 1,9412,132 289 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  308. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 22 DEFERRED TAXATION (cont’d) 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others The Group 2018 2017 RM’000 RM’000 The Company 2018 2017 RM’000 RM’000 Deferred tax liabilities (before offsetting) - Property, plant and equipment (135,488)(141,383) (44)(67) - Plantation development expenditure (130,589)(166,311) –– - Development properties (197,002)(208,009) –– - Intangible assets (5,312)(5,562) –– - Borrowings (12,813)(14,070) –– - Inventories (705)(705) –– - Payables (4)(4)–– - Concession assets (273,241)(241,233) –– - Derivative financial instruments (253)(606) –– - Others 817822 –– (754,590)(777,061) 72,413107,605 Offsetting (44)(67) 4467 (682,177)(669,456) –– Deferred tax liabilities (after offsetting) The amounts of unutilised deductible temporary differences and unused tax losses for which no deferred tax asset is recognised in the balance sheets are as follows: The Group 2018 2017 RM’000 RM’000 The Company 2018 2017 RM’000 RM’000 Unutilised deductible temporary differences Unused tax losses 107,873100,999 607,231810,599 –– –– 715,104911,598 –– Deferred tax assets not recognised at 24% (2017: 24%) 171,625218,784 –– The unutilised deductible temporary differences and unused tax losses as stated above are available indefinitely for offset against future taxable profits of the subsidiaries in which those items arose, except for unused tax losses of RM412,411,000 (2017: RM649,587,000) which will expire in the following financial years: 290 ANNUAL REPORT 2018 IJM CORPORATION BERHAD The Group 2018 2017 RM’000 RM’000 Financial year 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 –43,648 9,30094,748 89,142171,272 36,37939,010 149,454170,169 85,34196,292 10,71812,192 14,70616,450 6,6005,806 10,771– 412,411649,587
  309. 22 DEFERRED TAXATION (cont’d) Deferred tax assets have not been recognised in respect of these items as they may not be used to offset taxable profits of other subsidiaries in the Group and they have arisen in subsidiaries that have a recent history of losses and some of the subsidiaries are not expected to generate sufficient taxable profits before the expiry of the unused tax losses. 23 TRADE AND OTHER PAYABLES Note The Group 2018 2017 RM’000 RM’000 (a) 33,18033,180 Land and development costs payable (b) Less: Payable within 12 months (Note 44) 427,873426,063 (15,489)(12,238) Payable after 12 months 412,384413,825 Advances from the State Government Deposits(c) 155,461158,414 (d) 5,6155,628 Lease payable to Kuantan Port Authority (e) Less: Payable within 12 months (Note 44) 96,11696,021 (6,066)(5,666) Payable after 12 months 90,05090,355 Refundable membership securities 696,690701,402 (a)On 17 January 2003, Jelutong Development Sdn Bhd (“JDSB”), an indirect subsidiary of the Company, entered into a Reimbursement Land Cost Agreement (hereinafter referred to as “the RLC Agreement”) with the Penang State Government in connection with the completion of the Jelutong Expressway Project. Under the RLC Agreement, the advances received from the State Government for the reimbursement of land cost totalling RM33,180,000 are repayable to the State Government as follows: Percentage of advances to be repaid to the Penang State Government % 36 months from the commencement of Stage 3 of the Construction Works of Jelutong Expressway or from the completion of alienation of 30 Parcels A2 and B1, whichever is the later (1st Payment) 12 months from the date of the Certificate of Completion of the entire Jelutong Expressway or from the date of the 1st Payment, whichever is the later (2nd Payment) 30 12 months from the date of the 2nd Payment 40 100 291 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  310. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 23 TRADE AND OTHER PAYABLES (cont’d) (a)JDSB had completed Stage 3 of the Construction Works in March 2015 and the alienation of Parcels A2 and B1 has yet to commence as at balance sheet date. 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others The advances on reimbursable land cost are interest free. However, if JDSB fails to pay the Penang State Government any of the instalment payments above by their respective due dates, JDSB shall be liable to pay to the Penang State Government interest at a fixed rate of 8% per annum on any such outstanding instalment payments. (b) This represents the present value of the deferred development cost of RM210,729,000 (2017: RM214,733,000) in connection with a mixed development at Royal Mint Street, United Kingdom (“UK”), which will become payable upon surplus cash flow being available from the development; and the present value of the land and deferred development costs of RM217,144,000 (2017: RM211,330,000) in connection with a mixed development in Kuala Lumpur, which will become payable as the development progresses. (c) This represents deposits received from purchasers of development units for the mixed development at Royal Mint Street, United Kingdom. (d) This represents membership securities received by ERMS Berhad (“ERMS”), an indirect subsidiary of the Company, prior to the implementation of a Deed of Trust dated 20 May 1993. The membership securities are refundable only upon the transfer of a membership by a member to an acceptable transferee and after the said transferee has paid the required refundable securities. Based on the Deed of Trust, the refundable membership securities shall be paid to an Accumulated Fund over 92 equal annual payments of RM77,000. Subsequently, on 28 June 1997, the Trustee agreed to an annual payment of RM364 to be paid to the Accumulated Fund over 88 years beginning from 15 June 1998. On 20 March 2003, ERMS had withdrawn the Accumulated Fund and purchased a group premium pension scheme, wherein the terminal value will be used to refund the membership securities to the members. Accordingly, ERMS had ceased to contribute the fixed annual payment to the Accumulated Fund. (e) On 16 June 2015, Kuantan Port Consortium Sdn Bhd (“KPC”), which is a 60%-owned subsidiary of Road Builder (M) Holdings Bhd, which in turn is a wholly-owned subsidiary of the Company, entered into a new Privatisation Agreement with the Government of Malaysia (“Government”) and Kuantan Port Authority (“KPA”) (“Privatisation Agreement”), whereby KPC is granted a 30-year port concession in relation to the development, operation and management of Kuantan Port, which covers the existing Kuantan Port and a new deep water terminal adjacent to the existing Kuantan Port. 292 ANNUAL REPORT 2018 IJM CORPORATION BERHAD The balance represents the present value of future lease payments payable to the Government and KPA, which is in relation to the lease of land solely for the purpose of the port operations and the development of the port and other related purposes upon the terms and conditions of the Privatisation Agreement.
  311. 24 RETIREMENT BENEFITS (a) Defined contribution plan The Company and its subsidiaries in Malaysia contribute to the Employees Provident Fund, the national defined contribution plan. Once the contributions have been paid, the Group has no further payment obligations. (b) Unfunded defined benefit plan A local indirect subsidiary of the Company operates an unfunded defined benefit scheme (“the scheme”) for its eligible employees. Under the scheme, eligible employees are entitled to retirement benefits by applying a certain factor (either 0.50, 0.75 or 1.00 depending on the number of years of service with the company) to the 100% of final salary on attainment of the retirement age of 55 years based on the number of years of service with the company. The net obligation in respect of the scheme, calculated using the projected unit credit method is determined by an actuarial valuation carried out every 3 years by a qualified actuary. The last actuarial valuation was performed for the financial year ended 31 March 2016. The indirect subsidiaries of the Company in Indonesia operate an unfunded defined benefit scheme (“the scheme”) for its eligible employees. Under the scheme, the eligible employees are entitled to retirement benefits computed by applying certain factors on the severance pay and service pay. The severance pay and service pay are derived by applying certain multipliers on the final salary upon attainment of the retirement age of 55 years, based on the number of years of service with the company. The net obligation in respect of the scheme, calculated using the projected unit credit method is determined by an actuarial valuation carried out every year by a qualified actuary. The last actuarial valuation was performed for the financial year ended 31 March 2018. The movements during the financial year on the amounts recognised in the consolidated balance sheet are as follows: The Group 2018 2017 RM’000 RM’000 At 1 April 2017/2016 Reclassification Charged to profit or loss (Note 6) Capitalised in plantation development expenditure (Note 38) Contributions paid during the financial year Adjustment for actuarial gain Exchange differences 11,8896,348 –4,526 12,9892,029 1,888537 (1,939)(2,143) (1,643)– (2,150)592 At 31 March 21,03411,889 Present value of liabilities: - Payable within 1 year (Note 44) 1,6241,378 - Payable between 1 and 5 years - Payable after 5 years 1,9042,556 17,5067,955 Payable after 1 year (included in non-current liabilities) 19,41010,511 21,03411,889 293 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  312. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 24 RETIREMENT BENEFITS (cont’d) (b) Unfunded defined benefit plan (cont’d) 01 The amounts of unfunded defined benefit recognised in the balance sheet may be analysed as follows: 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others Present values of unfunded defined benefit obligations, recognised as liability in the balance sheets The Group 2018 2017 RM’000 RM’000 21,03411,889 Analysed as: Current (included in other payables - Note 44) 1,6241,378 Non-current 19,41010,511 21,03411,889 The expenses recognised in the profit or loss were analysed as follows: The Group 2018 2017 RM’000 RM’000 Current service cost Interest cost 12,3921,501 597528 Total unfunded defined benefit retirement plan (Note 6) 12,9892,029 The charges to the profit or loss were included in the following line items: The Group 2018 2017 RM’000 RM’000 Cost of sales Administrative expenses 12,8731,884 116145 Total included in employee benefits cost (Note 6) 12,9892,029 The principal actuarial assumptions used in respect of the Group’s unfunded defined benefit plan were as follows: The Group 2018 2017 % % Defined benefit plan operated by a local subsidiary: Discount rate Expected rate of salary increases 4.74.7 5.55.5 Defined benefit plan operated by Indonesian subsidiaries: Discount rate Expected rate of salary increases 294 ANNUAL REPORT 2018 IJM CORPORATION BERHAD 8.08.0 8.08.0
  313. 25PROVISIONS Note The Group 2018 2017 RM ’000 RM’000 Provision for maintenance At 1 April 2017/2016 2,7531,945 Current year provision 4,3995,823 Utilised during the year (4,131)(3,441) Over provision in respect of prior years (185)(1,406) Reclassification (72)(168) (a) 2,7642,753 At 1 April 2017/2016 Current year provision Reclassified to property development costs 117,67085,829 7,38231,841 (7,965)– At 31 March 117,087117,670 At 31 March Provision for affordable housing (b) 119,851120,423 Analysis of total provisions: 2,76410,718 Current Non-current 117,087109,705 119,851120,423 (a) Provision for maintenance is in respect of the contractual obligations under the respective concession agreements to maintain and restore the Expressway Development Expenditure (“EDE”) to a specified standard of serviceability. (b) Provision for affordable housing represents the present value of unavoidable costs exceeding the economic benefits expected to be received by the Group in discharging the obligation to develop affordable housing involuntarily based on the requirements imposed by relevant authorities in relation to the Group’s property development projects. 295 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  314. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 26 DEFERRED INCOME 01 Government grants Deferred gain Note The Group 2018 2017 RM’000 RM’000 (a) (b) –2,708 70,35570,355 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others 70,35573,063 (a) Government grants: Cost At 1 April 2017/2016 Reversal upon expiry of concession period Exchange translation differences 56,33348,982 (53,112)– (3,221)7,351 At 31 March –56,333 Accumulated amortisation At 1 April 2017/2016 Current amortisation 5(b) Reversal upon expiry of concession period Exchange translation differences (53,625)(40,818) (2,553)(6,172) 53,112– 3,066(6,635) At 31 March –(53,625) –2,708 The government grants represent grants received from the Indian Government for certain toll road concessions awarded to the Group. (b) The deferred gain represents the Group’s share of the gain arising from the disposal of a parcel of land to a joint venture held via a wholly-owned subsidiary of the Company. 296 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  315. ANNUAL REPORT 2018 297 IJM CORPORATION BERHAD The details of property , plant and equipment are as follows: 2018 Net book value At 31 March 2018 At 1 April 2017 Additions Disposals Written off (Note 5(a)) Depreciation charges for the year Transferred to investment properties (Note 29) Transferred from property development costs (Note 37(b)) Transferred to assets held for sale (Note 43) Exchange differences arising from translation of assets of foreign operations Reclassifications The Group – – 71,441 143,416 – – – – (818) – – (2,087) – – 354,750 (36,876) 9,867 – – – 317,649 (17,717) 54,394 (124) – 239,228 – 35,860 (17,808) 94,219 – 664,896 – – – (98,034) – – (5,348) 208,278 620,806 438 71,952 – (4,699) – (1,540) (301) (14,817) (24,286) 72,407 145,503 377,456 300,941 – – 19,120 4,924 (148) – –(62) – – –(120) Total RM’000 –(301) –(155,995) –(124) 37,074 161,6811,990,135 (910) (30,940)(105,069) (302)(194,038) – – – 674674 – (11,423) 41,984 222,2711,989,646 7,903 163,714268,051 (46) –(4,955) (132) –(1,792) Plant, Office machinery, equipment, equipment furniture, Capital Freehold Leasehold Plantation Hotel and fittings and work-in land land infrastructure Buildings properties vehicles renovations progress RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 27 PROPERTY, PLANT AND EQUIPMENT
  316. 01 02 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others 298 ANNUAL REPORT 2018 IJM CORPORATION BERHAD 2017 Net book value At 31 March 2017 At 1 April 2016 Additions Acquisition of a subsidiary (Note 48(b)(i)) Revaluation Disposals Written off (Note 5(a)) Depreciation charges for the year Write back of impairment of property, plant and equipment (Note 5(b)) Transferred to land use rights (Note 28) Transferred to investment properties (Note 29) Exchange differences arising from translation of assets of foreign operations Reclassifications The Group (4,474) – – – 72,407 145,503 107 (816) – – 836 (1) (2,086) – – – – – 9,800 – (1,051) – 62,749 152,772 74 – 186,410 1,019 (626) – – (19,321) 377,456 300,941 23,639 12,283 1,393 32,842 – – – (14,352) 208,278 – 92 – – 2,470 (4,699) – 28,300 39,412 – – 27,056 – (515) (43,482) – (468) – 336,765 245,606 30,011 2,840 620,806 15,657 43,266 – – 2,842 (92,033) – – (6,507) (617) 586,936 71,262 Total RM’000 – – – – (626) (4,474) 5,312 (143,841) 41,984 222,2711,989,646 701 19,39972,622 253(77,029) – – – – (11,350) 1,443 7,140 86,095 – –27,056 (58) (15,316)(66,929) (85) – (1,170) 44,172 197,147 1,812,557 6,908 90,930203,044 Plant, Office machinery, equipment, equipment furniture, Capital Freehold Leasehold Plantation Hotel and fittings and work-in land land infrastructure Buildings properties vehicles renovations progress RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Summary Information for Shareholder The details of property, plant and equipment are as follows: (cont’d) 03 27 PROPERTY, PLANT AND EQUIPMENT (cont’d) NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018
  317. ANNUAL REPORT 2018 299 IJM CORPORATION BERHAD The details of property , plant and equipment are as follows: (cont’d) 72,407 – – 72,407 Cost/Valuation Accumulated depreciation Accumulated impairment Net book value At 31 March 2017 145,503 172,982 (27,479) – 377,456 452,660 (75,204) – 300,941 487,136 (186,157) (38) 317,649 208,278 244,968 (13,340) (23,350) 239,228 620,806 1,480,717 (852,463) (7,448) 664,896 354,750 71,441 Net book value 143,416 437,234 520,728 258,051 1,562,001 (82,484) (203,041) (16,353) (887,355) – (38) (2,470) (9,750) 71,441 172,982 – (29,566) – – At 31 March 2018 Cost/Valuation Accumulated depreciation Accumulated impairment The Group Total RM’000 41,984 144,482 (102,373) (125) 37,074 222,271 1,989,646 225,1883,280,540 – (1,257,016) (2,917) (33,878) 161,6811,990,135 118,354 161,8133,302,604 (81,168) –(1,299,967) (112) (132)(12,502) Plant, Office machinery, equipment, equipment furniture, Capital Freehold Leasehold Plantation Hotel and fittings and work-in land land infrastructure Buildings properties vehicles renovations progress RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 27 PROPERTY, PLANT AND EQUIPMENT (cont’d)
  318. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 27 PROPERTY, PLANT AND EQUIPMENT (cont’d) 01 02 The details of property, plant and equipment are as follows: (cont’d) Office Plant,equipment, machinery,furniture, equipment fittings and Buildings and vehicles renovations RM’000 RM’000 RM’000 03 Summary Information for Shareholder 04 Business Review & Reports 2018 05 Sustainability Statement Net book value 06 Financial Statements & others Total RM’000 The Company At 1 April 2017 426 1,615 3892,430 Additions – 338 297635 Disposals – (1) –(1) Transferred to investment properties (Note 29) (301) – –(301) Transferred to assets held for sale (Note 43) (124) – –(124) Depreciation charges for the year (1) (628) (144)(773) Exchange differences – (26) –(26) At 31 March 2018 – 1,298 5421,840 At 1 April 2016 437 Additions – – Disposals Depreciation charges for the year (11) Exchange differences – 1,688 742 (105) (781) 71 366 2,491 108850 –(105) (85) (877) – 71 At 31 March 2017 1,615 3892,430 2017 Net book value 426 At 31 March 2018 Cost – 4,101 4,4848,585 Accumulated depreciation – (2,803) (3,942)(6,745) Net book value – 1,298 5421,840 At 31 March 2017 300 ANNUAL REPORT 2018 IJM CORPORATION BERHAD Cost Accumulated depreciation 577 (151) 4,423 4,1879,187 (2,808) (3,798) (6,757) Net book value 426 1,615 389 2,430
  319. 27 PROPERTY , PLANT AND EQUIPMENT (cont’d) (a)Valuation Property, plant and equipment include leasehold land, buildings and plant of certain subsidiaries which were last revalued in 1982, 1993 and 1997 based on an open market value basis by firms of independent professional valuers. In accordance with the Group’s accounting policy on property, plant and equipment, hotel building and leasehold land (“hotel properties”) are revalued periodically by an independent professional valuer at an interval of not exceeding 5 years. In the preceding financial year, the hotel properties of ERMS Berhad, an indirect subsidiary of the Company were revalued by an independent qualified valuer, Henry Butcher Malaysia, a member of the Institute of Surveyors, Malaysia. The valuation was arrived at based on the Comparison Method of Valuation where reference was made to similar properties. The fair values of these assets were within level 3 of the fair value hierarchy using significant unobservable inputs. This valuation method entails comparing hotel properties with similar properties that were sold recently. The location of the hotel property, time element, merits and demerits of the hotel properties were taken into consideration to arrive at an acceptable degree of comparability and the value of the hotel properties. The valuation results were reviewed by management and deliberated during the management committee meetings. Valuation Average fair method value per room RM’000 Comparison 504 method of valuation Parameters – Relationship of unobservable inputs to fair value Hotel properties Had the revalued leasehold land, buildings and plant been carried at the historical cost model, the net book values would have been as follows: The higher the average fair value per room, the higher the fair value The Group 2018 2017 RM’000 RM’000 Leasehold land 56,29456,994 Buildings 32,12634,000 88,420 90,994 (b) Assets acquired under finance lease agreements Included in property, plant and equipment of the Group are the net book values of the following assets acquired under finance lease agreements: The Group 2018 2017 RM’000 RM’000 2,3683,146 Plant, machinery, equipment and vehicles (c) Net book values of assets pledged as security for term loans of certain subsidiaries (Note 17): The Group 2018 2017 RM’000 RM’000 Land 108,449110,000 Building 51,88553,739 160,334163,739 301 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  320. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 27 PROPERTY, PLANT AND EQUIPMENT (cont’d) (d) During the financial year, the following depreciation charges of the Group and the Company have been included in the aggregate costs incurred to-date within amounts due from/(to) customers on construction contracts and capitalised as plantation development expenditure as set out below: 01 Note 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others Included in the aggregate costs incurred to-date within amounts due from/(to) customers on construction contracts Capitalised as plantation development expenditure 46 38(b) The Group 2018 2017 RM’000 RM’000 The Company 2018 2017 RM’000 RM’000 2,8152,153 292373 3,5565,343 –– 28 LAND USE RIGHTS Note The Group 2018 2017 RM’000 RM’000 Cost At 1 April 2017/2016 205,960166,073 Additions 4,21224,056 27 –5,593 Transferred from property, plant and equipment (16,339)10,238 Exchange differences At 31 March 193,833205,960 Accumulated amortisation At 1 April 2017/2016 40,12931,234 27 –1,119 Transferred from property, plant and equipment Amortisation for the financial year 5(a) 6,1176,037 Exchange differences (3,081)1,739 At 31 March 43,16540,129 Net book value At 31 March 150,668165,831 During the financial year, amortisation expenses of RM468,000 (2017: RM657,000) has been included in plantation development expenditure (Note 38(b)). The Group’s land use rights with carrying value of RM43.2 million (2017: RM51.3 million) are still in the process of being transferred to the Group. 302 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  321. 29 INVESTMENT PROPERTIES Long term Freehold Leasehold Freehold leasehold Work in Note land land buildings buildings progress RM ’000 RM’000 RM’000 RM’000 RM’000 Total RM’000 The Group 2018 Net book value At 1 April 2017 6,134 7,381 9,846 23,471 22,03568,867 Additions 156,656 – 8 – 238,601395,265 Depreciation charges for the year 5(a) – (97) (266) (309) –(672) Transferred from property, plant and equipment27 – – 301 – –301 Transferred from property development – – – – 34,84034,840 costs37(b) At 31 March 2018 162,790 7,284 9,889 23,162 295,476498,601 2017 Net book value At 1 April 2016 6,134 7,478 10,148 23,781 12,54260,083 Additions – – – – 9,4939,493 Depreciation charges for the year 5(a) – (97) (265) (310) – (672) Transferred from property, plant and equipment 27 – – 626 – –626 Disposals – – (252) – –(252) Reversal of over accrual of costs – – (411) – – (411) At 31 March 2017 6,134 7,381 9,846 23,471 22,03568,867 At 31 March 2018: Cost 162,790 8,713 13,496 24,549 295,476505,024 – (1,429) (3,236) (1,387) –(6,052) Accumulated depreciation Accumulated impairment – – (371) – –(371) Net book value 162,790 7,284 9,889 23,162 295,476498,601 13,051 (2,834) (371) 24,549 22,03574,482 (1,078) – (5,244) – – (371) At 31 March 2017: Cost Accumulated depreciation Accumulated impairment 6,134 – – 8,713 (1,332) – Net book value 6,134 7,381 9,846 23,471 22,035 68,867 303 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  322. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 29 INVESTMENT PROPERTIES (cont’d) LeaseholdFreehold Note buildings buildings RM’000 RM’000 01 The Company 02 2018 Total RM’000 Net book value 03 Summary Information for Shareholder 04 Business Review & Reports At 1 April 2017 2,955 4,3577,312 Transferred from property, plant and equipment 27 – 301301 Depreciation charges for the year 5(a) (32) (141)(173) 05 Sustainability Statement 2,923 At 31 March 2018 06 Financial Statements & others 4,5177,440 2017 Net book value At 1 April 2016 Depreciation charges for the year 5(a) 2,988 (33) 4,4897,477 (132) (165) At 31 March 2017 2,955 4,3577,312 At 31 March 2018: Cost 3,053 6,9129,965 Accumulated depreciation (130) (2,395)(2,525) Net book value 2,923 4,5177,440 At 31 March 2017: Cost Accumulated depreciation 3,053 6,4759,528 (98) (2,118) (2,216) Net book value 2,955 4,357 7,312 During the financial year, finance cost of RM670,000 (Note 9) has been capitalised in investment properties of the Group. The above properties are not occupied by the Group and are used to either earn rentals or for capital appreciation, or both. As at 31 March 2018, the fair value of the properties of the Group and the Company was estimated at RM561,046,000 (2017: RM106,660,000) and RM11,389,000 (2017: RM11,678,000) respectively by the Directors based on either valuations by independent professionally qualified valuers or the Directors’ estimates by reference to open market value of properties in the vicinity. The fair values of investment properties are within level 2 of the fair value hierarchy. The most significant input in the valuation approach adopted by the Group is price per square foot. The fair value of the investment properties includes investment properties that are under construction, which are measured at costs as the fair value is not reliably measurable until construction completes. 304 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  323. 30 CONCESSION ASSETS The Group Note20182017 RM ’000RM’000 Expressway development expenditure Port infrastructure 2,164,8472,325,629 1,177,539771,437 3,342,3863,097,066 Expressway development expenditure: Cost At 1 April 2017/2016 Additions Reversal upon expiry of concession period Written off 5(a) Exchange translation differences 3,390,6043,253,023 43,93947,161 (128,931)– (124)(409) (82,090)90,829 At 31 March 3,223,3983,390,604 Accumulated amortisation At 1 April 2017/2016 Current amortisation 5(a) Reversal upon expiry of concession period 5(a) Written off Exchange translation differences (772,177)(592,370) (157,173)(156,513) 128,931– 43125 20,873(23,419) At 31 March (779,503)(772,177) 2,443,8952,618,427 Less: Deferred income Cost At 1 April 2017/2016 and At 31 March (400,456)(400,456) Accumulated amortisation At 1 April 2017/2016 Current amortisation 5(a) 107,65894,933 13,75012,725 At 31 March 121,408107,658 (279,048)(292,798) 2,164,8472,325,629 305 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  324. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 30 CONCESSION ASSETS (cont’d) The Group Note20182017 RM’000RM’000 01 Port infrastructure: 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others Cost At 1 April 2017/2016 949,793716,148 Additions 425,579233,645 At 31 March 1,375,372949,793 Accumulated amortisation At 1 April 2017/2016 Current amortisation 5(a) (178,356)(159,102) (19,477)(19,254) At 31 March (197,833)(178,356) 1,177,539771,437 Concession assets incurred during the financial year include the capitalisation of the following expenses: The Group Note20182017 RM’000RM’000 Employee benefits cost Finance cost 6 9 594– 40– The concession assets with net carrying values of RM1,111,929,600 (2017: RM1,831,819,000) are pledged as security for bonds (Note 16). Deferred income comprises: (a) compensation received by New Pantai Expressway Sdn Bhd (“NPE”), an indirect subsidiary of the Company, from the Malaysian Government as a result of the cessation of toll collections with effect from 14 February 2009 at the PJS2 Toll Plaza for Kuala Lumpur bound road users on the NPE; and (b) compensation received by Besraya Sdn Bhd, an indirect subsidiary of the Company, from the Malaysian Government as a result of the cessation of toll collections with effect from 24 February 2009 at the Salak Jaya Toll Plaza. Expressway development expenditure comprises toll road concessions in Malaysia and India, with concession periods ranging from 15 to 44 years and ending between 2024 and 2042. During the concession periods, certain Malaysian and Indian subsidiaries, the concessionaires have the rights and obligations to construct, operate and maintain the expressways, which is to be in line with the provisions of the respective concession agreements. The amounts of construction revenue and profits recognised during the financial year on construction services for tollway concessions amounted to RM21,759,000 and RM9,257,000 (2017: RM45,076,000 and RM19,205,000) respectively. 306 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  325. 30 CONCESSION ASSETS (cont’d) Port infrastructure comprises a port concession in Malaysia, with concession period of 30 years ending in 2045. On 22 November 1997, Kuantan Port Consortium Sdn Bhd (“KPC“), an indirect subsidiary of the Company, entered into a Privatisation Agreement (“Agreement”) with the Government of Malaysia (“Government”) and Kuantan Port Authority (“KPA”), a concession to manage, operate and develop Kuantan Port (“Port”) for a period of 30 years commencing from 1 January 1998. On 16 June 2015, the said Agreement was superseded and replaced with a new Privatisation Agreement (“PA”), whereby the Government and KPA have requested KPC to develop a New Deep Water Terminal (“NDWT”) adjacent to the existing port. The concession commenced on 1 June 2015 for a period of 30 years and is subject for an extension of 30 years provided that certain obligations as mentioned in the new PA are fulfilled by KPC. The amounts of construction revenue and profit recognised during the financial year on construction services for port concession amounted to RM408,452,000 and RM21,681,000 (2017: RM213,362,000 and RM11,671,000) respectively. 31SUBSIDIARIES The Company 2018 2017 RM’000 RM’000 At cost: Quoted shares: – in Malaysia Unquoted shares: – in Malaysia – outside Malaysia 534,904534,100 5,605,8175,605,817 52,1808,716 Less: Accumulated impairment Unquoted shares – outside Malaysia 6,192,9016,148,633 Amounts owing by subsidiaries Costs of investment in relation to share options and share grants being granted to employees of subsidiaries 6,191,8666,147,598 844,735817,196 7,107,7567,038,258 Market value * Quoted shares: – in Malaysia 1,087,6051,590,731 (1,035)(1,035) 71,15573,464 The amounts owing by subsidiaries are unsecured, bear interest rate at 5% (2017: 5%) per annum and are repayable on demand. However the management does not intend to demand for repayment of the amounts owing by subsidiaries within the period of twelve months. The Group’s effective equity interest in the subsidiaries and their respective principal activities and countries of incorporation are set out in Note 54 to the financial statements. * The market values of quoted shares are traded in an active market and are within Level 1 of the fair value hierarchy. As at 31 March 2018, the total non-controlling interests are RM1,276,411,000 (2017: RM1,319,406,000), of which RM716,107,000 (2017: RM784,741,000) is attributable to IJM Plantations Berhad. The other noncontrolling interests are not significant. 307 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  326. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 31SUBSIDIARIES (cont’d) Set out below are the summarised financial information for a subsidiary that has non-controlling interests that are material to the Group. The financial information below is based on amounts before inter-company eliminations. 01 IJM Plantations Berhad 2018 2017 RM’000 RM’000 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others Proportion of ordinary shares held by non-controlling interests (%) 44%44% Summarised statements of comprehensive income: Revenue 747,217753,711 Net profit for the financial year 44,054116,538 Total comprehensive (loss)/income for the financial year (96,342)212,590 Net profit attributable to non-controlling interests 17,88752,767 Dividends paid to non-controlling interests 27,06019,729 Summarised balance sheets: Current assets Current liabilities Non-current assets Non-current liabilities 397,294551,021 (358,901)(295,034) 2,226,9922,426,062 (645,617)(903,019) Net assets 1,619,7681,779,030 Summarised cash flows: Cash flows from operating activities 110,085183,089 (108,305)(136,470) Cash flows used in investing activities Cash flows (used in)/from financing activities (143,813)50,583 308 ANNUAL REPORT 2018 IJM CORPORATION BERHAD Net (decrease)/increase in cash and cash equivalents during the financial year Cash and cash equivalents at beginning of the financial year Foreign exchange differences on opening balances (142,033)97,202 385,994268,520 (37,796)20,272 Cash and cash equivalents at end of the financial year 206,165385,994
  327. 32ASSOCIATES The Group Note20182017 RM ’000RM’000 Share of net assets of associates (a) Redeemable Unsecured Murabahah Stocks (b) Amount owing by an associate * 773,110873,376 43,30016,200 12,72411,816 829,134901,392 * Amount owing by an associate represents unsecured advances which bear interest at a fixed rate of 7.69% (2017: 7.85%) per annum. (a) Share of net assets of associates The Group 2018 2017 RM’000 RM’000 Quoted shares, at cost: – in Malaysia – outside Malaysia Unquoted shares, at cost: – in Malaysia – outside Malaysia Share of post-acquisition retained profits Share of post-acquisition reserves Currency translation differences 345,314345,314 38,08038,080 82,62283,591 349,810349,810 815,826816,795 107,663141,629 (14,552)953 (35,532)15,253 873,405974,630 (100,295)(101,254) Less: Accumulated impairment 773,110873,376 309 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  328. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 32ASSOCIATES (cont’d) (a) Share of net assets of associates (continued) The Company 2018 2017 RM’000 RM’000 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others Quoted shares, at cost: – in Malaysia – outside Malaysia Unquoted shares, at cost: – in Malaysia – outside Malaysia 345,314345,314 38,08038,080 28,30928,309 51,21451,214 462,917462,917 Less: Accumulated impairment (130,117)(91,117) Market value* Quoted shares: – in Malaysia – outside Malaysia 332,800371,800 296,346436,674 200,778237,540 497,124674,214 * The market values of quoted shares are traded in an active market and are within Level 1 of the fair value hierarchy. The Group has assessed whether there is any impairment of its investment in an associate of the Company as the associate has incurred losses during the financial year and the market value is lower than the carrying amount. This assessment was performed by calculating the value-in-use (“VIU”) of the investment based on net cash inflow generated from its operations. This computation is based on the discount rate of 18%. Based on management’s assessment, an impairment of RM39 million has been recognised during the financial year as other operating expenses. The Group’s effective equity interest in the associates and their respective principal activities and countries of incorporation are set out in Note 54 to the financial statements. (b) During the financial year, a subsidiary of the Company has subscribed for RM27,100,000 (2017: RM16,200,000) nominal value of Redeemable Unsecured Murabahah Stocks (“RUMS”), maturing on 12 July 2056, as issued by West Coast Expressway Sdn Bhd (“WCE”), an associate of the Company. The terms of the RUMS are as follows: (i) The RUMS bear a cumulative and non-compounding profit rate that is determined prior to each issuance of RUMS. As at 31 March 2018, the effective profit rate of RUMS is 10% (2017: 10%) per annum. (ii) Each issuance of RUMS shall be valid from and including the date of the issuance until the maturity date provided that if each issuance of RUMS has not been fully redeemed by such date, it shall be valid until it is redeemed and cancelled in accordance with the provision stated in the Deed Poll. (iii) The RUMS will be redeemed by WCE at 100% of their nominal value on their respective maturity dates. Any early redemption of RUMS shall be at a redemption price as mutually agreed between WCE and the subsidiary of the Company. (iv) Any issuance of RUMS redeemed shall be immediately cancelled and thereafter will not be available for resale or reissue. 310 ANNUAL REPORT 2018 IJM CORPORATION BERHAD (v) WCE may make Periodic Profit Payments (as defined in the Deed Poll) or redeem the RUMS subject to the conditions in relation to the Project Financing Facilities (as defined in the Deed Poll).
  329. 32ASSOCIATES (cont’d) (c) Certain losses of associates of the Group are not recognised when they exceed the Group’s cost of investment and advances as the Group has no further obligations beyond these amounts. The Group’s share of such losses is as follows: The Group 2018 2017 RM’000 RM’000 Current year share of losses Current year recognition of previously unrecognised losses Adjustment for previously unrecognised losses upon disposal of an associate Cumulative share of losses (35,445)(10,957) –24 –2,974 (35,445)(7,959) (49,178)(13,733) (d) Set out below are the associates of the Group as at balance sheet dates, which, in the opinion of the management, are material to the Group. The associates as listed below have share capital consisting solely of ordinary shares, which are held either directly or indirectly by the Group. Place of business/ country of incorporation % of ownership Name of entity 20182017 Nature of relationship Measurement method Scomi Group Berhad Malaysia 2125 Associate Equity Hexacon Construction Pte Limited Singapore 4646 Associate Equity WCE Holdings Berhad Malaysia 2626 Associate Equity (e) Set out below are the summarised financial information for material associates which are accounted for using the equity method: Summarised balance sheets: Scomi Group Berhad 2018 2017 RM’000 RM’000 Hexacon Construction Pte Limited 2018 2017 RM’000 RM’000 WCE Holdings Berhad 2018 2017 RM’000 RM’000 Current Cash and cash equivalents 95,161161,540 429,988491,323 1,296,2181,053,888 Other current assets (excluding cash) 1,154,2091,340,264 181,053155,769 90,412192,042 Total current assets Financial liabilities (excluding trade and other payables) Other current liabilities (including trade and other payables) Total current liabilities 1,249,3701,501,804 611,041647,092 1,386,6301,245,930 (566,441)(556,935) –––– (570,606)(523,619) (327,824)(347,589)(522,337)(268,346) (1,137,047)(1,080,554)(327,824)(347,589)(522,337)(268,346) 311 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  330. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 32ASSOCIATES (cont’d) (e) Set out below are the summarised financial information for material associates which are accounted for using the equity method: (continued) Summarised balance sheets: (continued) 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 06 Scomi Group Berhad 2018 2017 RM’000 RM’000 Hexacon Construction Pte Limited 2018 2017 RM’000 RM’000 WCE Holdings Berhad 2018 2017 RM’000 RM’000 Sustainability Statement Non-current Assets Financial liabilities Other liabilities 608,071822,957 279,696241,930 2,760,6141,653,212 (150,477)(250,410) –– (2,292,849) (1,619,853) (23,619)(30,839) (26,757)(31,488) (594,721)(289,911) Financial Statements & others Total non-current liabilities (174,096)(281,249) (26,757)(31,488) (2,887,570)(1,909,764) Non-controlling interests Net assets (excluding non-controlling interests) (308,671)(476,082) Market value (Group’s share) –– (40,678)(39,305) 237,627486,876536,156509,945696,659681,727 35,09986,577 –*–* 261,247350,097 * Hexacon Construction Pte Limited is a private company and there is no quoted market price available for its shares. Summarised statement of comprehensive income: Revenue Depreciation and amortisation Interest income Finance cost (Loss)/profit before taxation Income tax expense Scomi Group Berhad 2018 2017 RM’000 RM’000 Hexacon Construction Pte Limited 2018 2017 RM’000 RM’000 WCE Holdings Berhad 2018 2017 RM’000 RM’000 683,728935,962 486,067622,051 1,114,159869,374 (90,526)(136,597) –– (276)(348) 8666,281 –– 2,2531,234 (37,507)(30,151) –– (1,781)(2,114) (302,789)(180,023) 205,38195,42823,40135,738 (17,611)(9,503)(143,510)(16,928)(5,682)(3,309) (Loss)/profit after taxation from continuing operations (320,400)(189,526) 61,87178,50017,71932,429 Loss after taxation from discontinuing operations –– –– (3,019)– Other comprehensive (loss)/income (90,412)10,184 7,7174,395 399– Less: Profit/(loss) after taxation attributable to non-controlling interests 79,94869,500 –– (298)(1,248) Less: Other comprehensive income/(loss) attributable to non-controlling interests 23,114(16,065) –––– Total comprehensive (loss)/income Dividends received from associates 312 ANNUAL REPORT 2018 IJM CORPORATION BERHAD (307,750)(125,907) 69,58882,89514,80131,181 –– 2,1332,912 –– Note: The summarised financial information above reflects the amounts presented in the financial statements of the associates.
  331. 32ASSOCIATES (cont’d) (e) Set out below are the summarised financial information for material associates which are accounted for using the equity method: (continued) Reconciliation of the summarised financial information presented to the carrying amount of its interests in associates: Net assets at 1 April 2017/2016 Less: Gross dividend distributed during the year Net (loss)/profit for the financial year Other comprehensive (loss)/income Other reserves Transactions with non-controlling interests Foreign exchange differences Less: Fair value adjustment upon accretion/dilution of interest Net assets at 31 March (f) Scomi Group Berhad 2018 2017 RM’000 RM’000 Hexacon Construction Pte Limited 2018 2017 RM’000 RM’000 WCE Holdings Berhad 2018 2017 RM’000 RM’000 486,876605,739 509,945391,250681,727650,545 ––(4,688)(4,585) –– (240,452)(120,026)61,87178,50014,40231,181 (67,298)(5,881) 7,7174,395 399– –2,438 –– 1311 58,501– –––– –– (38,689)40,385 –– 237,627482,270 536,156509,945696,659681,727 –4,606 –––– 237,627486,876 536,156509,945696,659681,727 Interests in associates Less: Net assets attributable to non-controlling interests Goodwill 50,923119,727 243,951232,024184,268180,318 Carrying value 71,111139,915 243,951232,024151,359154,989 –– –– (32,909)(25,329) 20,18820,188 –––– Set out below are the financial information of all individually immaterial associates on an aggregate basis. 2018 2017 RM’000 RM’000 Carrying amounts of interest in associates Share of associates’ profits Share of associates’ other comprehensive (loss)/income Share of associates’ total comprehensive income 306,689346,448 35,29640,248 (8,888)3,578 26,40843,826 313 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  332. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 33 JOINT VENTURES The Group Note2018 2017 RM’000 RM’000 01 02 240,000240,000 (A) Redeemable Convertible Unsecured Loan Stocks (“RCULS”) At cost: – In Malaysia Share of post-acquisition reserves Currency translation differences 111,875111,875 (238,698)(161,061) 5,77110,972 03 Summary Information for Shareholder 04 Business Review & Reports Redeemable Convertible Secured Islamic Debt Securities (“RCSIDS”) (B) 118,948201,786 64,65957,540 05 Sustainability Statement Amounts owing by joint ventures Less: Allowance for impairment of amounts owing by joint ventures 652,078622,910 (127,260)(127,453) 06 Financial Statements & others 524,818495,457 708,425754,783 (A)RCULS In 2007 and 2009, the Company had subscribed for RM240,000,000 nominal value of Redeemable Convertible Unsecured Loan Stocks (“RCULS”), maturing on 8 February 2026, as issued by Lebuhraya Kajang-Seremban Sdn Bhd (“Lekas”), a joint venture of the Company. The terms of RCULS are as follows: (i) The RCULS bear fixed cumulative interest of 7% per annum from the date of subscription until the date of redemption or maturity, whichever is earlier. (ii) The RCULS are convertible on the basis of one RCULS for one new ordinary share of RM1 each in Lekas. (iii) The conversion period is the period commencing from the date immediately after the first anniversary of the date of issuance of the final completion certificate of the final phase of the works under the Concession Agreement and ending on such a date falling 3 years thereafter. As at 31 March 2018, the period for exercising the conversion had expired. (B)RCSIDS In the previous financial year, the Company acquired RM90,109,292 nominal value of Redeemable Convertible Secured Islamic Debt Securities (“RCSIDS”), maturing on 10 April 2023, as issued by Lekas, a joint venture of the Company. The terms of RCSIDS are as follows: (i) The RCSIDS bear a fixed, cumulative and non-compounding profit rate of 7.9% per annum. (ii) Every RM1 nominal value of the RCSIDS or every RM1 profit payable on such RCSIDS can be converted into 1 ordinary share of Lekas at the conversion price of RM1. The profit in respect of the RCSIDS can only be converted into ordinary shares if it is done in conjunction with the conversion of the corresponding RCSIDS. (iii) The conversion period commences from the date immediately after the issue date and ends on the maturity date. (iv) The RCSIDS may, prior to the maturity date, be redeemed in part or in full at their aggregate nominal value plus accrued and unpaid profit. No cash payment will be made for the principal amount in respect of the RCSIDS and the profit earned on the relevant profit payment dates during the subsistence of the syndicated term loan facility and until the maturity date. Any early redemption shall take place on a profit payment date or such other dates as may be mutually agreed between the parties. All outstanding RCSIDS and cumulative profit shall be redeemed by the issuer on the maturity date. 314 ANNUAL REPORT 2018 IJM CORPORATION BERHAD The RCSIDS which have been redeemed will be cancelled and cannot be reissued and the outstanding profit which has not been converted into new ordinary shares shall be paid by the issuer in the form of cash payment on the maturity date.
  333. 33 JOINT VENTURES (cont’d) The Company 2018 2017 RM’000 RM’000 RCULS 240,000240,000 Unquoted shares, at cost 50,00050,000 Less: Allowance for impairment of investments 290,000290,000 (138,695)(138,695) RCSIDS 151,305151,305 64,65957,540 Amounts owing by joint ventures Less: Allowance for impairment of amounts owing by joint ventures 50,42250,422 (33,567)(33,567) 16,85516,855 232,819225,700 The amounts owing by joint ventures of the Group and the Company are mainly unsecured advances for the joint ventures’ working capital requirements which bear interest rates ranging from 4.6% to 7.9% (2017: 4.6% to 7.9%) and at 7.9% (2017: 7.9%) per annum respectively. Movements on the Group’s and the Company’s allowance for impairment of amounts owing by joint ventures are as follows: The Group The Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 At 1 April 2017/2016 Write back of allowance for impairment of amounts owing by joint ventures (Note 5(b)) 127,453127,453 33,56733,567 At 31 March 127,260127,453 33,56733,567 (193)––– The Group has carried out an assessment on the recoverability of the amounts owing by joint ventures and management believes that the current impairment recognised is adequate. The management has assessed whether there is any impairment of its investment in a joint venture of the Company as the joint venture has incurred a loss during the financial year. As at 31 March 2018, the carrying amount of the interest in that joint venture for the Group and the Company amounted to RM136,345,000 and RM232,819,000 respectively. This assessment was performed by calculating the value-in-use (“VIU”) of the investment based on net cash inflow generated from its toll operations over the remaining concession period of 21 years up to the year 2039. Key assumptions used were: Annual growth rate of traffic volume 3.8% for the year 2019 and ranges from 0.8% to 8.0% per annum from the years 2019 to 2039 Discount rate 7.3% Based on management’s assessment, there is no provision for impairment required during the financial year. As at the reporting date, if the change in the annual growth rate of traffic volume and the discount rate used in the VIU had been 50 basis points lower and 50 basis points higher respectively, with all variables held constant, no provision for impairment is required. 315 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  334. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 33 JOINT VENTURES (cont’d) (a) Details of the joint ventures are as follows: 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others Group’s effective interest in joint ventures 2018 2017 %% Astaka Tegas Sdn Bhd * 5050 Elegan Pesona Sdn Bhd 50 50 IJM Properties-JA Manan Development 50 50 Joint Venture Sierra Ukay Sdn Bhd * 50 50 IJM Properties-Danau Lumayan Joint Venture 6060 IJM Management Services-Giat 70 70 Bernas Joint Venture Nasa Land Sdn Bhd 50 50 368 Segambut Sdn Bhd 50 50 50 50 IJM Perennial Development Sdn Bhd IJM-SCL Joint Venture 5050 IJM-Gayatri Joint Venture 6060 5050 IJM-NBCC-VRM Joint Venture Lebuhraya Kajang-Seremban Sdn Bhd 50 50 IJMC-Zublin Joint Venture 5050 ISZL Consortium 2525 BSC-RBM-PATI JV 2525 –50 IJMC-Ambang Usaha Joint Venture IJMC-Gayatri Joint Venture 6060 IJM-LFE Joint Venture 7070 Shimizu-Nishimatsu-UEMB-IJM Joint Venture 2020 IJMC-JAKS Joint Venture –60 4040 Kiara Teratai-IJM Joint Venture IJM Sunway Sdn Bhd 5050 IJM LFE Sdn Bhd 7070 IJM-CHEC Joint Venture 6060 Principal activities Dormant Property development Property development Property development Dormant Project and construction management services Property development Property development Property development Dormant Dormant Dormant Toll road operations Construction Construction Construction Construction Construction Construction Construction Construction Construction Construction Construction Construction *Joint ventures related to WCE Holdings Berhad, an associate of the Company. (b) As at 31 March 2018 and 31 March 2017, there are no contingent liabilities and capital commitments relating to the Group’s interest in the joint ventures. (c) Set out below are the joint ventures of the Group as at 31 March 2018 and 31 March 2017, which, in the opinion of the management, are material to the Group. The joint ventures as listed below have share capital consisting solely of ordinary shares, which are held directly or indirectly by the Group. Place of business/ country of Name of entity incorporation % of ownership 20182017 316 ANNUAL REPORT 2018 IJM CORPORATION BERHAD Nature of relationship Measurement method Lebuhraya KajangSeremban Sdn Bhd Malaysia 50 50 Joint venture Equity Elegan Pesona Sdn Bhd Malaysia 50 50 Joint venture Equity Nasa Land Sdn Bhd Malaysia 50 50 Joint venture Equity Lebuhraya Kajang-Seremban Sdn Bhd, Elegan Pesona Sdn Bhd and Nasa Land Sdn Bhd are private companies and there is no quoted market price available for their shares.
  335. 33 JOINT VENTURES (cont’d) (d) Set out below are the summarised financial information for material joint ventures which are accounted for using the equity method: (i) Summarised balance sheets: Lebuhraya Kajang- Seremban Sdn Bhd 2018 2017 RM’000 RM’000 Elegan Pesona Nasa Land Sdn Bhd Sdn Bhd 2018 2017 2018 2017 RM’000 RM’000 RM’000RM’000 Current Cash and cash equivalents Other current assets (excluding cash) 76,71064,881 17,388103,69825,61211,095 Total current assets 87,69672,388 42,377168,810336,050330,781 10,9867,50724,98965,112 310,438319,686 Financial liabilities (excluding trade and other payables) Other current liabilities (including trade and other payables) (155,315)(139,221) (24,617)(35,987) (124,570)(104,673) Total current liabilities (200,315)(174,221) (24,617)(35,987) (124,570)(104,673) Non-current Assets Financial liabilities (excluding trade and other payables) Other non-current liabilities (including trade and other payables) Total non-current liabilities Net (liabilities)/assets (45,000)(35,000) –––– 1,237,6421,280,1082,6184,070 264367 (1,491,301)(1,504,877) (93,012)(72,235) (1,584,313)(1,577,112) –– (139,063)(160,455) –––– –– (139,063)(160,455) (459,290)(398,837) 20,378136,89372,68166,020 317 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  336. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 33 JOINT VENTURES (cont’d) (d) Set out below are the summarised financial information for material joint ventures which are accounted for using the equity method: (continued) (ii) Summarised statements of comprehensive income: 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others Revenue Depreciation and amortisation Interest income Finance cost Lebuhraya Kajang- Seremban Sdn Bhd 2018 2017 RM’000 RM’000 Elegan Pesona Nasa Land Sdn Bhd Sdn Bhd 2018 2017 2018 2017 RM’000 RM’000 RM’000RM’000 79,78771,552 905119,40480,89533,038 (42,672)(32,450) –––– 2,0231,471 1,5831,859 19121 (88,147)(87,992) (689)– (2,080)– 93750,4736,661(3,233) (Loss)/profit before taxation (60,453)(50,228) Income tax expense –– (1,452)(11,829) –– Net (loss)/profit for the year/total comprehensive (loss)/income (60,453)(50,228) Dividends received from joint ventures (515)38,644 6,661(3,233) –– 58,000––– (iii) Reconciliation of the summarised information presented to the carrying amounts of interest in joint ventures is set out below: Net (liabilities)/assets at 1 April 2017/2016 Net (loss)/profit for the financial year Dividend Net (liabilities)/assets at 31 March Lebuhraya Kajang- Seremban Sdn Bhd 2018 2017 RM’000 RM’000 Elegan Pesona Nasa Land Sdn Bhd Sdn Bhd 2018 2017 2018 2017 RM’000 RM’000 RM’000RM’000 (398,837)(348,609) 136,89398,24966,02069,253 (60,453)(50,228) (515)38,644 6,661(3,233) –– (116,000)––– (459,290)(398,837)20,378136,89372,68166,020 Interests in joint ventures (229,645)(199,418) 10,18968,44736,34133,010 Goodwill –– –– 11,59711,597 RCULS 240,000240,000 –––– Carrying amount of interests in joint ventures 10,35540,582 10,18968,44747,93844,607 (e) Set out below are the financial information of all individually immaterial joint ventures on an aggregate basis. 2018 2017 RM’000 RM’000 318 ANNUAL REPORT 2018 IJM CORPORATION BERHAD Carrying amounts of interest in joint ventures 50,46648,150 Share of joint ventures’ profits / share of joint ventures’ total comprehensive income 17,15224,077
  337. 34 AVAILABLE-FOR-SALE FINANCIAL ASSETS The Group The Company 2018 2017 2018 2017 RM ’000 RM’000 RM’000 RM’000 Unquoted shares: – in Malaysia Transferable club membership 2,0502,0502,0502,050 105105 –– 2,1552,1552,0502,050 35 LONG TERM RECEIVABLES The Group Note2018 2017 RM’000 RM’000 13,26415,481 Lease receivables Less: Amount receivable within 12 months (included in trade and other receivables – Note 40) (a) Deposits Amounts due from non-controlling interests Advances for plasma schemes 10,71613,288 (b) 80,77482,309 (c) 33,80938,684 (d)54,16642,418 Other receivables Less: Allowance for impairment of other receivables (e) 40 (2,548)(2,193) 135,591– (63,704)– 71,887– 251,352176,699 (a) Lease receivables Lease receivables: – Receivable within 1 year 3,3653,217 – Receivable between 1 and 5 years 10,92814,317 14,29317,534 Less: Unearned interest income (1,029)(2,053) 13,26415,481 Lease receivables (net of unearned interest income): – Receivable within 1 year – Receivable between 1 and 5 years 2,5482,193 10,71613,288 13,26415,481 IJM Properties Sdn Bhd, an indirect subsidiary of the Company, entered into a lease arrangement with a third party to lease a building for a period of 15 years commencing 1 March 2007. The Group does not have any significant exposure to credit risk from the lease receivables as the ownership and rights to the building revert to the Group in the event of default. 319 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  338. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 35 LONG TERM RECEIVABLES (cont’d) (b) The deposits represent monies received from buyers of development units of a mixed development project at Royal Mint Street, United Kingdom that are held by a stakeholder. 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others (c) The amounts due from non-controlling interests are denominated in USD. The amounts due from non-controlling interests are in respect of advances made by subsidiaries of IJM Plantations Berhad, a subsidiary of the Company to non-controlling interests. The advances are operational in nature for furtherance of the overseas subsidiaries business operations. The amounts due from non-controlling interests are currently interest free, secured against the equity shares in the respective companies and repayable on demand. Management reserves the right to charge interest in the future. Management does not intend to demand for repayment of the amounts owing by the non-controlling interests within the period of twelve months. As a result, the amounts are classified as non-current assets as at the balance sheet date. (d) The Government of the Republic of Indonesia requires companies involved in plantation development to provide support to develop and cultivate oil palm lands for local communities in oil palm plantations as part of their social obligation which are known as “Plasma” schemes. In line with this requirement, the subsidiaries of IJM Plantations Berhad (“indirect subsidiaries”), a subsidiary of the Company, has involvement in several cooperative programs for the development and cultivation of oil palm lands for local communities. The indirect subsidiaries supervise and manage the plasma schemes. Advances made by the indirect subsidiaries to the plasma schemes in the form of plantation development costs are recoverable either through bank loans obtained by the cooperatives or direct repayments from the plasma schemes when these plasma areas come into production. IJM Plantations Berhad has carried out an assessment on the recoverability of its advances and management believes that no impairment is required. However, management expects the advances will not be repaid within the next financial year. As a result, the amounts are reclassified as non-current assets and accounted for at their present value at initial recognition during the current financial year. (e) The other receivables are unsecured advances which bear interest rate at 5% (2017: 5%) per annum. The Group has carried out an assessment on the recoverability of the net balances and the management believes that these balances are recoverable. 36 INTANGIBLE ASSETS Quarry Goodwill on development consolidation expenditure Total RM’000RM’000RM’000 The Group 2018 Cost At 1 April 2017 Additions 1,083,900 67,7731,151,673 –2,7102,710 At 31 March 2018 1,083,900 Accumulated amortisation At 1 April 2017 Amortisation for the financial year (Note 5(a)) – (44,616)(44,616) – (3,732)(3,732) At 31 March 2018 – (48,348)(48,348) Accumulated impairment At 1 April 2017 / At 31 March 2018 320 ANNUAL REPORT 2018 IJM CORPORATION BERHAD 70,4831,154,383 At 31 March 2018 (1,004,439) –(1,004,439) 79,461 22,135101,596
  339. 36 INTANGIBLE ASSETS (CONTINUED) Quarry Goodwill on development consolidation expenditure Total RM’000RM’000RM’000 The Group (cont’d) 2017 Cost At 1 April 2016 Additions Acquisition of a subsidiary (Note 48(b)(i)) 1,073,597 63,285 1,136,882 –4,4884,488 10,303 – 10,303 At 31 March 2017 1,083,900 67,773 1,151,673 Accumulated amortisation At 1 April 2016 Amortisation for the financial year (Note 5(a)) – – (40,840) (3,776) (40,840) (3,776) At 31 March 2017 – (44,616) (44,616) (1,004,439) – (1,004,439) 79,461 23,157 102,618 Accumulated impairment At 1 April 2016 / At 31 March 2017 At 31 March 2017 During the financial year, amortisation of quarry development expenditure of RM3,732,000 (2017: RM3,776,000) was included in cost of sales. 37 PROPERTY DEVELOPMENT (a) Land held for property development The Group 2018 2017 RM’000 RM’000 Freehold land, at cost Leasehold land, at cost Leasehold land, at valuation Development costs Accumulated impairment 520,665371,960 54,92162,355 63,36863,368 46,81039,411 (22,299)(22,306) 663,465514,788 At 1 April 2017/2016 Additions during the year Transferred to property development costs (Note 37(b)): – Land cost – Development costs 514,788604,143 164,82275,683 Disposals during the year Exchange differences (3,500)(8,465) (538)(156,573) (12,107)– At 31 March 663,465514,788 (7,733)(8,465) 4,233– During the financial year, finance cost of RM697,000 (2017: RM4,113,000) (Note 9) has been capitalised in land held for property development. The carrying values of freehold and leasehold land amounting to RM3,371,000 and RM543,000 respectively (2017: RM3,371,000 and RM543,000 respectively) are pledged as security for Term Loans of the subsidiaries (Note 17). 321 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  340. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 37 PROPERTY DEVELOPMENT (cont’d) (b) Property development costs The Group Note20182017 RM’000RM’000 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others At 1 April 2017/2016 Freehold land – at cost Leasehold land – at cost Development costs Accumulated costs charged to profit or loss Completed units transferred to inventories Accumulated impairment 736,076803,700 2,727,1932,784,028 5,384,8925,533,261 (2,468,951)(2,783,589) (710,083)(623,399) (81,747)(81,079) 5,587,3805,632,922 Less: Completed development properties: Freehold land – at cost Leasehold land – at cost Development costs Accumulated costs charged to profit or loss Completed units transferred to inventories Impairment (8,722)(92,187) (27,042)(16,717) (672,686)(1,057,709) 500,477916,531 207,736250,082 237– –– Costs incurred during the financial year: - Purchase of land - Reversal of over accrual of costs - Development costs 5,587,3805,632,922 Disposal of land Transferred from land held for property development: - Land cost - Development costs 1,411,593990,064 –(20,338) Costs charged to profit or loss (Impairment)/reversal of impairment during the year Completed units transferred to inventories Transferred to property, plant and equipment Transferred to investment properties Exchange differences At 31 March 322 ANNUAL REPORT 2018 IJM CORPORATION BERHAD 237,23139,205 –(47,471) 1,174,362998,330 37(a) 7,7338,465 (4,233)– 5(a),(b) 27 29 3,5008,465 (726,418)(649,788) (21,869)34 (57,791)(398,501) (674)– (34,840)– (32,541)24,522 6,128,3405,587,380
  341. 37 PROPERTY DEVELOPMENT (cont’d) (b) Property development costs (continued) The Group 2018 2017 RM’000 RM’000 At 31 March: Freehold land – at cost Leasehold land – at cost Development costs Accumulated costs charged to profit or loss Completed units transferred to inventories Accumulated impairment 740,497736,076 2,892,0932,727,193 5,818,4525,384,892 (2,649,715)(2,468,951) (570,949)(710,083) (102,038)(81,747) 6,128,3405,587,380 During the financial year, employee benefits cost and finance cost of RM132,000 (2017: RM131,000) (Note 6) and RM106,846,000 (2017: RM120,711,000) (Note 9) respectively have been capitalised in property development costs. In the preceding financial year, RM47,471,000 of the leasehold land cost/development rights had been reversed due to changes in the estimated land costs payable for a mixed development in Kuala Lumpur. The carrying values of freehold land and leasehold land amounting to RM401,189,000 (2017: RM617,862,000) and RM1,409,512,000 (2017: RM1,458,196,000) respectively are pledged as security for Revolving Credit (Note 45) and Term Loans of subsidiaries (Note 17). As at 31 March 2018, land titles to leasehold land with the carrying values of RM898,000 (2017: RM2,284,000) are in the process of being transferred. 38 PLANTATION DEVELOPMENT EXPENDITURE The Group 2018 2017 RM’000 RM’000 Cost or valuation At 1 April 2017/2016 At cost At valuation 1,032,837919,754 168,733168,733 Additions Exchange differences 1,201,5701,088,487 29,84031,898 (123,562)81,185 At 31 March 1,107,8481,201,570 Representing: At cost At valuation 939,1151,032,837 168,733168,733 1,107,8481,201,570 (a) Certain plantation development expenditure of IJM Plantations Berhad, a subsidiary of the Company and certain of its subsidiaries were last revalued in 1997 on an open market value basis by firms of independent professional valuers. Had the revalued plantation development expenditure of the Group been carried under the cost model, the carrying amount would have been RM64,117,000 (2017: RM64,117,000). 323 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  342. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 38 PLANTATION DEVELOPMENT EXPENDITURE (cont’d) (b) Plantation development expenditure capitalised during the financial year include the following: The Group Note2018 2017 RM’000 RM’000 01 Depreciation of property, plant and equipment Amortisation of land use rights Retirement benefits Finance cost Foreign exchange losses Employee benefits cost 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others 27(d) 3,5565,343 28 468657 241,888537 9 1,9003,263 9 2,751184 616,73417,773 39INVENTORIES The Group 2018 2017 RM’000 RM’000 Cost Raw materials: - Construction materials - Other raw materials Finished goods: - Completed buildings - Quarry and manufactured products - Palm kernels Oil palm nurseries Fertilisers and chemicals Stores, spares & consumables Goods in transit Net realisable value Finished goods: - Completed buildings - Crude palm oil - Consumables - Palm kernel expellers - Crude palm kernel oil 10,03817,149 134,954132,652 880,536994,485 153,927140,856 2,1954,064 8,84910,574 15,32022,109 20,91921,985 6,8917,347 1,233,6291,351,221 23,55819,995 68,48539,770 9361,040 550232 7,0859,703 100,61470,740 1,334,2431,421,961 Inventories recognised as an expense during the year amounted to RM1,036,791,000 (2017: RM1,020,148,000). 324 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  343. 40 TRADE AND OTHER RECEIVABLES The Group The Company 2018 2017 2018 2017 RM ’000 RM’000 RM’000 RM’000 Trade receivables Trade advances Other receivables Amounts owing by subsidiaries Amounts owing by associates Amount owing by a joint operations partner * Deposits 1,205,3681,339,758 57,09467,795 54,20145,874 1,3881,626 245,223347,775 3,13025,513 –– 1,983,3801,311,514 334,188191,947 1,3411,340 47,23952,391 –– 34,73034,891 380463 Less: Allowance for impairment of trade and other receivables 1,920,9492,012,6362,046,7131,408,251 Amounts due from customers on construction contracts (Note 46) Accrued billings in respect of property development Prepayments 1,795,5771,799,5991,999,1761,355,466 1,952,3132,031,0031,999,5621,357,059 (125,372)(213,037) (47,537)(52,785) 12,83054,874 –7 111,123124,155 –– 32,78352,375 3861,586 Other receivables include the current portion of the following items: The Group 2018 2017 RM’000 RM’000 Lease receivables (Note 35) 2,5482,193 The currency exposure profile of trade and other receivables is as follows: The Group 2018 2017 RM’000 RM’000 United States Dollar Singapore Dollar Brunei Dollar 4,2391,520 2,5485,615 1,6924,882 8,47912,017 * The balance represents an amount owing by a joint operations partner, WCE Holdings Berhad, which is a 26% associate of the Company. IJMC-KEB joint venture, a 70% unincorporated joint operation of the Group between IJM Construction Sdn Bhd (“IJMC”) and WCE Holdings Berhad, to carry out the engineering, procurement and construction works for the construction of the West Coast Expressway. IJMC is a whollyowned subsidiary of the Company. 325 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  344. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 40 TRADE AND OTHER RECEIVABLES (cont’d) Trade and other receivables that are neither past due nor impaired: Credit terms of trade receivables range from payment in advance to 120 days (2017: range from payment in advance to 120 days). 01 Trade and other receivables that are neither past due nor impaired comprise: 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others • Receivables in relation to construction business arising from rendering of construction services to companies with a good collection track record with the Group and the Company. These receivables include retention sums which are to be settled in accordance with the terms of the respective contracts; • Receivables in relation to property development business arising from sale of development units to large number of property purchasers with end financing facilities from reputable end-financiers, and the ownership and rights to the properties revert to the Group in the event of default; and • Receivables from other external parties with no history of default. Trade and other receivables that are past due but not impaired: As at 31 March 2018, trade and other receivables of the Group and the Company of RM400,933,000 (2017: RM358,170,000) and RM891,000 (2017: RM1,023,000) respectively were past due but not impaired. The Group has carried out an assessment on the recoverability of these balances and the management believes that these balances are recoverable. The ageing analysis of these receivables is as follows: The Group The Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 Up to 6 months More than 6 months 237,492272,279 –– 163,44185,891 8911,023 400,933358,170 8911,023 Trade and other receivables that are impaired: As at 31 March 2018, trade and other receivables of the Group and the Company of RM125,372,000 (2017: RM213,037,000) and RM47,537,000 (2017: RM52,785,000) respectively were impaired and provided for. The receivables were individually impaired either because of significant delays in collection periods or because the debtors are in unexpectedly difficult economic situations. Movements on the Group’s and the Company’s allowance for impairment of trade and other receivables are as follows: The Group The Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 326 ANNUAL REPORT 2018 IJM CORPORATION BERHAD At 1 April 2017/2016 Allowance for impairment of receivables during the year (Note 5(a)) Write back of allowance for impairment of receivables (Note 5(b)) Bad debts written off Foreign currency exchange differences Derecognition of outstanding balances pursuant to an acquisition of subsidiary * Reclassification of balances ** 213,037232,80052,78564,167 At 31 March 125,372213,037 47,53752,785 5,1528,329 –– (4,938)(3,650) –– (13,975)(15,153)(5,248)(11,382) (10,200)9,336 –– –(18,625) –– (63,704)–––
  345. 40 TRADE AND OTHER RECEIVABLES (cont’d) * These amounts were transferred to amount due from a subsidiary and are hence eliminated in the Group financial statements. ** These balances are reclassified to non-current (Note 35). Concentrations of credit risk with respect to trade and other receivables are limited due to the Group’s large number of customers, who are dispersed over a broad spectrum of industries and businesses, other than the concentration of credit risk in respect of amounts due from WCE Holdings Berhad, an associate and companies related to the associate. The Group has carried out an assessment on the recoverability of these balances and management believes that the current impairment recognised is adequate. The amounts owing by subsidiaries and associates are unsecured and repayable on demand. Certain amounts owing by subsidiaries and associates bear interest at rates ranging from 5.0% to 7.9% (2017: 5.0% to 7.65%) per annum. The Company has carried out an assessment on the recoverability of these balances and management believes that the carrying amount is recoverable. The amount owing by a joint operations partner mainly comprises receivables arising from the rendering of construction services to the joint operation and has no history of default. The credit term of these trade related balances is 30 days (2017: 30 days). Also included in the amount owing by a joint operations partner are non-trade advances provided to the joint operations partner which are unsecured, repayable on demand and bear interest at a fixed rate of 6%. There is no material difference between the carrying value of trade and other receivables and their fair value, due to the short-term duration of the receivables. 41FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS The Group The Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 Quoted securities in Malaysia – held for trading: Quoted shares Quoted real estate investment trusts Quoted unit trusts 2,3353,198 –– 6,4527,0356,4527,035 290,004275,159 –– Quoted securities outside Malaysia – held for trading: Quoted government securities Quoted unit trusts 9,41213,717 9,41213,717 2,87655 2,87655 311,079299,164 18,74020,807 The fair values of all quoted securities are based on their quoted market prices in an active market and are within level 1 of the fair value hierarchy. The currency exposure profile of financial assets at fair value through profit or loss is as follows: The Group and the Company 2018 2017 RM’000 RM’000 Argentine Peso 12,28813,772 327 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  346. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 42 DEPOSITS, CASH AND BANK BALANCES The Group The Company Note2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 Deposits with licensed banks 01 49 671,8211,053,596 16,98169,550 393,632624,232 68,335160,847 Cash and bank balances Housing Development Accounts (a) 402,200469,949 –– 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others 49795,8321,094,181 68,335160,847 1,467,6532,147,777 85,316230,397 (a) Cash and bank balances include balances amounting to RM402,200,000 (2017: RM469,949,000) which are maintained in designated Housing Development Accounts pursuant to the Housing Developers (Control and Licensing) Act, 1966 and Housing Regulations, 1991 in connection with the Group’s property development projects. The utilisation of these balances are restricted before completion of the housing development projects and fulfilment of all relevant obligations to the purchasers, such that the cash can only be withdrawn from such accounts for the purpose of completing the particular projects. The currency exposure profile of deposits with licensed banks is as follows: The Group The Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 United States Dollar 23,318190,371 –– The currency exposure profile of cash and bank balances and Housing Development Accounts is as follows: The Group The Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 United States Dollar Singapore Dollar Argentine Peso Pakistan Rupee 85,260106,623 58,84974,675 12,00621,018 –– 87053 87053 117– 117– 98,253127,694 59,83674,728 The effective interest rates per annum as at the end of the financial year for the Group and the Company are as follows: The Group The Company 2018 2017 2018 2017 % % % % Deposits with licensed banks: Ringgit Malaysia US Dollar Indian Rupee Indonesian Rupiah Cash at bank held under Housing Development Accounts 3.042.973.203.05 1.201.13 –– 5.945.696.446.50 5.886.00 –– 2.021.91 –– Deposits, cash and bank balances are mainly deposits with banks with high credit ratings assigned by international credit rating agencies. The cash and bank balances are deposits held at call with banks and earn no interest. 328 ANNUAL REPORT 2018 IJM CORPORATION BERHAD Deposits with licensed banks of the Group and of the Company have a maturity period ranging between 1 and 90 days (2017: 1 and 90 days).
  347. 43 ASSETS HELD FOR SALE The Group and The Company 2018 2017 RM ’000 RM’000 Property, plant and equipment (Note 27) 124– On 9 February 2018, the Directors of the Company approved the execution of a sale and purchase agreement for the disposal of an apartment measuring approximately 721 square feet at Fraser’s Silverpark Resort for a cash consideration of RM161,500. As at 31 March 2018, the disposal is subject to fulfilment of conditions precedent. 44 TRADE AND OTHER PAYABLES The Group The Company Note2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 Current: 1,367,4051,126,226 2711,544 Trade payables Amounts owing to subsidiaries –– 292,362297,947 Amounts owing to associates 121 11 Amounts owing to joint ventures 6,15329,636 69– 18 33,10433,104 –– Government support loans Trade accruals 421,480426,365 29,50432,389 Hire purchase and lease payables19 599685 –– Land and development costs –– payable23(b)15,48912,238 Land costs payable* 223,421––– Other payables and accruals 546,269459,622 8,7369,833 Lease payable to Kuantan Port Authority 23(e) 6,0665,666 –– Retirement benefits payable Progress billings in respect of property development Amounts due to customers on construction contracts 2,619,9872,093,563 330,943341,714 24 1,6241,378 –– 57,23369,437 46 341,515353,827 –– 939850 3,020,3592,518,205 331,882342,564 Non-current: Amount owing to a subsidiary ** –– 852,537948,028 * The land costs payable is in connection to a property development in Kuala Lumpur and Kuantan, which will become payable as the development progresses. ** This amount is due and payable after twelve months. The currency exposure profile of trade and other payables is as follows: The Group The Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 United States Dollar 9667,526 –– As at balance sheet date, the current amounts owing to subsidiaries, associates and joint ventures are unsecured and repayable on demand. Credit terms of trade and other payables range from payments in advance to 120 days (2017: range from payments in advance to 120 days). 329 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  348. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 45BORROWINGS The Group The Company Note2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others Secured Bonds16 40,00030,000 Term loans 17 232,856232,985 Revolving credits (A) 117,83192,824 –– –– –– 390,687355,809 –– Unsecured Term loans 17 1,441,918455,717483,188– Bankers’ acceptances 48,56862,159 –– Revolving credits 838,843816,588225,000210,000 Revolving loans 135,293– 135,293– Bank overdrafts 49 32,30944,514 –1,098 Letters of credit 16,4998,109 –– 2,513,4301,387,087 843,481211,098 2,904,1171,742,896 843,481211,098 The currency exposure profile of the above bank borrowings is as follows: The Group The Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 United States Dollar Chinese Yuan Renminbi 1,355,734425,046618,481– 3,05826,768 –– 1,358,792451,814618,481– As at the balance sheet date, the weighted average annual effective interest rates for the bank borrowings, other than Bonds and Term Loans which are disclosed in Notes 16 and 17 respectively, of the Group and of the Company are as follows: The Group and The Company 2018 Bankers’ Revolving Revolving Bank acceptances credits loans overdrafts % % % % Ringgit Malaysia Indian Rupee United States Dollar Chinese Yuan Renminbi 330 ANNUAL REPORT 2018 IJM CORPORATION BERHAD 4.154.59 – – –8.50 – 8.55 – 2.662.93 – –5.13 – 4.79
  349. 45BORROWINGS (cont’d) As at the balance sheet date, the weighted average annual effective interest rates for the bank borrowings, other than Bonds and Term Loans which are disclosed in Notes 16 and 17 respectively, of the Group and of the Company are as follows: (continued) The Group and The Company 2017 Bankers’Revolving Bank acceptances credits overdrafts %% % Ringgit Malaysia Indian Rupee United States Dollar Chinese Yuan Renminbi 3.79 8.80 – – 4.48 8.75 1.80 5.13 7.15 9.95 – 4.79 The security of bonds and term loans are disclosed in Notes 16 and 17 respectively. (A) As at the balance sheet date, the following revolving credits of the Group are secured as follows: The Group Note2018 2017 RM’000 RM’000 Revolving credit (i) Revolving credit (ii) Revolving credit (iii) Revolving credit (iv) Revolving credit (v) (a) 2,0002,000 (b) 24,37527,475 (c) 29,84913,349 (d)50,00050,000 (e) 11,607– 117,83192,824 (a) The revolving credit (i) of RM2,000,000 (2017: RM2,000,000) is secured by way of: (i) a facility agreement for the sum of RM9,000,000, which had been partially repaid in the previous financial year; (ii) a registered open all monies third party charge over certain parcels of freehold vacant commercial land of a subsidiary of IJML (Note 37); and (iii) a corporate guarantee by IJML. (b) The revolving credit (ii) of RM24,375,000 (2017: RM27,475,000) is secured by way of a Lien-Holder’s Caveat over landed properties (Note 37) of a subsidiary of IJML with a minimum security cover of 1.0 time the loan outstanding. (c) The security for revolving credit (iii) of RM29,849,000 (2017: RM13,349,000) is disclosed in Note 17(C)(i). (d) The security for revolving credit (iv) of RM50,000,000 (2017: RM50,000,000) in accordance with the Shariah Principle of Bai’ al-Inah is secured by way of: (i) a first party legal charge over one parcel of leasehold land of a subsidiary of IJML (Note 37); (ii) a deed of debenture registering a fixed and floating charge over the present and future assets (“debenture”) of a subsidiary of IJML prior to the completion of reclamation of commercial land of “The Light” project (“commercial land”) and issuance of relevant land title(s), of which upon completion of reclamation, the debenture shall be discharged and replaced with legal charge over the commercial land; (iii) an irrevocable letter of undertaking from a subsidiary of IJML to execute the legal charge in favour of the bank over the commercial land upon issuance of the land title(s); and (iv) a corporate guarantee by IJML. (e) The security for revolving credit (v) of RM11,607,000 (2017: Nil ) is disclosed in Note 17(C)(a). 331 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  350. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 46 AMOUNTS DUE FROM / (TO) CUSTOMERS ON CONSTRUCTION CONTRACTS The Group The Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 01 Aggregate costs incurred to-date Attributable profits less recognised losses 10,743,35910,736,225 729,449729,141 742,694787,612(32,218)(31,814) Less: Progress billings on contracts 11,486,05311,523,837 697,231697,327 (11,814,738)(11,822,790)(698,170)(698,170) 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others (328,685)(298,953) (939)(843) Amounts due from customers on construction contracts (included in trade and other receivables – Note 40) Amounts due to customers on construction contracts (included in trade and other payables – Note 44) (341,515)(353,827) (939)(850) (328,685)(298,953) (939)(843) Advances received on contracts (included in trade payables) 172,325107,018 –– Retention sums on contracts (included in trade receivables) 190,072178,440 10,29211,816 12,83054,874 –7 During the financial year, the following expenses have been included in the aggregate costs incurred to-date of the Group and of the Company: The Group The Company Note2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 Employee benefits cost Depreciation of property, plant and equipment 332 ANNUAL REPORT 2018 IJM CORPORATION BERHAD 6 92,89898,528 –– 27(d)2,8152,153 292373
  351. 47 IMPAIRMENT OF ASSETS Impairment tests for goodwill Goodwill is allocated to the Group ’s cash-generating units (CGUs) identified according to business segments. The carrying amounts of goodwill allocated to the CGUs are as follows: Manufacturing and quarrying Construction Property Total RM’000 RM’000RM’000 RM’000 2018 At 1 April 2017 / At 31 March 2018 56,026 13,13210,303 79,461 2017 At 1 April 2016 Acquisition of a subsidiary (Note 48(b)(i)) 56,026 – 13,132 – – 10,303 69,158 10,303 At 31 March 2017 56,026 13,132 10,303 79,461 The recoverable amounts of the respective CGUs are determined based on value-in-use (“VIU”) calculations, using pre-tax cash flow projections on the following basis: CGU Basis of cash flow projections Manufacturing and Quarrying Construction Property Financial budgets approved by management covering a fiveyear period based on past performance and expectations of market development Discounted cash flows of the construction order book covering a 3-year period Discounted cash flows of a property development project covering a 17-year period Growth rate Discount rate 2018201720182017 %%%% 2.33.07.04.5 N/AN/A10.010.0 N/A– 10.0– N/A denotes not applicable The discount rates used are pre-tax and reflect the specific risks relating to the respective CGUs. In the preceding financial year, the Group recognised a goodwill arising from the acquisition of a subsidiary (Note 48(b)(i)) as the goodwill allocated to the property CGU was supportable by the net recoverable amounts. There are no reasonably possible changes in any of the key assumptions used that would cause the carrying amount of the CGUs to materially exceed the recoverable amounts. 333 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  352. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 48 ACQUISITION OF SUBSIDIARIES (a) During the current financial year, the Group acquired the following subsidiaries: (i) 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others On 21 November 2017, IJM RE Commercial Sdn Bhd (“IJMREC”), a wholly-owned subsidiary of IJM RE Sdn Bhd, which in turn is a wholly-owned subsidiary of the Company, entered into a share sale and purchase agreement with KLIFD Sdn Bhd to acquire 1,000,000 ordinary shares in Fairview Valley Sdn Bhd (“FVSB”), representing a 100% equity interest in FVSB, for a total purchase consideration of RM1,000,000. FVSB is the land owner cum developer of a purpose-built 27-storey office building on a piece of freehold land identified as Plot B10.17-CT within the Tun Razak Exchange and held under H.S.(D) 119946, PT No. 179, Seksyen 67, Bandar Kuala Lumpur, Daerah Kuala Lumpur, Negeri Wilayah Persekutuan Kuala Lumpur, measuring approximately 1.175 acres. (ii) On 12 December 2017, the Company incorporated a wholly-owned subsidiary in India, namely Vijayapura Tollway Private Limited with an initial share capital of 1,000,000 equity shares of INR10 each. The acquisitions (i) and (ii) have no significant effect on the financial results of the Group in the current financial year and the financial position of the Group as at the end of the current financial year. (b) In the preceding financial year, the Group acquired the following subsidiaries: (i) On 6 January 2017, Cypress Potential Sdn Bhd (“CPSB”), a 70%-owned subsidiary of IJM Properties Sdn Bhd, which in turn is a wholly-owned subsidiary of the Company via IJM Land Berhad, entered into a sale and purchase agreement with Sebana Holdings Sdn Bhd (“SHSB”), to acquire 7,000,000 ordinary shares and 23,741 preference shares in Sebana Golf & Marina Resort Berhad (“SGMR”), representing a 100% of the issued and paid up ordinary share capital of SGMR for a total purchase consideration of RM1. The acquisition was completed on 6 January 2017. Details of net assets acquired were as follows: NoteFair value RM’000 Identifiable assets and liabilities: Non-current asset Property, plant and equipment 27 86,095 Current assets Trade and other receivables 3,009 Inventory421 Cash and bank balances 734 4,164 Non-current liabilities Deferred tax liabilities 334 ANNUAL REPORT 2018 IJM CORPORATION BERHAD 22 (1,904) Current liabilities Trade and other payables (98,658) Fair value of identifiable net liabilities acquired Less: Purchase consideration (10,303) * Goodwill on acquisition (10,303) 36,47
  353. 48 ACQUISITION OF SUBSIDIARIES (cont’d) (b) In the preceding financial year, the Group acquired the following subsidiaries: (continued) Details of cash flows arising from the acquisition were as follows: Group RM’000 Total purchase consideration Less: Cash and cash equivalents of a subsidiary acquired * 734 Cash inflow to the Group on acquisition 734 * The purchase consideration was RM1. The acquired business contributed revenue of RM1,532,000 and incurred net loss of RM2,127,000 to the Group for the period from 6 January 2017, date of completion of acquisition, to 31 March 2017. (ii) On 13 May 2016, IJM Vijayawada (Mauritius) Limited, a wholly-owned subsidiary of IJM Investments (M) Limited, which in turn is a wholly-owned subsidiary of the Company, completed the acquisition of 2,970,000 ordinary shares of INR10 each, representing a 10.1% equity interest in Vijayawada Tollway Private Limited (“VTPL”) from IDFC Limited for a total cash consideration of INR29,700,000. With this acquisition, the Company’s effective equity interest in VTPL had increased from 89.8% to 99.9%. The additional interest in VTPL had been accounted for as transactions with non-controlling interests. The difference between the consideration paid and the relevant share of the carrying value of net assets of VTPL amounting to RM7,734,000, was charged to equity. (iii) On 17 June 2016, Industrial Concrete Products Sdn Bhd (“ICP”), a wholly-owned subsidiary of the Company, acquired 1,260,000 ordinary shares in ICP Jiangmen Co. Ltd (“ICPJM”), representing a 21% equity interest in ICPJM for a total cash consideration of RM15,389,576. With this acquisition, the Company’s effective equity interest in ICPJM had increased from 75% to 96%. The additional interest in ICPJM had been accounted for as transactions with non-controlling interests. The difference between the consideration paid and the relevant share of the carrying value of net assets of ICPJM amounting to RM13,072,000, was charged to equity. (iv) On 18 August 2016, IJM Properties Sdn Bhd, a wholly-owned subsidiary of IJM Land Berhad, which in turn is a wholly-owned subsidiary of the Company, had incorporated a 55%-owned subsidiary, namely Era Moden Hartanah Sdn Bhd. (v) On 30 December 2016, the Company had acquired 2 ordinary shares, representing a 100% equity interest in IJM RE Sdn Bhd (“IJM RE”) for a total cash consideration of RM2. On the same day, IJM RE has acquired 2 ordinary shares, representing a 100% equity interest in IJM RE Commercial Sdn Bhd for a total cash consideration of RM2. (vi) On 22 February 2017, the Company incorporated a wholly-owned subsidiary in India, namely Dewas Bypass Tollway Private Limited (“DBTPL”) with an initial share capital of 1,000,000 equity shares of INR10 each. On 31 March 2017, IJM Dewas (Mauritius) Limited, a wholly-owned subsidiary of IJM Investments (M) Limited, which in turn is a wholly-owned subsidiary of the Company, subscribed for 25,000,000 shares of INR10 each, representing a 96.15% equity interest in DBTPL. 335 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  354. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 48 ACQUISITION OF SUBSIDIARIES (cont’d) (b) In the preceding financial year, the Group acquired the following subsidiaries: (cont’d) (vii) On 17 March 2017, IJM Dewas (Mauritius) Limited (“IJMDM”) was incorporated in the Republic of Mauritius as a wholly-owned subsidiary of IJM Investments (M) Limited, which in turn is a wholly-owned subsidiary of the Company. 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others (viii) On 17 May 2017, IJM Realty (Mauritius) Limited was incorporated in the Republic of Mauritius as a wholly-owned subsidiary of IJM Investments (M) Limited, which in turn is a wholly-owned subsidiary of the Company. The acquisitions (iv), (v), (vi), (vii) & (viii) had no significant effect on the financial results of the Group in the preceding financial year and the financial position of the Group as at the end of the preceding financial year. 49 CASH AND CASH EQUIVALENTS Cash and cash equivalents included in the Group’s and the Company’s cash flow statements comprise the following: The Group The Company Note2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 Deposits with licensed banks Cash and bank balances Bank overdrafts - Unsecured 42 671,8211,053,596 16,98169,550 42 795,8321,094,181 68,335160,847 45 (32,309) (44,514) –(1,098) 1,435,3442,103,263 85,316229,299 Less: Restricted deposits with licensed banks (a)(28,343) (25,932) –– 1,407,0012,077,331 85,316229,299 (a) As at balance sheet date, the restricted deposits with licensed banks are mainly deposits of certain subsidiaries, which were assigned to the banks to be held as security in connection with the term loans of certain subsidiaries referred to in Note 17 to the financial statements; escrow amounts in respect of toll collected on behalf of the tollway authority and in respect of a corporate guarantee facility to a cooperative in Indonesia. 336 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  355. 50FAIR VALUES OF FINANCIAL INSTRUMENTS The fair value of a financial instrument is assumed to be the amount at which the instrument could be exchanged or settled between knowledgeable and willing parties in an arm ’s length transaction. Quoted market prices, when available, are used as a measure of fair values. However, for a significant portion of the Group’s and of the Company’s financial instruments, quoted market prices do not exist. For such financial instruments, fair values presented are estimates derived using the discounted value of future cash flows or other valuation techniques. These techniques involve uncertainties and are significantly affected by the assumptions used and judgements made regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows and other factors. Changes in assumptions could significantly affect these estimates and the resulting fair values. The carrying values of financial assets and financial liabilities of the Group and of the Company at the balance sheet date approximated their fair values except for the following: The Group The Company CarryingFair CarryingFair Note value value* value value* RM’000 RM’000 RM’000 RM’000 Financial Liabilities At 31 March 2018 (i)Bonds (ii) Term loans (iii) Government support loans (iv) Advances from the State Government At 31 March 2017 (i)Bonds (ii) Term loans (iii) Government support loans (iv) Advances from the State Government 16 1,950,000 1,959,3491,300,000 1,308,469 172,614,924 2,614,544 483,188 483,188 18 158,819149,983 – – 23(a) 16 17 18 23(a) 33,180(aa) – – 1,980,000 2,004,9551,300,000 1,312,966 2,810,511 2,799,061 176,940 176,940 187,578 178,262 – – 33,180 (aa) – – (aa) The fair value of the Advances from the State Government has not been disclosed as the repayment is scheduled upon completion of certain conditions as set out in Note 23(a) to the financial statements, of which the completion date could not be reasonably determined as at the year end. * The fair values of the financial liabilities above have been derived based on discounted cash flows using market interest rates applicable for similar financial instruments as at the balance sheet date and are within Level 2 of the fair value hierarchy. 337 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  356. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 51 SIGNIFICANT RELATED PARTY DISCLOSURES In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other significant related party transactions and balances. (a) The following transactions with related parties were carried out under terms and conditions negotiated amongst the related parties: 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others The Group 20182017 RM’000RM’000 (aa) Associates (i) Sales/progress billings in respect of construction contract: – West Coast Expressway Sdn Bhd – Swarna Tollway Private Limited 432,136519,935 –438 (ii) Interest charged to: – Kuantan Pahang Holding Sdn Bhd 909844 (iii) Net repayment from/(advances to): – WCE Holdings Berhad – West Coast Expressway Sdn Bhd (1)157 279,030630,359 (ab) Joint ventures (i) Progress billings in respect of construction contracts to: – Sierra Ukay Sdn Bhd (ii) Project management and sales and marketing fees charged to: – Elegan Pesona Sdn Bhd – Sierra Ukay Sdn Bhd – Nasa Land Sdn Bhd – IJM Perennial Development Sdn Bhd – 368 Segambut Sdn Bhd – IJM-CHEC Joint Venture (iii) Toll operation and maintenance revenue charged to: – Lebuhraya Kajang Seremban Sdn Bhd (iv) Management fees charged by: – Lebuhraya Kajang Seremban Sdn Bhd 338 ANNUAL REPORT 2018 IJM CORPORATION BERHAD 651,133 1,191660 –234 1,076– 102– 2,074– 1,0731,069 7,9797,155 350602
  357. 51 SIGNIFICANT RELATED PARTY DISCLOSURES (cont’d) (a) The following transactions with related parties were carried out under terms and conditions negotiated amongst the related parties: (cont’d) The Group (cont’d) 20182017 RM’000RM’000 (ab) Joint ventures (cont’d) (v) Interest charged to: – Sierra Ukay Sdn Bhd – Lebuhraya Kajang Seremban Sdn Bhd – Nasa Land Sdn Bhd – 368 Segambut Sdn Bhd 16,74714,337 7,1197,104 3,4111,904 3,1202,424 (vi) Net (advances to)/repayment from: – 368 Segambut Sdn Bhd – Sierra Ukay Sdn Bhd – Elegan Pesona Sdn Bhd – Nasa Land Sdn Bhd – IJMC-JAKS Joint Venture – IJM Perennial Development Sdn Bhd – ISZL Consortium – IJM-CHEC Joint Venture – Astaka Tegas Sdn Bhd – IJM Properties-Danau Lumayan Joint Venture (4,462)(8,851) 2,807(3,451) 1,39518,081 (21,790)(27,348) –(437) (30,337)(32,534) 575(641) 1,1632,869 193– (1,036)– (ac) Joint operation partner (i) Progress billings in respect of construction contracts to: – IJMC-KEB Joint Venture (ii) Project management fee charged to: – IJMC-KEB Joint Venture 129,657186,458 6,41316,711 (ad) Other related parties * (i) Purchase of fresh fruit bunches 5,943– * Companies in which a director of the Company has deemed interest through his family members. 339 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  358. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 51 SIGNIFICANT RELATED PARTY DISCLOSURES (cont’d) (a) The following transactions with related parties were carried out under terms and conditions negotiated amongst the related parties: (cont’d) The Company 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others 340 ANNUAL REPORT 2018 IJM CORPORATION BERHAD 20182017 RM’000RM’000 (aa) Subsidiaries (i) Interest charged to: – IJM Properties Sdn Bhd – Liberty Heritage (M) Sdn Bhd – Suria Bistari Development Sdn Bhd – IJM Land Berhad – IJM Land Management Services Sdn Bhd – IJM RE Sdn Bhd – Nilai Cipta Sdn Bhd 36,62142,579 –735 4,3034,090 26,06115,619 1,7751,078 4,295– 3,500– (ii) Capital contribution via share-based payment in: – IJM Construction Sdn Bhd – IJM Land Berhad – IJM Plantations Berhad – Industrial Concrete Products Sdn Bhd – Road Builder (M) Holdings Bhd 10,51012,957 6,2809,171 2,3273,709 4,6375,140 3,4273,379 (iii) Share-based payments charged to: – Kuantan Port Consortium Sdn Bhd – Industrial Concrete Products Sdn Bhd – Malaysian Rock Products Sdn Bhd – IJM Plantations Berhad – IJM Construction Sdn Bhd – IJM Land Management Services Sdn Bhd – Besraya Sdn Bhd 1,9291,778 3,5542,994 873633 3,6064,430 11,11010,709 7,1256,003 613825 (iv) Management fees charged to: – IJM Construction Sdn Bhd – IJM Plantations Berhad – Industrial Concrete Products Sdn Bhd – New Pantai Expressway Sdn Bhd – Kuantan Port Consortium Sdn Bhd – Besraya (M) Sdn Bhd – IJM Land Management Services Sdn Bhd 10,21710,181 1,9922,801 4,9684,531 1,2501,015 3,7212,092 1,153937 6,5248,374
  359. 51 SIGNIFICANT RELATED PARTY DISCLOSURES (cont’d) (a) The following transactions with related parties were carried out under terms and conditions negotiated amongst the related parties: (cont’d) The Company (cont’d) 20182017 RM’000RM’000 (aa) Subsidiaries (cont’d) (v) Office rental charged by: – IJM Construction Sdn Bhd (vi) 2,1192,008 Repayment from/(advances to): – IJM Investments (M) Limited – IJM Construction Sdn Bhd – IJM Properties Sdn Bhd – IJM Land Berhad – Jelutong Development Sdn Bhd – IJM (India) Infrastructure Limited – IJM Investments (L) Ltd – Kuantan Port Consortium Sdn Bhd – IJM Land Management Services Sdn Bhd – Industrial Concrete Products Sdn Bhd – IJM Plantations Berhad – Malaysian Rock Products Sdn Bhd – Besraya (M) Sdn Bhd – New Pantai Expressway Sdn Bhd – IJM RE Sdn Bhd – Fairview Valley Sdn Bhd – Vijayawada Tollway Private Limited – IJM Highway Services Sdn Bhd (94,670)(60,009) 22,34728,710 13,385182,780 (278,947)(176,557) 235,718 3,763(3,800) (44,214)59,288 (52,341)4,411 8,7213,820 9,7818,219 6,6488,139 –677 1,536– 1,9441,977 (30,958)(54,280) (145,785)– 4,723– 598– (vii) Advances from/(repayments to): – Road Builder (M) Holdings Bhd – IJM (India) Geotechniques Private Limited (95,491)(16,206) (2,492)580 (ab) Associates (i) Repayment from: – WCE Holdings Berhad –157 (ac) Joint ventures (i) Interest charged to: – Lebuhraya Kajang Seremban Sdn Bhd 7,1197,104 341 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  360. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 51 SIGNIFICANT RELATED PARTY DISCLOSURES (cont’d) (b) Key management compensation during the financial year: Key management personnel comprises the Directors and certain management personnel of the Group, having authority and responsibility for planning, directing and controlling the activities of the Group entities directly or indirectly. 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others The Group The Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 Wages, salaries and bonus Defined contribution retirement plan Fees and other employee benefits Share-based payments 13,08011,423 7,1585,724 2,0291,8171,080927 2,174585 1,546277 5,8756,6333,4623,857 23,15820,45813,24610,785 (c) Transactions with Directors and key management relating to the purchase of properties during the financial year: In the ordinary course of business, certain Directors and key management personnel of the Group purchased properties from the property development subsidiaries during the financial year. The following transactions with Directors and key management personnel were carried out under terms not more favourable than those generally available to the public or employees of the Group, or under negotiated terms which the Board of Directors, after deliberation, has believed to be in the best interests of the Group: The Group 2018 2017 RM’000 RM’000 Progress billings during the financial year: – Directors and key management personnel of the Company – Close family members of Directors and key management personnel of the Company Amount outstanding arising from progress billings as at end of financial year from: – Directors and key management personnel of the Company – Close family members of Directors and key management personnel of the Company 1,3364,938 1,6721,324 –1,591 3731,280 (d) The amounts that remained outstanding at the reporting date in respect of the transactions with related parties are disclosed in Notes 31, 32, 33, 40 and 44. 342 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  361. 52COMMITMENTS (a) Capital commitments The Group 2018 2017 RM’000 RM’000 Approved and contracted for Approved but not contracted for 1,032,7091,098,039 145,33171,913 1,178,0401,169,952 Analysed as follows: Purchases of property, plant and equipment, land use rights and plantation development expenditure Purchases of development land Concession assets Investment properties 433,513265,607 17,5685,948 608,302808,942 118,65789,455 1,178,0401,169,952 (b) Non-cancellable operating lease commitments (i) The Group as lessor: The non-cancellable operating lease commitments are in relation to operating lease receivables from various tenants. The Group 2018 2017 RM’000 RM’000 Future minimum sublease receipts: – expiring not later than 1 year – expiring later than 1 year but not later than 5 years – expiring later than 5 years 17,28214,399 66,74450,269 87,59966,568 171,625131,236 (ii) The Group as lessee: The non-cancellable operating lease commitments is in relation to the operating lease payables by IJM Plantations Berhad, a 56%-owned subsidiary of the Company and its subsidiaries, which is pursuant to the Sub-lease Agreement dated 30 September 2015 for land use rights until the end of the respective land use rights periods. The Group 2018 2017 RM’000 RM’000 Future minimum lease payments: - expiring not later than 1 year - expiring later than 1 year but not later than 5 years - expiring later than 5 years 1,1341,134 4,5374,536 67,96268,789 73,63374,459 343 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  362. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 53 CONTINGENT LIABILITIES (UNSECURED) The Group The Company 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others Performance guarantees in respect of the contract performance of concession agreements Stamp duty matters under appeal Sales and service tax matters under appeal –– 8,827750 1,9482,237 –– 5,1886,5419,6091,647 3,2404,304 782897 54 LIST OF SUBSIDIARIES AND ASSOCIATES AS AT 31 MARCH 2018 SUBSIDIARIES Country of Name incorporation Effective equity interest 2018 2017 % % Principal activities Held by the Company CIDB Inventures Sdn Bhd Malaysia 100 Emcee Corporation Sdn Bhd Malaysia 100 100Dormant 100 IJM Construction Sdn Bhd Malaysia 100 100 IJM Construction (Middle East) Limited Liability Company * United Arab Emirates Hong Kong 100 100 Investment holding IJM Investments (L) Ltd ^ Federal Territory of Labuan 100 100 Investment holding IJM Investments (M) Limited # Republic of Mauritius 100 100 Investment holding IJM Land Berhad Malaysia 100 100 Investment holding IJM Overseas Ventures Malaysia 100 100 Sdn Bhd ^^^ Under member’s voluntary liquidation IJM Plantations Berhad Malaysia 56 56 Cultivation of oil palms and investment holding Malaysia 100 100 Industrial Concrete Malaysia 100 100 Products Sdn Bhd Kamad Quarry Sdn Bhd IJM CORPORATION BERHAD Provision of toll operation and maintenance services IJM International Limited * IJM RE Sdn Bhd ANNUAL REPORT 2018 Civil and building construction and investment holding 100 100Construction IJM Highway Services Sdn Bhd Malaysia 100 100 344 Infrastructure investment Malaysia Investment holding Production and sale of concrete products and investment holding 100 100Dormant
  363. 54 LIST OF SUBSIDIARIES AND ASSOCIATES AS AT 31 MARCH 2018 (cont’d) SUBSIDIARIES (cont’d) Country of Name incorporation Effective equity interest 2018 2017 % % Principal activities Held by the Company (cont’d) Kemena Industries Sdn Bhd * Malaysia 55 55 Manufacture and sale of ready-mixed concrete and reinforced concrete products Makmur Venture Sdn Bhd Malaysia 100 100 Nilai Cipta Sdn Bhd Malaysia 70 70Dormant RB Manufacturing Sdn Bhd Malaysia 100 100Dormant Road Builder (M) Holdings Bhd Malaysia 100 100 100 – Vijayapura Tollway Private Limited India Investment holding Investment holding Highway development Held by IJM Construction Sdn Bhd Commerce House Sdn Bhd Malaysia 100 100 Trading in construction materials and providing insurance agency services IJM Building Systems Sdn Bhd Malaysia 100 100 Construction contracts, trading and rental of aluminium formworks IJM Construction Vietnam Vietnam 100 100 Co., Ltd # Provision of construction services, consulting service and installation of electrical system and mechanical system IJM Investments J.A. Limited * United Arab Emirates 100 100 ** 100 100 IJM-Norwest JV Jurutama Sdn Bhd Malaysia 100 100 Investment holding Civil and building construction Construction contract Prebore Piling & Engineering Malaysia 100 100 Sdn Bhd Piling, engineering and other construction works Road Builder (M) Sdn Bhd Malaysia 100 100 Civil and building construction 345 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  364. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 54 LIST OF SUBSIDIARIES AND ASSOCIATES AS AT 31 MARCH 2018 (cont’d) SUBSIDIARIES (cont’d) Country of Name incorporation 01 02 Effective equity interest 2018 2017 % % 03 Summary Information for Shareholder Held by IJM Investments J.A. Limited 04 Business Review & Reports IJM Construction (Pakistan) Pakistan 100 100 (Private) Limited # 05 Sustainability Statement 06 Financial Statements & others IJM Gulf Limited ^^^ United Arab 60 60 Emirates Pakistan 60 60 IM Technologies Pakistan (Private) Limited * Karachi Expressway J.A. Limited ^^^ United Arab 100 100 Emirates Principal activities Civil and building construction Under members’ voluntary liquidation Civil, building construction and property development Under member’s voluntary liquidation Held by Road Builder (M) Sdn Bhd ** 100 100Construction IEMCEE Infra (Mauritius) Limited # Republic of Mauritius 100 100 Investment holding IJM Dewas (Mauritius) Limited # Republic of Mauritius 100 100 Investment holding IJMII (Mauritius) Limited # Republic of Mauritius 100 100 Investment holding IJM Rajasthan (Mauritius) Limited # Republic of Mauritius 100 100 Investment holding IJM Rewa (Mauritius) Limited # Republic of Mauritius 100 100 Investment holding IJM Trichy (Mauritius) Ltd # Republic of Mauritius 100 100 Investment holding IJM Vijayawada (Mauritius) Ltd # Republic of Mauritius 100 100 Investment holding IJM Realty (Mauritius) Limited # Republic of Mauritius 100 – Investment holding RBM-PATI JV Held by IJM Investments (M) Limited 346 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  365. 54 LIST OF SUBSIDIARIES AND ASSOCIATES AS AT 31 MARCH 2018 (cont’d) SUBSIDIARIES (cont’d) Country of Name incorporation Effective equity interest 2018 2017 % % Principal activities Held by IJM Dewas (Mauritius) Limited Dewas Bypass Tollway Private Limited * (of which 26% (2017: 3.85%) is held directly by the Company) India 100 100 Highway development Held by IJMII (Mauritius) Limited IJM (India) Infrastructure Limited *India 99.9 99.9Construction Held by IJM (India) Infrastructure Limited IJM (India) Geotechniques India 99.9 99.9 Private Limited * IJM Lingamaneni Township Private Limited * India 98 98 Roadstar (India) Infrastructure India 70 70 Private Limited * Soil investigation & testing, foundation laying & treatment & piling Property development Under members’ voluntary liquidation Swarnandhra-IJMII Integrated Township Development Company Private Limited * India 51 51 Swarnandhra Road Care Private Limited * India 99.9 99.9 India 94.9 – 100 100 Infrastructure development 99.9 99.9 Highway development Property development Road maintenance Held by IJM Realty (Mauritius) Limited Nagpur Integrated Township Private Limited * Property development Held by IJM Rewa (Mauritius) Limited Rewa Tollway Private Limited *India Held by IJM Vijayawada (Mauritius) Ltd Vijayawada Tollway Private Limited * (of which 25.51% (2017: 25.51%) is held directly by the Company) India 347 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  366. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 54 LIST OF SUBSIDIARIES AND ASSOCIATES AS AT 31 MARCH 2018 (cont’d) SUBSIDIARIES (cont’d) Country of Name incorporation 01 02 Effective equity interest 2018 2017 % % Principal activities Held by IJM Land Berhad 03 Summary Information for Shareholder Asas Panorama Sdn Bhd Malaysia 60 60 Property development 04 Business Review & Reports Emko Properties Sdn Bhd Malaysia 100 100 Property development 05 Sustainability Statement ERMS Berhad Malaysia 100 100 Hotel operations 06 Financial Statements & others IJM Land Management Malaysia 100 100 Services Sdn Bhd Provision of management services IJM Properties Sdn Bhd Malaysia 100 100 Property development and investment holding Mintle Limited #Jersey 51 51 Property investment OneAce Global Limited Federal Territory of Labuan 100 100 Investment holding RB Development Sdn Bhd Malaysia 100 100 Property development RB Land Sdn Bhd Malaysia 100 100 Property development and construction activities Malaysia 70 70 Property development Malaysia 100 100 Property management Malaysia 100 100Dormant Aqua Aspect Sdn Bhd Malaysia 80 80 Property development Chen Yu Land Sdn Bhd Malaysia 100 100 Property development Sova Holdings Sdn Bhd Held by Emko Properties Sdn Bhd Emko Management Services Sdn Bhd Held by ERMS Berhad Holiday Villa Management Sdn Bhd Held by IJM Properties Sdn Bhd Cypress Potential Sdn Bhd Malaysia 70 70 348 ANNUAL REPORT 2018 IJM CORPORATION BERHAD Property development activities and property investment
  367. 54 LIST OF SUBSIDIARIES AND ASSOCIATES AS AT 31 MARCH 2018 (cont’d) SUBSIDIARIES (cont’d) Country of Name incorporation Effective equity interest 2018 2017 % % Principal activities Held by IJM Properties Sdn Bhd (cont’d) Era Moden Hartanah Sdn Bhd Malaysia 55 Ever Mark (M) Sdn Bhd Malaysia 100 100Dormant 55Dormant Malaysia 100 100 IJM Management Services Sdn Bhd Providing project and construction management services and sales and marketing services IJMP-MK Joint Venture ** 70 70 Jalinan Masyhur Sdn Bhd Malaysia 51 51Dormant Jelutong Development Sdn Bhd Malaysia 80 80 Property development Larut Leisure Enterprise (Hong Kong) Limited * Hong Kong 99 99 Investment holding Liberty Heritage (M) Sdn Bhd Malaysia 100 100Dormant Manda’rina Sdn Bhd Malaysia 100 100 Property development Maxharta Sdn Bhd Malaysia 100 100 Investment holding NS Central Market Sdn Bhd Malaysia 70 70 Property development Preferred Accomplishment Sdn Bhd Malaysia 100 100 Sale of electricity Radiant Pillar Sdn Bhd *Malaysia 71 71 (of which 10.6% (2017: 10.6%) is held indirectly by the Company via WCE Holdings Berhad) Property development Property development and investment holding Sinaran lntisari (M) Sdn Bhd Malaysia 100 100Dormant Suria Bistari Development Sdn Bhd Malaysia 51 The Light Waterfront Sdn Bhd Malaysia 100 100Dormant 51 Property development 349 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  368. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 54 LIST OF SUBSIDIARIES AND ASSOCIATES AS AT 31 MARCH 2018 (cont’d) SUBSIDIARIES (cont’d) Country of Name incorporation 01 02 03 Summary Information for Shareholder Held by IJM Properties Sdn Bhd (cont’d) 04 Business Review & Reports Valencia Terrace Sdn Bhd 05 Sustainability Statement 06 Financial Statements & others Malaysia Effective equity interest 2018 2017 % % 100 100 Worldwide Ventures Sdn Bhd Malaysia 86 86 Principal activities Property development Property development and investment holding Held by Cypress Potential Sdn Bhd Malaysia 70 70 Sebana Golf & Marina Resort Berhad * Resort, marina and golf course operator Held by Larut Leisure Enterprise (Hong Kong) Limited China 99 99 Property development Jelita Kasturi Sdn Bhd Malaysia 100 100 Property development Panorama Jelita Sdn Bhd Malaysia 100 100 Property development Eksplorasi Cemerlang Sdn Bhd Malaysia 100 100Dormant Jilin Dingtai Enterprise Company Limited * Held by Maxharta Sdn Bhd Held by Radiant Pillar Sdn Bhd Bandar Rimbayu Sdn Bhd *Malaysia (of which 10.6% (2017: 10.6%) is held indirectly by the Company via WCE Holdings Berhad) 71 71 IJMP-RPSB Joint Venture *** (of which 5.3% (2017: 5.3%) is held indirectly by the Company via WCE Holdings Berhad) 85 85Dormant Property development Held by Worldwide Ventures Sdn Bhd 350 ANNUAL REPORT 2018 IJM CORPORATION BERHAD Island Golf View Sdn Bhd Malaysia 86 86 Sheffield Enterprise Sdn Bhd Malaysia 60 60Dormant Property development
  369. 54 LIST OF SUBSIDIARIES AND ASSOCIATES AS AT 31 MARCH 2018 (cont’d) SUBSIDIARIES (cont’d) Country of Name incorporation Effective equity interest 2018 2017 % % Principal activities Held by Mintle Limited England and Wales 51 51 RMS (England) 1 Limited # England and Wales 51 51Dormant RMS (England) 2 Limited # England and Wales 51 51Dormant RMS (England) Limited # Property development Held by RMS (England) Limited Held by RB Land Sdn Bhd Aras Varia Sdn Bhd Malaysia 100 100 Property development and clubhouse operations Casa Warna Sdn Bhd Malaysia 100 100 Property management Dian Warna Sdn Bhd Malaysia 100 100 Property development Ikatan Flora Sdn Bhd Malaysia 100 100 Property development Murni Lapisan Sdn Bhd Malaysia 100 100 Property development and construction activities RB Property Management Sdn Bhd Malaysia 100 100 Property development Seremban Two Holdings Sdn Bhd Malaysia 100 100 Property development Seremban Two Property Management Sdn Bhd Malaysia 100 100 Property management Seremban Two Properties Sdn Bhd Malaysia 100 100 Property development Shah Alam 2 Sdn Bhd Malaysia 100 100 Property development Tarikan Abadi Sdn Bhd Malaysia 100 100 Property development Titian Tegas Sdn Bhd Malaysia 100 100 Property development Unggul Senja Sdn Bhd Malaysia 100 100 Property development 351 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  370. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 54 LIST OF SUBSIDIARIES AND ASSOCIATES AS AT 31 MARCH 2018 (cont’d) SUBSIDIARIES (cont’d) Country of Name incorporation 01 02 Effective equity interest 2018 2017 % % Principal activities Held by IJM Plantations Berhad 03 Summary Information for Shareholder Akrab Perkasa Sdn. Bhd. Malaysia 56 56Dormant 04 Business Review & Reports Berakan Maju Sdn. Bhd. Malaysia 56 56 05 Sustainability Statement Desa Talisai Palm Oil Mill Sdn. Bhd. Malaysia 56 56Dormant 06 Financial Statements & others Desa Talisai Sdn. Bhd. Malaysia 56 56 Investment holding Dynasive Enterprise Sdn. Bhd. Malaysia 56 56 Investment holding Excellent Challenger (M) Sdn. Bhd. Malaysia 56 56 Cultivation of oil palms Gunaria Sdn. Bhd. Malaysia 56 56 Investment holding IJM Biofuel Sdn Bhd Malaysia 56 56Dormant IJM Edible Oils Sdn. Bhd. Malaysia 56 56 IJMP Investments (M) Limited ^^^ Republic of Mauritius Minat Teguh Sdn. Bhd. Malaysia 56 56 Investment holding Rakanan Jaya Sdn. Bhd. Malaysia 56 56 Cultivation of oil palms Ratus Sempurna Sdn. Bhd. Malaysia 56 56 Property holding Sabang Mills Sdn. Bhd. Malaysia 56 56Dormant Sijas Plantations Sdn. Bhd. Malaysia 56 56Dormant – Cultivation of oil palms Palm oil and kernel milling 56Liquidated Held by Dynasive Enterprise Sdn Bhd PT Prima Alumga #(1)Indonesia53 – Cultivation of oil palms Held by Gunaria Sdn Bhd 352 ANNUAL REPORT 2018 IJM CORPORATION BERHAD PT Sinergi Agro Industri #Indonesia 53 53 Cultivation of oil palms PT Karya Bakti Sejahtera Agrotama # 53 53 Cultivation of oil palms Indonesia
  371. 54 LIST OF SUBSIDIARIES AND ASSOCIATES AS AT 31 MARCH 2018 (cont’d) SUBSIDIARIES (cont’d) Country of Name incorporation Effective equity interest 2018 2017 % % Principal activities Held by Minat Teguh Sdn. Bhd. PT Primabahagia Permai #Indonesia 53 53 Cultivation of oil palms 53 Cultivation of oil palms Held by PT Primabahagia Permai PT Prima Alumga #(1)Indonesia– PT Indonesia Plantation Indonesia 48 48 Synergy # Cultivation of oil palms and milling Held by IJM RE Sdn Bhd IJM RE Commercial Sdn Bhd Malaysia 100 100 Investment holding Held by IJM RE Commercial Sdn Bhd Fairview Valley Sdn Bhd Malaysia 100 – Property development, property investment and investment holding Held by Industrial Concrete Products Sdn Bhd Malaysia 100 100 Durabon Sdn Bhd – Processing and sales of steel bars Expedient Resources Sdn Bhd ^^^ Malaysia ICP Investments (L) Limited ^ Federal Territory of Labuan ICP Jiangmen Co. Ltd. * People’s Republic 96 96 of China ICP Marketing Sdn Bhd Malaysia 100 100Dormant ICP Precast Products Sdn Bhd Malaysia 100 100Dormant 100 100Liquidated 100 Malaysian Rock Products Malaysia 100 100 Sdn Bhd Investment holding Production and sale of concrete products Quarrying, sale of rock products and investment holding 353 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  372. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 54 LIST OF SUBSIDIARIES AND ASSOCIATES AS AT 31 MARCH 2018 (cont’d) SUBSIDIARIES (cont’d) Country of Name incorporation 01 02 03 Summary Information for Shareholder Held by Expedient Resources Sdn Bhd 04 Business Review & Reports Tadmansori Rubber Industries Sdn Bhd ^^^ 05 Sustainability Statement 06 Financial Statements & others Malaysia Effective equity interest 2018 2017 % % – Principal activities 100Liquidated Held by ICP Investments (L) Limited ICPB (Mauritius) Limited #Mauritius 100 100 Investment holding Held by ICPB (Mauritius) Limited IJM Steel Products Private Limited * India 100 100Dormant IJM Concrete Products India 100 100 Private Limited * Production and supply of ready-mixed concrete Held by IJM Concrete Products Private Limited IJM-AIKYA Joint Venture *India 60 60 Crushing and marketing of building stone material Held by Malaysian Rock Products Sdn Bhd Aggregate Marketing Sdn Bhd Malaysia 100 100Dormant Azam Ekuiti Sdn Bhd Malaysia 100 100 Bohayan Industries Sdn Bhd Malaysia 70 70Dormant IJM Concrete (Private) Limited ^ United Arab Emirates 60 60 IJM Concrete Products Pakistan (Private) Limited * Pakistan 100 100Dormant Kuang Rock Products Sdn Bhd Malaysia 100 100 Oriental Empire Sdn Bhd 354 ANNUAL REPORT 2018 IJM CORPORATION BERHAD Malaysia 100 100 Leaseholder of quarry land Investment holding Quarrying and sale of rock products Leaseholder of quarry land Scaffold Master Sdn Bhd Malaysia 100 100 Sale and rental of steel scaffolding Strong Mixed Concrete Malaysia 100 100 Sdn Bhd Production and supply of ready-mixed concrete
  373. 54 LIST OF SUBSIDIARIES AND ASSOCIATES AS AT 31 MARCH 2018 (cont’d) SUBSIDIARIES (cont’d) Country of Name incorporation Effective equity interest 2018 2017 % % Principal activities Held by Malaysian Rock Products Sdn Bhd (cont’d) 100 100 IJM Concrete Pakistan *Pakistan 60 60Dormant IJM Concrete Pakistan (Private) Limited * 60 60Dormant Warga Sepakat Sdn Bhd Malaysia Leaseholder of quarry land Held by IJM Concrete (Private) Limited Pakistan Held by Strong Mixed Concrete Sdn Bhd SMC Islamabad (Private) Pakistan 60 60 Limited * Production and supply of ready-mixed concrete Held by RB Manufacturing Sdn Bhd Malaysia 100 100 Property management Besraya (M) Sdn Bhd Malaysia 100 100 Toll road operation Essmarine Terminal Sdn Bhd Malaysia 100 100 Investment holding Gagah Garuda Sdn Bhd Malaysia 100 100 Investment holding HMS Resource Sdn Bhd Malaysia 100 100 Investment holding Kuantan Port Consortium Sdn Bhd (of which 30% (2017 : 30%) is held directly by Essmarine Terminal Sdn Bhd) Malaysia 60 60 Port management Kuching Riverine Resort Management Sdn Bhd Held by Road Builder (M) Holdings Bhd New Pantai Expressway Malaysia 100 100 Sdn Bhd NPE Property Development Sdn Bhd Malaysia 100 100 Design, construction, management, operation and maintenance of New Pantai Highway Property development 355 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  374. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 54 LIST OF SUBSIDIARIES AND ASSOCIATES AS AT 31 MARCH 2018 (cont’d) SUBSIDIARIES (cont’d) Country of Name incorporation 01 02 Effective equity interest 2018 2017 % % 03 Summary Information for Shareholder Held by Kuantan Port Consortium Sdn Bhd 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others KP Port Services Sdn Bhd Malaysia 60 60 Principal activities Port supporting services, stevedorage, storage handling and providing nitrogen purging and pigging services Held by KP Port Services Sdn Bhd KPN Services Sdn Bhd ^^^Malaysia 60 60 Under members’ voluntary liquidation ASSOCIATES Held by the Company Bionic Land Berhad *Malaysia 20 20 Investment holding and provision of management services Cofreth (M) Sdn Bhd *Malaysia 25 25 Total facilities management, operations & maintenance, co-generation and district cooling system/service provider Community Resort Development System Sdn Bhd ^^^ Malaysia Emas Utilities Corporation Sdn Bhd * Malaysia – 40 20Liquidated 40 Grupo Concesionario del Argentina 20 20 Oeste S.A. * ANNUAL REPORT 2018 IJM CORPORATION BERHAD Construction, renovation, repair, conservation and operation of Acesso Oeste highway Inversiones E Inmobiliaria Sur-Sur S.A. * Chile 25 25 Property development WCE Holdings Berhad * Malaysia 26 26 Investment holding Scomi Group Berhad *Malaysia 21 25 356 Investment holding Investment holding and provision of management services
  375. 54 LIST OF SUBSIDIARIES AND ASSOCIATES AS AT 31 MARCH 2018 (cont’d) ASSOCIATES (cont’d) Country of Name incorporation Effective equity interest 2018 2017 % % Principal activities Held by CIDB Inventures Sdn Bhd 30 30 Infrastructure development 20 20 Power generation Singapore 46 46 Hexacon Construction Pte Limited * Civil and building construction Swarna Tollway Private Limited *India Held by IEMCEE Infra (Mauritius) Limited GVK Gautami Power Limited *India Held by IJM Construction Sdn Bhd Highway Master Sdn Bhd Malaysia 50 50 Integrated Water Services Malaysia 35 35 (M) Sdn Bhd * Road pavement construction Operation and maintenance of a water treatment plant Held by IJM Investments (L) Ltd Malaysia 22 22 Property development Malaysia 40 40 Investment holding Cekap Tropikal Sdn Bhd *Malaysia 50 50 Property development Good Debut Sdn Bhd *Malaysia 50 50 Property development MASSCORP-Vietnam Sdn Bhd *Malaysia 20 20 Investment holding Sierra Selayang Sdn Bhd *Malaysia 50 50Dormant Earning Edge Sdn Bhd Held by IJM Land Berhad Kuantan Pahang Holding Sdn Bhd Held by IJM Properties Sdn Bhd Held by KP Port Services Sdn Bhd KP Depot Services Sdn Bhd *Malaysia 18 18 Provision of container depot services 357 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  376. NOTES TO THE FINANCIAL STATEMENTS (cont’d) for the financial year ended 31 March 2018 54 LIST OF SUBSIDIARIES AND ASSOCIATES AS AT 31 MARCH 2018 (cont’d) ASSOCIATES (cont’d) Country of Name incorporation 01 02 Effective equity interest 2018 2017 % % 03 Summary Information for Shareholder Held by Malaysian Rock Products Sdn Bhd 04 Business Review & Reports DML-MRP Resources Malaysia 50 50 (M) Sdn Bhd ^^^ 05 Sustainability Statement 06 Financial Statements & others Principal activities Under members’ voluntary liquidation Held by Road Builder (M) Holdings Bhd Malaysia 41 41 West Coast Expressway Sdn Bhd * (of which 21.2% (2017: 21.2%) is held indirectly by the Company via WCE Holdings Berhad) Design, construction and development of the West Coast Expressway Project and managing its toll operations Held by Road Builder (M) Sdn Bhd Budi Benar Sdn Bhd ^^^Malaysia 25 25 Under members’ voluntary liquidation # Audited by a member firm of PricewaterhouseCoopers International Limited which is a separate and independent legal entity from PricewaterhouseCoopers PLT, Malaysia. * Audited by a firm other than member firm of PricewaterhouseCoopers International Limited and PricewaterhouseCoopers PLT, Malaysia. ** Unincorporated entities. Entity is not required to be audited under the laws of the country of incorporation. ^ Entity is not required to be audited as it is either in liquidation or liquidated. ^^^ 1 358 ANNUAL REPORT 2018 IJM CORPORATION BERHAD During the financial year, IJM Plantations Berhad (“IJMPLT”), a 56%-owned subsidiary of the Company has undertaken an internal restructuring exercise whereby a subsidiary of IJMPLT has disposed PT Prima Alumga to another subsidiary of IJMPLT. This restructuring exercise has no material impact on the results and net assets of the Group.
  377. Statutory Declaration Pursuant to Section 251 (1)(b) of the Companies Act 2016 I, Cyrus Eruch Daruwalla, being the officer primarily responsible for the financial management of IJM Corporation Berhad, do solemnly and sincerely declare that, to the best of my knowledge and belief, the financial statements set out on pages 190 to 358 are correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960. Subscribed and solemnly declared at Petaling Jaya on 30 May 2018. CYRUS ERUCH DARUWALLA Before me: 359 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  378. INDEPENDENT AUDITORS ’ REPORT TO THE MEMBERS OF IJM CORPORATION BERHAD (Incorporated in Malaysia) (Company No. 104131-A) 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Our opinion In our opinion, the financial statements of IJM Corporation Berhad (“the Company”) and its subsidiaries (“the Group”) give a true and fair view of the financial position of the Group and of the Company as at 31 March 2018, and of their financial performance and their cash flows for the financial year then ended in accordance with Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. What we have audited We have audited the financial statements of the Group and of the Company, which comprise the balance sheets of the Group and of the Company as at 31 March 2018, and the statements of comprehensive income, statements of changes in equity and cash flow statements of the Group and of the Company for the financial year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 190 to 358. Basis for opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the “Auditors’ responsibilities for the audit of the financial statements” section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence and other ethical responsibilities We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. Our audit approach As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements of the Group and the Company. In particular, we considered where the Directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the Group and of the Company, the accounting processes and controls, and the industry in which the Group and the Company operate. 360 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  379. REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (cont’d) Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current financial year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. KEY AUDIT MATTERS HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTERS Revenue and costs recognition of the Group 1) Construction contracts Revenue: RM2,286,502,000 Cost: RM2,130,100,000 2) Property development activities Revenue: RM1,208,154,000 Cost: RM858,947,000 Refer to Note 9(a) and Note 9(b) for the accounting policies and Notes 2(c), 2(d), 4 and 5(a) to the financial statements. We focused on this area because the accounting for construction contracts and property development activities is inherently complex as it involves the use of significant judgements made by management in the following areas: a) Stage of completion and the overall progress of projects as to whether provision for liquidated ascertained damages is required b) Extent of costs incurred for construction contracts and property development projects, and construction costs or property development costs yet to be incurred c) Status of variation orders and claims with customers We evaluated and tested the key controls in respect of the review and approval of construction contracts and property development project budgets to assess the reliability of these budgets. We checked the extent of costs incurred to date to internal quantity surveyors’ latest valuations or sub-contractor claim certificates to corroborate the stage of completion. Where costs have not been billed or certified, we assessed the adequacy of management’s accruals of such costs by checking subsequent contractors’ claims certificates or approvals from internal quantity surveyors. We discussed with management and read management meeting minutes to understand the overall progress of construction and property development projects. With regards to projects whereby actual progress is behind planned progress, we understood the cause of the delays, inspected correspondences with customers and sub-contractors and corroborated key judgement applied by management as to whether provision for liquidated ascertained damages is required. We checked the reasonableness of the estimated total construction costs and property development costs, including subsequent changes to the costs, by agreeing to supporting documentation; i.e. approved budgets, quotations, correspondences, contracts and variation orders with sub-contractors. We had discussions with management to understand the nature of the variation orders and claims included in revenue and inspected correspondences from the customers and minutes of meetings to corroborate the key judgement applied by management. Based on the procedures performed above, we noted no material exceptions in the revenue and costs recognition for construction contracts and property development activities. 361 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  380. INDEPENDENT AUDITORS ’ REPORT TO THE MEMBERS OF IJM CORPORATION BERHAD (cont’d) (Incorporated in Malaysia) (Company No. 104131-A) REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (cont’d) Key audit matters (cont’d) KEY AUDIT MATTERS 01 HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTERS Impairment assessment of the Group’s and Company’s interest in joint venture 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others Interest in joint venture – Lebuhraya KajangSeremban Sdn Bhd (“LEKAS”) (Group: RM136.3 million; Company: RM232.8 million) Refer to Note 4 and Note 25 for the accounting policies and Note 33 to the financial statements. LEKAS is the toll road operator of Lebuhraya KajangSeremban and has been granted a service concession up to the year of 2039. For the financial year ended 31 March 2018, management has performed an impairment assessment over the carrying amount of the interest in LEKAS by calculating the value-in-use (“VIU”) of the interest based on net cash inflow generated from its toll operation over the remaining concession period of 21 years up to the year of 2039 net of tax and financing cash flows. We obtained management’s VIU impairment model and checked the key assumptions used in the cash flow projections by performing the following procedures: • Compared the annual traffic growth rate to historical trends and traffic consultant’s forecast; • Checked the reasonableness of the discount rate by comparing the rates used to comparable organisations and market information; • Checked the sensitivity analysis performed by management on the annual traffic growth rate and discount rate to determine whether reasonable changes on these key assumptions would give rise to a material impairment. Based on the procedures performed above, we did not identify any material exceptions. We focused on this area because management’s impairment assessment includes inputs that are based on significant assumptions and judgements, comprising annual traffic growth rate and the discount rate. Information other than the financial statements and auditors’ report thereon The Directors of the Company are responsible for the other information. The other information comprises the Directors’ Report and Statement, which we obtained prior to the date of this auditors’ report, and the Chairman’s Statement and other sections of the 2018 Annual Report, which are expected to be made available to us after that date. Other information does not include the financial statements of the Group and of the Company and our auditors’ report thereon. Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditors’ report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 362 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  381. REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (cont’d) Responsibilities of the Directors for the financial statements The Directors of the Company are responsible for the preparation of the financial statements of the Group and of the Company that give a true and fair view in accordance with the Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error. In preparing the financial statements of the Group and of the Company, the Directors are responsible for assessing the Group’s and the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so. Auditors’ responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: (a) Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. (b) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Company’s internal control. (c) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors. (d) Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s or the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group or the Company to cease to continue as a going concern. (e) Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions and events in a manner that achieves fair presentation. (f) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. 363 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  382. INDEPENDENT AUDITORS ’ REPORT TO THE MEMBERS OF IJM CORPORATION BERHAD (cont’d) (Incorporated in Malaysia) (Company No. 104131-A) REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (cont’d) Auditors’ responsibilities for the audit of the financial statements (cont’d) We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Company for the current financial year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the requirements of the Companies Act 2016 in Malaysia, we report that the subsidiaries of which we have not acted as auditors, are disclosed in Note 54 to the financial statements. OTHER MATTERS This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. PRICEWATERHOUSECOOPERS PLT LLP0014401-LCA & AF 1146 Chartered Accountants Kuala Lumpur 30 May 2018 364 ANNUAL REPORT 2018 IJM CORPORATION BERHAD LOH LAY CHOON 02497/03/20 (J) Chartered Accountant
  383. list of material properties as at 31 March 2018 Area Hectares Tenure No Location Description 1 District of Kuala Langat Selangor PT 36309 , 36330 36334, 36341, 36342 36344, 36348, 36349 41090, 41184 - 41186 41188 - 41190, 41192 41210, 41211, 41213 41217, 41220, 71955 Mukim Tanjung Dua Belas Mixed development 2 PT 9209 (HSD 119538) PT 9210 (HSD 119539) Residential 2.63 PT 9211 (HSD 119540) PT 9216 (HSD 119543) PT 9222 (HSD 119548) PT 9223 (HSD 119549) PT 9238 (HSD 119552) Residential land 9.16 PT 9212 (HSD 119541) PT 9217 (HSD 119544) PT 9218 (HSD 119545) PT 9219 (HSD 119546) PT 9220 (HSD 119547) PT 9230 (HSD 119550) Commercial land 3 Kutai Timur East Kalimantan Indonesia Agriculture land 4 AGL264342 Mixed Royal Mint Street development London, United Kingdom 5 Mukim Sungao Karang Kuantan, Pahang 433.94 Leasehold (expiring 2111) Residential HSD No. 20044, 20046 Industrial 6 PT 26971 - 26980 PT 26985 - PT 27156 PT 27234 - PT 27461 PT 27481 Mukim Rasah, Daerah Seremban, Negeri Sembilan Darul Khusus Commercial Residential Approx. Age of Building Net Book Value (RM’000) A: 2014 N/A 1,262,745 For future development A: 2013 N/A 1,031,983 A: 2008, 2012 & 2014 6 753,838 A: 2012 N/A 630,555 A: 2013 N/A 11.63 21,827 Leasehold (expiring 2044, 2045 & 2053) 1.10 Leasehold (expiring 3011) 273.21 HSD No. 20056 - 20061 Industrial/ Commercial HSD No. 47540 Under development Date of Revaluation (R)/ Acquisition (A) Under development Leasehold (expiring 2106) HSD No. 19137 - 19178 Industrial/ HSD No. 19180 - 19195 Commercial HSD No. 19196 Existing Use 404.69 8.39 Leasehold (expiring 2065 & 2098) Leasehold (expiring 2115) Oil Palm Estat, Palm Oil Mill and Kernal Crushing Plant Under development Under development 586,154 Under development A: 2017 N/A Under development 365 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  384. list of material properties (cont’d) as at 31 March 2018 No Location 6 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others Description Area Hectares Tenure Net Book Value (RM’000) A: 2004 N/A 445,750 PT 23227 - 23243 Mukim Rasah, Daerah Seremban, Negeri Sembilan Darul Khusus PT 36987 - PT 37048 PT 37049 - PT 37055, PT 37057 - PT 37067, PT 37069 - PT 37150 PT 37801 PT 37158 - 37323 PT 37334 - 37527 PT 37528 PT 39938 - PT 40039 Mukim Labu, Daerah Seremban, Negeri Sembilan Darul Khusus Residential land 47.24 Freehold For future development Commercial land 36.12 Agriculture land 213.46 PT 27161 Mukim Rasah, Daerah Seremban, Negeri Sembilan Darul Khusus PT 37152 PT 37324 - 37326 PT 37533 - 37534 PT 32134 Mukim Labu, Daerah Seremban, Negeri Sembilan Darul Khusus IJM CORPORATION BERHAD Approx. Age of Building PT 32965 Mukim Labu, Daerah Seremban, Negeri Sembilan Darul Khusus PT 23245 - 23247 PT 23996 PT 22597 PT 25326 - 25328 PT 27157 - 27159 Lot 51509 Mukim Rasah, Daerah Seremban, Negeri Sembilan Darul Khusus ANNUAL REPORT 2018 Date of Revaluation (R)/ Acquisition (A) PT 37811 - PT 37915 Mukim Labu, Daerah Seremban, Negeri Sembilan Darul Khusus PT 32115 - 32118 PT 36982 - 36983 PT 37154 PT 37327 - 37328 PT 37535 PT 36066 Mukim Labu, Daerah Seremban, Negeri Sembilan Darul Khusus 366 Existing Use
  385. No Location 7 Description Area Hectares Tenure Date of Revaluation (R)/ Acquisition (A) Approx. Age of Building Net Book Value (RM’000) N/A N/A 411,962 Under development A: 2014 N/A 304,519 Oil Palm Estate A: 2008 N/A 251,225 Under development A: 2015 N/A 194,960 Existing Use Seksyen 8, Georgetown Daerah Timur Laut Penang Parcel A1, Lot 691 Geran 117786 Residential 12.98 Parcel A1-3 Residential 1.73 Balance Parcel A1 Residential, Mixed development & Commercial 13.96 Mixed development & Commercial 8.75 Parcel A2 Under development Under reclamation Freehold Yet to be reclaimed Parcel B1 Residential & Commercial 15.58 Leasehold PT 168 HS(D) 14095 Recreation & Amenities 0.56 Leasehold (expiring 2105) PT 87 HS(D) 13805 Commercial 1.83 Leasehold (expiring 2014) 8 Huihai Plaza, Xi’an Road Chaoyang District Changchun, Jilin Province, The People’s Republic of China Commercial 4.18 Leasehold (expiring 2043) 9 Bulungan, East Kalimantan, Indonesia Agriculture land 10 PT 5454 PT 5707 - 5728 PT 5729 - 5741 PT 5743 - 5764 PT 5817 - 5842 PT 5843 - 5854 PT 5859 - 5874 PT 5875 - 5894 PT 5895 - 5916 PT 5917 - 5938 PT 5939 - 5946 PT 5947 PT 5949 PT 5950 Mukim Bandar Ampang Daerah Hulu Langat Selangor PT 15843 - 15844 PT 15845 PT 15971 - 15972 Mukim Bandar Ampang Daerah Hulu Langat Selangor 15,188 Leasehold (expiring 2043 & 2046) For future development Leasehold (expiring 2112) Residential 0.59 Leasehold (expiring 2116) 367 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  386. list of material properties (cont’d) as at 31 March 2018 No Location 01 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others 368 ANNUAL REPORT 2018 IJM CORPORATION BERHAD 10 PT 5453 PT 5455 - 5464 PT 5467 - 5508 PT 5685 - 5706 PT 5779 - 5786 PT 5510 Mukim Bandar Ampang Daerah Hulu Langat Selangor PT 15797 Mukim Bandar Ampang Daerah Hulu Langat Selangor Description Area Hectares Tenure Leasehold (expiring 2112) Residential 0.17 Leasehold (expiring 2113) Existing Use Date of Revaluation (R)/ Acquisition (A) Approx. Age of Building Net Book Value (RM’000)
  387. NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the 34th Annual General Meeting (“AGM”) of IJM CORPORATION BERHAD (104131-A) will be held at the Victorian Ballroom, Level 1, Holiday Villa Hotel & Suites Subang, 9 Jalan SS12/1, 47500 Subang Jaya, Selangor Darul Ehsan, Malaysia on Tuesday, 28 August 2018, at 3.00 p.m. to transact the following matters:1. To receive the audited financial statements for the year ended 31 March 2018 together with the reports of the Directors and Auditors thereon. 2. To re-elect the following Directors who retire by rotation in accordance with Article 90 of the Company’s Articles of Association and who being eligible, offer themselves for re-election:a) Tan Sri Dato’ Tan Boon Seng @ Krishnan (Resolution 1) b) Datuk Ir. Hamzah bin Hasan (Resolution 2) c) Goh Tian Sui (Resolution 3) Please refer to Note 1 3. To re-elect the following Directors who retire in accordance with Article 94 of the Company’s Articles of Association and who being eligible, offer themselves for re-election:a) Tunku Alina Binti Raja Muhd Alias (Resolution 4) b) Tan Ting Min (Resolution 5) Please refer to Note 1 4. To re-appoint PricewaterhouseCoopers PLT as Auditors and to authorise the Directors to fix their remuneration. 5. As special business to consider and pass the following resolutions:a) RETENTION OF INDEPENDENT NON-EXECUTIVE DIRECTOR (Resolution 6) (Resolution 7) “THAT Tan Sri Abdul Halim bin Ali shall continue to serve as an Independent Non-Executive Director of the Company notwithstanding that his tenure as an independent director has exceeded a cumulative term of nine (9) years.” Please refer to Note 2 b) DIRECTORS’ FEES (Resolution 8) “THAT the Directors’ fees of RM1,223,166 for the year ended 31 March 2018 be approved to be divided amongst the Directors in such manner as they may determine.” Please refer to Note 3 c) DIRECTORS’ BENEFITS (Resolution 9) “THAT the payment of Directors’ benefits to the Non-Executive Directors up to an amount of RM425,000 for the period from 29 August 2018 until the next Annual General Meeting be approved.” Please refer to Note 3 369 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  388. NOTICE OF ANNUAL GENERAL MEETING (cont’d) d) DIRECTORS’ FEES AND MEETING ALLOWANCE OF THE SUBSIDIARIES (Resolution 10) “THAT the payment of Directors’ fees and/or meeting allowance by the subsidiaries to several Directors be approved:(i) Directors’ fees of RM359,750 for the year ended 31 March 2018; and 01 (ii) Directors’ meeting allowance of up to an amount of RM29,000 from 29 August 2018 until the next Annual General Meeting.” 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others Please refer to Note 3 e) AUTHORITY TO ISSUE SHARES UNDER SECTIONS 75 AND 76 (Resolution 11) “THAT the Directors be and are hereby authorised, pursuant to Sections 75 and 76 of the Companies Act 2016, to allot and issue not more than ten percent (10%) of the total number of issued shares of the Company at any time, upon such terms and conditions and for such purposes as the Directors in their absolute discretion deem fit or in pursuance of offers, agreements or options to be made or granted by the Directors while this approval is in force, and that the Directors be and are hereby further authorised to make or grant offers, agreements or options which would or might require shares to be issued after the expiration of the approval hereof.” Please refer to Note 4 f) PROPOSED RENEWAL OF SHARE BUY-BACK AUTHORITY “THAT the Directors be and are hereby authorised to purchase the ordinary shares of the Company through the stock exchange of Bursa Malaysia Securities Berhad at any time upon such terms and conditions as the Directors in their absolute discretion deem fit provided that:i) the aggregate number of shares purchased (which are to be treated as treasury shares) does not exceed ten per cent (10%) of the total number of issued shares of the Company; and ii) the funds allocated for the purchase of shares shall not exceed its retained profits AND THAT the Directors be and are hereby further authorised to deal with the treasury shares in their absolute discretion (which may be distributed as dividends, resold, transferred, cancelled and/or in any other manner as prescribed by the Companies Act 2016, and the relevant rules, regulations and/or requirements) AND THAT such authority shall continue to be in force until:a) the conclusion of the next Annual General Meeting (“AGM”); b) the expiration of the period within which the next AGM is required by law to be held; or c) revoked or varied in a general meeting, whichever occurs first.” Please refer to Note 5 370 ANNUAL REPORT 2018 IJM CORPORATION BERHAD (Resolution 12)
  389. g ) Special Resolution PROPOSED ADOPTION OF THE NEW CONSTITUTION OF THE COMPANY (Resolution 13) “THAT the new Constitution as set out in Appendix I of the Circular to Shareholders dated 30 July 2018 be and is hereby adopted as the Constitution of the Company in place of the existing Memorandum and Articles of Association (“Proposed New Constitution”); AND THAT the Directors be and are hereby authorised to give full effect and to do all acts and things as may be required for or in connection with the Proposed New Constitution.” Please refer to Note 6 By Order of the Board Ng Yoke Kian Company Secretary MAICSA 7018150 Petaling Jaya 30 July 2018 Notes:1. RE-ELECTION OF DIRECTORS The performance of each Director who subject for re-election or re-appointment had been assessed through the Board annual evaluation (including the independence of Independent Non-Executive Directors). The Nomination & Remuneration Committee (“NRC”) and the Board are satisfied with the performance and effectiveness of the Directors. Tan Sri Dato’ Tan Boon Seng @ Krishnan, Datuk Ir. Hamzah bin Hasan, Goh Tian Sui, Tunku Alina Binti Raja Muhd Alias and Tan Ting Min are standing for re-election as Directors, and being eligible, have offered themselves for re-election at this AGM. The profiles of the Directors who are subject for re-election are set out on pages 30 to 35 of the Annual Report 2018. 2. RETENTION OF INDEPENDENT NON-EXECUTIVE DIRECTOR The Resolution 7, if approved, will authorise the retention of Tan Sri Abdul Halim bin Ali as an Independent Non-Executive Director of the Company. Tan Sri Abdul Halim, had completed his 9-year tenure on 25 April 2016, and was retained as an Independent Non-Executive Chairman by the shareholders of the Company at the AGMs held on 24 August 2016 and 23 August 2017. Tan Sri Abdul Halim contributes constructive views and criticism during Board discussions. Tan Sri Abdul Halim always engages in constructive challenge within the Board room for effective decision making. He also demonstrates the values and principles associated with independence in the Board room. He seeks clarifications and raises pertinent questions to the Management on its assumptions, including challenging Management on the Group’s strategies. As an Independent Chairman, Tan Sri Abdul Halim always promotes good corporate governance practices, besides providing leadership for the Board and facilitate the Board to perform its responsibilities effectively through his independent and objective chairmanship. Furthermore, the insight and good understanding of the Group’s various core business operations acquired by Tan Sri Abdul Halim over time would continue to facilitate him to discharge the duties and role as an Independent Director effectively. The experience and stability brought by Tan Sri Abdul Halim due to his long-service on the Board and as an active participant in the corporate community will serve the interest of the Company and its shareholders. As such, the NRC and the Board recommend the retention of Tan Sri Abdul Halim as an Independent Director and Chairman of the Company. 3. DIRECTORS’ FEES AND BENEFITS Pursuant to Section 230(1) of the Companies Act 2016, the fees of the directors, and any benefits payable to the directors of a listed company and its subsidiaries shall be approved at the general meeting. The Resolution 8, if approved, will authorise the payment of Directors’ fees to the Non-Executive Directors (“NED”) by the Company. The Resolution 9, if approved, will authorise the payment of Directors’ benefits to the NED by the Company. The Directors’ benefits of RM425,000 for the period from 29 August 2018 until the next AGM in year 2019 are derived from the estimated meeting allowance based on the number of scheduled meetings and unscheduled meetings (when necessary) for the Board and Board Committees, number of NEDs involved in the meetings, travel claims of the NEDs and car benefits of the Non-Executive Chairman and Deputy Non-Executive Chairman. The meeting allowance for a NED is RM1,000 per meeting. 371 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  390. NOTICE OF ANNUAL GENERAL MEETING (cont’d) The Resolution 10 is in relation to the payment of Directors’ fees and/or meeting allowance by two (2) subsidiaries to several Directors of the Company. The details are as follows:(a) Directors’ fees payable by the subsidiaries for the financial year ended 31 March 2018 01 SUBSIDIARIES DIRECTORS IJM Plantations Berhad (“IJMP”) (a 56% owned subsidiary) 1. Tan Sri Dato’ Tan Boon Seng @ Krishnan (“TSKT”) 2. Dato’ Soam Heng Choon (“DSHC”) 3. Pushpanathan a/l S A Kanagarayar (“Ken”) Kuantan Port Consortium Sdn Bhd (“KPC”) (a 60% owned subsidiary) 1. TSKT (resigned on 31 May 2017) 2. Datuk Lee Teck Yuen (resigned on 5 May 2017) 02 03 Summary Information for Shareholder 04 Business Review & Reports 05 Sustainability Statement 06 Financial Statements & others AMOUNT (RM) Total 354,750 5,000 359,750 (b) TSKT, DSHC and Ken are also entitled to the meeting allowance of IJMP for RM1,000 per person for each meeting attended. The estimated Directors’ meeting allowance of RM29,000 is based on the number of scheduled meetings and unscheduled meetings (when necessary) for the Board and Board Committees of IJMP during the period from 29 August 2018 until the next AGM in year 2019. The Directors’ fees and/or meeting allowance payable by IJMP and KPC are subject to the shareholders’ approval at the general meetings of IJMP and KPC. 4. AUTHORITY TO ISSUE SHARES UNDER SECTIONS 75 AND 76 OF THE COMPANIES ACT 2016 The Resolution 11, if approved, will empower the Directors to issue up to 10% of the total number of issued shares (excluding treasury shares) of the Company, for purposes of funding future investment projects, working capital, acquisitions and/or so forth. The approval is a renewal of general mandate and is sought to provide flexibility and avoid any delay and cost in convening a general meeting for such issuance of shares for fund raising activities, including placement of shares. The authorisation, unless revoked or varied by the Company at a general meeting, will expire at the next AGM. At this juncture, there is no decision to issue new shares. Should there be a decision to issue new shares after the authorisation is sought, the Company will make an announcement of the actual purpose and utilisation of proceeds arising from such issuance of shares. 5. SHARE BUY-BACK AUTHORITY The details of the proposal are set out in the Share Buy-Back Statement dated 30 July 2018, which is despatched together with the Annual Report 2018. 6. PROPOSED ADOPTION OF THE NEW CONSTITUTION OF THE COMPANY The Resolution 13, if approved, will bring the Constitution of the Company in line with the Companies Act 2016, and the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, as set out in the Circular to Shareholders dated 30 July 2018. 7. APPOINTMENT OF PROXY AND ENTITLEMENT OF ATTENDANCE (i) a proxy may but need not be a member; (ii) a member, other than an exempt authorised nominee, is entitled to appoint up to two (2) proxies; (iii) a member, who is an authorised nominee, may appoint up to two (2) proxies in respect of each Securities Account held; whereas, an exempt authorised nominee may appoint multiple proxies in respect of each Securities Account held; (iv) a member who appoints a proxy must duly execute the Form of Proxy, and if more than one (1) proxy is appointed, the number of shares to be represented by each proxy must be clearly indicated; (v) a corporate member who appoints a proxy must execute the Form of Proxy under seal or the hand of its officer or attorney duly authorised; (vi) the duly executed Form of Proxy must be deposited at the Registered Office before 3.00 p.m. on 26 August 2018; (vii) only members whose names appear in the Record of Depositors and/or Register of Members as at 21 August 2018 will be entitled to attend and vote at the meeting; and (viii) the Annual Report, Share Buy-Back Statement and Circular to Shareholders, and Form of Proxy are available for download at www.ijm.com. 372 ANNUAL REPORT 2018 IJM CORPORATION BERHAD
  391. form of proxy I /We NRIC/Passport/Company No.: Mobile Phone No.: CDS Account No.: Number of Shares Held: Address: being a member of IJM CORPORATION BERHAD (104131-A), hereby appoint:NRIC No.: 1) Name of proxy: Address: Number of Shares Represented: 2) Name of proxy: NRIC No.: Address: Number of Shares Represented: or failing him/her, the Chairman of the meeting, as my/our proxy to vote for me/us and on my/our behalf at the 34th Annual General Meeting (“AGM”) of IJM CORPORATION BERHAD to be held at the Victorian Ballroom, Level 1, Holiday Villa Hotel & Suites Subang, 9 Jalan SS12/1, 47500 Subang Jaya, Selangor Darul Ehsan, Malaysia on Tuesday, 28 August 2018, at 3.00 p.m., and at any adjournment thereof, in the manner indicated below:No. Resolutions 1. To re-elect Tan Sri Dato’ Tan Boon Seng @ Krishnan as Director For 2. To re-elect Datuk Ir. Hamzah bin Hasan as Director 3. To re-elect Goh Tian Sui as Director 4. To re-elect Tunku Alina Binti Raja Muhd Alias as Director 5. To re-elect Tan Ting Min as Director 6. 7. To re-appoint PricewaterhouseCoopers PLT as Auditors and to authorise the Directors to fix their remuneration To retain Tan Sri Abdul Halim bin Ali as an Independent Non-Executive Director 8. To approve the payment of Directors’ fees of RM1,223,166 9. To approve the payment of Directors’ benefits of RM425,000 Against 10. To approve the payment of Directors’ fees of RM359,750 and/or meeting allowance of up to an amount of RM29,000 by the subsidiaries 11. To authorise the issuance of up to 10% of the total number of issued shares of the Company 12. To approve the Proposed Renewal of Share Buy-Back Authority Special Resolution: 13. To approve the Proposed Adoption of the New Constitution of the Company Please indicate with “X” how you wish your vote to be cast. In the absence of specific instruction, your Proxy will vote or abstain as he/she thinks fit. Signed (and sealed) this day of Notes:(i) a proxy may but need not be a member; (ii) a member, other than an exempt authorised nominee, is entitled to appoint up to two (2) proxies; (iii) a member, who is an authorised nominee, may appoint up to two (2) proxies in respect of each Securities Account held; whereas, an exempt authorised nominee may appoint multiple proxies in respect of each Securities Account held; (iv) a member who appoints a proxy must duly execute the Form of Proxy, and if more than one (1) proxy is appointed, the number of shares to be represented by each proxy must be clearly indicated; 2018 Signature(s) (v) a corporate member who appoints a proxy must execute the Form of Proxy under seal or the hand of its officer or attorney duly authorised; (vi) the duly executed Form of Proxy must be deposited at the Registered Office before 3.00 p.m. on 26 August 2018; (vii) only members whose names appear in the Record of Depositors and/or Register of Members as at 21 August 2018 will be entitled to attend and vote at the meeting; and (viii) the Annual Report, Share Buy-Back Statement and Circular to Shareholders, and Form of Proxy are available for download at www.ijm.com.
  392. Please Fold Here Stamp The Company Secretary IJM CORPORATION BERHAD (104131-A) 2nd Floor, Wisma IJM Jalan Yong Shook Lin 46050 Petaling Jaya Selangor Darul Ehsan Malaysia Please Fold Here
  393. CORPORATE INFORMATION MALAYSIA BRANCH OFFICES JOHOR , MALAYSIA 17-05, 17th Floor, City Plaza Jalan Tebrau, 80250 Johor Bahru Johor Darul Ta’zim, Malaysia Tel : 607-333 4895, 607-333 4896 Fax : 607-333 4918 E-mail : ijmjb@ijm.com Website: http://www.ijm.com Contact : Mr Ong Teng Cheng PENANG, MALAYSIA Suite 05-01, Menara IJM Land 1, Lebuh Tunku Kudin 3 11700 Gelugor, Penang, Malaysia Tel : 604-296 1388 Fax : 604-296 1389 E-mail : ijmpg@ijm.com Website: http://www.ijm.com Contact : Mr Mak Wai Hong SARAWAK, MALAYSIA 1st Floor, Lots 7886 & 7887 Queen’s Court Jalan Wan Alwi, 93350 Kuching Sarawak, Malaysia : 6082-463 496, 6082-463 497 Tel Fax : 6082-461 581 E-mail : ijmkch@ijm.com Website: http://www.ijm.com Contact : Mr Chan Kai Leong REGISTERED OFFICE 2nd Floor, Wisma IJM, Jalan Yong Shook Lin 46050 Petaling Jaya, Selangor Darul Ehsan Malaysia Tel : 603-7985 8288 Fax : 603-7952 1200 E-mail : csa@ijm.com Website: http://www.ijm.com PRINCIPAL BANKERS •AmInvestment Bank Berhad •CIMB Bank Berhad •HSBC Bank Malaysia Berhad •Malayan Banking Berhad • OCBC Bank (Malaysia) Berhad •RHB Banking Group •Standard Chartered Bank Malaysia Berhad •United Overseas Bank (Malaysia) Berhad AUDITORS PricewaterhouseCoopers PLT Chartered Accountants Level 10, 1 Sentral, Jalan Rakyat Kuala Lumpur Sentral 50706 Kuala Lumpur, Malaysia Tel : 603-2173 1188 Fax : 603-2173 1288 Website: www.pwc.com/my SHARE REGISTRAR Tricor Investor & Issuing House Services Sdn Bhd Unit 32-01, Level 32, Tower A Vertical Business Suite, Avenue 3 Bangsar South, No. 8, Jalan Kerinchi 59200 Kuala Lumpur, Malaysia Tel : 603-2783 9299 Fax : 603-2783 9222 STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad since 29 September 1986 BMSB Code : 3336 Reuters Code : IJMS.KL Bloomberg Code : IJM MK IJM CORPORATION BERHAD (104131-A) HEAD OFFICE Wisma IJM, Jalan Yong Shook Lin 46050 Petaling Jaya, Selangor Darul Ehsan, Malaysia Tel : 603-7985 8288 Fax : 603-7952 9388 E-mail : ijm@ijm.com Website : http://www.ijm.com QUALITY SYSTEM OH&S SYSTEM UKAS SIRIM QUALITY MANAGEMENT SIRIM Certified to ISO 9001:2015 Cert. No. : AR 0911 MALAYSIA IJM CONSTRUCTION SDN BHD (195650-H) 2nd Floor, Wisma IJM Jalan Yong Shook Lin 46050 Petaling Jaya Selangor Darul Ehsan, Malaysia Tel : 603-7985 8288 Fax : 603-7952 9388 E-mail : ijm@ijm.com Website : http://www.ijm.com Contact : Mr Liew Hau Seng INDIA IJM (INDIA) INFRASTRUCTURE LIMITED H. No. 1-89/1, 3rd & 4th Floor Plot No. 42 & 43, Kavuri Hills Phase-1 Madhapur, Hyderabad – 500 081, India Tel : 91 40 2311 4661/62/63/64 Fax : 91 40 2311 4669 E-mail : ijmii@ijm.com Website : http://www.ijm.com Contact : Mr Cyrus Eruch Daruwalla MIDDLE EAST KINGDOM OF BAHRAIN IJM CONSTRUCTION SDN BHD MIDDLE EAST REGIONAL OFFICE Villa No. 835, Road No. 31 Block No. 608, Wadyan P. O. Box 28141 West Riffa, Kingdom of Bahrain Tel : 973 1773 0343 Fax : 973 1773 2187/1773 7881 E-mail : ijmme@ijmmellc.ae Contact : Mr Liew Hau Seng UNITED ARAB EMIRATES IJM CONSTRUCTION (MIDDLE EAST) LLC (560467) Flat #G10, Building #U18 International City P.O.Box 36634 Dubai, United Arab Emirates Tel : 971 4 340 9028 E-mail : ijm@ijm.com Contact : Mr Liew Hau Seng PAKISTAN IJM CONSTRUCTION (PAKISTAN) (PVT) LTD IT Tower Complex Plot # ST-2 & 3/15A, Block No.14 Adjacent to Civic Center, Opposite Water & Sewerage Board Office Gulshan-e-Iqbal, 75300 Karachi, Pakistan Tel : 92 332 378 6001 E-mail : ijm@ijm.com Contact : Mr Pook Fong Fee SINGAPORE HEXACON CONSTRUCTION PTE LTD (198204843K) 432, Balestier Road #02-432 Public Mansion Singapore 329813 Tel : 65-6251 9388 Fax : 65-6253 1638 E-mail : hexacon@singnet.com.sg Website : http://www.hexacon.com.sg Contact : Mr Pang Hoe Sang INDUSTRY MALAYSIA INDUSTRIAL CONCRETE PRODUCTS SDN BHD (32369-W) Wisma IJM Annexe Jalan Yong Shook Lin P. O. Box 191 46720 Petaling Jaya Selangor Darul Ehsan, Malaysia Tel : 603-7955 8888 Fax : 603-7958 1111 E-mail : icp@ijm.com Website : http://www.icpb.com.my Contact : Mr Tan Boon Leng MALAYSIAN ROCK PRODUCTS SDN BHD (4780-T) STRONG MIXED CONCRETE SDN BHD (193822-X) SCAFFOLD MASTER SDN BHD (146056-P) Wisma IJM Annexe Jalan Yong Shook Lin 46050 Petaling Jaya Selangor Darul Ehsan, Malaysia Tel : 603-7955 8888 Fax : 603-7957 4891 E-mail : mrp@ijm.com Website : http://www.ijm.com Contact : Mr Tan Khuan Beng DURABON SDN BHD (392693-W) Lot 27, Jalan Perindustrian 4 Kawasan Perindustrian Senai Fasa ll 81400 Senai, Johor Malaysia Tel : 607-599 2680 Fax : 607-599 1700 E-mail : icpdsn@ijm.com Contact : Mr Pang Chwee Hoon KUANG ROCK PRODUCTS SDN BHD (246283-D) 21-D, Jalan BRP 6/10, Section U20 Bukit Rahman Putra 47000 Sungai Buloh, Selangor Malaysia Tel : 603-6156 6224 Fax : 603-6156 7634 E-mail : krp@ijm.com Contact : Mr Ng Seng Keong MALAYSIAN ROCK PRODUCTS SDN BHD (4780-T) 19-A, Jalan Ronggeng 3, Taman Skudai Baru 83100 Skudai, Johor Malaysia Tel : 607-556 5155 Fax : 607-556 5299 E-mail : mrp@ijm.com Contact : Mr Tan Khuan Beng CHINA ICP JIANGMEN CO LTD 6, Sihang Road Gujing Town, Xinhui District Jiangmen City, Guangdong, 529145, China Tel : 86 (0) 750-826 9008 Fax : 86 (0) 750-826 9098 E-mail : icpjm@163.com Website : http://www.icpjm.com.cn Contact : Mr Lee Hong Chai INDIA IJM CONCRETE PRODUCTS PRIVATE LIMITED Head Office – Hyderabad H. No. 1-89/1, 2nd Floor Plot No. 42 & 43, Kavuri Hills Phase-1 Madhapur, Hyderabad – 500 081, India Tel : 91 40 4340 8888 Fax : 91 40 2311 4669 E-mail : ijmcpplhyd@ijm.com Contact : Mr Lau Liang See/Mr Choo Teck Kooi Ben PAKISTAN IJM CONCRETE PAKISTAN (PRIVATE) LIMITED Islamabad Goldcrest DHA Islamabad, DHA Phase II Sheikh Zayed Bin Sultan Road (G.T. Road) Islamabad, Pakistan Tel : 9251 582 5075 : 9251 449 2203 Fax E-mail : ijmcpp@ijm.com Contact : Mr Desmond Hoy Foo Mun PLANTATION IJM PLANTATIONS BERHAD (133399-A) Wisma IJM Plantations Lot 1, Jalan Bandar Utama, Mile 6, Jalan Utara 90000 Sandakan, Sabah Postal Address: BQ 3933 Mail Bag No. 8 90009 Sandakan, Sabah, Malaysia Tel : 6089-667 721 : 6089-667 728 Fax E-mail : ijmplt@ijm.com Website : http://www.ijm.com Contact : Mr Joseph Tek Choon Yee INFRASTRUCTURE BESRAYA (M) SDN BHD (342223-A) Plaza Tol Loke Yew, Lebuhraya Sungai Besi 56100 Kuala Lumpur, Malaysia Tel : 603-9282 8382 Fax : 603-9282 8389 E-mail : info.besraya@ijm.com Website : http://www.besraya.com.my Contact : Pn Wan Salwani Binti Wan Yusoff NEW PANTAI EXPRESSWAY SDN BHD (308276-U) Plaza Tol Pantai Dalam KM 10.6, Lebuhraya Baru Pantai 58200 Kuala Lumpur, Malaysia Tel : 603-7783 8800 Fax : 603-7783 1111 E-mail : info.npe@ijm.com Website : http://www.npe.com.my Contact : Pn Wan Salwani Binti Wan Yusoff LEBUHRAYA KAJANG-SEREMBAN SDN BHD (700707-U) Plaza Tol Kajang Selatan KM 3.3, Lebuhraya Kajang Seremban 43500 Semenyih Selangor Darul Ehsan, Malaysia Tel : 603-8723 8021 Fax : 603-8723 0021 E-mail : info.lekas@ijm.com Website : http://www.lekas.com.my Contact : Pn Wan Salwani Binti Wan Yusoff KUANTAN PORT CONSORTIUM SDN BHD (374383-H) Wisma KPC, KM 25, Tanjung Gelang P. O. Box 199, 25720 Kuantan Pahang Darul Makmur, Malaysia Tel : 609-586 3888 Fax : 609-586 3777 E-mail : info.kuantanport@ijm.com Website : http://www.kuantanport.com.my Contact : En Mazlim Bin Husin PROPERTY MALAYSIA IJM LAND BERHAD (187405-T) Head Office – Petaling Jaya Ground Floor, Wisma IJM Jalan Yong Shook Lin 46050 Petaling Jaya Selangor Darul Ehsan, Malaysia Tel : 603-7985 8288 Fax : 603-7952 9091 E-mail : ask@ijm.com Website : http://www.ijmland.com Contact : Mr Edward Chong Sin Kiat MS ISO/IEC 17021:2011 OHS 06122005 CB 01 OH&S SYSTEM SIRIM Certified to OHSAS 18001:2007 Cert. No. : SR 0105 MALAYSIA AC CR Y EDIT ED CERTIFICATION BOD ENVIRONMENTAL SYSTEM UKAS MS ISO/IEC 17021:2011 OHS 06122005 CB 01 SIRIM ENVIRONMENTAL MANAGEMENT 074 Certified to MS 1722:2011 Cert. No. : SR 0308 Certified to ISO 14001:2015 Cert. No. : ER 0489 DIVISIONAL OFFICES CONSTRUCTION MALAYSIA AC CR Y EDIT ED CERTIFICATION BOD 074 Selangor Bandar Rimbayu No 1, Jalan Flora 3, Bandar Rimbayu 42500 Telok Panglima Garang Selangor Darul Ehsan, Malaysia Tel : 1800 22 8686 Fax : 603-5525 2500 E-mail : ask@ijm.com Website : http://www.rimbayu.com Contact : Mr Chai Kian Soon Negeri Sembilan PT10786, Seremban 2 70300 Seremban Negeri Sembilan Darul Khusus, Malaysia Tel : 1800 222 456 Fax : 606-761 9888 E-mail : ask@ijm.com Website : http://www.seremban2.ijmland.com Contact : Dato’ Hoo Kim See Penang Suite 01-01, Menara IJM Land 1, Lebuh Tunku Kudin 3 11700 Gelugor Penang, Malaysia Tel : 604-296 1222 Fax : 604-296 1223 E-mail : ask@ijm.com Website : http://www.ijmland.com Contact : Dato’ Toh Chin Leong Johor 17-01, 17th Floor City Plaza, Jalan Tebrau 80250 Johor Bahru Johor Darul Ta’zim, Malaysia : 607-339 1888 Tel Fax : 607-333 4803 E-mail : ask@ijm.com Website : http://www.ijmland.com Contact : Mr Clement Pee Poh Hun Sebana Cove No 52, Jalan Permas 15/1 Bandar Baru Permas Jaya 81750 Johor Bahru Johor Darul Ta’zim, Malaysia : 607-382 3323 Tel : 607-382 4338 Fax E-mail : ask@ijm.com Website : http://www.sebanacoveresort.com Contact : Ms Yeo Yee Khim Nasa City No 1, Jalan Palma Puteri 4 Desa Palma 81100 Johor Bahru Johor Darul Ta’zim, Malaysia : 607-357 8899 Tel Fax : 607-359 1188 E-mail : ask@ijm.com Website : http://nasacity.ijmland.com Contact : Mr Lim Hock Seng Sabah Wisma IJM Plantations Ground Floor Lot 1, Jalan Bandar Utama, Mile 6 Jalan Utara, 90000 Sandakan Sabah, Malaysia Tel : 6089-671 899 Fax : 6089-673 860 E-mail : ask@ijm.com Website : http://www.ijmland.com Contact : Mr Patrick Oye Kheng Hoon Sarawak Level 2 Riverine Emerald Condominium (South Wing Mail Box) Jalan Petanak 93100 Kuching Sarawak, Malaysia Tel : 6082-231 678 Fax : 6082-252 136 E-mail : ask@ijm.com Website : http://www.ijmland.com Contact : Mr Chai King Sing UNITED KINGDOM RMS (ENGLAND) LIMITED Quay Level, International House 1 St Katherine’s Way London E1W 1UN, United Kingdom Tel : 44 (0) 20 3752 3949 Fax : 44 (0) 20 7488 9911 E-mail : ask@ijm.com Website : http://www.royalmintgardens.com Contact : Mr Mark Lahiff VIETNAM SOVA HOLDINGS SDN BHD Beautiful Saigon 1 Level 8 Room 802 02 Nguyen Khac Vien Street Tan Phu Ward, District 7 Ho Chi Minh City, Vietnam Tel : 84 8 5416 0808/0909 Fax : 84 8 5413 6433 E-mail : ask@ijm.com Website : http://www.ijmland.com Contact : Mr Chow Ah Kan
  394. IJM CORPORATION BERHAD A NNUA L R EP OR T 2018 .................................................................. 01 OUR VISION Become a leading Malaysian conglomerate in the markets we serve. .................................................................. 02 OUR MISSION (104131-A) ANNU AL REP O RT 2 0 1 8 IJM CORPORATION BERHAD Deliver sustainable value to our stakeholders and enrich lives with the IJM Mark of Excellence. .................................................................. 03 CORE VALUES At IJM, we are guided by a set of core values in everything we do. These values form an integral part of our corporate culture, which is geared towards long-term success: Wisma IJM, Jalan Yong Shook Lin 46050 Petaling Jaya Selangor Darul Ehsan, Malaysia Tel : +603-7985 8288 Fax : +603-7952 9388 E-mail : ijm@ijm.com www.ijm.com PRINCIPLES INTEGRITY We act with professionalism in everything we do and with everyone we deal with, always delivering on our promise. TEAMWORK We work, collaborate and succeed in unity, believing and trusting each other in pursuing our shared goals. We embrace a philosophy of openness in acknowledging differences of opinions, cultures and contributions among all team members, treating all with respect. INNOVATION We believe in continuous improvements, always exploring new ideas and promoting creative thinking. We commit passionately to excel at all we do, constantly striving to push the limits and surpass standards of excellence at every opportunity. CUSTOMER FOCUS We place our customers at the heart of everything we do, constantly delivering at the right time with high quality and great attitude. We relentlessly rise to exceed customers’ expectations with the IJM Mark of Excellence. ..................................................................
  395. IJM CORPORATION BERHAD (104131-A) Part A1 : Quarterly Report Quarterly report for the financial period ended: Quarter: Financial Year End: The figures: Full Quarterly Report: 30/09/2018 2nd Quarter 31/03/2019 Have not been audited Refer attached Part A2 : Summary of Key Financial Information for the financial period ended 30/09/2018 1 2 3 4 Revenue Profit before taxation Net profit for the period Net profit attributable to owners of the Company Individual Quarter Current year Preceding year quarter quarter 30/09/2018 30/09/2017 RM'000 RM'000 Restated 1,309,166 1,599,045 35,832 183,895 11,766 126,474 Cumulative Period Current year Preceding year to date to date 30/09/2018 30/09/2017 RM'000 RM'000 Restated 2,753,482 3,060,607 139,060 370,353 72,583 262,158 21,918 114,229 84,682 235,398 0.60 2.00 3.15 3.00 2.33 2.00 6.50 3.00 5 Basic earnings per share (sen) 6 Proposed/Declared dividend per share (sen) As at end of current quarter 30/09/2018 7 Net assets per share attributable to ordinary equity holders of the Company (RM) 2.54 1 As at preceding financial year end Restated 2.58
  396. IJM CORPORATION BERHAD (104131-A) CONDENSED STATEMENT OF COMPREHENSIVE INCOME (The figures have not been audited) Individual Quarter Preceding Current Change year year quarter (+/-) quarter 30/09/2018 30/09/2017 RM'000 RM'000 % Cumulative Period Current Preceding Change year year (+/-) to date to date 30/09/2018 30/09/2017 RM'000 RM'000 % Restated Operating revenue Cost of sales Gross profit Other operating income Foreign exchange differences Tendering, selling and distribution expenses Administrative expenses Other operating expenses Operating profit before finance cost Finance cost Operating profit after finance cost Share of profits/(losses) of associates Share of (losses)/profits of joint ventures Profit before taxation Income tax expense Net profit for the period Other comprehensive income / (loss) (net of tax): Items that will not be reclassified to profit or loss: Share of other comprehensive losses of associates Items that may be reclassified subsequently to profit or loss: Currency translation differences of foreign operations Share of other comprehensive income/(losses) of associates Total comprehensive (loss)/income for the period Net profit/(loss) attributable to:Owners of the Company Non-controlling interests 1,309,166 (1,093,689) 215,477 54,263 (33,513) (28,158) (83,112) (50,862) 74,095 (56,803) 17,292 24,036 (30,531) (98,896) (14,869) 235,542 (50,340) 185,202 (2,964) (5,496) 35,832 (24,066) 11,766 1,657 183,895 (57,421) 126,474 - Restated 1,599,045 -18.1% (1,266,170) -13.6% 332,875 -35.3% 47,340 14.6% (377) 8789.4% -7.8% -16.0% 242.1% -68.5% 12.8% -90.7% -910.9% -431.7% -80.5% -58.1% -90.7% (230) 2,753,482 (2,249,084) 504,398 127,954 (104,554) 3,060,607 -10.0% (2,437,159) -7.7% 623,448 -19.1% 99,055 29.2% (4,015) 2504.1% (60,704) (168,517) (64,755) 233,822 (116,636) 117,186 31,406 (65,110) (176,970) (31,612) 444,796 (95,408) 349,388 14,288 (9,532) 139,060 (66,477) 72,583 6,677 370,353 (108,195) 262,158 - (2,420) -6.8% -4.8% 104.8% -47.4% 22.2% -66.5% 119.8% -242.8% -62.5% -38.6% -72.3% (33,814) (39,639) (50,360) (84,938) 4,568 (15,072) 5,238 (15,976) (29,246) (54,941) -46.8% (45,122) (103,334) -56.3% (17,480) 71,533 -124.4% 27,461 158,824 -82.7% 21,918 (10,152) 11,766 114,229 12,245 126,474 -80.8% -182.9% 84,682 (12,099) 72,583 235,398 26,760 262,158 -145.2% 70,711 822 71,533 -1797.9% 38,074 (10,613) 27,461 153,588 5,236 158,824 -302.7% Total comprehensive (loss)/income attributable to:Owners of the Company (3,523) Non-controlling interests (13,957) (17,480) Earnings per share (sen):Basic 0.60 Fully diluted 0.60 -90.7% -105.0% -124.4% 3.15 3.11 2.33 2.33 2 6.50 6.42 -64.0% -72.3% -75.2% -82.7%
  397. IJM CORPORATION BERHAD (104131-A) CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION CAPITAL AND RESERVES ATTRIBUTABLE TO OWNERS OF THE COMPANY Share capital Treasury shares Shares held under trust Other reserves Retained profits Non-controlling interests Total equity NON-CURRENT LIABILITIES Bonds Medium Term Notes Term loans Government support loans Hire purchase and lease payables Deferred tax liabilities Trade and other payables Provisions Retirement benefits DEFERRED INCOME 3  30/09/2018 RM'000 31/03/2018 RM'000 01/04/2017 RM'000 Unaudited Restated Restated 6,099,350 (9,994) (1,379) (101,295) 3,230,566 6,074,349 (2,104) (1,521) (53,559) 3,347,252 6,022,651 (10) (4,016) 70,273 3,279,164 9,217,248 1,142,968 9,364,417 1,175,280 9,368,062 1,225,738 10,360,216 10,539,697 10,593,800 2,055,000 875,000 1,479,190 90,842 32 574,420 759,136 117,239 20,776 1,910,000 940,150 125,715 290 573,912 696,690 117,087 19,410 1,950,000 2,121,809 154,474 802 573,481 701,402 109,705 10,511 5,971,635 4,383,254 5,622,184 70,355 70,355 73,063 16,402,206 14,993,306 16,289,047
  398. IJM CORPORATION BERHAD (104131-A) CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION NON-CURRENT ASSETS Property, plant and equipment Land use rights Concession assets Plantation development expenditure Investment properties Associates Joint ventures Available-for-sale financial assets Financial assets at fair value through other comprehensive income Long term receivables Deferred tax assets Inventories Intangible assets CURRENT ASSETS Inventories Produce growing on bearer plants Trade and other receivables Contract assets Financial assets at fair value through profit or loss Derivative financial instruments Assets held for sale Tax recoverable Deposits, cash and bank balances CURRENT LIABILITIES Trade and other payables Contract liabilities Provisions Derivative financial instruments Borrowings: - Bank overdrafts - Others Current tax liabilities NET CURRENT ASSETS NET ASSETS PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY (RM) 4  30/09/2018 RM'000 31/03/2018 RM'000 01/04/2017 RM'000 Unaudited Restated Restated 2,810,980 146,836 3,503,648 549,546 748,820 711,650 - 2,753,002 150,668 3,342,386 498,601 829,134 708,473 2,155 2,855,864 165,831 3,097,066 68,867 901,392 754,288 2,155 2,155 257,458 331,057 663,336 101,875 251,352 320,395 663,465 101,596 176,699 319,730 514,788 102,618 9,827,361 9,621,227 8,959,298 7,644,903 10,253 1,698,331 227,103 466,660 9,316 161,724 175,531 1,659,551 7,490,185 10,615 1,713,256 262,390 311,079 1,055 124 150,041 1,467,653 7,013,375 13,249 1,776,563 279,381 299,164 2,909 129,329 2,147,777 12,053,372 11,406,398 11,661,747 2,404,276 522,419 5,366 - 2,631,716 455,399 2,764 5,858 2,102,097 463,308 10,718 - 90,467 2,408,851 47,148 32,309 2,871,808 34,465 44,514 1,698,382 12,979 5,478,527 6,034,319 4,331,998 6,574,845 5,372,079 7,329,749 16,402,206 14,993,306 16,289,047 2.54 2.58 2.59
  399. IJM CORPORATION BERHAD (104131-A) CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 30 SEPTEMBER 2018 (The figures have not been audited) -----------------------------Attributable to owners of the Company------------------------Share Treasury Shares held Retained Non-controlling Other capital shares under trust reserves profits Total interests RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 At 1 April 2018 (as previously reported) Effects of transition from FRSs to MFRSs (see Note A2) Effects of adoption of MFRS 9 (see Note A2) 6,074,349 (2,104) (1,521) 41,607 - - - (95,166) - - - At 1 April 2018 (as restated) 6,074,349 (2,104) (1,521) (53,333) 3,255,828 9,273,219 84,682 38,074 110 110 - 110 226 3,376,581 9,488,912 (29,329) (124,495) (91,424) (91,198) 1,276,411 Total equity RM'000 (101,131) 1,175,280 10,765,323 (225,626) (91,198) 10,448,499 Total comprehensive income for the period - - - (46,608) Accretion of interest in an associate - - - - Issuance of employee share options and share grants - - - 23,577 - 23,577 - 23,577 - (1,127) Accretion of interests in a subsidiary Capital distribution upon liquidation of a subsidiary - - - - (1,127) (1,127) - - - - - - Single tier second interim dividend: Year ended 31 March 2018 - - - - Dividends paid by subsidiaries to noncontrolling shareholders - - - - - - Issuance of shares: - exercise of employee share options - vesting of shares under ESGP 122 24,879 - 142 - (52) (24,879) - 212 - - (7,890) - - - Shares buy back (108,927) (108,927) (7,890) (10,613) (214) 27,461 (214) - (108,927) (21,485) (21,485) - 212 (7,890) At 30 September 2018 6,099,350 (9,994) (1,379) (101,295) 3,230,566 9,217,248 1,142,968 10,360,216 At 1 April 2017 (as previously reported) Effects of transition from FRSs to MFRSs (see Note A2) 6,022,651 (10) (4,016) 175,746 3,302,903 9,497,274 1,319,406 10,816,680 At 1 April 2017 (as restated) 6,022,651 - (10) - (105,473) (4,016) 70,273 (23,739) 10,593,800 232,978 153,588 5,236 158,824 - - - (79,390) - - - 1,652 (1,406) Issuance of employee share options and share grants - - - 20,087 - Single tier second interim dividend: Year ended 31 March 2017 - - - - Dividends paid by subsidiaries to non-controlling shareholders - - - - - 18,912 24,346 6,314 - 8,502 (6,314) (6,029) (24,346) - - (10) (1,828) (17,753) Amounts attributable to owners of Retained the Company profits RM'000 RM'000 3,376,581 9,488,912 (29,329) (124,495) Noncontrolling interests RM'000 1,276,411 (101,131) Total equity RM'000 10,765,323 (225,626) 1,175,280 10,539,697 At 31 March 2018 (as previously reported) Effects of transition from FRSs to MFRSs At 31 March 2018 (as restated) - without the effects of adoption of MFRS 9 6,072,223 Other reserves RM'000 41,607 (95,166) (53,559) 3,347,252 9,364,417 5 (222,880) 1,225,738 Accretion of interest in an associate At 30 September 2017 (93,668) 9,368,062 Total comprehensive income for the period Issuance of shares: - exercise of employee share options - vesting of shares under ESGP - shares held under trust (129,212) 3,279,164 (163,195) 3,347,541 246 - 246 20,087 - 20,087 (163,195) - (163,195) - (29,844) (29,844) 21,385 - - 21,385 - 9,400,173 1,201,130 10,601,303
  400. IJM CORPORATION BERHAD (104131-A) CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED 30 SEPTEMBER 2018 (The figures have not been audited) 6 months ended 30/09/2018 RM'000 6 months ended 30/09/2017 RM'000 Restated OPERATING ACTIVITIES Receipts from customers Payments to contractors, suppliers and employees Income tax paid 2,787,538 (2,665,254) (86,876) 2,791,962 (2,513,917) (136,318) 35,408 141,727 (105) (15,010) (12,408) (409,033) (1,500) (493,318) (452,003) (283,479) 261,927 (214) 32,288 19,773 (6,622) 527,897 42,362 193 83,577 (112,229) (581,407) (236,497) 212 (7,890) (85,118) (302) (134,601) (21,485) (108,927) 1,035,000 (816) (1,127) 21,385 (36,811) (352) (124,373) (29,844) (163,195) (30,000) (740) - Net cash flow from/(used in) financing activities 674,946 (363,930) Net increase/(decrease) in cash and cash equivalents during the financial period 128,947 (458,700) Net cash flow from operating activities INVESTING ACTIVITIES Additional investment in an associate Subscription of Redeemable Unsecured Murabahah Stocks in an associate Additional investment in a joint venture Acquisition of financial assets at fair value through profit or loss Purchases of property, plant and equipment, development land, land use rights, investment properties, concession assets and deferred expenditure Disposal of investments, property, plant and equipment, land use rights, investment properties and assets held for sale Capital distribution to minority shareholders upon liquidation of a subsidiary Interest received Income from unit trusts Dividends received from associates and other investments Net advances to associates and joint ventures Net cash flow used in investing activities FINANCING ACTIVITIES Issuance of shares by the Company - exercise of share options Re-purchase of treasury shares Net repayment of bank and government borrowings Repayments to hire purchase and lease creditors Interest paid Dividends paid by a subsidiary to non-controlling shareholders Dividends paid by the Company Net drawdown/(repayment) of Medium Term Notes ("MTN") and Sukuk Net placements of restricted deposits Acquisition of additional interests in a subsidiary Cash and cash equivalents at beginning of the financial period 1,407,001 Foreign exchange differences on opening balances 4,659 Cash and cash equivalents at end of the financial period Cash and cash equivalents comprise the following : Deposits, cash and bank balances Bank overdrafts Less: restricted deposits with licensed banks 6 2,077,331 (19,225) 1,540,607 1,599,406 1,659,551 (90,467) 1,569,084 (28,477) 1,540,607 1,654,673 (29,702) 1,624,971 (25,565) 1,599,406
  401. IJM CORPORATION BERHAD (104131-A) A NOTES TO THE QUARTERLY RESULTS A1. Basis of Preparation The unaudited interim financial report has been prepared in accordance with MFRS 134: Interim Financial Reporting and Paragraph 9.22 of Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”). The unaudited interim financial report should be read in conjunction with the audited financial statements of the Group for the year ended 31 March 2018 which are available at http://www.ijm.com. The explanatory notes attached to the unaudited interim financial report provide an explanation of events and transactions that are significant for an understanding of the changes in the financial position and performance of the Group since the financial year ended 31 March 2018. A2. Changes in Accounting Policies For the periods up to and including the year ended 31 March 2018, the Group prepared its financial statements in accordance with the Financial Reporting Standards (“FRS”). The accounting policies and methods of computation adopted for the interim financial report are consistent with those adopted for the annual audited financial statements for the financial year ended 31 March 2018, except for the effects arising from the transition from FRSs to MFRSs, which are disclosed below. The interim financial report of the Group for the period ended 30 September 2018 is prepared in accordance with MFRS Framework, including MFRS 1 “First-time Adoption of Malaysian Financial Reporting Standards”. Subject to certain transition elections and effects of adoption of MFRS 141 “Agriculture”, MFRS 9 “Financial Instruments” and MFRS 15 “Revenue from contracts with customers” as disclosed below, the Group has consistently applied the same accounting policies in its opening MFRS balance sheet as at 1 April 2017, being the transition date, and throughout all periods presented, as if these policies had always been in effect. Transition from FRSs to MFRSs: (i) MFRS 1 exemption options As provided in MFRS 1, first time adopters of MFRS can elect optional exemptions from full retrospective application of MFRSs. The Group has elected the following exemptions: (a) Exemption for business combinations The Group has elected to apply MFRS 3 “Business Combinations” prospectively from the date FRS 3 “Business Combinations” was adopted i.e. 1 April 2011. Business combinations that occurred prior to that date have not been restated. In addition, the Group has also applied MFRS 10 “Consolidated Financial Statements” on the same date as FRS 3. This election does not have any impact on the financial results of the Group. (b) Property, plant and equipment – previous revaluation as deemed cost Under FRS, valuation adjustments on certain property, plant and equipment were incorporated into the financial statements. The Group has elected to use the previous revaluation as deemed cost under MFRS. Accordingly, the carrying amounts of these property, plant and equipment as at 1 April 2017 have not been restated. The revaluation reserve of RM104.3 million as at 1 April 2017 was reclassified to retained profits. 7
  402. IJM CORPORATION BERHAD (104131-A) A2. Changes in Accounting Policies (continued) Transition from FRSs to MFRSs (continued): (i) MFRS 1 exemption options (continued) (c) MFRS 9 “Financial Instruments” The Group has elected the exemption in MFRS 1 which allows the Group not to restate comparative information in the year of initial application. The Group continues to apply FRS 139 “Financial Instruments: Recognition and Measurement” and FRS 7 “Financial Instruments: Disclosure” for the comparative information. Any adjustments to align the carrying amounts of financial assets and financial liabilities under the previous FRS 139 with MFRS 9 are recognised in retained profits as at 1 April 2018. (d) Assets and liabilities of subsidiaries, joint ventures and associates The assets and liabilities of subsidiaries, joint ventures and associates which had adopted the MFRS Framework or International Financial Reporting Standards (“IFRS”) earlier than the Group shall remain at the same carrying amounts as in the financial statements of these subsidiaries, joint ventures and associates, after adjusting for consolidation adjustments. The optional exemptions elected by the Group that have an impact on the reported financial positions prepared in accordance with FRSs have been applied in the opening MFRS statement of financial position as at 1 April 2017 and throughout all periods presented in the interim financial report. (ii) Effects of adoption of Amendments to MFRS 116 “Property, Plant and Equipment” and MFRS 141 “Agriculture” Amendments to MFRS 116 “Property, Plant and Equipment” and MFRS 141 “Agriculture: Bearer Plants” introduce a new category of biological assets i.e. bearer plants. A bearer plant is a living plant that is used in the production and supply of agricultural produce, is expected to bear produce for more than one period, and has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales. Bearer plants are accounted for under MFRS 116 as an item of property, plant and equipment. Agricultural produce growing on bearer plants are measured at fair value less costs to sell under MFRS 141, with fair value changes recognised in profit or loss as the produce grows. Prior to the adoption of the MFRS 116 and MFRS 141, all new planting expenditure incurred from land clearing, planting, field upkeep and maintenance to the point of maturity were capitalised under plantation development expenditure and were not amortised. Replanting expenditure which represents cost incurred to replant old planted areas were charged to profit or loss as and when incurred. Agricultural produce which form part of the bearer plants were not recognised and identified separately. 8
  403. IJM CORPORATION BERHAD (104131-A) A2. Changes in Accounting Policies (continued) Transition from FRSs to MFRSs (continued): (ii) Effects of adoption of Amendments to MFRS 116 “Property, Plant and Equipment” and MFRS 141 “Agriculture” (continued) With the adoption of the Amendments to MFRS 116 and MFRS 141, new planting expenditure and replanting expenditure are accounted for as property, plant and equipment in accordance with MFRS 116 and measured at cost less accumulated depreciation, whereas produce growing on bearer plants within the scope of MFRS 141 are measured at fair value less costs to sell. The adoption of the Amendments to MFRS 116 and MFRS 141 have resulted in additional depreciation on property, plant and equipment and replanting expenditure that were charged to profit or loss prior to the adoption of the Amendments to MFRS 116 and MFRS 141 being reversed and capitalised under property, plant and equipment. Changes in fair value less costs to sell of the produce growing on bearer plants are recognised in profit or loss. (iii) MFRS 9 “Financial Instruments” MFRS 9 replaces MFRS 139 and amends the previous requirements in three main areas: (i) classification and measurement of financial assets; (ii) impairment of financial assets, mainly by introducing a forward looking expected loss impairment model; and (iii) hedge accounting including removing some of the restrictions on applying hedge accounting in MFRS 139. The impact of MFRS 9 adoption are described below: (a) Classification and measurement Under MFRS 9, financial assets are classified according to their cash flow characteristics and the business model under which they are managed. The Group has categorised its financial assets as financial assets measured at amortised cost, fair value through profit or loss (“FVTPL”) and fair value through other comprehensive income (“FVOCI”). The Group has made an irrevocable election to classify RM2.2 million of the Group’s other investments previously classified as available-for-sale financial assets as financial assets at FVOCI. Fair value changes on other investments at FVOCI are presented in other comprehensive income (“OCI”) and are not subsequently transferred to profit or loss. Upon sale of other investments at FVOCI, the cumulative gain or loss in OCI is reclassified to retained profits. The other financial assets held by the Group which include: - equity investments, currently measured at fair value through profit or loss will continue to be measured on the same basis under MFRS 9; and - debt instruments, currently classified as loans and receivables and measured at amortised cost meet the conditions to be classified at amortised cost under MFRS 9. There is no impact on the Group for financial liabilities as the new requirements only affect the accounting for financial liabilities that are designated at FVTPL and the Group does not have such liabilities. The derecognition rules have been transferred from FRS 139 “Financial Instruments: Recognition and Measurement” and have not been changed. 9
  404. IJM CORPORATION BERHAD (104131-A) A2. Changes in Accounting Policies (continued) Transition from FRSs to MFRSs (continued): (iii) MFRS 9 “Financial Instruments” (continued) (b) Impairment MFRS 9 changes the recognition of impairment provision for financial assets by introducing an expected credit loss model. Upon the adoption of MFRS 9, the Group has revised its impairment methodology to include expected credit losses based on an assessment of any significant increase in credit risk for financial assets measured at amortised cost, contract assets and lease receivables at the end of each reporting period. The assessment has resulted in a decrease of RM86.7 million in retained profits with a corresponding adjustment to trade receivables as at 1 April 2018. (c) Hedge accounting The new accounting requirements on hedge accounting do not have any impact on the Group because the Group does not adopt hedge accounting. The Group has elected the exemption in MFRS 1 which allows the Group not to restate comparative information in the year of initial application of MFRS 9. (iv) MFRS 15 “Revenue from Contracts with Customers” MFRS 15 “Revenue from contracts with customers” replaces MFRS 118 “Revenue”, MFRS 111 “Construction Contracts” and related interpretations. The Group has assessed the effects of applying the new revenue standard on the Group’s financial statements and based on the analysis of the recognition of various revenue sources, no significant differences with existing accounting principles were identified except for the following: (a) Determining the transaction price In determining the transaction price, the Group assesses the estimated transaction price based on the most likely amount, which is not reversible in the future. (b) Accounting for separate performance obligations arising from the sale of properties The application of MFRS 15 resulted in the identification of various separate performance obligations which previously had been bundled as a sale of property. The performance obligations are separated if they are capable of being distinct and are distinct within the context of the contracts, such as, the provision of furniture and fittings, common facilities and any other charges paid on behalf of house buyers. Revenue will then be allocated to the respective performance obligations and recognised when controls in relation to the performance obligations have been transferred. This could affect the timing of the recognition of revenue going forward. 10
  405. IJM CORPORATION BERHAD (104131-A) A2. Changes in Accounting Policies (continued) Transition from FRSs to MFRSs (continued): (iv) MFRS 15 “Revenue from Contracts with Customers” (continued) (c) Timing of recognition for the sales of properties Revenue from property development is recognised as and when the control of the asset is transferred to the customer and it is probable that the Group will collect the consideration to which it will be entitled in exchange for the asset that will be transferred to the customer. Control of the asset may transfer over time or at a point in time. For properties sold in accordance with the Housing Development (Control and Licensing) Act 1966 (“HDA”), control of the asset is transferred over time as the Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date. Therefore revenue from sale of properties under HDA, without a secured financing arrangement is recognised when it is probable that the Group will collect the consideration of the sale of the property to which it is entitled. Sales of properties that are not governed under HDA, will be assessed on a contract by contract basis, to establish the Group's enforceable right to payment for performance completed to date. (d) Accounting for incremental costs of obtaining a contract The Group’s existing accounting policy is to expense off costs, such as sales commissions, in obtaining a contract. Under MFRS 15, these costs are recognised as an asset, as the Group expects to recover them. (e) Classification of land held for property development and property development costs Upon withdrawal of FRS 201 “Property Development Activities”, land held for property development and property development costs are reclassified as inventories as these assets are in the process of production for sale. These inventories are carried at the lower of cost or net realisable value. (f) Presentation of contract assets and contract liabilities in the balance sheet MFRS 15 requires separate presentation of contract assets and contract liabilities in the balance sheet. This results in some reclassifications as of 1 April 2018, which are currently included in other statement of financial position line items. Contract assets identified are mainly the right to consideration for goods or services transferred to the customers. In the case of property development and construction contracts, contract assets are the excess of cumulative revenue earned over cumulative billings to-date and contract liabilities are the obligations to transfer goods or services to the customers for which the Group or the Company has received the consideration or has billed the customers. With the adoption of MFRS 15, revenue is recognised by reference to each distinct performance obligation in the contracts with customers. Transaction price is allocated to each performance obligation on the basis of the relative standalone selling prices of each distinct good or service promised in the contract. Depending on the substance of the contract, revenue is recognised when the performance obligation is satisfied, which may be at a point in time or over time. The Group has applied this standard retrospectively. 11
  406. IJM CORPORATION BERHAD (104131-A) A2. Changes in Accounting Policies (continued) Transition from FRSs to MFRSs (continued): (iv) MFRS 15 “Revenue from Contracts with Customers” (continued) The Group has also elected the following practical expedients upon the adoption of MFRS 15: - - completed contracts that began and ended in the same comparative reporting period as well as completed contracts at the beginning of the earliest period presented, are not restated; and for all reporting periods presented before the date of initial application, the amount of transaction price allocated to the remaining performance obligation and an explanation of when the Group expects to recognise the amount as revenue are not disclosed. Upon adoption of MFRS 15, property development cost and land held for property development are measured at the lower of cost and net realisable value in accordance with MFRS 102 “Inventories”. The effects of the transition from FRSs to MFRSs are as follows: As previously stated under FRSs RM'000 Effects of adoption of MFRS 141 RM'000 Effects of adoption of MFRS 15 RM'000 30 September 2017 as restated RM'000 1,593,809 (1,254,721) 49,619 (40,754) (16,076) 2,672 181,972 (57,607) 124,365 (6,206) 1,207 (4,999) 2,646 (2,353) 5,236 (5,243) (2,279) 10,223 (1,015) 6,922 (2,460) 4,462 1,599,045 (1,266,170) 47,340 (30,531) (14,869) 1,657 183,895 (57,421) 126,474 Other comprehensive income/(loss): Items that may be reclassified subsequently to profit or loss: Currency translation differences of foreign operations Total comprehensive income (41,763) 67,300 2,124 (229) 4,462 (39,639) 71,533 Net profit attributable to: Owners of the Company Non-controlling interests 110,862 13,503 (1,089) (1,264) 4,456 6 114,229 12,245 66,214 1,086 41 (270) 4,456 6 70,711 822 Condensed Consolidated Statement of Comprehensive Income Quarter ended 30 September 2017 Revenue Costs of sales Other operating income Tendering, selling and distribution expenses Other operating expenses Share of profits of joint ventures Profit before taxation Income tax expense Net profit for the period Total comprehensive income attributable to: Owners of the Company Non-controlling interests Earnings per share (sen): Basic Fully Diluted 3.06 3.02 12 3.15 3.11
  407. IJM CORPORATION BERHAD (104131-A) A2. Changes in Accounting Policies (continued) Transition from FRSs to MFRSs (continued): The effects of the transition from FRSs to MFRSs are as follows (continued): As previously stated under FRSs RM'000 Effects of adoption of MFRS 141 RM'000 Effects of adoption of MFRS 15 RM'000 30 September 2017 as restated RM'000 3,062,120 (2,417,359) 102,477 (81,905) (31,419) 7,668 379,477 (111,284) 268,193 (13,292) (193) (13,485) 5,216 (8,269) (1,513) (6,508) (3,422) 16,795 (991) 4,361 (2,127) 2,234 3,060,607 (2,437,159) 99,055 (65,110) (31,612) 6,677 370,353 (108,195) 262,158 Other comprehensive income/(loss): Items that may be reclassified subsequently to profit or loss: Currency translation differences of foreign operations Total comprehensive income (88,776) 161,021 3,838 (4,431) 2,234 (84,938) 158,824 Net profit attributable to: Owners of the Company Non-controlling interests 237,257 30,936 (4,144) (4,125) 2,285 (51) 235,398 26,760 Total comprehensive income attributable to: Owners of the Company Non-controlling interests 153,412 7,609 (2,109) (2,322) 2,285 (51) 153,588 5,236 Condensed Consolidated Statement of Comprehensive Income Period ended 30 September 2017 Revenue Costs of sales Other operating income Tendering, selling and distribution expenses Other operating expenses Share of profits of joint ventures Profit before taxation Income tax expense Net profit for the period Earnings per share (sen): Basic Fully Diluted 6.55 6.47 13 6.50 6.42
  408. IJM CORPORATION BERHAD (104131-A) A2. Changes in Accounting Policies (continued) Transition from FRSs to MFRSs (continued): The effects of the transition from FRSs to MFRSs are as follows (continued): As previously stated under FRSs RM'000 Effects of adoption of MFRS 1 RM'000 Effects of adoption of MFRS 141 RM'000 Effects of adoption of MFRS 15 RM'000 (104,246) 104,246 - 9,080 (125,821) (102,085) (7,754) 954 31 March 2018 As restated (after effects of Effects of transition from adoption of FRSs to MFRSs) MFRS 9 RM'000 RM'000 1 April 2018 As restated RM'000 Condensed Consolidated Statement of Financial Position As at 31 March 2018/1 April 2018 Total Equity Other reserves Retained profits Non-controlling interests Non-current liabilities Deferred tax liabilities 41,607 3,376,581 1,276,411 (53,559) 3,347,252 1,175,280 682,177 - (108,265) - 573,912 1,990,135 829,134 708,425 2,155 - 762,867 - 48 - 2,753,002 829,134 708,473 2,155 304,147 663,465 1,107,848 - 7,275 (1,107,848) 8,973 (663,465) 663,465 - 320,395 663,465 - Current assets Property development costs Inventories Produce growing on bearer plants Trade and other receivables Contract assets 6,128,340 1,334,243 1,952,313 - - 10,615 - (6,128,340) 6,155,942 (239,057) 262,390 7,490,185 10,615 1,713,256 262,390 Current liabilities Trade and other payables Contract liabilities 3,020,359 - - - (388,643) 455,399 2,631,716 455,399 Non-current assets Property, plant and equipment Associates Joint ventures Available-for-sale financial assets Financial assets at fair value through other comprehensive income Deferred tax assets Land held for property development Inventories Plantation development expenditure Net assets per share attributable to owners of the Company (RM) 2.62 2.58 14 226 (91,424) - - (4,542) (2,155) 2,155 - (86,656) - - (53,333) 3,255,828 1,175,280 573,912 2,753,002 824,592 708,473 2,155 320,395 663,465 7,490,185 10,615 1,626,600 262,390 2,631,716 455,399 2.56
  409. IJM CORPORATION BERHAD (104131-A) A2. Changes in Accounting Policies (continued) Transition from FRSs to MFRSs (continued): The effects of the transition from FRSs to MFRSs are as follows (continued): As previously stated under FRSs RM'000 Effects of adoption of MFRS 1 RM'000 Effects of adoption of MFRS 141 RM'000 Effects of adoption of MFRS 15 RM'000 (104,284) 104,284 - (1,189) (116,986) (95,001) (11,037) 1,333 1 April 2017 As restated RM'000 Condensed Consolidated Statement of Financial Position (continued) As at 1 April 2017 Total Equity Other reserves Retained profits Non-controlling interests Non-current liabilities Deferred tax liabilities 175,746 3,302,903 1,319,406 669,456 - (95,975) Non-current assets Property, plant and equipment Joint ventures Deferred tax assets Land held for property development Inventories Plantation development expenditure 1,989,646 754,783 297,762 514,788 1,201,570 - 866,218 12,952 (1,201,570) Current assets Property development costs Inventories Produce growing on bearer plants Trade and other receivables Contract assets 5,587,380 1,421,961 2,031,003 - - Current liabilities Trade and other payables Contract liabilities 2,518,205 - - Net assets per share attributable to owners of the Company (RM) 2.63 15 - 70,273 3,279,164 1,225,738 573,481 (495) 9,016 (514,788) 514,788 - 2,855,864 754,288 319,730 514,788 - 13,249 - (5,587,380) 5,591,414 (254,440) 279,381 7,013,375 13,249 1,776,563 279,381 - (416,108) 463,308 2,102,097 463,308 2.59
  410. IJM CORPORATION BERHAD (104131-A) A2. Changes in Accounting Policies (continued) Transition from FRSs to MFRSs (continued): The effects of the transition from FRSs to MFRSs are as follows (continued): As previously stated under FRSs RM'000 Effects of transition from FRSs to MFRSs RM'000 Restated under MFRSs RM'000 Condensed Consolidated Statements of Cash Flow Period ended 30 September 2017 Net cash fow from operating activities: Payments to contractors, suppliers and employees (2,522,017) Net cash flow used in investing activities: Purchase of property, plant and equipment, development land, land use rights, investment properties, concession assets and deferred expenditure (275,379) 8,100 (8,100) (2,513,917) (283,479) A3. Audit Report The audit report for the financial year ended 31 March 2018 was not subject to any modification or qualification. A4. Seasonality or Cyclicality of Operations The Group’s operations are not materially affected by seasonal or cyclical factors except for the Plantation division which normally sees its cropping pattern of oil palms declining to a trough in the first half of a calendar year before rising to a peak in the second half. A5. Unusual Significant Items There were no items affecting assets, liabilities, equity, net income, or cash flows that were unusual in nature, size or incidence during the financial period ended 30 September 2018. A6. Material Changes in Estimates There were no major changes in estimates that have a material effect on the results for the financial period ended 30 September 2018. 16
  411. IJM CORPORATION BERHAD (104131-A) A7. Debt and Equity Securities (a) For the financial period ended 30 September 2018, the number of issued and paid-up ordinary shares of the Company was increased from 3,628,678,020 to 3,635,687,820 by way of the issuance of:i. 6,981,000 new ordinary shares arising from the vesting of shares under the Employee Share Grant Plan (“ESGP”); and ii. 28,800 new ordinary shares arising from the exercise of options under the Employee Share Option Scheme (“ESOS”). (b) For the financial period ended 30 September 2018, 3,990,100 ordinary shares were repurchased in the open market at an average price of RM1.98 per share and retained as treasury shares of the Company. There were no cancellations and repayments of debt and equity securities for the financial period ended 30 September 2018. A8. Dividend Paid On 20 July 2018, a single tier second interim dividend of 3 sen per share in respect of the financial year ended 31 March 2018 was paid totalling RM108,927,000. 17
  412. IJM CORPORATION BERHAD (104131-A) A9. Segmental Information GROUP 3 months ended 30/09/2018 RM'000 GROUP 3 months ended 30/09/2017 Change (+/-) 6 months ended 30/09/2018 RM'000 % RM'000 Restated External revenue: Construction Property development Manufacturing and quarrying Plantation Infrastructure Investment and others Inter-segment revenue: Construction Property development Manufacturing and quarrying Plantation Infrastructure Investment and others Profit/(loss) before taxation: Construction Property development Manufacturing and quarrying Plantation Infrastructure Investment and others Earnings before interest, tax, depreciation and amortisation: Construction Property development Manufacturing and quarrying Plantation Infrastructure Investment and others Finance Cost Depreciation and amortisation Profit before taxation 6 months ended 30/09/2017 Change (+/-) RM'000 % Restated 530,013 255,566 220,240 140,086 162,986 275 675,328 269,893 299,258 196,438 157,492 636 -21.5% -5.3% -26.4% -28.7% 3.5% -56.8% 1,056,931 590,259 451,900 323,229 330,749 414 1,207,347 562,911 574,321 381,032 334,297 699 -12.5% 4.9% -21.3% -15.2% -1.1% -40.8% 1,309,166 1,599,045 -18.1% 2,753,482 3,060,607 -10.0% 124,031 12,375 179,868 316,274 145,347 4,808 57,723 207,878 -14.7% 211.6% 52.1% 299,900 17,945 243,880 561,725 287,766 11,428 381,146 680,340 -36.0% -17.4% 38,509 21,924 16,081 (31,749) 8,536 (17,469) 71,083 32,444 27,459 13,259 35,730 3,920 -45.8% -32.4% -41.4% -339.5% -76.1% -545.6% 78,199 66,821 29,227 (58,018) 33,392 (10,561) 127,158 56,463 49,864 29,546 100,374 6,948 -38.5% 18.3% -41.4% -296.4% -66.7% -252.0% 35,832 183,895 -80.5% 139,060 370,353 -62.5% 71,240 16,920 29,854 14,503 61,222 (17,469) 176,270 (56,803) (83,635) 35,832 85,569 42,680 41,015 59,921 86,245 3,920 319,350 (50,340) (85,115) 183,895 -16.7% -60.4% -27.2% -75.8% -29.0% -545.6% -44.8% 134,473 69,422 56,887 34,881 137,644 (10,561) 422,746 (116,636) (167,050) 139,060 157.4% -80.5% As at 30/09/2018 RM'000 Total Assets: Construction Property development Manufacturing and quarrying Plantation Infrastructure Investment and others Total segment assets Unallocated corporate assets Consolidated total assets 2,141,140 10,556,903 1,438,428 2,184,440 4,971,139 82,095 21,374,145 506,588 21,880,733 18 4.2% 57.0% 158,978 -15.4% 76,857 -9.7% 76,876 -26.0% 112,860 -69.1% 207,800 -33.8% 6,948 -252.0% 640,319 -34.0% (95,408) (174,558) 370,353 -62.5% As at 31/03/2018 RM'000 Restated 1,735,566 10,306,910 1,461,472 2,269,221 4,633,362 150,658 20,557,189 470,436 21,027,625
  413. IJM CORPORATION BERHAD (104131-A) A9. Segmental Information (continued) Property  Manufacturing  Investment  Construction development & Quarrying Plantation Infrastructure & Others RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 Total RM'000 3 months ended 30/09/2018 Timing of revenue recognition: ‐ At a point in time                6,857 ‐ Over time           523,156 ‐ Others                        ‐           530,013           218,985             36,332                   249           255,566              219,407                  1,252                      (419)              220,240         140,086                      ‐                      ‐         140,086            52,939              2,080          107,967          162,986                     ‐                     ‐               275               275       638,274       562,820       108,072    1,309,166           222,500           367,264                   495           590,259              447,510                  2,561                  1,829              451,900         323,229                      ‐                      ‐         323,229          115,741              4,143          210,865          330,749                     ‐                     ‐               414               414    1,122,035    1,417,844       213,603    2,753,482           210,475             59,119                   299           269,893              290,156                  7,682                  1,420              299,258         196,438                      ‐                      ‐         196,438            53,137              2,004          102,351          157,492                     ‐                     ‐               636               636       756,926       737,413       104,706    1,599,045           214,254           348,062                   595           562,911              558,732                13,100                  2,489              574,321         381,032                      ‐                      ‐         381,032          126,614              4,000          203,683          334,297                     ‐                     ‐               699               699    1,294,407    1,558,734       207,466    3,060,607 6 months ended 30/09/2018 Timing of revenue recognition: ‐ At a point in time              13,055 ‐ Over time        1,043,876 ‐ Others                        ‐        1,056,931 3 months ended 30/09/2017 Timing of revenue recognition: ‐ At a point in time                6,720 ‐ Over time           668,608 ‐ Others                        ‐           675,328 6 months ended 30/09/2017 Timing of revenue recognition: ‐ At a point in time              13,775 ‐ Over time        1,193,572 ‐ Others                        ‐        1,207,347 A10. Carrying Amount of Revalued Property, Plant and Equipment The valuations of certain property, plant and equipment have been brought forward without amendments from the audited financial statements for the Financial Year 2018. A11. Changes in the Composition of the Group During the financial period-to-date, the following changes in composition were effected: (i) On 23 May 2018, Industrial Concrete Products Sdn Bhd, which is a wholly-owned subsidiary of the Company, incorporated a wholly-owned subsidiary known as IJM IBS Sdn Bhd. This incorporation has no material impact on the financial results of the Group for the period-to-date. (ii) On 5 October 2018, the Company made an announcement on members’ voluntary winding-up of a dormant subsidiary, Sheffield Enterprise Sdn Bhd (“SESB”). SESB is a 90%-owned subsidiary of the Company via IJM Land Berhad. This winding-up has no material impact on the financial results of the Group for the period-to-date. 19
  414. IJM CORPORATION BERHAD (104131-A) A11. Changes in the Composition of the Group (continued) (iii) On 23 October 2018, ICPB (Mauritius) Limited, a wholly-owned subsidiary of the Company via ICP Investments (L) Limited and Industrial Concrete Products Sdn Bhd, entered into a share purchase agreement to dispose 32,083,669 ordinary shares of INR10 each, representing 99.99% of the issued and paid-up share capital of IJM Steel Products Private Limited to Pravan Holdings LLP and Highworth Holdings LLP in equal proportion for a total consideration of INR63,999,998 (which is equivalent to RM3.6 million). The disposal has no material impact on the financial results of the Group for the period-to-date. A12. Contingent Liabilities The changes in contingent liabilities are summarised as follows:RM’000 5,188 Balance as at 31 March 2018 - Exchange differences (201) Balance as at 30 September 2018 4,987 A13. Capital Commitments Capital commitments not provided for in the financial statements as at 30 September 2018 are as follows: RM’000 747,514 104,239 851,753 Approved and contracted for Approved but not contracted for Analysed as follows: - Purchases of property, plant and equipment and land use rights - Purchases of development land - Concession assets - Investment properties 266,677 33,607 430,648 120,821 851,753 A14. Significant events subsequent to the date of statement of financial position On 26 November 2018, the Company announced that CIDB Inventures Sdn Bhd (“CIDBI”), a whollyowned subsidiary of the Company has exercised its rights pursuant to a Shareholders Agreement dated 26 October 2015 to dispose 81,000,000 ordinary shares in Swarna Tollway Private Limited (“STPL”) to MAIF Investments India 3 Pte Ltd (“MAIF”), representing the remaining 30% issued and paid-up share capital of STPL, for a total consideration of INR2,419.43 million (equivalent to approximately RM143.4 million). The disposal of the remaining stake resulted in losses of approximately RM37.5 million to the Group, which have been accrued for the financial period. 20
  415. IJM CORPORATION BERHAD (104131-A) B Bursa Securities Listing Requirements (Part A of Appendix 9B) B1. Detailed Analysis of Performance of all Operating Segments In the current quarter, the Group achieved an operating revenue of RM1,309.17 million, a decrease of 18.1% over the corresponding quarter of the preceding year, following lower revenues contributed by the Group’s Construction, Property Development, Manufacturing & Quarrying and Plantations divisions. The Group also recorded a pre-tax profit for the current quarter of RM35.83 million, a decrease of 80.5% over the corresponding quarter of the preceding year, mainly due to weaker earnings posted by the Group’s Construction, Property Development, Manufacturing & Quarrying, Plantations and Infrastructure divisions. It was further exacerbated by an increase in net unrealised foreign exchange losses of RM33.5 million in the current quarter as opposed to a loss of RM0.4 million in the corresponding quarter of the preceding year. For the current period ended 30 September 2018, the Group posted an operating revenue of RM2,753.48 million, a decrease of 10.0% over the corresponding period of the preceding year, mainly due to lower revenue contributed by the Group’s Construction, Manufacturing & Quarrying, Plantations and Infrastructure divisions. The Group’s pre-tax profit for the current period totalled RM139.06 million, a decrease of 62.5% compared to the corresponding period of the preceding year, mainly due to an increase in net unrealised foreign exchange losses of RM104.6 million in the current period as opposed to a loss of RM4.0 million in the corresponding period of the preceding year. This was accompanied by lower contributions from the Group’s Construction, Manufacturing & Quarrying, Plantation and Infrastructure divisions in the current period compared to the corresponding period of the preceding year. Further analysis of the divisional performances is given below. Operating Segment Construction Commentary Revenue for the current quarter and period ended 30 September 2018 declined by 21.5% and 12.5% respectively compared to the corresponding period of the preceding year as newer projects have yet to reach optimal construction phase. Consequently, pre-tax profit for the current quarter and period also fell by 45.8% and 38.5% respectively compared to the corresponding period of the preceding year mainly due to lower construction margins as well as an increase in unrealised foreign exchange losses to RM6.7 million for the current quarter and RM30.7 million for the current period as opposed to unrealised foreign exchange losses of RM0.4 million and RM3.6 million in the previous year’s corresponding quarter and period respectively. Property development Current quarter revenue and pre-tax profit decreased by 5.3% and 32.4% respectively compared to the previous year’s corresponding quarter. This was mainly due to lower sales coupled with lower margins achieved in the current quarter compared to the previous year’s corresponding quarter. On a period basis, the revenue and pre-tax profit was 4.9% and 18.3% higher as compared to the corresponding period of the preceding year. The higher revenue and profit before tax registered in the current period was mainly due to the completion of certain development projects as well as lower operating expenses incurred in the current period as compared to the corresponding period of the preceding year. Manufacturing and quarrying Current quarter revenue and pre-tax profit decreased by 26.4% and 41.4% respectively compared to the previous year’s corresponding quarter. Revenue and pre-tax profit for the period was also down 21.3% and 41.4% respectively compared to the previous year’s corresponding period. These were mainly due to lower sales volumes and margins in the piles and quarrying sectors. 21
  416. IJM CORPORATION BERHAD (104131-A) B1. Detailed Analysis of Performance of all Operating Segments (cont’d) Operating Segment Plantation Commentary Infrastructure Revenue for the current quarter and period were almost unchanged compared to the corresponding period of the preceding year, increasing by 3.5% and decreasing by 1.1% respectively. The Division’s pre-tax profit for the current quarter decreased to RM8.5 million from RM35.7 million recorded in the previous year’s corresponding quarter. This was mainly due to the losses being accrued for the disposal of the remaining 30% equity interests in Swarna Tollway Private Limited in the current quarter. The losses were mitigated by higher contribution from the Group’s local tolls as well as toll concession investment in Argentina. However, the Division’s pre-tax profit for the period decreased to RM33.4 million from RM100.4 million recorded in the corresponding period of the preceding year mainly due to the losses as mentioned above and a decrease in cargo throughput handled by the Group’s port concession as well as increased net foreign exchange loss of RM43.0 million in the current period compared to a net foreign exchange loss of RM4.3 million in the corresponding period of the preceding year. Revenue for the current quarter and period decreased by 28.7% and 15.2% respectively compared to the corresponding period of the preceding year mainly due to lower CPO sales volume and commodity prices. The pre-tax losses of RM31.7 million for the current quarter and RM58.0 million for the period were mainly attributable to the lower commodity prices and higher production costs from the increase in young mature areas in the Indonesian operations incurring full fixed plantation maintenance and overhead costs set against the start-up crop yield. This was further compounded by the net unrealised foreign exchange losses of RM22.6 million and RM53.5 million on the US Dollar denominated borrowings for the current quarter and period respectively as compared to unrealised foreign exchange losses of RM8.5 million and RM9.3 million respectively in the corresponding period of the preceding year. B2. Material Changes in the Quarterly Profit Before Taxation Compared to the Immediate Preceding Quarter The Group’s pre-tax profit decreased by RM67.4 million (or 65.3%) compared to that of the immediate preceding quarter mainly due to lower contributions from the Group’s Construction, Property, Plantations and Infrastructure divisions. 22
  417. IJM CORPORATION BERHAD (104131-A) B3. Prospects for the Current Financial Year The Group’s Construction division expects continued growth based on an outstanding order book of RM8.8 billion, underpinned by the implementation of on-going domestic projects. The local property market is expected to remain challenging, with the key issues of price affordability, the overhang of high priced properties, rising costs of living and tight financing continue to have a dampening effect. Nonetheless, the Property Development division remains steadfast in its efforts to grow its business in view of the strategic locations of its properties and the brand premium that it has established. With unbilled sales of about RM2.0 billion, the division is expected to maintain a satisfactory performance in the current financial year. Given a difficult operating environment both domestically and overseas, the Group’s Industry division expects a lower performance for the current financial year. The Group’s Plantation division expects a challenging year due to the weakening of the commodity prices, volatile foreign exchange rates particularly that of the Indonesian Rupiah against the US Dollar and higher borrowing costs. Notwithstanding the anticipated recovery of crop production from the effects of the prolonged dry weather and increased young mature areas, the division continues to be affected by the start-up yields whilst incurring full plantation maintenance costs and overheads. The Group’s toll and port operations continue to provide recurrent revenue streams as existing concessions mature thereby further enhancing the earnings of the Group’s Infrastructure division. Based on the above stated factors and given the constantly changing business environment, the Group expects the current financial year to be challenging. B4. Profit Forecast Not applicable. 23
  418. IJM CORPORATION BERHAD (104131-A) B5. Taxation The taxation for the group for the financial period under review is as follows: INDIVIDUAL QUARTER 3 MONTHS ENDED 30 SEPTEMBER 2018 2017 RM’000 RM’000 Restated Malaysian income tax Overseas taxation Deferred taxation CUMULATIVE PERIOD 6 MONTHS ENDED 30 SEPTEMBER 2018 2017 RM’000 RM’000 Restated 39,855 51,677 83,698 97,408 (3,903) (11,886) 24,066 5,744 57,421 (6,515) (10,706) 66,477 (161) 10,948 108,195 The Group’s effective tax rate (excluding the results of associates and joint ventures which are equity accounted net of tax) was higher than the statutory tax rate mainly due to certain expenses not being deductible for tax purposes and the non-recognition of deferred tax assets on unused tax losses of certain subsidiaries. B6. Status of Corporate Proposals As at 30 September 2018, there were no outstanding corporate proposals. 24
  419. IJM CORPORATION BERHAD (104131-A) B7. Group Borrowings Particulars of the Group’s borrowings as at 30 September 2018 are as follows: As at 30/09/2018 RM'000 (a) (i) Short Term Borrowings Secured:- Islamic bonds - Term loans - Hire purchase and lease payables (included in trade and other payables) - Revolving credits - Government support loans (included in trade and other payables) Unsecured:- Government support loans (included in trade and other payables) - Term loans - Revolving credits - Revolving loans - Bankers' acceptances - Letters of Credit - Bank overdrafts (ii) Long Term Borrowings Secured:- Islamic bonds - Medium term notes - Hire purchase and lease payables - Term loans - Government support loans Unsecured:- Islamic bonds - Government support loans - Term loans 55,000 48,630 551 121,534 6,951 26,153 829,645 1,000,739 290,115 54,376 8,812 90,467 2,532,973 555,000 875,000 32 835,205 64,972 1,500,000 25,870 643,985 4,500,064 (b) Foreign currency borrowings included in the above are as follows: Foreign Currency '000 US Dollar Indian Rupee Chinese Yuan Pound Sterling 445,200 5,346,550 47,800 37,202 25 RM Equivalent '000 1,846,107 305,288 28,608 201,637 2,381,640
  420. IJM CORPORATION BERHAD (104131-A) B8. Changes in Material Litigation There was no material litigation since 31 March 2018. B9. Dividends The Company has declared a single tier first interim dividend in respect of the financial year ending 31 March 2019 of 2 sen per share to be paid on 27 December 2018 to every member who is entitled to receive the dividend at the close of business on 13 December 2018. In respect of the financial year ended 31 March 2018, a single tier first interim dividend of 3 sen per share was paid on 28 December 2017 and a single tier second interim dividend of 3 sen per share was paid on 20 July 2018. B10. Earnings per Share Individual Quarter Current year quarter 30/09/2018 RM’000 Basic Earnings per share:(a) Net profit for the period attributable to owners of the Company (b) Weighted average number of ordinary shares ('000) Basic Earnings per share (sen) Diluted Earnings per share:(a) Net profit for the period attributable to owners of the Company (b) Weighted average number of ordinary shares (‘000) Effect of dilution (‘000) - Employee share options and share grants Adjusted weighted average number of ordinary shares in issue and issuable (‘000) Diluted Earnings per share (sen) Cumulative Period Preceding year quarter Current year to date Preceding year to date 30/09/2017 RM’000 Restated 30/09/2018 RM’000 30/09/2017 RM’000 Restated 21,918 114,229 84,682 235,398 3,634,891 3,627,478 3,631,872 3,622,950 0.60 3.15 2.33 6.50 21,918 114,229 84,682 235,398 3,634,891 3,627,478 3,631,872 3,622,950 3,764 46,287 3,764 45,755 3,638,655 3,673,765 3,635,636 3,668,705 0.60 3.11 2.33 6.42 26
  421. IJM CORPORATION BERHAD (104131-A) B11. Notes to the Statement of Comprehensive Income Individual Quarter Interest income Cumulative Period Current year quarter Preceding year quarter 30/09/2018 RM'000 30/09/2017 RM'000 30/09/2018 RM'000 30/09/2017 RM'000 28,728 Restated 24,676 57,226 Restated 52,618 Preceding Current year to date year to date Other income (including investment income) Interest expense 15,621 (56,803) * 22,763 (50,340) * 50,163 (116,636) * Depreciation and amortisation Net reversal/(allowance) of impairment of receivables Net (losses)/gains on disposal of investments or properties (83,635) 4,695 (36,989) (85,115) (1,118) 638 (167,050) 3,804 (35,787) (174,558) (3,924) 2,183 Net allowance of impairment of assets Net foreign exchange losses Net gains/(losses) on derivatives (106) (33,513) 2,941 (1,456) (377) (3,003) (400) (104,554) 14,444 (1,537) (4,015) (2,283) 2,461 1,208 (306) (192) (10,825) (9,116) (22,581) (9,116) Fair value gains/(losses) on produce growing on bearer plants * Includes unrealised foreign exchange losses incurred by the Plantation division classified under Finance Cost 43,630 (95,408) * The above disclosure is prepared in accordance with paragraph 16 of Appendix 9B of the Main Market Listing Requirements (“MMLR”) issued by Bursa Malaysia Securities Berhad. Except for the above, the rest of the items required for disclosures pursuant to paragraph 16 of the MMLR are not applicable to the Group. 27
  422. IJM CORPORATION BERHAD (104131-A) B12 Derivative financial instruments (a) Crude Palm Oil Pricing Swap Contracts The Group entered into Crude Palm Oil (“CPO”) pricing swap contracts offered by certain reputable banks in Malaysia to mitigate the exposure of fluctuations in the price of CPO. As at 30 September 2018, the outstanding notional volume and value of the CPO pricing swap contracts and their fair values are as follows: CPO pricing swap contracts - (b) Less than 1 year 1 year to 3 years More than 3 years Notional volume outstanding as at 30/09/2018 (metric tonnes) 3,750 - Notional value outstanding as at 30/09/2018 (RM’000) 9,420 - Fair value as at 30/09/2018 (RM’000) 1,102 - Cross Currency Swap Contracts The Group entered into Cross Currency Swap contracts offered by certain reputable banks in Malaysia to swap USD floating rate liability into MYR floating rate liability, thus hedging the USD/MYR currency risk and the interest rate risk. As at 30 September 2018, the outstanding notional value of the cross currency swap contracts and their fair values are as follows: Cross currency swap contracts - (c) Less than 1 year 1 year to 3 years More than 3 years Notional value outstanding as at 30/09/2018 (USD’000) 90,000 - Notional value outstanding as at 30/09/2018 (RM’000) 363,330 - Fair value as at 30/09/2018 (RM’000) 8,214 - Forward foreign exchange contracts The Group enters into Forward Foreign Exchange contracts offered by certain reputable banks in Malaysia to purchase US Dollars at a predetermined exchange rate for settlement at a predetermined time in the future, thus hedging the USD/MYR currency risk. As at 30 September 2018, there are no outstanding forward foreign exchange contracts. 28
  423. IJM CORPORATION BERHAD (104131-A) B13. Fair value changes of derivative financial instruments The Group recognised a total net fair value gain on derivative financial instruments of RM14.44 million during the current financial period. The details are as follows: Type of derivative Crude palm oil (“CPO”) pricing swap contracts Cross currency swap contracts Forward foreign exchange contracts Current quarter fair value gains/(losses) RM’000 Current period fair value gains/(losses) RM’000 999 1,912 Price differentials between the average future CPO prices quoted on the Bursa Malaysia Derivative Exchange and the fixed contracted CPO prices. The average future CPO price quoted on the Bursa Malaysia Derivative Exchange has dropped below the contracted prices. 1,942 10,152 Exchange rate differentials between the USD/MYR spot rate and the contracted USD/MYR rate; Interest rate differentials between the USD floating interest rate and the contracted MYR interest rate. The fair value gain or loss is affected by movements in the USD/MYR spot rates and the USD and MYR interest rates. - 2,380 Exchange rate differentials between the market spot rate and the contracted rate between USD and MYR. The market spot rate for USD against the MYR has risen above the contracted rate. 29 Basis of fair value measurement Reasons for the gains/(losses)
  424. THE ISSUER IJM Land Berhad 2nd Floor , Wisma IJM, Jalan Yong Shook Lin, Petaling Jaya, 46050 Selangor Darul Ehsan LEAD ARRANGER/ LEAD MANAGER CIMB Investment Bank Berhad Level 13, Menara CIMB Jalan Stesen Sentral 2 Kuala Lumpur Sentral 50470 Kuala Lumpur SUKUK TRUSTEE Universal Trustees (Malaysia) Berhad No.1, Jalan Ampang 3rd Floor 50450 Kuala Lumpur THE KAFALAH PROVIDER FACILITY AGENT IJM Corporation Berhad 2 Floor, Wisma IJM, Jalan Yong Shook Lin, Petaling Jaya, 46050 Selangor Darul Ehsan CIMB Investment Bank Berhad Level 13, Menara CIMB Jalan Stesen Sentral 2 Kuala Lumpur Sentral 50470 Kuala Lumpur nd SOLICITORS TO THE LEAD ARRANGER/ LEAD MANAGER Messrs Adnan Sundra & Low Level 11 Menara Olympia No. 8 Jalan Raja Chulan 50200 Kuala Lumpur SHARIAH ADVISER CIMB Islamic Bank Berhad Level 13, Menara CIMB Jalan Stesen Sentral 2 Kuala Lumpur Sentral 50470 Kuala Lumpur 186