Creating Synergy B Annual Report 2016 | Damansara Realty Berhad

Annual Report 2016 DAMANSARA REALTYBERHAD

DAMANSARA REALTY BERHAD (4030-D) Lot 10.3, Level 10 Wisma Chase Perdana off Jalan Semantan (4030-D) Damansara Heights 50490 Kuala Lumpur

T : 03-2081 2688 F : 03-2081 2690 E : [email protected] ANNUAL REPORT2016 www.dbhd.com.my

CREATING SYNERGY B ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

COVER RATIONALE

CREATING SYNERGY A business transformation encompasses the creation of a new culture whilst improving the core businesses which involves formulation of strategic plans, organizational development and continuous process improvements. The metamorphosis of a cocoon into a butterﬂ y symbolizes this journey; the transformation that Damansara Realty Berhad is embarking on. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 1

TABLE OF CONTENTS

COMPANY FINANCIAL STATEMENTS 02 Corporate Information 70 Directors’ Report

03 Corporate Structure 74 Statement by Directors

06 Board of Directors’ Proﬁ le 74 Statutory Declaration

11 Key Managements’ Proﬁ le 75 Independent Auditors’ Report

14 Group Management 81 Statements of Comprehensive Income

15 Subsidiary Management 82 Statements of Financial Position

84 Statement of Changes In Equity CORPORATE STATEMENTS 86 Statement of Cash Flows 18 Chairman’s Statement 88 Notes to the Financial Statements 20 Executive Vice Chairman’s Message 151 Supplimentary Information 22 Group Chief Executive Ofﬁ cer’s Review of Operations

30 Management Discussion and Analysis OTHER INFORMATION 152 List of Properties Held by the Group 34 Sustainability Report 153 Shareholdings Statistics

CORPORATE GOVERNANCE 156 Notice of Annual General Meeting 41 Statement of Corporate Governance 160 Statement Accompanying the Notice of Annual General Meeting 56 Audit Committee Report

60 Statement on Risk Management FORM OF PROXY and Internal Control

65 Statement on Directors’ Responsibility

66 Recurrent Related Party Transactions

2 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

CORPORATE INFORMATION

BOARD OF DIRECTORS YB DATO’ AHMAD ZAHRI BIN JAMIL YB DATUK MD OTHMAN BIN HJ YUSOF Independent Non-Executive Chairman Independent Non-Executive Director

YB DATO’ DAING A MALEK BIN DAING A RAHAMAN TUAN HAJI ABDULLAH BIN MD YUSOF Executive Vice Chairman Independent Non-Executive Director

PUAN ZAINAH BINTI MUSTAFA ENCIK WAN AZMAN BIN ISMAIL Senior Independent Non-Executive Director Non-Independent Non-Executive Director

YBHG DATO’ MOHD AISOM BIN OMAR ENCIK SHAHRIZAM BIN A SHUKOR Independent Non-Executive Director Independent Non-Executive Director

GROUP CHIEF EXECUTIVE BOARD OF RISK MANAGEMENT SHARE REGISTRAR OFFICER COMMITTEE TRICOR INVESTOR ENCIK BRIAN ISKANDAR YBHG DATO’ MOHD AISOM SERVICES SDN BHD BIN ZULKARIM BIN OMAR Unit 32-01, Level 32, Tower A (Appointed on 01.09.2016) (Chairman) Vertical Business Suite (Appointed on 05.12.2016) Avenue 3, Bangsar South TUAN HAJI MOHD FAZLIN SHAH No. 8 Jalan Kerinchi BIN MOHD SALLEH PUAN ZAINAH BINTI MUSTAFA 59200 Kuala Lumpur (Resigned on 26.08.2016) (Appointed on 05.12.2016) T : 03-27839299 F : 03-27839222 TUAN HAJI ABDULLAH BIN MD E : [email protected] BOARD OF AUDIT COMMITTEE YUSOF PUAN ZAINAH BINTI MUSTAFA (Appointed on 05.12.2016) (Chairman) STOCK EXCHANGE LISTING ENCIK SHAHRIZAM BIN A SHUKOR (Appointed on 05.12.2016) Main Market of Bursa Malaysia TUAN HAJI ABDULLAH Securities Berhad BIN MD YUSOF

COMPANY SECRETARY ENCIK SHAHRIZAM BIN A AUDITORS SHUKOR WAN RAZMAH BINTI WAN ABD (Appointed on 30.05.2016) RAHMAN Messrs. Jamal, Amin & Partners (MAICSA 7021383) (AF 1067) (Appointed on 15.03.2017) BOARD OF NOMINATION AND REMUNERATION COMMITTEE AHMAD FAISAL BIN ABDUL KARIM PRINCIPAL BANKER YBHG DATO’ MOHD AISOM (MAICSA 7045851) CIMB Bank Berhad BIN OMAR (Resigned on 31.03.2017) CHAIRMAN (Appointed on 30.05.2016) WEBSITE ADDRESS REGISTERED OFFICE www.dbhd.com.my PUAN ZAINAH BINTI MUSTAFA Lot 10.3, Level 10 Wisma Chase Perdana TUAN HAJI ABDULLAH Off Jalan Semantan BIN MD YUSOF Damansara Heights 50490 Kuala Lumpur T : 03-20812688 F : 03-20812690 E : [email protected] ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 3

CORPORATE STRUCTURE

WHOLLY OWNED SUBSIDIARIES

(4030-D) 100% Damansara Forest Products (Malaysia) Sdn Bhd SUBSIDIARIES 100% Damansara Galaxy Sdn Bhd 51% DHealthcare Centre Sdn Bhd 100% Damansara Realty (Johor) Sdn Bhd 80% Damansara Realty (Pahang) Sdn Bhd 100% Damansara Realty (Terengganu) Sdn Bhd 75% HC Duraclean Sdn Bhd 100% Damansara Realty Construction Sdn Bhd 70% Healthcare Technical Services Sdn Bhd 100% Damansara Realty Land Sdn. Bhd. 95% Kesang Kastory Enterprise Sdn Bhd 100% Damansara Realty Management (Timber Operations) Sdn Bhd 70% Kesang Quarry Sdn Bhd 100% Damansara Realty Management Services Sdn Bhd 90% M.N. Koll (M) Sdn Bhd 100% Damansara Realty Properties Sdn Bhd 55% Pedas Quarry Sdn Bhd 100% Damansara Urban Sdn. Bhd. 95.5% TMR Urusharta (M) Sdn Bhd 100% DAC Land Sdn. Bhd. 70% TMR LC Services Sdn. Bhd 100% (fka Damansara Millenium Sdn Bhd) DRP Construction Sdn Bhd 100% Harta Facilities Management Sdn Bhd 100% JOLS Construction Sdn Bhd 100% OVERSEAS COMPANIES Kesang Construction & Engineering Sdn Bhd 100% 100% Kesang Equipment Hire Sdn Bhd Metro Parking (B) Sdn Bhd 100% 55% Kesang Industries Sdn Bhd Metro Parking (HK) Limited 100% 70% Kesang Leasing Sdn Bhd Metro Parking (S) Pte Ltd 100% 100% Kesang Properties Sdn Bhd Metro Parking Services (I) Pvt. Ltd. 100% 75% Kesang Trading Sdn Bhd Metro Parking Management (Philippines) Inc 100% 100% Metro Equipment Systems (M) Sdn Bhd Healthcare International Ltd 100% Metro Parking (M) Sdn Bhd 100% Metro Parking (Sabah) Sdn Bhd 100% ASSOCIATED COMPANIES Smart Parking Management Systems Sdn Bhd 100% 30% Tebing Aur Sdn Bhd DAC Properties Sdn Bhd 100% 45% TMR ACMV Services Sdn Bhd Healthcare Technical Services (PNG) Limited 100% TMR Koll Sdn Bhd 4 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD Ensuring

Continuity

Damansara Realty Berhad sets its transformation journey by rapidly evolving itself through rigorous and continuous improvement initiatives that aim to foster synergistic cohesion within the Group ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 5 6 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

BOARD OF DIRECTORS

YB DATO’ AHMAD ZAHRI BIN JAMIL Independent Non-Executive Chairman

Dato’ Ahmad Zahri bin Jamil, aged 68, male, a Malaysian, is the Independent Non-Executive Chairman of Damansara Realty Berhad (“Damansara Realty” or the “Group”). He was appointed to the Board of Damansara Realty on 22 August 2014. Dato’ Ahmad Zahri served as a Director of Yayasan Pelajaran Johor from 2004 to 2013 and was a Director of Johor Corporation (“JCorp”) from 2009 to 2013. He was the Chairman of the Executive Committee, Housing, Local Government and Public Amenities of State of Johor from 2008 to 2013. He holds a Bachelor of Arts of History from University Malaya.

He was the Private Secretary to the Menteri Besar of Johor from 1982 to 1986 and subsequently became the Political Secretary at the Prime Minister’s Department from 1986 to 1987. He was also the State Assemblyman of Sri Medan, Parit Sulong, Batu Pahat, Johor from 1999 to 2013.

He holds 20,000 units of ordinary shares in the Damansara Realty. Other than as disclosed, he does not have any family relationship with any director and / or major shareholder of Damansara Realty.

He has not been convicted for any offences for the past 5 years and he had attended 4 out of 6 Board Meetings held during the ﬁ nancial year ended 31 December 2016 (“FY2016”). ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 7

BOARD OF DIRECTORS

YB DATO’ DAING A MALEK BIN DAING A RAHAMAN Executive Vice-Chairman • Chairman of Tender Board Committee

Dato’ Daing A Malek bin Daing A Rahaman, aged 61, male, a Malaysian, was appointed as Executive Vice Chairman on 26 May 2014. He is also the Chairman of the Tender Board Committee of Damansara Realty.

Dato’ Daing A Malek possesses more than 30 years of business experience, namely, in real estate, property development, construction and material supplies. He is the Non-Executive Chairman of Astaka Padu Sdn Bhd, a Bumiputra company, which is currently developing the tallest residential tower in Johor Bahru. He is also the Chairman and Shareholder of SIPP Energy Sdn Bhd which was awarded a contract by the Federal Government to construct, own, operate and maintain the 1,440MW electricity generating power plant in Pasir Gudang, Johor. He is a director in many other private companies, which businesses include logistics, reclamation works, port services and management, advisory and consultancy for development and management of BLT (build, lease and transfer) and government-related projects. He is also a Member of the Johor Council Royal Court.

He holds a Bachelor of Surveying (Property Management) from Universiti Teknologi Malaysia. Prior to venturing into business, he was a Valuation Ofﬁ cer under the Ministry of Finance and attached to Jabatan Penilaian Harta Batu Pahat. He was also a Lecturer at the Survey Faculty at the University Teknologi Malaysia.

He holds indirect interest of 51% equity shareholding in the Group through Seaview Holdings Sdn Bhd. Other than as disclosed, he does not have any family relationship with any director and / or major shareholder of the Group.

He has not been convicted for any offences for the past 5 years and he had attended all Board Meetings of the Group in the FY2016. 8 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

BOARD OF DIRECTORS

PUAN ZAINAH BINTI MUSTAFA YBHG DATO’ MOHD AISOM Senior Independent Non-Executive Director BIN OMAR • Chairman of Board Audit Committee Independent Non-Executive Director • Member of Board Nomination and Remuneration • Chairman of Board Risk Management Committee Committee • Chairman of Board Nomination and Remuneration • Member of Board Risk Management Committee Committee

Zainah binti Mustafa, aged 62, female, a Malaysian, was Dato’ Mohd Aisom bin Omar, aged 60, male, a Malaysian, appointed on the Board of Damansara Realty on 17 was appointed as an Independent Non-Executive Director April 2003. She is a Senior Independent Non-Executive of Damansara Realty on 15 December 2015. He is the Director of Damansara Realty. She is the Chairman of Chairman of Board Risk Management Committee. Board Audit Committee, member of Board Nomination and Remuneration Committee and a member of Board Dato’ Mohd Aisom graduated with a Bachelor’s Degree Risk Management Committee. in Law (LLB Hons) from University of Malaya in 1982. He was a Legal Assistant at Messrs Tahir & Salleh in Johor She graduated from Institut Teknologi MARA (presently Bahru for a one year stint in 1983. In 1984, he ventured known as Universiti Teknologi MARA) and obtained her into the corporate world to join Sri Tenaga Perunding Sdn Association of Chartered Certiﬁ ed Accountants (ACCA) Bhd as the General Manager, Corporate and Legal Affairs. United Kingdom in 1976. She is now a Fellow of He later joined Astaka Group of Companies as the Group Association of Certiﬁ ed Chartered Accountant (FCCA). General Manager, Legal Affairs.

She started her career as an Assistant Senior Auditor in In pursuit of his passion in legal practice, he joined Perbadanan Nasional Berhad in 1977. She joined JCorp in Messrs Zamani Ibrahim, Tarmizan & Co. as a Partner in October 1978 and rose through the ranks to Group Chief June 2004. In 2005, he set up his own legal practice Financial Offi cer before retiring on 31 October 2002. through Messrs Omar Ismail & Co, which was later known as Messrs Omar Ismail, Hazman & Co. She also sits on the board of other listed companies, namely, KPJ Healthcare Berhad, Damansara REIT Dato’ Mohd Aisom is also passionate in the political arena. Managers Sdn Bhd (Al-Àqar KPJ REIT) and Al-’Aqar He was the Committee Member of Biro Perlembagaan Capital Sdn Bhd. Pemuda UMNO Malaysia in 1984. He was also an UMNO Youth Head of Taman Perbadanan Islam branch, Other than as disclosed, she does not have any family Johor Bahru. He was the Committee Member of UMNO relationship with any director and/or major shareholder Bahagian Beruas and a representative of the UMNO of the Group, nor any confl ict of interest with the Group. General Assembly in 2008. He is now the UMNO Branch Chief, Sungai Tuntong, Bahagian Beruas. She has not been convicted for any offences for the past 5 years and she had attended all Board Meetings of the Other than as disclosed, he does not have any family Company during the FY2016. relationship with any director and / or major shareholder of the Group, nor any confl ict of interest with the Group.

He has not been convicted for any offences for the past 5 years and he had attended all Board Meetings held during the FY2016. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 9

BOARD OF DIRECTORS

YB DATUK MD OTHMAN TUAN HAJI ABDULLAH BIN HAJI YUSOF BIN MD YUSOF Independent Non-Executive Director Independent Non-Executive Director • Member of Board Audit Committee • Member of Board Nomination and Remuneration Committee Datuk Md Othman bin Haji Yusof, aged 59, male, a • Member of Board Risk Management Committee Malaysian, was appointed as an Independent Non- • Member of Tender Board Committee Executive Director of Damansara Realty on 15 December 2015. Abdullah bin Md. Yusof, aged 50, male, a Malaysian, was appointed as an Independent Non-Executive Director on 6 Datuk Md Othman is a businessman with over 31 years June 2014. He is a member of the Board Audit Committee, of experience in various industries. He is currently the Board Nomination & Remuneration Committee, Board Risk Executive Director of Country Garden Paciﬁ cview Sdn Bhd Management Committee and Tender Board Committee of since 2013. Damansara Realty.

In 2008, he was elected as the Assemblyman for Kukup, He holds a Bachelor of Arts (Hons) in History from Tanjung Piai. During his term of service, he had contributed University Malaya in 1989 and holds a Certificate of enormously to improve the well-being of the people within Company Secretarial from Institut Usahawan Bumiputera. his constituency. He is the Chairman of Polytax and Accounting Services, Other than as disclosed, he does not have any family which provide Company Secretarial and Business relationship with any director and / or major shareholder Consultancy since 2004. He was a member of Majlis of the Group, nor any conﬂ ict of interest with the Group. Bandaraya, Johor Bahru from 2007 until 2014. He is a member of the Jawatankuasa Majlis Usahawan and He has not been convicted for any offences for the past Koperasi Negeri Johor since 2005. He has also served the 5 years and he had attended 5 out of 6 board meetings community as Ketua Penerangan Majlis / Vice President held during the FY2016. Gabungan NGO Melayu Negeri Johor (GABUNG) since 2011, YDP Persatuan Penjaja, Peniaga dan Pengusaha Industri Kecil Melayu, Johor Bahru since 2002, Penceramah dan Penyelia Biro Tatanegara Johor from 1990-2000. He was also the EXCO Pemuda UMNO Malaysia and Ketua Pemuda UMNO Bahagian Pulai from 2004-2008.

Other than as disclosed, he does not have any family relationship with any director and / or major shareholder of the Group, nor any conﬂ ict of interest with the Group. He has not been convicted for any offences for the past 5 years and he had attended 5 out of 6 Board Meetings of the Group in the FY2016. 10 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

BOARD OF DIRECTORS

ENCIK WAN AZMAN BIN ISMAIL ENCIK SHAHRIZAM BIN A SHUKOR Non-Independent Non-Executive Director Independent Non-Executive Director • Member of Tender Board Committee • Member of Board Audit Committee • Member of Board Risk Management Committee Wan Azman bin Ismail, aged 53, male, a Malaysian, was appointed as a Non-Independent Non-Executive Director Shahrizam bin A. Shukor, aged 45, male, a Malaysian, was of Damansara Realty on 6 June 2014. He is also a appointed as an Independent Non-Executive Director of member of Tender Board Committee of Damansara Realty. Damansara Realty on 15 December 2015. He is a member of Board Audit Committee and Board Risk Management He graduated with a BA (Hons) in Accounting and Committee. Financial Analysis, University of Newcastle upon Tyne, United Kingdom in 1988. He started his career under Currently he is the Chief Financial Offi cer of Tresnergy the Corporate Finance Division of Perwira Affi n Merchant Sdn Bhd, an oil and gas company. Bank Berhad from September 1990 to March 1996. He later joined the Corporate Finance Division of BSN He is a Chartered Accountant with the Malaysia Institute Merchant Bank Berhad on March 1999 to July 1999. of Accountants and an Associate member of CPA Australia with 15 years of working experience in auditing, corporate He joined JCorp Group in September 1999 to December and fi nancial management. 2000 and later joined Damansara Realty in January 2001. He was appointed as the Managing Director of Damansara He holds a Bachelor of Accountancy (Honours) from Realty on 1 Feb 2011 and later redesignated as Director. University Putra Malaysia. He started his career at Coopers Later, in June 2014, he joined JCorp as Vice President & Lybrand in 1996 and then joined Azman, Wong Salleh and resigned on 15 February 2017. On 15 February 2017, & Co. until 2002 in the areas of auditing and fi nancial he was appointed Non-Executive Director of Damansara advisory. He then set up his own fi nancial advisory fi rm REIT Managers Sdn Bhd. through Westland Consulting Sdn Bhd and still operates until now. Other than as disclosed, he does not have any family relationship with any director and / or major shareholder Other than as disclosed, he does not have any family of the Group, nor any confl ict of interest with the Group. relationship with any director and / or major shareholder of the Group, nor any confl ict of interest with the Group. He has not been convicted for any offences for the past 5 years and he had attended all board meetings held during He has not been convicted for any offences for the past 5 the FY2016. years and he had attended all board meetings held during the FY2016. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 11

KEY MANAGEMENT

BRIAN ISKANDAR ZULKARIM Group Chief Executive Ofﬁ cer • Member of Tender Board Committee

Brian Iskandar Zulkarim, 43, male, a Malaysian, was From 2009 to 2011, he held the post of General Manager appointed as the Group Chief Executive Officer of (Overseas Ventures) for MAHB. He was responsible for Damansara Realty on 1 September 2016. monitoring the management of MAHB’s international airport investments in India, Maldives and Turkey; in His experience and expertise covers the areas of addition to spearheading and participating in airport Corporate Planning & Transformation, Asset & Facilities acquisition bids around the world. Management, Overseas Investments & International Business, Airport Planning & Operations, Corporate He had also served as the CEO of a multimodal international Restructuring Consultancy and Project Management. logistics company prior to joining MAHB in 2009. Before that, he held the post of Regional Director (Asia) for an Previously he was the General Manager - Transformation international company specializing in Homeland Security Management of Malaysia Airports Holdings Berhad equipment and drug detection & identifi cation systems. (“MAHB”). He started his professional career in 1997 as a Maintenance Prior to that, from September 2011 to September 2015, and Consultant Engineer in the USA. He has a Master Brian was the CEO of MAHB’s facilities management in Business Administration and a Bachelor of Science subsidiary, Urusan Teknologi Wawasan Sdn. Bhd. (“UTW’). Degree in Mechanical Engineering. During his tenure as CEO, UTW transformed from a loss EBITDA position to becoming one of the most profi table Other than as disclosed, he does not have any family Facilities Management company in Malaysia and ranked relationship with any director and / or major shareholder top 3 in the country’s industry market share – with CAGR of the Group, nor any confl ict of interest with the Group. of 217% (2011 to 2015). He has not been convicted for any offences for the past 5 years. 12 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

KEY MANAGEMENT

ZAIN AZRAI ZAINUDDIN Group Chief Financial Ofﬁ cer

Zain Azrai Zainuddin, 44, male, a Malaysian, was appointed as the Group Chief Financial Ofﬁ cer (“Group CFO”) of Damansara Realty on 1 September 2016. He has 22 years of experience in auditing, consultancy and ﬁ nance.

He holds a Bachelor of Business (Accounting) from Monash University, Melbourne, Australia. He started his career with Deloitte Kassim Chan in Malaysia from 1995 to 2007. From 2000 until 2002, he was attached at Deloitte & Touche in New Jersey, USA.

He was also attached as a consultant in Transaction Services Department of Pricewaterhouse Coopers Advisory Services Sdn Bhd from 2007 to 2011. From 2011 to 2012, he was the Assistant Vice President in Investment Banking Division with the Asian Finance Bank Berhad.

He was appointed as the Vice President of UDA Holdings Berhad (“UDA”) in Finance Department and later promoted to Senior Vice President heading UDA’s Group Finance in 2015 before joining Damansara Realty.

He is a member of CPA Australian and Malaysian Institute of Accountants (MIA).

WAN RAZMAH WAN ABD RAHMAN Company Secretary

Wan Razmah Wan Abd Rahman, 48, female, a Malaysian, was appointed as the Company Secretary of Damansara Realty on 15 March 2017.

She is a Chartered Secretary of the Institute of Chartered Secretaries and Administrators (ICSA) UK and a member of the Malaysian Institute and Chartered Secretaries and Administrators (MAICSA) since 1996.

Her career in a public listed company began in 1996 when she joined Amcorp Properties Berhad as an Assistant Company Secretary and thereafter joined Idaman Unggul Berhad as the Company Secretary and Head of Human Resources.

In 2014, she joined MAHB as Senior Manager, Company Secretarial Division. In 2016, she was appointed as the Corporate Affairs Manager at Tune Group Sdn Bhd.

Other than as disclosed, she does not have any family relationship with any director and / or major shareholder of the Group, nor any conﬂ ict of interest with the Group. She has not been convicted for any offences for the past 5 years. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 13

KEY MANAGEMENT

LOH ZHI SING General Manager, Property & Land Development

Loh Zhi Sing, 43, male, a Malaysian, was appointed as General Manager of Property & Land Development Division for Damansara Realty since 7 November 2016.

He has been in Property Development and Construction industry for the past 20 years. He holds a Bachelor’s Degree in Civil Engineering from Universiti Teknologi Malaysia (UTM).

ELIZA CHE MALIK General Manager, Corporate Services

Eliza Che Malik, 43, female, a Malaysian, was appointed as General Manager of Corporate Services for Damansara Realty since 15 December 2016.

She has experience in Corporate Services for more than 20 years especially on Rewards, Performance, Talents, Succession & Development.

She holds a Bachelor’s Degree in Computer & Management Science from the University of Warwick, United Kingdom.

Having served in various Government Linked Companies and industries including Telekom Malaysia, RHB Bank and Time dotCom at Senior Managerial role, Eliza is well rounded and is experienced in the area of transformation for large companies.

GROUP MANAGEMENT

1 2 3 456 7 8 9

1. SYED ZULKIFLI BIN SYED ISMAIL 6. OSNAINI BINTI OSMAN Head of Corporate Planning and Transformation Head of Accounting and Finance

2. SUHANA BINTI MOKHTAR 7. ZALINA BINTI MAAT Head of Legal Head of Treasury

3. EIKMAR RIZAL BIN MOHD RIPIN 8. DAENG FATIN ZULAIKA BINTI DAING A MALEK Head of Corporate Communication Head of Risk Management

4. SAFIAH BINTI ADNAN 9. AZULLAIHA BINTI ABDULLAH Head of Human Resource Head of Internal Audit

5. ERLINA BINTI AHAMAD Head of Procurement ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 15

SUBSIDIARY MANAGEMENT

1 2 3 4

1. ABDUL JALIL BIN PANDI Managing Director of Metro Parking (Malaysia) Sdn Bhd

2. SHAMSUL BIN MOHD SALLEH Managing Director of TMR Urusharta (M) Sdn Bhd

3. HAJI AZHARI BIN ABDUL HAMID Managing Director of HC Duraclean Sdn Bhd

4. HAJI YAHAYA BIN HASSAN Managing Director of Healthcare Technical Services Sdn Bhd 16 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD Crafting Creativity

Damansara Realty Berhad is determined to inculcate creativity and innovation through nurturing a dynamic work culture within the Group ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 17 18 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

CHAIRMAN’S STATEMENT

YB DATO’ AHMAD ZAHRI BIN JAMIL Independent Non-Executive Chairman ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 19

CHAIRMAN’S STATEMENT

DEAR SHAREHOLDERS, On behalf of the Board of Directors (the “Board”), I am pleased to present the Annual Report and the Audited Financial Statements of Damansara Realty for the FY2016.

The year under review saw the Group executed several The Group has established an Executive Committee (“EXCO”) strategic actions in order to accelerate corporate recovery and on 22 November 2016 which comprises the Group CEO, enhance shareholder value, such as efforts to increase the Group CFO, Group GMs and subsidiary MDs to collectively Group’s project base, leverage synergies, enhance operational implement the Group’s restructuring plan. efﬁ ciencies and bolster corporate governance. The Board is mindful that much more remains to be done In a very eventful year, the management team conducted a to realise Damansara Realty’s full potential. While the Board rigorous corporate review led by the new Group CEO Encik recognizes the challenges that lie ahead, the Board retains its Brian Iskandar bin Zulkarim and had put in place a Strategic utmost faith in the ability of the management team and the Restructuring Plan (“SRP”) exercise to drive its transformation. strategic initiatives to be executed. The Board believes that I am confident that we have begun a new chapter in recent signiﬁ cant project wins, together with expected higher transforming Damansara Realty to a stronger corporation able revenue contribution over both medium and long terms will to unlock its combined strengths and capabilities to enhance position the Group to seize new opportunities and embark on shareholder value. a new phase of growth.

The Group’s ﬁ nancial performance in FY2016 must be viewed I wish to express my deepest gratitude to all stakeholders for in the context of the seeds we have sown. In a challenging their continuous support. I believe the Group has emerged year amidst economic and geopolitical uncertainty, the revenue from a difﬁ cult year, and is cautiously optimistic as it lays the across our subsidiaries declined to RM183.6 million in FY2016 groundwork to accelerate our corporate recovery. Recognition from RM207.1 million in FY2015. Gross profit declined to should also be given to fellow Board members for their RM19.3 million from RM47.3 million over the comparative guidance, support and advice. periods as a result of higher operating expenses and costs of sales in FY2016. In spite of these, the Board is hopeful that the Finally, on behalf of the Board, I would like to extend transformation plan which focuses on growing and sustaining my heartfelt appreciation to the management team and medium to long term revenue streams, will bear fruit. employees for their dedication and commitment to bring the Group forward. On 2 June 2016, the Group announced that it will issue redeemable convertible notes to raise up to RM150 million to seize and execute property development opportunities in Thank you. Malaysia. The Group intends to use the proceeds to develop projects in Putrajaya, Kuantan and Johor Bahru. I believe this will be a major catalyst for growth that will strengthen our YB Dato’ Ahmad Zahri Bin Jamil balance sheet and boost trading liquidity. Chairman

There had been many new appointments across the Group at various levels. As part of the Board’s commitment to refresh itself, both Dato’ Sohaimi bin Shahadan and the late Dato’ Ar. Wan Mohammad Khair-il Anuar bin Wan Ahmad had stepped down from the Board as Independent and Non-Executive Directors. I thank them for their contributions.

The appointment of Encik Brian Iskandar bin Zulkarim as the Group CEO on 1 September 2016 will allow the Group to tap his corporate transformation expertise as it embarks on a new chapter. On 1 September 2016, Encik Zain Azrai bin Zainnuddin was appointed as the Group CFO. 20 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

EXECUTIVE VICE CHAIRMAN’S MESSAGE

The FY2016 has been a busy one with significant developments especially for our property development division.

One of the most signiﬁ cant highlights is the proposed joint-venture with Hong Kong-listed Country Garden Holdings Company Limited (“Country Garden”), one of China’s largest property developers.

This major milestone will play a signiﬁ cant role in the Group’s efforts to accelerate its property development business in various parts of Malaysia. Although sentiments about the property market remain cautious, we are optimistic that investors will be able to discern the quality and differentiating attributes of the Group’s projects.

YB DATO’ DAING A MALEK BIN DAING A RAHAMAN Executive Vice Chairman ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 21

EXECUTIVE VICE CHAIRMAN’S MESSAGE

Subsequent to FY2016, Central Park held its grand opening in March 2017 that attracted many homebuyers and potential investors.

The Group is also developing a 500-acre land parcel in Kuantan known as Bandar Damansara Kuantan, which has been rebranded to Damansara Hills Kuantan.

The luxurious development, which will be completed by the ﬁ nancial ending 31 December 2018 (“FY2018”), boasts 49 spacious and private terraced houses. It is uniquely situated next to an expansive park and is just 19 kilometres from Kuantan city centre.

As announced in September 2016, the Group, via a joint venture, won a RM124 million contract to provide facilities For the past few years in Johor Bahru, there has been a management and catering service to Petronas’ Refinery mismatch of supply and demand as most homes built in the and Petrochemical Integrated Development (“Rapid”) project urban areas are catered for the high-end market. We are going in Pengerang, Johor. This underscores the strength of our to amend this by providing affordable homes to Malaysians. facilities management services division and we are proud to play a part in the largest integrated refi nery and petrochemical On 14 October 2016, the Group announced the formation of hub in the region. a joint-venture with Country Garden, to develop a 53-acre freehold land parcel in Johor Bahru into a mega integrated township known as Central Park. The Group will hold A NEW ERA 30%-stake in DAC Properties Sdn Bhd with the remaining 70% held by Hong Kong-listed Country Garden. Damansara Realty is simultaneously scaling up the size and scope of its property development projects while building Development is expected to commence in the fi rst half of the up its capabilities in integrated facilities management. Under fi nancial year ending 2017 (“FY2017”) and will span over eight the leadership of Encik Brian Iskandar bin Zulkarim, our new years. The integrated township development, located in the Group CEO, major actions have been executed over the past Tebrau district and 5 kilometres to the north-west of Johor few months which will yield positive results in the near future. Bahru city centre, will comprise of commercial shop lots and Through the disciplined execution of our strategies, we will amenities, and affordable residential units targeted at young strive to return to profi tability. genuine buyers.

In Johor, huge development projects and infrastructure works APPRECIATION have been announced, such as the Johor-Bahru-Singapore I would like to extend my utmost gratitude to our business Rapid Transfer System link and the Kuala Lumpur-Singapore partners, fi nancial associates, Federal and State Government High Speed Rail. These will contribute to a major enhancement Agencies and Regulatory Authorities for your cooperation and of infrastructure in this region and raise the profile as a continuous support over the past year. preferred location for residents, businesses and industries. Thank you to all our shareholders and investors for their trust. Our partnership with Country Garden represents a signifi cant Last but not least, I would like to thank the Board members, opportunity for the Group to execute a large-scale project management and employees for their commitment and all their alongside one of China’s most reputable developers. It is a hard work. testament to the strong confi dence in our ability to implement and complete a development of such scale. Together, we will continue to achieve excellence in the coming years. I look forward to another exciting year ahead with all I believe Central Park will play a crucial role to accelerate of you. the Group’s corporate growth. The execution of the various agreements between JCorp, Country Garden and Damansara Realty will also strengthen our balance sheet. I foresee the partnership to generate a steady and signifi cant income over YB Dato’ Daing A Malek bin Daing A Rahaman the next few years. Executive Vice Chairman

22 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

GROUP CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS

The year in review has seen the Group executed a series of strategic initiatives to facilitate corporate recovery and enhance shareholder value. Despite the uncertain economic backdrop and geopolitical challenges, we have demonstrated resilience and secured major contract wins as we embark on a strategic restructuring plan.

BRIAN ISKANDAR BIN ZULKARIM Group Chief Executive Ofﬁ cer ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 23

GROUP CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS

STRATEGIC RESTRUCTURING PLAN Since my appointment as the Group CEO in September 2016, the management team under my leadership has put in tremendous efforts to identify issues and challenges, perform business analysis as well as introduce the Strategic Restructuring Plan (“SRP”).

Changing the Group’s direction successfully requires detailed analysis of all our businesses followed by dedication and persistence to ensure proper execution. Strategic changes in business direction with prudent ﬁ nancial management to prioritise immediate initiatives were made. This was done through a transformation plan comprising ‘diagnostic’, ‘prescription’ and ‘health-plan’ phases which was presented to and approved by the Board in November 2016. Such transformation plans typically take 100 days, but our team worked quickly to formulate it in only 60.

To return to proﬁ tability, signiﬁ cant changes have to be made. In the coming months, the focus will be to build a strong foundation for growth. As Damansara Realty operates in various competitive industries, there is a need for us to constantly evolve. On that note, we introduced the SRP and it is envisioned to be the catalyst to propel the Group forward. With utmost discipline, we set internal goals for the team that can be measured in various periods-ranging from immediate quick wins to longer term initiatives and action plans.

The SRP identiﬁ es 8 key transformation drivers which include: 1. Upholding Governance 5. Enhancing Business Acumen 2. Raising Leadership Competency 6. Rebuilding Reputation 3. Setting Effective Performance Measures 7. Revamping Organization Structure 4. Creation of a Strategic Business Plan 8. Ensuring Effective Cash Flow Management (including granular level action plans)

As part of the strategy, we have begun to centralise various management and operational functions – including procurement, ﬁ nance and human resources – with a view to improve Group-wide cost management and standardize business processes. Recognising the need of a strong corporate headquarter, we have established new divisions such as Corporate Planning & Transformation, Risk Management and Corporate Communication. These divisions will allow us to better monitor processes holistically as we raise the proﬁ le of the Damansara Realty brand, leveraging on synergies between business units. 24 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

GROUP CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS

PROPERTY DEVELOPMENT The current challenges faced by Malaysia’s property The Central Park site is part of a larger 63-acre land parcel market are well known. These include high construction (“TDA Land”) that the Group will acquire for RM141.53 costs, Government cooling measures, as well as weak million, following a development rights agreement signed consumer sentiments. Despite these, the Group’s property in 2002 and 2003 with JCorp, DAC Properties will pay division has made signifi cant headway. RM130.3 million to JCorp for the 53-acre site. Separately, the Group will acquire from JCorp the remaining 10 acres On 14 October 2016, the Group announced that it would of TDA Land, which comprises completed shop offi ces form a joint-venture with Country Garden, to develop and undeveloped land, for RM11.23 million. a 53-acre freehold land parcel in Johor Bahru into an integrated township known as Central Park and has by The Group is developing 49 residential units on a project been approved by the Shareholders at the Extraordinary known as Damansara Hills 1 – which sits on a portion General Meeting held on the 11 April 2017. of a 500-acre land parcel in Kuantan. We launched our showrooms in April 2017 and expect revenue contribution The joint-venture, DAC Properties Sdn Bhd, is 30% held from this project to kick in commencing FY2017. by the Group’s wholly-owned subsidiary and 70% held by Hong Kong-listed Country Garden. This partnership with Damansara Aliff Square, located in Tampoi, comprises a one of China’s largest developers will elevate the profi le of total of 39 multi-storey shop lots. We have sold 22 units Damansara Realty and enable us to showcase our abilities to date and expect to recognise sales from the remaining on a bigger scale. units in FY2017.

INTEGRATED FACILITIES MANAGEMENT (“IFM”) Under the IFM business, we now offer planning, development, maintenance, operation, car park solutions and management of assets, through our subsidiaries, TMR Urusharta (M) Sdn Bhd (“TMR”), HC Duraclean Sdn Bhd (“HCD”) and Metro Parking (M) Sdn Bhd (“Metro Parking”).

This strategic shift is intended to create sharper focus and better positions for Damansara Realty to capture the increasing number of clients who prefer to deal with a single service provider. In addition, we will be able to leverage synergies and increase opportunities across our businesses.

TMR and HCD have grown in the past few years to Metro Parking continues to position itself as a premier evolve into professional service providers that manage car park operator across Asia Pacific with over 200 over 10 million square feet of property and assets for car parks comprising of 60,000 parking bays under the the Government as well as private and government- management in Malaysia, Singapore and Philippines. linked companies throughout Malaysia. To ensure Going forward, Metro Parking will progressively roll out global standards are upheld, various subsidiaries have increased automation for its car parks, even as it moves received certiﬁ cations such as ISO9001, ISO14001 and towards managing its own car park assets. Metro Parking OHSAS18001. also intends to enter into collaborations with public transport providers to further expand its market share. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 25

GROUP CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS

We are proud to state that our clients include household contributed RM64.7 million in revenue, accounting for 35.3% names such as Petronas, JCorp, Malaysia Airports of total revenue. Revenue from the property development Holdings Berhad, Permodalan Nasional Berhad and segment decreased to RM3.8 million accounting for 2.1% Telekom Malaysia Berhad. of total revenue, due largely to lower contributions from its Aliff Square 1 development – 3 units were sold in FY2016, Underscoring our proven track record and strength of while 18 units were sold in FY2015, as the project was our facilities management offerings, the Group’s joint completed in FY2016. venture with L.C. Catering Sdn Bhd, was awarded a RM124.0 million contract to provide facilities management The Group reported a net loss attributable to shareholders and catering services to Rapid. As announced on 26 of RM26.8 million in FY2016 from RM4.4 million in FY2015. September 2016, the contract covers general cleaning, The loss in FY2016 included the following: pest control, landscaping, mechanical & electrical and civil & structural services for the temporary executive village Item RM million and management office from 1 November 2016. Most Non-recurring interest expenses in relation 9.2 importantly, this joint venture opens up the opportunity to the unwinding of an amount due to a for us to be involved in the food and beverage industry. trade payable The 38-month contract will contribute to Group’s revenue Recognition of construction cost due to the 8.9 until FY2019. commencement of the Perumahan Penjawat Awam 1 Malaysia Project (“PPA1M”) As announced on 22 April 2016, the Group also won a Write-back payables (11.8) RM6.9 million contract from the Ministry of Health Malaysia One-off provision for doubtful debts and 2.7 to provide cleaning services for Health Departments in the receivables Federal Territory Kuala Lumpur and Putrajaya for three years commencing 1 May 2016. Write-off for property, plant and equipment 2.2 Total 11.2 We are confident that the combined expertise across our businesses will help the Group establish itself as Excluding the items stated in the above table, the Group the preferred asset and facilities management solutions would have reported a net loss attributable to shareholders provider in the region. of RM 0.9 million in FY2016.

HEALTHCARE CONSULTANCY SENIOR LEADERSHIP APPOINTMENTS Healthcare Technical Services Sdn Bhd (“HTS”) operates As part of the Group’s SRP plan and to strengthen the in a niche healthcare consultancy segment that includes management bench, we have made the following senior hospital planning & design, technical advisory for appointments: mechanical & electrical services, hospital equipment and - Loh Zhi Sing as General Manager of Property & Land logistics, amongst others. Since its establishment in Development Division; 1995, HTS has grown rapidly to become a global leader in the industry. It has established a proven track record - Eliza binti Che Malik as General Manager of Corporate of having consulted and built over 30 hospitals including Services; in countries such as Poland, Saudi Arabia, Bangladesh, - Shamsul bin Mohd Salleh who was re-designated as Indonesia, Laos and Papua New Guinea. Managing Director of TMR; - Azua binti Kamaruddin as Executive Director of TMR;

FINANCIAL REVIEW - Syed Zulkiﬂ i bin Syed Ismail as Head of Corporate Planning and Transformation; Our scorecard for FY2016 must be seen against the various initiatives which we have executed. - Eikmar Rizal bin Ripin as Head of Corporate Communications; For FY2016, the Group’s revenue decreased to RM183.6 - Suhana binti Mokhtar as Head of Legal; million from RM207.1 million a year ago due to lower - Daeng Fatin Zulaika binti Daing A Malek as Head of contributions across all segments. The parking segment, Risk Management; which is the Group’s main revenue driver has contributed 62.6% of the total sales, saw revenue decreasing 3.6% to - Saﬁ ah binti Adnan as Head of Human Resource; and RM115.0 million in FY2016. The property services segment - Erlina binti Ahamad as Head of Procurement. 26 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

GROUP CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS

OUTLOOK

Damansara Realty’s core business synergy ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 27

GROUP CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS

With major internal restructuring and business developments seeded in FY2016, the Group now has a stronger foundation for growth. Further, the contributions from various projects and the launch of major corporate action plans, allows the Group to remain optimistic about the business outlook in FY2017.

Damansara Realty will continue to explore business opportunities, improve internal efﬁ ciencies with a view to achieve proﬁ tability and enhance shareholder value in the near future.

APPRECIATION I would like to take this opportunity to extend my sincere appreciation to the Chairman, Executive Vice Chairman, and all Directors for their invaluable counsel. To all our stakeholders, business associates, regulatory authorities, State and Federal Government bodies, thank you for your continuous support.

As our people are important to us, I would like to take this chance to express my gratitude to all the employees for their contribution for the growth of the Group. We look forward to better years ahead as we progress on our path to recovery.

Brian Iskandar bin Zulkarim Group Chief Executive Ofﬁ cer 28 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

CascadingGROUP CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS CHAIRMAN Credibility

Like the metamorphosis into a butterﬂ y, the core of Damansara Realty Berhad’s transformation is to enhance its reputation and establish credibility; this effect will ﬂ ow through the bottom-line impacting the Group positively ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 29 30 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

MANAGEMENT DISCUSSION AND ANALYSIS

INTRODUCTION Damansara Realty began its operations in the 60’s as a renowned property developer and asset management company. Since then, it has evolved to a diversiﬁ ed group of companies with the addition of various facilities and asset management subsidiaries in 2012. The Group’s key subsidiaries can be categorized into 3 major business segments; Property and Land Development, Integrated Facilities Management (“IFM”) as well as Project Management & Consultancy Services.

Under the Property and Land Development segment, the Group’s key subsidiaries are Damansara Realty Johor Sdn Bhd (“DRJ”) and Damansara Realty Pahang Sdn Bhd (“DRP”); while for IFM, the key subsidiaries are TMR which focuses on engineering related facilities management; Metro Parking which focuses on parking management and consultancy services, as well as HCD which focuses on cleaning and hygiene services. In addition, the Group also consists of project management and consultancy services (construction & infrasturcture development) spearheaded by HTS.

2016 FINANCIAL PERFORMANCE The Group had undergone a series of challenges in FY2016 which includes global economic uncertainty, currency depreciation, increase in direct and indirect costs due to more stringent statutory requirements (i.e. minimum wages, GST, etc) and tougher competition within our operating industries. By and large, the above combined challenges had somewhat impacted our FY2016 ﬁ nancial performance.

The Group had recorded a net Loss After Tax (“LAT”) of RM27.7 mil for the period of twelve months ended 31st December 2016 as compared to a net LAT of RM2.8 mil in the previous year. The increase in LAT was mainly due to exceptional items amounting to RM16.2 million that occurred in FY2016 and will not recur in FY2017 and includes discounted cashﬂ ow, property, plant and equipment written off and provision for doubtful debt.

In addition to the above, the Group recorded a lower revenue of RM183.6 million in FY2016 as compared to RM207.1 million a year ago which is primarily attributable to lower contributions from its existing businesses. The Group also booked a higher Total Cost of RM222.7 million in FY2016 as compared to RM212.7 million in FY2015, mainly due to the increase in expenses and direct costs, inclusive of RM8.9 million construction costs for PPA1M in FY2016.

OVERVIEW OF PROPERTY & LAND DEVELOPMENT SEGMENT Damansara Realty’s Property Division is currently focusing on 2 key projects; the Damansara Hills (“DH1”) and Damansara Aliff Square (“AS1” & “AS2”). DH1 is a medium to high-end housing development project with a total of 49 units of Terrace and Semi-Detached houses built in prime area in Kuantan, Pahang. The development is just minutes away from East Coast Highway, Bandar Indera Mahkota and Teluk Cempedak, one of the key attractions in Kuantan. DH1 aims to provide a safe and exciting living experience with 24-hour security surveillance to ensure the safety of its residents. In addition, DH1 also keeps residents close to nature, providing them a healthy and active living environment.

Show Units of Central Park, Johor Bahru ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 31

MANAGEMENT DISCUSSION AND ANALYSIS

Show Units of Central Park, Johor Bahru

FUTURE PROSPECTS OF PROPERTY DEVELOPMENT The AS1 and AS2 projects are part of the development The Group is expecting better sales in FY2017 due to of a 53-acre freehold land parcel in Johor Bahru which the recovery of Malaysia’s economy which is expected to is strategically located in the bustling Tampoi commercial improve consumer’s buying power and sentiment towards zone and a short distance from Johor Bahru City Centre, the property market in the country. Pasir Gudang Port and PTP Port, in the heart of Iskandar Malaysia. The Aliff Square project consists of units ranging The increase in sales would also be supported by continuous from 4,814 square feet up to 9,881 square feet with excellent rapid development in areas surrounding the Group’s projects accessibility and unique eye-catching design surrounded by i.e. Central Park in Johor Bahru which would increase the restaurants, banks, and various education institutions. There value of its properties over-time where the Group is targeting are currently 16 units of 3 and 4 storey shops or offi ces predominantly local buyers. The Group has also formulated which are expected to be completed by 3rd Quarter 2017. future plans to continue the development of Damansara Hills 2, a second phase development on its land in Kuantan. The Property Division contributed a total of RM3.8 million to the Group’s revenue in FY2016 as compared to RM16.4 Among the potential challenges identifi ed for this segment million in FY2015 due to lower number of units sold (3 units is the Group’s capability to secure fi nancing for large scale in FY2016 vs 18 units in FY2015). The Property Division development projects due to stricter requirements set by recorded a net loss of RM17.2 million mainly due to RM9.2 local fi nancial institutions. million fi nancing cost and RM8.9 million PPA1M development cost respectively. 32 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

MANAGEMENT DISCUSSION AND ANALYSIS

Despite its strong confidence in market recovery in the OVERVIEW OF PROJECT MANAGEMENT & CONSULTANCY coming years, the Group shall continue to enhance its SERVICES SEGMENT marketing strategies including social media marketing to create traction for its projects and improving the sales of The Group’s Project Management & Consultancy services properties. are spearheaded by HTS which has expertise in planning and development of hospitals & healthcare specialist centers throughout the country. In addition, the Group also provides OVERVIEW OF IFM SEGMENT Project Management & Consultancy services in the overall The Group’s IFM segment mainly evolved around its key construction process inclusive of coordination & facilitation facilities management subsidiaries namely TMR, HCD and between the clients, contractors and consultants. MPM where each gave specifi c prominence on individual company’s expertise such as engineering related services, The Group is also equipped with the right capabilities in hygiene and cleaning services and parking management energy management, medical technology as well as technical services. These services which will be molded into IFM and construction advisory services where it provides a service offering, shall provide the Group with better mixture of complete services to clients. opportunities to capture the increasing demands from clients who prefer to deal with a single service provider. Key projects that are currently in the Group’s pipeline include KPJ Damansara Specialist, KPJ Ampang Puteri, Despite the above, the Group had only managed to MSU Medical Centre, Seremban Specialist Hospital, Johor emphasize on synergistic relationship late 2016 which did Specialist Hospital, UITM Hospital and Gerehu Hospital in not have much impact to the Group’s FY2016 performance. Papua New Guinea. Nonetheless, it still managed to secure high value contracts from well-known organization which include Petronas, JCorp, Malaysia Airports Holdings Berhad, Permodalan FUTURE PROSPECT OF PROJECT MANAGEMENT & Nasional Berhad and Telekom Malaysia Berhad throughout CONSULTANCY SERVICES SEGMENT the year. In general, the IFM segment contributed a total In the near future, Damansara Realty envisions to enhance of RM179.8 million to the Group’s revenue in FY2016 as its project management and consultancy services where it compared to RM190.7 million in FY2015 due to expiry of will explore opportunities in general construction sectors several signifi cant service contracts hence attributable to the where emphasis shall be given to the Group’s Property negative Gross Profi t in FY2016. Development in various locations including projects in Damansara Hills and Damansara Aliff Square.

FUTURE PROSPECT OF IFM SEGMENT The Group shall also focus on diversifying income In FY2017, the Group’s IFM segment shall focus more streams from other consultancy activities such as Energy on leveraging each other’s expertise where the Group will Management, Medical Technology (MEQ) as well as Technical continue to explore business opportunities in their existing & Construction advisory. contracts especially those in Rapid. Damansara Realty is also keen in exploring new business Amongst others, the Group will re-package its service offerings opportunities in Healthcare industry such as providing to include F&B, catering, comprehensive maintenance and comprehensive consultancy services for the clients via Build- operations, housekeeping and cleaning services, security Equip-Transfer (BET) model for future hospital development. services, medical facility services, transportation and logistics services and other related consultancy services for its clients. This shall be in-tandem with the Group’s Vision GROUP’S STRATEGIC RESTRUCTURING PLAN (“SRP”) statement which is to be the ‘Preferred Assets and Facility In Q3 FY2016, the Group had embarked on the SRP to Management Solutions Provider’. steer its businesses back to proﬁ tability. SRP’s fundamental focus now is to strengthen the foundation of its businesses The Group shall also enhance its focus on product and by leveraging on synergies between its subsidiaries in efforts services mix including the development of centralized to enrich service offerings to the client. monitoring and billing system which aims to improve the Group’s efﬁ ciency in managing the car park business. In The Group’s SRP initiatives are part of a deliberate and addition, Damansara Realty is currently developing a smart clear strategic plan in realizing its Vision which is to become application to allow users to pre-book car park bays via the Preferred Asset and Facilities Management Solutions smartphones at the parking facilities. Provider. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 33

MANAGEMENT DISCUSSION AND ANALYSIS

The SRP is segregated into 2 phases with specifi c targets. The Group had also implemented the Group Approval Limits Phase-1 of the SRP is targeted to strengthen the very of Authority (“GALOA”) in its efforts to enhance corporate foundation of Damansara Realty’s businesses or in short, governance and establish effi cient processes in the Group. to solidify its business DNA. Phase-2 of the SRP shall have In addition, the Group’s overall enhancement of effectiveness more focus on the Group’s future business plans and targets. via centralization of key support services such as Procurement, Legal, Human Resources and Finance services. In the effort to transform by the Group, it is crucial to Centralization aims to prevent unnecessary duplication of understand the business where the new management team support-function at subsidiaries hence promoting cost- conducted a plethora of analysis which includes analyzing savings and standardization of processes company-wide. current market positions of each subsidiary, its strengths and Other initiatives currently in place also include implementation weaknesses, the organization structure, assessing leadership of effective performance measurement, creation of investor competencies as well as comprehension of current business relations plan, creation of key divisions such as Corporate challenges. Subsequently, the Group has identified key Planning and Corporate Communication, enhancing cash challenges faced by the Group which includes identifying fl ow management and creation of a sustainable business symptoms and detail analysis of the root-causes which plan throughout the Group. were then categorized into several groups to allow effective hypothesis generation for solutions. Further, the Group has The expected impact from implementation of SRP would be: identifi ed possible initiatives, person in charge (champion), a) To enhance synergy between subsidiaries within IFM deadline and expected impact from each initiative. Lastly, businesses where the Group can capitalize on each the Group monitors and reports the progress of these subsidiaries strength and expansion of services to initiatives on regular basis to the Executive Committee existing clientele. (“EXCO”) and Damansara Realty’s Board. b) To improve governance especially on adherence to The Group has identifi ed 8 key transformation drivers which internal processes, GALOA as well as compliance to includes: Bursa and regulatory requirements for public listed 1. Upholding governance company. 2. Raising leadership competencies c) To enhance internal efficiency via implementation 3. Setting effective performance measures of centralized shared services for Finance, HR and 4. Creation of a Strategic Business Plan encompassing Procurement (support services at HQ). Once processes granular level action plans are centralized, subsidiaries can focus on operational 5. Enhancing business acumen effi ciency and productivity.

6. Rebuilding reputation d) To ensure business profi tability via effective tracking 7. Revamping organization structure and monitoring of Key Performance Indicators, project 8. Ensuring effective cash fl ow management progress, group fi nancial performance through EXCO.

In totality, the Group has implemented over 50 initiatives In summary, the SRP provides clearer path for the Group to address the above key transformation drivers which towards business recovery. Internal weaknesses that was further refined to granular level action plans and threatened the Group’s resilience and strength have been presented to the management for continuous monitoring identifi ed and various initiatives to turn the business around and improvements. Amongst the high impact initiatives have been put in place. Damansara Realty believes the SRP implemented is the formation of EXCO, being the highest will provide a fi rm foundation to bring the Group back to decision making Committee after Damansara Realty’s Board. profi tability and at the same time prepares the Group to EXCO is chaired by the Group CEO on a monthly basis navigate through the ever growing challenging industries the with members being subsidiaries’ Managing Directors and Group is currently operating in. Group General Managers. EXCO is formed to deliberate on matters related to the business inclusive of the Group’s year- to-date fi nancial performance, elevating synergies between subsidiaries and most importantly, to effectively track SRP’s initiatives progress. 34 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

SUSTAINABILITY REPORT

This sustainability report reﬂ ects Damansara Realty’s commitment to the economy, environment and social responsibility for all stakeholders. As Damansara Realty heads towards a new direction, it understands that the incorporation of environmental protection, social obligation and good governance are essential. The Group CEO leads the sustainability plan in 2017 through the members of the EXCO, who will act as the Sustainability Council. The sustainability initiatives will be presented during the board meeting for reviews.

Certiﬁ cations:

HEALTH AND SAFETY Each subsidiary’s health and safety practices are in Damansara Realty believes that an effective workforce line with the industry standards. The subsidiaries will is essential to the success of an organization. Effective continue their initiatives to inculcate awareness amongst human resource strategies have been put forth to promote all employees to accept responsibilities in occupational wide communication, transparency and harmony amongst safety and health matters. all employees. Ongoing reviews are carried out by the Group’s Corporate Services to align its HR policies based Trainings and workshops are conducted regularly to on the industry’s best practices. ensure that working environments are in compliance with the rules and regulations. In FY2016, 63 employees had All new employees undergo induction training to make been successfully trained under the National Institute for it possible for them to seamlessly adapt into the new Occupational Safety and Health (NIOSH). working environment. In addition to specific on-job training, a session on the overview of Damansara Realty’s At the construction and maintenance sites, daily businesses, products and services is also provided for safety meetings are conducted to highlight Personal better understanding of the operations. Protective Equipment (PPE), guidelines, good hygiene and housekeeping. It is important to note that construction and The Property Divison regularly carries out training facility areas are prone to mosquito breeding grounds and sessions to enable the marketing team to clearly explain as a precautionary measure, possible breeding areas are to customers the content of the contracts, agreements thoroughly inspected and fogging is carried out monthly. and compliance in the sale and purchase of a property. To satisfy the requirements of the Government Sales TMR has aligned its workplace health and safety standards Tax (“GST”) legislation, the accountants underwent GST- in accordance with OHSAS18001. This certiﬁ cation serves related trainings to equip themselves with the knowledge as a guideline for TMR to monitor and achieve good of tax implementation for products and services. working conditions at all sites as well as to identify health and safety risks. In addition, an employer-employee engagement session is also conducted through a town hall session where both employees and the Group CEO are able interact and EMPLOYEES convey the Damansara Realty’s commitment to employees. Further, engagement during the Group’s Hari Raya Aidilﬁ tri Damansara Realty is committed to its employees’ Open House as well as Management and Staff Family Day satisfaction in both professional and personal levels. It are examples of initiatives conducted to foster greater fashions its career development initiatives to retain and sense of camaraderie amongst the employees. attract bright and talented employees through various career advancement programmes. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 35

SUSTAINABILITY REPORT

QUALITY Customer satisfaction is one of the most important In order to map out a framework to manage environmental aspects of Damansara Realty’s policy. Therefore, it is impact, TMR has obtained an ISO14001 certifi cate.This essential that Damansara Realty continuously upgrades certifi cation is one of the facilities management’s tools to the quality of its product and services. In validating the improve, monitor and assure stakeholders that the working ability to consistently give quality services, both TMR and environment is protected while the company conducts its Metro Parking have been certifi ed with ISO9001. business. In furtherance, all contractors are informed to strictly provide proactive measures to dispose waste in In measuring customer satisfaction holistically, all compliance with environmental laws and regulation. TMR sites are required to conduct monthly customer satisfaction surveys. Surveys are analyzed and the results TMR has employed an energy manager to strategically are presented during the monthly management meeting evaluate the company’s energy and water consumption for review and further action. as well as introduced rainwater harvesting for landscaping and cleaning. In addition, TMR is using battery operated Satisfaction surveys that have been conducted by machines as opposed to fuel. TMR for Telekom Malaysia on Civil, Mechanical and Electrical Maintenance and Housekeeping contracts HTS provides green building services to hospitals and showed improvement in 2016. This was due to pragmatic commercial buildings. Its sustainability management improvement measures implemented after the review in consultancy assists hospitals to plan the development of 2015 was presented to the management. sustainable buildings by promoting eco-friendly material sourcing, introduction of renewable energy by thermal transfer and natural lighting. In addition, HTS also creates TMR CUSTOMER SATISFACTION SURVEY TELEKOM designs and systems to maximise water effi ciency such MALAYSIA CONTRACT as rainwater harvesting, water recovery and use of water saving fi tting and fi xtures. Further, HTS tasked 4 energy Service 2015 Average 2016 Average certifi ed managers to develop, coordinate and implement Contract environmental strategies. CME 89 91 Housekeeping 92 93 COMMUNITY

The building contractors appointed by the Property Division The Group contributes to the community though charity are chosen from the members of Contractors Industry contributions and work opportunities. In 2016, TMR Development Board (CIDB). In addition to this, contractors started its Management Training Programme in strategic are vetted before accreditation into the supply chain. partnership with Skills Johor to provide employment Suppliers’ qualiﬁ cations are strictly inspected against a opportunities and to enhance employability of graduates. checklist including historical records of work quality, timely Graduates are trained for 6 months at various work delivery and regulatory compliance. sites, with the opportunity to be absorbed in the Group’s workforce. Currently, there are 26 trainees under this HTS ﬁ nds that meeting client’s expectation and changes initiative. in regulation are very challenging as customers are getting more knowledgeable and informed, as such, higher quality The Group prioritizes sourcing workforce from the standards are expected. It is proven that being a step ahead is prudent to guarantee customer satisfaction. surrounding areas where the business or site is located. For example, at Rapid, the majority of the workforce is HTS’ Sustainable Site Planning and Management from Johor Bahru, particularly Pengerang. In addition, to Supports Construction Companies monitors its QLASSIC celebrate the spirit of Ramadan, TMR had hosted an Iftar Score which is a method to measure and evaluate the for underprivileged children in Bandar Damansara Hills, workmanship quality of building construction work based Kuantan. on industry standards. The Group adopted a corporate governance statement “Strategies Promoting Sustainability” to address corporate ENVIRONMENT responsibility. Damansara Realty will continuously carve a Damansara Realty adheres to all environmental laws and sustainable path to successfully achieve its vision to be regulations and considers its compliance as a responsibility the “Preferred Asset and Facilities Management Solution to operate in a safe environment. Provider”. 36 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 37

METRO PARKING (MALAYSIA) SDN BHD

Metro Parking started its business in 1991 with the setting Metro Parking has diversified its operations to other up of Metro Parking in Malaysia where its core business segments of the parking industry including; includes car park management and consultancy. Since it • Car park total solutions and consultancy was established, Metro Parking has aggressively expanded its business operations in Singapore, Brunei, Philippines, • Car park design and planning Hong Kong and India. • Supply of car park and safety equipment • Build operate and transfer of car park Metro Parking’s mission is to be the largest car park operator with initial emphasis on Asia’s market and to • Added value service to car park establish operations in other continents. Metro Parking’s clients consist of but are not limited to; Institut As one of the nation’s premier car park management Jantung Negara, MRT Corporation, Permodalan Nasional companies, Metro Parking strives to provide the best Berhad, Malaysia Airport Holdings Berhad, Terengganu services to its clients. With extensive experience Development Corporation and Giant Hypermarket. gained over than 2 decades in the car park industry, 38 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

TMR URUSHARTA (M) SDN BHD

TMR was incorporated in 1997 and its services adhere to a series of TMR Global Standards issued by Bureau Veritas to ensure that TMR’s Global Standards uphold high level technologies, products and systems, being TMR’s commitment to excellence.

TMR offers facilities management services with a main focus on facilities and asset management services, including; • Project Management • Mechanical & Electrical • Utility Management • Civil & Structural • Warranty Management • Landscaping • Technical Due Diligence • Cleaning Services • Energy Efﬁ ciency Management • Security Services • Total Infrastructure Facilities Management • Green Technology Management • Asset Management System • Food & Beverages Services • Green & Clean Expertise • Building & Asset Audit

TMR’s partners, amongst others, are; Petronas, Malaysia Airports Holdings Berhad, Telekom Malaysia Berhad, Maybank, KPJ, Johor Corporation, Lembaga Tabung Haji, Tenaga Nasional Berhad and Majlis Amanah Rakyat. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 39

HC DURACLEAN SDN BHD

HCD is a professional care and cleaning company offering a diverse range of cleaning services to commercial, residential and healthcare premises.

As the Master Franchisee for Duraclean International Incorporation (USA), HCD is fully equipped with state of the art equipment and machinery with effective cleaning solutions in ensuring the highest performance standard among its clients.

Since its operations in 1997, HCD has grown from only servicing its parent company’s facilities in its infant years to cleaning services for aircrafts and airports. HCD’s growth is attributed to the strong belief in uniformity and quality of service achieved through its comprehensive staff training programs.

HCD’s partners, amongst others, include KPJ Hospitals, KPJ EyeCare Specialist, Kementerian Kesihatan Malaysia, IJN, UEM (Edgenta), Siegwerk (M) Sdn Bhd, Bank Simpanan Nasional and Muzium DiRaja Johor. 40 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

HEALTHCARE TECHNICAL SERVICES SDN BHD

HTS was founded in 1995 as a consulting service provider in the healthcare sector. Since its inception, HTS has grown rapidly to become the leader in healthcare consultancy in Malaysia and internationally.

HTS is a multi-disciplinary consulting company with more than 20 years of experience in providing consultancy on hospital planning & design, hospital equipment & logistics, project management, integrated facilities management, medical technology, sustainability through energy management & green building design, technical advisory in mechanical & electrical services and accreditation advisory services to healthcare providers.

HTS’ scope of services ranges from feasibility studies to the completion and operations of hospital buildings. It has also carried out condition and hospital accreditation surveys for many areas of healthcare facilities in Malaysia and overseas, including Poland, Saudi Arabia, Bangladesh, Indonesia, Laos, and Papua New Guinea. Moving forward, HTS is ready to embark in becoming the project management consultant for residential and commercial developments as well as construction projects.

HTS’ expertise is supported by a group of highly skilled employees with various technical backgrounds and its clients includew; the Ministry of Health Malaysia, KPJ Hospitals, Boustead Holdings Berhad, Nadayu Properties and the Curve Shopping Complex. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 41

STATEMENT OF CORPORATE GOVERNANCE

The Board of Damansara Realty recognizes the importance The Group CEO and the Group CFO are separated of adopting good corporate governance in its efforts to from the Board and were appointed to be accountable safeguard and enhance shareholders’ investment and value for the day-to-day management of financial and and also to protect the interests of other stakeholders. operational matters of the Group within the prescribed The Board presents this statement to provide an insight limits of authority. into the corporate governance practices of Damansara Realty under the leadership of the Board. There is a clear distinction of responsibilities between the Chairman and the Group CEO to ensure a balance As such, the Board supports the 8 principles and 26 of power and authority. The Board is led by the recommendations stated in the Malaysian Code on Chairman, YB Dato’ Ahmad Zahri bin Jamil, while the Corporate Governance 2012 (“MCCG 2012”) as set out post of Group CEO is held by En. Brian Iskandar bin below in promoting best corporate governance through Zulkarim who attained the post on 1 September 2016. structures, systems, processes in self-promoting good practices and development of a corporate governance The Chairman is responsible for the leadership, culture and environment, will continue the existing corporate effectiveness, conduct and governance of the Board. governance practices and shall strive to adopt the substance The Group CEO holds the principal responsibilities of behind the corporate governance prescriptions and not reporting, clarifying, communicating and recommending merely in form, but also in managing its business affairs. key strategic and operational matters and proposals to the Board for approval as well as implementation In line with this commitment, the Board has taken and is of policies and strategies. continuously reviewing, where appropriate, the necessary steps to comply with the requirements on the standard of In determining the limitation of authorities within corporate responsibility, integrity and accountability and the Group, the Board has approved the Group provide greater disclosure and transparency by complying Approval Limit of Authority (“GALOA”) aims to give with the principles of the MCCG 2012. The corporate clear indication on the management authority (i.e. governance adopted by the Group during the FY2016 is EVC, Group CEO, Group CFO, Managing Director as follows: (“MD”) of Subsidiaries, General Manager) to approve matters related to company’s day to day operation requirement (i.e. purchases of stocks, payments, PRINCIPLE 1 – ESTABLISH CLEAR ROLES AND appointment of contractors and etc) RESPONSIBILITIES 1.1 Clear Function Reserved for Board and Delegation The GALOA shall cover all operational item that requires to Management management’s approval which include but not limited to: The Board is made up of 8 members, comprising: • Procurement: Purchase limits, direct awards, variation orders, extension of time, Tender • One (1) Independent Non-Executive Chairman; exercise, etc; •. One (1) Executive Vice Chairman (“EVC”); • Five (5) Independent Non-Executive Directors; and • Human Resource: Recruitment, promotion, demotion, salary adjustment, disciplinary action, • One (1) Non-Independent Non-Executive Director. employment contract, termination, organization structure & employees benefi ts; In accordance with Paragraph 15.02 of the Main Market Listing Requirements (“MMLR”) of Bursa Securities • Legal: Appointment of external lawyers; (“Bursa Securities”) that requires at least 2 directors execution of agreements (Memorandum of or one-third of the Board to comprise Independent Understanding (MOU), Joint Venture Agreement Directors, the presence of 6 Independent Non-Executive (JVA), Non-Disclosure Agreements (NDA); Directors lead to the Board being satisfi ed that the size Material litigation; Settlement outsite of court and composition of the Independent Non-Executive for a specifi c amount at threshold); Directors has fulfilled this requirement adequately. In the opinion of the Board, the composition and • Corporate Communication: Press release, sharing size of the Board is suffi cient and well balanced for of information with Bursa, sharing info with Damansara Realty to carry out its duties effectively, external parties etc; and whilst providing greater assurance that no individual or small group of individuals can dominate the Board’s • Finance: Signatory, reporting to Bursa, Reports decision. to the Board of Directors, etc. 42 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

STATEMENT OF CORPORATE GOVERNANCE

1.2 Clear Roles and Responsibility in Discharging iv. Reshuffl ed leaders from various key positions; Fiduciary / Leadership v. Usage of earnings before interest, tax, depreciation All members of the Board contribute signifi cantly and amortization (EBITDA) as performance in the areas of formulation of strategic direction measure; and policies, performance monitoring and allocation vi. Business acumen – enhance project evaluation; of resources and enhancement of controls and governance. vii. New Vision & Mission; viii. External talents with competency; and As prescribed by the MCCG 2012, the Board ix. Disciplinary inquiry – action on non-compliance. assumes 6 principal stewardship responsibilities: • Reviewing, monitoring and where appropriate, Executive Committee (EXCO) approving fundamental fi nancial and business The Board also has established EXCO on 22 November strategies and major corporate actions; 2016 that comprises of the following members:- • Overseeing the conduct of the Group’s business Chairman: Group CEO to evaluate whether the business is properly • Secretary: Company Secretary managed; • Secretariat: Corporate Planning & Transformation • Establishing the Group’s Enterprise-Wide Risk • Members: Management (EWRM) framework; – Group CFO – MD TMR Urusharta • Formulating a succession plan for the Managing Director and Senior Executives; – MD HC Duraclean – MD Healthcare & Technical Services • Establishing an investor relations programme; and – MD Metro Parking • Ensuring processes are in place for maintaining – GM Property & Land Development Division the integrity of the Company, integrity of the – GM Corporate Services Division financial Statements, compliance with law and ethics, relationships with customers and suppliers and relationship with stakeholders. The roles and responsibilities of EXCO including:- Primary The 6 principal stewardship responsibilities assumed • Ensure suffi cient deliberation on matters regarding by the Board are also available at the Board Charter performance of the Group & its Subsidiaries; in the corporate website (www.dbhd. com.my). • Deliberate & decide on matters regarding During the Board meeting held on 22 November projects participation including assessment 2016, the Board has approved the Strategic on project viability & profi tability, operational Restructuring Plan (“SRP”) and currently implemented strategy, risk analysis & mitigation as well as by Damansara Realty. The conceptual plan of SRP its impact to Group reputations / image etc; consist of 3 phases as follows: • Review & approve any change of management • Diagnostic Phase – to identify basic issues/ policy/ policies & its implementation; challenges faced by the Company (Phase 1); • Ensure effective implementation of SRP; • Ensure effective progress update on Group SRP • Prescription Phase – to implement quick wins plans; and and immediate corrections (Phase 2); and • Allow effective monitoring and tracking of the • Health Plan Phase – Long term business SRP’s deliverables. development and strategy (Phase 3). Secondary The following initiatives of SRP have been done in • To update the Board of Directors on the the Diagnostic phase:- progress of the SRP i. GALOA; The EXCO meeting will be held quarterly with the ii. Centralized Procurement services; following matters will be discussed:- iii. Establishment of EXCO; I. Business Review for EXCO; ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 43

STATEMENT OF CORPORATE GOVERNANCE

II. Policy related matters; The details of the investor relations and shareholder III. New projects; communication can be referred to the Board Charter. It is also available in the corporate website at www. IV. Special update request from EXCO; and dbhd.com.my. V. Update SRP. The new management has now put succession At the same time, the Board also ensures the planning in place by ensuring that all candidates sustenance of a dynamic and robust corporate appointed to senior management positions are of climate focused on strong ethical values. This sufﬁ cient, calibre and that there are programmes emphasizes active participation and dialogue on a to provide for the orderly succession of senior structured basis involving key personnel at all levels, management. as well as ensuring accessibility to information and transparency on all executive actions. The corporate 1.3 Formalised Ethical Standards through Code of climate is also continuously nourished by value- Ethics centered programmes for team-building and active The Board has developed a Code of Conduct subscription to core values. for the Directors and employees of the Group by setting out standards of conduct expected The Board has delegated certain specific from Directors and employees, to create a good responsibilities to four (4) Committees which operate corporate behavior across the Group. The Code within clearly deﬁ ned terms of references, with the of Conduct of the Directors which included in the main objective to assist the Board in discharging Board Charter, includes the related whistle-blower its duties and responsibilities. Under the previous procedures which outline the procedures to raise board governance structure, the Board Committees any actual or potential corporate fraud or breach included the Board Audit Committee (“BAC”), Board of conduct involving employee, Management or Nomination and Remuneration Committee (“BNRC”), Director in the Group. The Board also recognizes Tender Board Committee (“TC”) and Board Risk the importance of adherence to the Code by all Management Committee (“BRMC”). During FY2016, employees in the Group and will take measures to the Board undertook a review of the compositions put in place a process to ensure its compliance. and functions of the Board Committees aimed at ensuring an optimum level of governance model for The Group, in its effort to enhance corporate further enhancing the Board’s operations. governance, has put into place its Whistle Blowing Policy, providing an avenue for employees and The Terms of Reference (“TOR”) of the relevant Board stakeholders to report genuine concerns on Committees are available on www.dbhd.com.my. malpractices, unethical behavior and misconduct without fear of reprisal. All concerns raised shall The Board shall place great importance in ensuring be investigated and reports of investigations of the high standards of transparency and accountability genuine concerns shall be provided to the Audit in its communication to shareholders, as well as to Committee. The Whistle Blowing Policy is available potential investors, analysts and the public. in the corporate website www.dbhd.com.my.

The Board recognizes the need of effective 1.4 Strategies Promoting Sustainability communication with shareholders and the investment community and adheres strictly to the disclosure The Board promotes good corporate governance requirements of Bursa Securities. Dissemination in the application of sustainability practices. The of information includes the distribution of annual Group practices a system of rewards based on reports and relevant circulars to shareholders, the philosophy of pay for performance. Employees issuance of press releases, announcing the quarterly are rewarded for productivity improvements and ﬁ nancial results and performance of the Group to contribution towards the achievement of the Group’s Bursa Securities and the public as well as holding immediate and long-term objectives. The rewards press conferences encompass not only compensation and benefits but also performance recognition and professional The Chairman and the Board encourage shareholders development and career progression. to attend and participate in the AGM held annually as well as in the EGM. The shareholders are given A summary of the Group’s sustainability activities the opportunity to seek clarification by making including its corporate social responsibility activities use of the Question and Answer session during are set out in the Sustainability Report of this the AGM / EGM on any matters pertaining to the Annual Report. business and ﬁ nancial performance of Damansara Realty. The rights to demand for a poll during the meetings are conveyed to shareholders by the Board. 44 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

STATEMENT OF CORPORATE GOVERNANCE

1.5 Access to Information and Advice as Directors, whenever independent professional The Board has full and unrestricted access to all advice is required, external independent experts information on the Group’s business and affairs may be engaged at the Group’s expense. including inter alia, fi nancial results, annual budgets, business reviews against business plans and 1.6 Qualifi ed and Competent Company Secretary progress reports on the Group’s developments and The Board has unrestricted access to the advice business strategies. Therefore, it will enable them to and services of the Company Secretary and where discharge their duties effectively. necessary, in the furtherance of their duties, obtain independent professional advice with the Company Prior to each Board Meeting, every director is given paying the related costs. The Company Secretary an agenda and a set of board papers for each must obtained a professional qualification from agenda item to be deliberated. The board papers will professional bodies or qualifi ed under section 139 be distributed to the board members at least seven (A) of the Companies Act 1965. (7) days before the meeting. At the Board Meetings, the Management will present the board papers and The Company Secretary play an advisory role to provide comprehensive explanation of pertinent ensure all Board Members’ decisions and actions issues. Information provided to the Board goes are complied with the relevant rules and regulations. beyond quantitative performance data to include The Company Secretary must ensures that all other qualitative performances. Board Meetings are Board and Committee members’ deliberations held regularly. The Board and its Committees have and decisions are complied with the Damansara access to all information within the Group pertaining Realty’s Articles and Association and other statutory to the Group’s business and affairs. regulations.

The Board is provided in advance with the agenda The Company Secretary also keeps abreast of the for every Board Meeting, together with management evolving capital market environment, regulatory reports and supporting documents for the Board’s changes and developments in Corporate Governance perusal. The Board is briefed in a timely manner on through continuous training. The Company Secretary all matters requiring their deliberation and approval. has attended several trainings provided by Companies Commissioner of Malaysia (CCM) and All directors are entitled to call for additional Malaysian Association of Chartered Secretaries and clarification and information to assist them in Administrators (MAICSA) to improve his knowledge in matters that require their decision. In arriving at any ensuring all the board members are updated on the decision on recommendation by the Management, developments of Corporate Governance in Malaysia deliberation and discussion by the Board is a and the new Companies Act 2016. prerequisite. All proceedings of the Board Meetings are minuted and signed by the Non-Executive 1.7 Board Charter Chairman of the Meeting in accordance with the The Board has always conducted itself in an ethical provision of Section 156 of the Companies Act, manner while executing its duties and functions with 1965. Apart from the quarterly and year end ﬁ nancial the establishment of its own Board Charter. The statements, a report of the Group’s performance and Board Charter of Damansara Realty sets out key progress is presented to the Board every quarter for values, principles and ethos of Damansara Realty the directors to be kept informed of the Group’s in ensuring the Board’s efﬁ ciency in discharging its state of affairs. duties.

The Board is also notified of any disclosures or The Company Directors’ Code of Ethics in tandem announcements made to Bursa Securities. For each with the recommendation by the CCM had also ﬁ nancial year, the Board will review and approve been established. The Board Charter and Directors’ the Group’s plan and budget for the forthcoming Code of Ethics shall be reviewed annually or as year. Whilst the Management reviews the budget and when necessary. Both are available on the results regularly, reports of the results and variances corporate website at www. dbhd.com.my. against the budget are presented to the Board for review every quarter. In furtherance of their duties ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 45

STATEMENT OF CORPORATE GOVERNANCE

PRINCIPLE 2 – STRENGTHENED COMPOSITION order to maintain an appropriate range and balance 2.1 Establishment of a Nomination and Remuneration of skills, experience and background on the Board. Committee In identifying suitable candidates for appointment to the Board, BNRC also has considered candidates Recommendation 2.2 of the Malaysian Code on on merit against objective criteria and with due Corporate Governance 2012 recommends that regard for the benefi ts of diversity on the Board. the board should establish a policy formalising its approach to boardroom diversity. The Board In accordance with Paragraph 15.02 of the Main through its nominating committee had taken steps Market Listing Requirements of Bursa Securities, to ensure that women candidates are sought as that requires at least two directors or one-third part of its gender diversity target. Therefore, the of the Board to comprise Independent Directors, Board has ensured at least one (1) female director the presence of six (6) Independent Non-Executive in its composition. Directors out of eight (8) lead to the Board being satisfied that the size and composition of the The Group recognises and embraces the benefi ts Independent Non-Executive Directors has fulfi lled of having a diverse Board, and sees increasing this requirement adequately. The number of members diversity at Board level as an essential element in is suffi cient and well balanced for Damansara Realty maintaining a competitive advantage. to carry out its duties effectively, whilst providing greater assurance that no individual or small group The Group also has made good use of differences of individuals can dominate the Board’s decision. in thought, perspective, knowledge, skills, regional and industry experience, cultural and geographical On 21 March 2011, the Board resolved to establish background, age, ethnicity and gender which will its own BNRC. The Board is of the view that the ensure that Damansara Realty retains its competitive composition of the BNRC meets the objectives advantage. These differences have been considered and principles of good corporate governance. The in determining the optimum composition of the members of the BNRC comprise exclusively of non- Board and when possible, be balanced appropriately. executives directors, all of whom are independent. The BNRC develops, maintains and reviews the All Board appointments are made on merit, in the criteria to be used in the recruitment process and context of the skills and experience the Board as a annual assessment of directors. whole requires to be effective. The BNRC consists of the following members: The Board consists of qualified individuals with diverse set of skills, experience and knowledge (i) Y.B Dato’ Mohd Aisom bin Omar – Chairman necessary to govern the Group. The composition (ii) Puan Zainah binti Mustafa – Member and size of the Board is such that it facilitates (iii) Tuan Haji Abdullah bin Md Yusof – Member the decision making of the Group. The Articles of Association of Damansara Realty provides for The appointment of a BNRC member terminates a minimum of 2 Directors and maximum of 15 when the member ceases to be a director of the Directors. The composition and size of the Board Company. The BNRC shall have no executive are reviewed from time to time to ensure its power. In the event of equality of votes, the effectiveness. Chairman of the BNRC shall have a casting vote. In the absence of the Chairman of the BNRC, the The Group seeks to maintain a Board comprised of members present shall elect one of them to chair talented and dedicated directors with a diverse mix the meeting. The BNRC shall meet at least once a of expertise, experience, skills and backgrounds. year and any additional meetings shall be scheduled The skills and backgrounds collectively represented as considered necessary by the Chairman of the on the Board should reflect the diverse nature BNRC. The BNRC may establish procedures from of the business environment in which the Group operates. For purposes of Board composition, time to time to govern its meeting, keeping of diversity includes, but is not limited to, business minutes and its administration. experience, geography, age, ethnicity and gender.

In reviewing Board composition, Board Nomination and Remuneration Committee (“BNRC”) has considered the beneﬁ ts of all aspects of diversity in 46 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

STATEMENT OF CORPORATE GOVERNANCE

The TOR of the BNRC is set out in the corporate Scope Activities of BNRC website (www.dbhd.com.my). The duties of the BNRC shall include the following: During the ﬁ nancial year, the BNRC had met once, A. Nomination attended by all members purposely to assess the (i) To determine the criteria for Board membership, Board members’ effectiveness. including qualities, experience, skills, education and other factors that will best qualify a The BNRC shall have access to such information and nominee to serve on the Board; advice, both from within the Group and externally, as it deems necessary or appropriate in accordance (ii) To review annually and recommend to the with the procedures determined by the Group. The Board with regard to the structure, size, BNRC may request other directors, members of balance and composition of the Board and management, counsels and consultants as applicable Committees including the required mix of to participate in the BNRC Meetings, as necessary, skills and experience, core competencies to carry out the BNRC’s responsibilities. Non-BNRC which Non-Executive Directors should directors and members of the Management in bring to the Board and other qualities to attendance may be required by the Chairman to leave function effectively and efﬁ ciently; the meeting of the BNRC when so requested. (iii) To consider, evaluate and propose to the Board any new board appointments, The Secretary of the BNRC shall be the Company whether of executive or non-executive Secretary. position. In making a recommendation to the Board on the candidate for directorship, BNRC meeting agenda shall be the responsibility the BNRC shall have regard to: of the Chairman of the BNRC with input from the BNRC members. The Chairman may also request • Size, composition, mix of skills, Management to participate in this process. The experience, competencies and other agenda of each meeting including supporting qualities of the existing Board, level information shall be circulated at least seven (7) days of commitment, resources and time before each meeting to the BNRC members and all that the recommended candidate can those who are required to attend the meeting. contribute to the existing Board; and

The BNRC shall cause the minutes to be duly • Best Practices of the Code Part entered in the books provided for the purpose of 2 AAIII which stipulate that Non- all resolutions and proceedings of all meetings of Executive Directors should be persons the BNRC. Such minutes shall be signed by the of calibre, credibility and have the Chairman of the meeting at which the proceedings necessary skill and experience to were held or by the Chairman of the next succeeding bring an independent judgment to meeting, and if so signed, shall be the conclusive bear on issues considered by the evidence without any further proof of the facts Board and that Independent Non- thereon stated. Executive Directors should make up at least one-third of the membership The BNRC, through its Chairman, shall report to of the Board. the Board at the next Board of Directors’ meeting after each BNRC meeting. When presenting any (iv) To propose to the Board the responsibilities recommendation to the Board, the BNRC shall of Non-Executive Directors, including provide such background and supporting information membership and Chairpersonship of as may be necessary for the Board to make an Board Committees. informed decision. (v) To evaluate and recommend the appointment The BNRC shall provide such information to the Board of Senior Executive positions, including as necessary to assist the Board in making a disclosure that of the Managing Director or Chief in the Annual Report of the Group in accordance with Executive Ofﬁ cer and their duties and the the Best Practices of the Code Part 2 AAIX. continuation (or not) of their service.

The Chairman of the BNRC shall be available to answer questions about the BNRC’s work at the Annual General Meeting of Damansara Realty. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 47

STATEMENT OF CORPORATE GOVERNANCE

(vi) To establish and implement processes for (iii) To review and recommend the entire assessing the effectiveness of the Board individual remuneration packages for the as a whole, the Committees of the Board Managing Director and, as appropriate, and for assessing the contribution of each other Senior Executives, including: the director. terms of employment or contract of Employment / service; any beneﬁ t, pension (vii) To evaluate on an annual basis: or incentive scheme entitlement; any other a. The effectiveness of each director’s bonuses, fees and expenses; and any ability to contribute to the effectiveness compensation payable on the termination of the Board and the relevant Board of the service contract. Committees and to provide the necessary feedback to the directors (iv) To review with the Managing Director/ in respect of their performance; Group Chief Executive Officer, his/her goals and objectives and to assess his/ b. The effectiveness of the Committees her performance against these objectives of the Board; and as well as contribution to the corporate strategy. c. The effectiveness of the Board as a whole. (v) To review the performance standards for key executives to be used in implementing (viii) To recommend to the Board: the Group’s compensation programs where appropriate. a. Whether directors who are retiring by rotation should be put forward for re- (vi) To consider and approve compensation election; and commitments / severance payments for Executive Directors and key executives, b. Termination of membership of individual where appropriate, in the event of early director in accordance with policy, for termination of the employment/service cause or other appropriate reasons. contract.

(ix) To establish appropriate plans for succession (vii) To consider other matters as referred to at Board level, and if appropriate, at Senior the BNRC by the Board. Management level.

(x) To provide for adequate training and TENDER BOARD COMMITTEE orientation of new directors with respect to The Group has also established a Tender Board the business, structure and management Committee (“TC”) at Board level comprising of the Group as well as the expectations of Independent Non-Executive Directors, Non- the Board with regard to their contribution Independent Non-Executive Directors and the to the Board and Company. Group Chief Executive Ofﬁ cer. The functions of the said TC are to evaluate, deliberate and approve (xi) To consider other matters as referred to the recommendations made by the Management the BNRC by the Board. prior to awarding of major contracts and tenders to potential contractors. B. Remuneration (i) To establish and recommend the remuneration The members of the TC are as follows: structure and policy for directors and key Chairman executives, if applicable and to review for changes to the policy as necessary. Y.B Dato’ Daing A Malek bin Daing A Rahaman

(ii) To ensure that a strong link is maintained Members between the level of remuneration and Encik Brian Iskandar bin Zulkarim individual performance against agreed (Appointed on 1 September 2016) targets, the performance-related elements of remuneration setting forming a signiﬁ cant Tuan Haji Abdullah bin Md. Yusof proportion of the total remuneration Encik Wan Azman bin Ismail package of Managing Directors. Y.B Dato’ Ar. Wan Mohammad Khair-il Anuar bin Wan Ahmad (Resigned on 28.04.2016) 48 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

STATEMENT OF CORPORATE GOVERNANCE

BOARD RISK MANAGEMENT COMMITTEE needs. The Board considers diversity from various areas, including gender, age, ethnicity, academic The Group has also established a Board Risk and professional experience and skills. Every year, Management Committee (“BRMC”) on 23 November the composition of the Board will be reviewed by 2016 during the Board meeting. The function of the BNRC in order to ensure the effectiveness of BRMC is to identify, assess, monitor and report the Board to meet the targets of the Group. significant risks faced by the Group. BRMC comprised of Independent Non-Executive members During the ﬁ nancial year, the BNRC, during the meeting as follows:- had carried out all assessments and evaluations which Chairman were properly documented. The assessments and evaluations were carried out as follows:- Y.B Dato’ Mohd Aisom bin Omar a) Directors’ Self - Evaluation:- Members Each Director will be assessed based on the following level of assessment:- Puan Zainah binti Mustafa i. Developmental: Performance and quality En Shahrizam bin A. Shukor of contribution sometimes meet standard Tuan Haji Abdullah bin Md Yusof requirements. Training should overcome any gaps. Duties, Responsibilities and Functions of the BRMC ii. Competent: Performance and quality The duties, responsibilities and functions are as contribution are of a standard expected follows:- of a director. i. Review and recommend appropriate risk management strategies, policies and risk iii. Outstanding: Performance and quality tolerances in with Damansara Realty business of contribution consistently exceeds the objectives for the Board’s approval; standards expected of a director.

ii. Ensure the implementation of the Enterprise List of Competencies to be assessed:- Risk Management Department (“ERMD”) and i. Integrity & Ethics review the adequacy and integrity of the same ii. Governance in identifying, assessing and managing risk and in establishing Damansara Realty’s risk appetite; iii. Strategic Perspective iv. Business Acumen iii. Discuss with management on action taken to v. Judgement and Decision Making improve the ERM framework based on the risk vi. Teamwork identifi ed in the Risk Management reports; vii. Communication iv. Review the adequacy of the scope, functions, viii. Leadership competency and resources of the ERMD and ensure that it has the necessary authority to b) Independent Directors’ Self-Assessment carry out its work; c) Board Committee’s Assessment v. Consider and evaluate other matters as judged appropriate by the Committee or as authorized The results of the assessments are compiled into a by the Board; and report for deliberation and recommendation at the BNRC meeting. The BNRC will table the matter to vi. All recommendations and findings of the the Board for further deliberation. The deliberations Committee shall be submitted to the Board for of the BNRC and the Board are duly minuted in the respective meetings. approval and notation. The Board is satisfi ed that the combination of different 2.2 Recruitment Process and Annual Assessment professionals and skills of each Director provide The Board has been aware of the needs for diversity much diversity of perspectives and comprehension to in its composition which provides the Board the lead and guide the Group in a competitive business benefi ts of different opinions to bear on issues and environment. right decisions that are aligned to stakeholders’ ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 49

STATEMENT OF CORPORATE GOVERNANCE

The Board also recognizes the importance of gender diversity policy and target, as set out in the MCCG 2012 and currently there is 1 female Senior Independent Non-Executive Director, Puan Zainah binti Mustafa. There are also few female Directors in the board of directors of Damansara Realty’s subsidiaries. The presence of Independent Directors is essential as to provide unbiased and independent views, advice and judgment to safeguard the interest of stakeholders. It is also implemented at Metro Parking, HTS and TMR.

2.3 Remuneration policies and procedures Through the BNRC, the Board has established formal and transparent remuneration policies and procedures to attract and retain directors in which BNRC are responsible for making recommendations on the framework, policies and procedures in reviewing and determining the speciﬁ c remuneration package of the Directors of Damansara Realty. Damansara Realty’s remuneration scheme for the Group CEO commensurate with performance, seniority, experience and scope of responsibilities and is benchmarked to market/industry standards. For Non-Executive Directors, the level of remuneration reﬂ ects the level of responsibilities undertaken by them.

The Group’s remuneration scheme for the Group CEO commensurate with performance, seniority, experience and scope of responsibilities and is benchmarked to market/industry standards. For Non-Executive Directors, the level of remuneration reﬂ ects the level of responsibilities undertaken by them. Directors’ fees are subject to approval by the shareholders. Details of the remuneration paid/payable to each Director for the FY2016 are as below:

Basic Beneﬁ ts Salary and Directors’ in-kind Name of Directors EPF (RM) Fee (RM) Allowance (RM) Total (RM) YB Dato’ Ahmad Zahri bin Jamil – 120,000 65,000 – 185,000 – Independent Non-Executive Chairman YB Dato’ Daing A Malek bin Daing A. Rahaman 1,284,000 300,000 6,000 – 1,590,000 – Executive Vice Chairman Puan Zainah binti Mustafa – 60,000 13,000 – 73,000 – Senior Independent Non-Executive Tuan Haji Abdullah bin Md Yusof – 60,000 13,000 – 73,000 – Independent Non-Executive Encik Wan Azman bin Ismail – 60,000 7,000 – 67,000 – Non-Independent Non-Executive YB Datuk Md Othman bin Hj Yusof – 60,000 5,000 – 65,000 – Independent Non-Executive YBhg Dato’ Mohd Aisom bin Omar – 60,000 7,000 – 67,000 – Independent Non-Executive Encik Shahrizam bin A. Shukor – 60,000 11,000 – 71,000 – Independent Non-Executive Dato’ Sohaimi bin Shahadan – 20,000 2,000 – 22,000 – Independent Non- Executive (Resigned on 28.04.2016) YB Dato’ Ar. Wan Mohammad Khair-il Anuar bin – 20,000 3,000 – 23,000 Wan Ahmad – Independent Non-Executive (Resigned on 28.04.2016) Encik Mohammad Asri bin Hassan Sabri – 20,000 1,000 – 21,000 – Independent Non-Executive (Resigned on 28.04.2016) Encik Zulhaﬁ s bin Badoldin 78,400 5,000 – – 83,400 – Executive Director (Appointed on 01.06.2016 and Resigned on 29.06.2016) TOTAL 1,362,400 845,000 133,000 - 2,340,400 50 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

STATEMENT OF CORPORATE GOVERNANCE

PRINCIPLE 3 – REINFORCED INDEPENDENCE approval at the forthcoming Annual General Meeting 3.1 Assessment of Independence Annually (AGM) with the following justifi cations:- (a) She has fulfi lled the criteria under the defi nition The Board, through its BNRC, undertakes an of Independent Director as stated in the evaluation in order to assess how well the Board, Main Market Listing Requirements of Bursa its Committees, the Directors including Independent Securities, and thus, she would be able to Directors and the Chairman are performing. function as a check and balance, bring an The evaluation covers the Board’s composition, element of objectivity to the Board; skills mix, experience, communication, roles and responsibilities, effectiveness as well as conduct. (b) She has possessed vast experience in the fi nance industry that would enable her to provide The process also includes a peer review in which the Board with a diverse set of experience, Directors assess their fellow Directors’ performance expertise and independent judgement; against set criteria, including the skills they bring to the Group and the contributions they make. (c) She has been with the Group for more than nine (9) years and has the knowledge of the 3.2 Tenure of Independent Directors Group’s business operations and the property The Board recognizes the importance of the development market; Independent Non-Executive Directors to ensure that (d) She has devoted suffi cient time and attention issues of strategies, performance and resources to her professional obligations for informed and proposed by the Management are professionally balanced decision making; and evaluated by taking into consideration the interest of the stakeholders in which the Group conduct (e) She has exercised due care during her tenure its business. It is also include ensuring the interest as an Independent Non-Executive Director of the of Minority Shareholder is fairly considered through Group and carried out her professional duties in Board representation. the best interest of the Group and shareholders.

The MCCG 2012 recommends for the tenure of 3.4 Separation of Chairman and CEO an Independent Director of the Company not to There is a clear distinction of responsibilities between exceed a cumulative term of 9 years. However, the Chairman and the Group CEO to ensure a balance the Board does not have a policy on the tenure of power and authority. The Chairman was responsible for Independent Directors as the Board is of the for conducting meetings of the Board and shareholders view that a term of more than 9 years may not and ensuring all Board members were properly necessary impair independence and judgement of briefed during Board discussions and shareholders an Independent Director and therefore the Board were informed of the subject matters requiring their does not impose a ﬁ xed term limit for Independent approval. The Group CEO has responsibility to ensure Directors. that the strategic planning of the Group be effectively implemented as well as responsible for the whole However, the Board will seek shareholders’ approval performance of the Group. to retain Independent Directors who have served on the Board for more than 9 years by providing The Chairman of Damansara Realty is the Independent strong justifications and its recommendations to Non-Executive Chairman, YB Dato’ Ahmad Zahri bin shareholders. Jamil, while the post of Group CEO is held by En. Brian Iskandar bin Zulkarim who attained the post on 3.3 Shareholders’ Approval for the retention of 1 September 2016. Independent Directors The Board shall seek the shareholders’ approval PRINCIPLE 4 – FOSTER COMMITMENT for the retention of the independent status of an existing Director who had served in that capacity 4.1 Commitment of Board Members and Protocols for more than 9 years. for Accepting New Directorships The Directors will notify the Chairman of the Board Puan Zainah binti Mustafa was appointed as before accepting any new directorship in a public a Board Member on 17 April 2003 and had listed company and to indicate the time expected served the Board as Independent Non-Executive to be spent on the new appointment. The Directors Director beyond than 9 year tenure limit. Hence, are at liberty to accept other board appointments so the Board has, after conducting an assessment, long as such appointments are not in conﬂ ict with the has recommended her tenure as an Independent business of the Group and do not adversely affect the Director be retained subject to the shareholders’ Directors’ performance as a member of the Board. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 51

STATEMENT OF CORPORATE GOVERNANCE

The Directors are the view that their acceptance of directorships in private limited companies does not affect their commitment and performance as a director of company.

The Board shall conduct at least 4 scheduled meetings annually, with additional meetings to be convened as and when necessary. All Directors will be provided with the performance and progress reports on a timely basis prior to the scheduled Board meetings. A full agenda of the meeting and all Board papers, including complicated issues or specifi c matters, would be distributed in advance to ensure Directors are well informed and have the opportunity to seek additional, and are able to obtain further clarifi cation from the Company Secretary, should such a need arise. Where necessary, the services of other senior management or external consultants will be arranged to brief the Directors or clear to their doubts or concerns. The Board and Board Committee’s’ meeting schedule will be provided to all Directors at the beginning of the fi nancial year.

For the FY2016, there were 6 meetings held on the following dates and venue:

Date of Meeting Description Venue Attendance 25.02.2016 140th Board of Directors’ Meeting Board Room, Wisma Chase Perdana 9/11 Off Jalan Semantan Damansara Heights 50490 Kuala Lumpur 29.03.2016 Special Board of Directors’ Meeting Board Room, Wisma Chase Perdana 11/11 Off Jalan Semantan Damansara Heights 50490 Kuala Lumpur 30.05.2016 141st Board of Directors’ Meeting Board Room, Wisma Chase Perdana 7/8 Off Jalan Semantan Damansara Heights 50490 Kuala Lumpur 26.08.2016 142nd Board of Directors’ Meeting Board Room, Wisma Chase Perdana 7/8 Off Jalan Semantan Damansara Heights 50490 Kuala Lumpur 14.10.2016 Special Board of Directors’ Meeting VIP Conference Room, Forest City, 8/8 Gallery Persada Utama, Jalan Forest City 1, Pulau Satu, 81550 Gelang Patah, Johor 23.11.2016 143rd Board of Directors’ Meeting Board Room, Wisma Chase Perdana 6/8 Off Jalan Semantan Damansara Heights 50490 Kuala Lumpur

The Board Members remain committed and dedicated in fulﬁ lling their duties and responsibilities and this is reﬂ ected via their attendance at each Board Meeting for FY2016 as listed below:

Director Non-Executive Independent Attendance YB Dato’ Ahmad Zahri bin Jamil Yes Yes 4/6 – Independent Non-Executive Chairman YB Dato’ Daing A Malek bin Daing A Rahaman No No 6/6 – Executive Vice Chairman Puan Zainah binti Mustafa Yes Yes 6/6 – Senior Independent Non-Executive Tuan Haji Abdullah bin Md Yusof Yes Yes 5/6 – Independent Non-Executive Encik Wan Azman bin Ismail Yes No 6/6 – Non-Independent Non-Executive YB Datuk Md Othman bin Hj Yusof Yes Yes 5/6 – Independent Non-Executive YBhg Dato’ Mohd Aisom bin Omar Yes Yes 6/6 – Independent Non-Executive 52 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

STATEMENT OF CORPORATE GOVERNANCE

Director Non-Executive Independent Attendance Encik Shahrizam bin A. Shukor Yes Yes 6/6 – Independent Non-Executive YB Dato’ Ar. Wan Mohammad Khair-il Anuar bin Wan Ahmad -Independent Non-Executive Yes Yes 1/6 (Resigned on 28.04.2016) Dato’ Sohaimi bin Shahadan - Independent Non- Executive Yes Yes 2/6 (Resigned on 28.04.2016) Encik Mohammad Asri bin Hassan Sabri -Independent Non-Executive Yes Yes 1/6 (Resigned on 28.04.2016)

Any nominations for new Directors to the Board are reviewed by the BNRC and presented to the Board for approval. The Company Secretary will ensure that all appointments are properly made and that statutory requirements are met.

4.2 Continuing Education Programmes The Board is aware of the importance for its members to participate and undergo continuous training to be notiﬁ ed and enlighten on any changes on the relevant regulatory requirements and the impact of the said regulatory requirement to the Group.

In compliance with the MMLR of Bursa Securities, all members of the Board have completed the Mandatory Accreditation Programme (MAP) conducted by Bursatra Training Sdn Bhd or relevant courses recognized by Bursa Securities.

The Board encourages its Directors to attend talks, seminars, workshops and conferences to update and enhance their skills and knowledge to enable them to carry out their roles effectively as Directors in discharging their responsibilities towards good corporate governance, operational and regulatory standards. The Board took note of the amendments to the Listing Requirements, which stated that the Board of Directors of listed companies will assume the onus of determining or overseeing the training needs of their directors.

During the ﬁ nancial year, the Directors attended the following courses:

No.Director Courses 1. YB Dato’ Ahmad Zahri bin Jamil • Business Sustainability – 26 August 2016 • Latest Amendments to the Bursa Malaysia Listing Requirements – 26 August 2016 2. YB Dato’ Daing A Malek bin Daing A Rahaman • Business Sustainability – 26 August 2016 • Latest Amendments to the Bursa Malaysia Listing Requirements – 26 August 2016 3. Puan Zainah binti Mustafa • Business Sustainability – 26 August 2016 • Latest Amendments to the Bursa Malaysia Listing Requirements – 26 August 2016 • Fraud Risk Management: Whose Responsibility Is It?- 8 September 2016 4. Tuan Haji Abdullah bin Md Yusof • Business Sustainability – 26 August 2016 • Latest Amendments to the Bursa Malaysia Listing Requirements – 26 August 2016 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 53

STATEMENT OF CORPORATE GOVERNANCE

No.Director Courses 5. Encik Wan Azman bin Ismail • Malaysian 2020 Vision Asean Microfinance Conference- 20 January 2016 • JCorp Knowledge and Empowerment Programme For Leadership & Top Management - Session 2 – 25 April 2016 • Business Sustainability– 26 August 2016 • Latest Amendments to the Bursa Malaysia Listing Requirements– 26 August 2016 • Achieving Business Continuity through Innovation and Corporate Responsibility- 4 October 2016 6. YB Datuk Md Othman bin Hj Yusof • Mandatory Accreditation Program for Directors of Public Listed Companies (MAP) by Bursatra Sdn Bhd – 2 and 3 March 2016 7. YBhg Dato’ Mohd Aisom bin Omar • Business Sustainability – 26 August 2016 • Latest Amendments to the Bursa Malaysia Listing Requirements – 26 August 2016 8. Encik Shahrizam bin A. Shukor • Business Sustainability – 26 August 2016 • Latest Amendments to the Bursa Malaysia Listing Requirements – 26 August 2016 9. Encik Mohammad Asri bin Hassan Sabri • Mandatory Accreditation Program for Directors of (Resigned on 28.04.2016) Public Listed Companies (MAP) by Bursatra Sdn Bhd – 6 and 7 March 2016

PRINCIPLE 5 - UPHOLD INTEGRITY IN FINANCIAL REPORTING 5.1 Compliance with Applicable Financial Reporting Standards Pursuant to Paragraph 15.26(a) of the MMLR of Bursa Securities, all the Company Directors are collectively responsible in ensuring that the ﬁ nancial statements and the quarterly results are drawn up in accordance with the approved accounting standards adopted by the Malaysian Financial Reporting Standard (MFRS), the provisions of the Companies Act, 1965, and the MMLR of Bursa Securities.

It is the responsibility of the Directors to ensure that the fi nancial reporting of the Group presents a true and fair view of the state of affairs of Damansara Realty and its subsidiary companies as of the end of the fi nancial period and of the results and cash fl ows of the Group for FY2016.

The Directors have applied the appropriate and relevant accounting policies on a consistent basis and made judgments and estimates that are reasonable and fair in preparing the fi nancial statements of Damansara Realty and of the subsidiaries. The fi nancial statements are also prepared on a going concern basis and the Directors have assured that proper accounting records are kept so as to enable the preparation of the fi nancial statements with reasonable accuracy.

In overseeing the ﬁ nancial reporting, the BAC reviewed the ﬁ nancial statements and the quarterly results as presented by the Group CFO in accordance with the approved accounting standards adopted by the Malaysian Financial Reporting Standard (MFRS). During the fourth quarter of 2016 meeting, discussion was conducted on detailed analysis of impairment of assets in compliance with the MFRS 136 Impairment of Assets with the present of external auditors and internal auditors. The external auditors, Messrs. Jamal Amin & Partners (“JAP”) also conducted limited review for every quarterly results.

The further details of the compliance with applicable ﬁ nancial reporting standards can be referred in the Audit Committee Report section. 54 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

STATEMENT OF CORPORATE GOVERNANCE

Every quarter, each Director declared their interest Further details of the assessment of suitability in companies (as director or shareholder) pursuant and independence of the external auditor can be to section 135 of the Companies Act, 1965 referred in the Audit Committee Report section. which were tabled during the quarterly Board of Director’s meeting. The Board monitors and review any potential Related Party or Confl ict of Interest PRINCIPLE 6 – RECOGNIZE AND MANAGE RISKS transactions. During the year, there were no Related Party and/or Confl ict of Interest transactions except 6.1 Sound Framework to Manage Risks for Y.B Dato’ Mohd Aisom bin Omar, pursuant to The BRMC was set-up to assist the Board to oversee section 131 of the Companies Act 1965, whom the risk management framework. The BRMC reviews has declared his interest as a partner of a Legal the risk management framework and processes, and firm to be appointed as a panel lawyer for one receives periodic reporting on risk management matters of Damansara Realty’s subsidiaries and he has and management’s actions to mitigate and manage abstained from deliberating and participating in the significant risks to ensure that the Group’s business decision made by the Board. objectives are met. 5.2 Assessment of Suitability and Independence of 6.2 Internal Audit Function the External Auditor The external auditors play an important role in The Group has an Internal Audit Department which ensuring the reliability of the Group’s financial reported directly to the BRMC members. The details statements and providing the assurance of accuracy of the recognition and risk management and the to shareholders. The Board, via the BAC, maintains a Internal Audit Functions are set out in the Statement formal and transparent professional relationship with on Risk Management and Internal Control and Audit the external auditors, JAP, in seeking professional Committee Report of this Annual Report, respectively. advice and ensuring compliance with the applicable accounting standards and statutory requirements. The Internal Audit function is independent from the operations of the Group and provides reasonable The external auditors were invited and had attended assurance that the Group’s system of internal all the BAC meetings and general meetings of the control and risk management is satisfactory and Damansara Realty during the fi nancial year. operating effectively. The internal auditors adopt The BAC ensures that the policies and procedures to a risk based approach towards the planning and assess the suitability and independence of external conduct of their audits, and this is consistent with auditors are complied. The Committee meets with the the Group’s framework in designing, implementing external auditors without the presence of the Senior and monitoring its internal control system. Management at least once a year to assess the suitability and independence of the external auditors. During the year, one meeting was conducted without PRINCIPLE 7 – ENSURE TIMELY AND HIGH QUALITY the presence of the Management. Representatives DISCLOSURE from the external auditors were also invited to attend every Annual General Meeting (“AGM”). 7.1 Corporate Disclosure Policy The Group has in place procedures for compliance During the meeting held on 24 February 2017, the with the MMLR of Bursa Securities and ensures BAC has agreed and adopted the external auditors’ that all material information must be announced assessment and the BAC had on 7 March 2017, immediately to Bursa Securities. assessed the external auditor on their quality of service, sufficiency of resources, communication and interaction, and independence, objectivity and The Corporate Disclosure Policy and Procedures professional skepticism. can be accessed by Stakeholders through the corporate website www.dbhd.com.my. The BAC was satisfi ed with the suitability of JAP, as a fi rm as well as in terms of the professional 7.2 Leverage on Information Technology for Effective staff assigned to the audit, based on the quality of Dissemination of Information services and suffi ciency of resources they provided to the Group. The BAC also took note of the The Group maintains a website which enable public openness in communication and interaction with to access information on the latest updates on the the lead audit engagement partner and engagement corporate information, corporate events, annual report, team, which demonstrated their independence, corporate announcements, financial information as objectivity and professionalism. well as the Board Charter of Damansara Realty. Thus, ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 55

STATEMENT OF CORPORATE GOVERNANCE

it will create greater awareness of the Group activities, MATERIAL CONTRACTS INVOLVING DIRECTORS AND performance and other relevant information among the SUBSTANTIAL SHAREHOLDERS stakeholders and general public. Except as otherwise disclosed in the report, there were no material contracts involving Directors and substantial shareholders entered by Damansara Realty for the FY2016. PRINCIPLE 8 – STRENGTHEN RELATIONSHIPS BETWEEN THE COMPANY AND SHAREHOLDERS UTILISATION OF PROCEEDS 8.1 Encourage Shareholder Participation at General Meetings There were no proceeds raised by Damansara Realty from any corporate proposals during the FY2016. The AGM is the principal forum for dialogue with shareholders. Notice of the AGM and Annual Reports are sent out at least 21 days before the AUDIT AND NON-AUDIT FEES date of the meeting. In the case of an Extraordinary The Audit and Non-audit fees of External Auditors during General Meeting (“EGM”), the Notice is sent out at the FY2016, as follows:- least 14 days before the date of the meeting (or 21 days where any special resolutions are proposed). FEES (RM) AUDIT 135,797 The Chairman and the Board encourage shareholders to attend and participate in the AGM held annually NON- AUDIT 63,965 as well as in the EGM. The shareholders are given TOTAL 199,762 the opportunity to seek clarifi cation by making use of the Question and Answer session during the AGM / EGM on any matters pertaining to the business and RELATED PARTY TRANSACTIONS AND RECURRENT fi nancial performance of Damansara Realty. RELATED PARTY TRANSACTIONS (“RPT AND RRPT”) All RPT including RRPT entered into by the Group were made 8.2 Encourage Poll Voting in the ordinary course of business and on substantially the same terms as those prevailing at the time for comparable The rights to demand for a poll during AGM was transactions with other persons or charged on the basis conveyed to the shareholders at the commencement of of equitable rates agreed between the parties. All RPT are the AGM by the Chairman in line with Recommendation reviewed by the BAC and reported to the Board. 8.2 of the MCCG 2012. The Board also encourages poll voting for substantive resolutions specifi cally, the At the forthcoming AGM to be held on 24 May 2017, Recurrent Related Party Transactions. Damansara Realty intends to seek its shareholders’ approval to renew the existing mandate for recurrent 8.3 Effective Communication and Proactive Engagement related party transactions of a revenue or trading nature. The details of the shareholders’ mandate to be sought will The Board also recognizes the importance of be furnished in the Circular to Shareholders dated 28 April effective communication with shareholders and the 2017 attached to this Annual Report. investment community and adheres strictly to the disclosure requirements of Bursa Securities. COMPLIANCE WITH THE MCCG 2012 Dissemination of information includes the The Board is of the opinion that the Group had complied distribution of annual reports and relevant circulars with the spirit and objectives of the MCCG 2012. Although, to shareholders, issuance of press releases, there are deviations from several recommendations as announcing the quarterly financial results and contained in the MCCG 2012, the Board believes that performance of the Group to Bursa Securities and there are justifi able rationale for the deviations and that the public as holding press conferences. the overall corporate governance of Damansara Realty is not compromised. Nevertheless, Damansara Realty will continue to strengthen its governance practices to COMPLIANCE STATEMENT safeguard the best interest of its shareholders and other stakeholders. This Statement is made in accordance with a resolution of the Board dated 15 March 2017. This Corporate Governance Statement is made in accordance with the resolution of the Board dated 15 March 2017. 56 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

AUDIT COMMITTEE REPORT

COMPOSITION OF MEMBERS The composition of the BAC are as follows: 1. Puan Zainah binti Mustafa (Chairman - Senior Independent Non-Executive Director) 2. Tuan Haji Abdullah bin Md. Yusof (Independent Non-Executive Director) 3. Encik Shahrizam bin A. Shukor (Independent Non-Executive Director)

This meets the requirements of paragraph 15.09(1)(a) and (b) of Bursa Securities’s MMLR.

The BAC Chairman, Puan Zainah binti Mustafa, is a fellow member of Association of Certiﬁ ed Chartered Accountant. Accordingly, Damansara Realty complies with paragraph 15.09(1)(c)(ii) and 15.10 of MMLR.

MEETINGS The BAC met 6 times during the year under review. The Directors holding executive positions, Damansara Realty's Internal Auditors, representatives of the Damansara Realty’s External Auditors and members of the Management were invited to the meetings (ACM).

The attendance of each Committee Member during the ﬁ nancial year was as follows:

24/02/16 29/03/16 30/05/16 25/08/16 14/10/16 22/11/16 Members (79th (Special (80th (81st (Special (82nd ACM) ACM) ACM) ACM) Audit) ACM) Puan Zainah binti Mustafa Yes Yes Yes Yes Yes Yes Tuan Haji Abdullah bin Md. Yusof Yes Yes Yes Yes Yes Yes YB Dato’ Ar. Wan Mohammad YesYes---- Khair-il Anuar bin Wan Ahmad (Resigned on 28.04.2016) Encik Shahrizam bin A. Shukor - - Yes Yes Yes Yes (Appointed on 28.04.2016)

TERMS OF REFERENCE Objectives The objectives of the BAC are as follows: 1. To assist the Board in discharging its responsibilities relating to the Group and Damansara Realty’s management of principal risks, internal controls, corporate governance, ﬁ nancial reporting and compliance of statutory and legal requirements.

2. To provide, by way of regular meetings, a line of communication between the Board, Senior Management and External Auditors.

3. To provide emphasis on the internal audit functions by increasing the objectivity and independence of the Internal Auditors and provide a forum for discussion that is independent of the Management.

4. To review the quality of the audits conducted by the Internal and External Auditors of Damansara Realty. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 57

AUDIT COMMITTEE REPORT

Authorities 8. To review any related party transactions and conflict The BAC is authorized by the Board: of interest situation that may arise within Damansara Realty or Group including any transactions, procedures or 1. To investigate any matter within its terms of reference. courses of conduct that raise questions of Management’s integrity. 2. To have full, free and unrestricted access to any information, records, properties and personnel of the 9. To review inspection and examination reports issued Company and any other companies within the Group. by any regulatory authority and to ensure prompt and appropriate actions are taken in respect of any fi ndings. 3. To have direct communication channels with the External Auditors and person(s) carrying out the 10. To receive reports and deliberate on the implementation internal audit functions or activities. of the risk-control process and the progress of risk management activities undertaken by the Group. 4. To obtain independent professional or other advice. 11. To perform any other functions as authorized by the Board. 5. To convene meetings with the External Auditors, without the presence of the Management (executive Summary of Activities members) at least once a year. The BAC’s activities during 2016 comprised the following: Duties and Responsibilities A) Financial Reporting Duties and responsibilities of the BAC are as follows: 1. BAC reviewed the financial statements and 1. To review with the Management and recommend the Quarterly Results as presented by the acceptance or otherwise of major accounting policies, Group CFO in accordance with the approved principles and practices especially on management accounting standards adopted by the Malaysian accounting, fi nancial reporting, risk management and Financial Reporting Standard (MFRS). During the business practices. fourth quarter of 2016 meeting, discussion was conducted on detailed analysis of impairment 2. To review the Group’s quarterly and year-end fi nancial of assets in compliance with the MFRS 136 statements before submission to the Board. Impairment of Assets with the present of external auditors and internal auditors. 3. To consider the appointment of the External Auditors, the terms of reference of their appointment, the audit 2. The Group CFO had given assurance to the fee and any proposal of their resignation as auditors. BAC, on quarterly meetings that: i. Appropriate accounting policies had been 4. To review with the External Auditors, the nature and consistently adopted and applied; scope of their audit plans and their audit reports. ii. The going concern basis applied in the Annual 5. To review the External Auditor’s Management Letter Financial Statements and Consolidated and discuss any matter that the External Auditors Financial Statements was appropriate; may wish to raise in the absence of Management, where necessary. iii. Prudent judgements and reasonable estimates had been made in accordance 6. To review the Internal Audit Charter and the yearly with the requirements set out in the MFRSs; audit plan and budget to ensure that the internal audit functions are adequately resourced to undertake its iv. Adequate processes and controls were in place functions and have appropriate standing in the Group. for effective and efficient financial reporting and disclosures under the MFRSs, and 7. To review the internal audit functions and the result of the internal audit programs or investigations v. The Annual Financial Statements and Quarterly undertaken and whether or not Management has Consolidated Financial Statements did not taken appropriate actions on the recommendations contain material misstatements and gave a made by the Internal Auditors. true and fair view of the financial position of the Group and the respective companies within the Group for fi nancial year 2016. 58 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

AUDIT COMMITTEE REPORT

vi. Quarterly Results were reviewed by external iii. The activities of internal audit are consistent auditors, Jamal Amin & Partners (“JAP”) with the long term goals of the Group and prior to announcement to Bursa Securities. are in line with its internal controls, policies and procedures 3. Significant issues reviewed by BAC during the fi nancial year were as follows: 4. BAC met Internal Auditors quarterly and the i. Compliance with MFRS following topics were discussed: ii. Compliance with statutory requirements i. Internal audit reports including Appendix 9B of the MMLR ii. Follow up audit reports iii. Budget and expenditures iii. Risk management reports iv. Unexpected expenses iv. Unresolved audit fi ndings v. Financial performance 5. Internal Auditors conducted a risk based approach vi. Audit fi ndings reports during the development of the annual audit vii. Risk management reports plan. The coverage of auditable areas takes into consideration the functions of governance, review 4. BAC was satisfi ed of the issues reviewed. of controls and compliance, operational risks, audit history, and request by the top management B) Internal Audit Functions or BAC that is aligned to the organization’s 1. The Internal Auditors ultimately report to the BAC strategic objectives. and administratively to the Group CEO. They have carried out their internal audit functions for the 6. The scope of internal audit covers the audits of Group independently with impartiality, profi ciency all of the Group’s operational units, including its and due professional care. subsidiary companies based on the approved 2016’s audit plan. Among the key areas covered 2. The core function of internal audit is to perform an during the fi nancial year were: independent appraisal of the Group’s activities as a i. Revenue Recognition service to the Management. The internal audit functions ii. Billings play an important role in helping Management to establish and maintain the best possible internal iii. Debtors and Creditors Ageing control environment within the Group. The sound iv. Bank Reconciliation internal control environment would ensure the Group’s v. Credit Facility compliance with legal and regulatory requirements, safeguarding of assets, adequacy of records, vi. Inventory Management prevention or early detection of frauds, material errors vii. Operations and Maintenance and irregularities as well as effi ciency of operations. viii. Planning

3. The Internal Auditors had ensured that: ix. Project Management i. The internal audit plans and programs were x. Safety and Security appropriately developed to commensurate xi. Procurement with the Group’s activities and appropriate xii. Asset Management focus and resources were allocated; xiii. Financial Management ii. The internal audit plans and programs were xiv. Human Resource Management continuously reviewed and where necessary xv. Contracts were adjusted accordingly to reflect any signiﬁ cant changes in the Group’s business xvi. Legal and government regulations environment, structure, activities, risk xvii. SOPs exposures or systems; and ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 59

AUDIT COMMITTEE REPORT

7. Internal Auditors presented audit reports that contain 3. Assessment questionnaires were used as a tool purpose, scope and results of the audit, including to obtain input from Damansara Realty personnel findings, conclusions and recommendations, who had considerable contact with the external management response and corrective actions in audit team throughout the year. A fi ve-point scale areas with significant risks and internal control was used to evaluated JAP’S performance which defi ciencies to the BAC on a monthly basis. During encompassed on their ability to provide advice, the year, 70 audit activities (including 39 special suggestions or clarifications pertaining to the audits or investigations and 23 follow-ups) were presentation of financial statements, ability to undertaken throughout the Group and 66 audit provide realistic analysis of issues using technical reports issued. knowledge and independent judgment, and maintain active engagement, via both verbal and 8. Internal audit findings in 2016 continued to written communication during the audit process, reflect a moderate internal control system. as well as their responsiveness to issues. Internal audit reports provide a formal means of communicating audit results and recommended 4. The BAC satisfi ed with the suitability of JAP, actions to the Management and BAC. Audit based on the quality of services and suffi ciency reports provide the basis for the BAC to highlight of resources they provided to the Group. The signifi cant weaknesses and the Management’s BAC also acknowledged of the communication proposed remedial measures to the Board. and interaction with the lead audit engagement The Internal Auditors’ recommendations are for partner and engagement team, which revealed their reducing risks, strengthening internal controls independence, objectivity and professionalism. and correcting errors. BAC was satisfi ed with Internal Auditors review and instructed the 5. Result of the performance assessment of JAP Management to take all necessary actions to for 2016 supports the BAC’s recommendation resolve the issues raised by Internal Auditors. to the Board for approval of the appointment of JAP as External Auditors for the fi nancial year 9. As at 31 December 2016, IAD had a total of 5 ending 31 December 2017. auditors, comprising staff from various backgrounds. The total costs incurred during the fi nancial year 6. The Board at its meeting approved the BAC’s for the internal audit functions for the Group level recommendation to appoint JAP, subject to was approximately RM341,035 as compared to the shareholders’ approval being sought at the RM422,868 in 2015. forthcoming 55th AGM on the appointment of JAP as external auditors of the Company for the fi nancial year ending 31 December 2017. C) External Audit 1. In November 2016, BAC had a private meeting 7. On 31 December 2016, the Group CFO reported with the External Auditors without the presence that non-audit fees incurred in 2016 amounted to of the Group CEO, Management and Internal RM63,965, constituting approximately 32% of the Auditors. The BAC questioned about Management’s total remuneration of RM199,762 to the External cooperation with the External Auditors, their sharing Auditors for the fi nancial year 2016. Group CFO of information and the profi ciency and adequacy also sought the BAC’s approval for the proposed of resources in fi nancial reporting functions with audit and non-audit services to be provided by applicable MFRSs. The BAC Chairman also the External Auditors for 2016. requested the External Auditors to inform BAC at any time should they be aware of incidents or 8. JAP had provided a written assurance on 15 matters in the course of their audits or reviews March 2017 to the BAC that, in accordance that needed BAC’s attention. with the terms of all relevant professional and regulatory requirements, they had been 2. Policy established and adopted by the Board independent throughout the audit engagement for BAC to assess suitability and independence for 2016. of External Auditors. During fi rst quarter 2017 meeting, BAC performed an annual assessment on lead audit engagement partner and engagement team which covered their performance and quality of audit, communications with the BAC and Bursa Malaysia, and JAP’s independence, objectivity and professionalism. 60 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

MCCG 2012 requires the Board to identify the Group’s there are prudent risk management over the Group’s critical business risks and implement a system to businesses and operations. manage these risks as well as to review the adequacy and the integrity of the Group’s internal control system The following Board Committees have been set up to to safeguard shareholder’s investment and the Group’s promote transparency, governance and accountability: assets. Paragraph 15.26(b) of the MMLR of Bursa • Board Audit Committee Securities requires Directors of listed companies to include a statement in the annual report on the state of • Board Risk Management Committee the Group’s internal controls for the ﬁ nancial year under • Tender Board Committee review with the guidance provided to directors as set • Board Nomination & Remuneration Committee out in the “Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers” issued by the Taskforce on Internal Control with the support and MANAGEMENT endorsement of Bursa Securities. The Management is responsible in ensuring risk management is adequately carried out, as part of their RESPONSIBILITY & ACCOUNTABILITY BOARD responsibility in evaluating and making key strategic and operational decision. The Management provides oversight BOARD for risk management and internal control implementation The Board acknowledges its responsibility in instituting a across the Group and reviewing, monitoring and taking system of internal controls that covers all aspects of the action as required. Furthermore, the Management ensures business including strategic, commercial, operational and that corporate level risks are being reviewed and actions ﬁ nancial areas. are appropriately followed up by respective Divisions.

It recognizes that reviewing the Group’s system of internal Management has set up the following committees to control is a concerted and continuing process, designed monitor, direct and provide on-going assessment to ensure to manage rather than eliminate the risk of failure to that the Group’s businesses follow its business plans and achieve business objectives. Accordingly, the system established policies: effected by Damansara Realty’s Board and Management, • Group Management Procurement Committee can only provide reasonable but not absolute assurance with regard to the achievement of the Group’s objectives. • Group Executive Committee

The Board has received assurance from the Group CEO and Group CFO that the Group’s risk management and RISK MANAGEMENT FRAMEWORK internal control system is operating adequately and The Board has established a risk management framework effectively, in all material aspects. for the Group by adopting the Risk Management Process. This framework designed by Damansara Realty’s Directors, The Board confi rms that there is an ongoing process of Management and other personnel, is a process to identify, identifying, evaluating and managing all signifi cant risks evaluate, monitor and manage principal risks that will faced by the Group throughout the year and up to the provide reasonable assurance regarding the achievement date of approval of the Annual Report and Financial of the following objectives: Statement. The Group includes material joint ventures and • Effectiveness and effi ciency of operations; associated companies. • Reliability of fi nancial reporting; Previously the Group formed an Risk Management • Compliance with applicable laws and regulations; and Committee, which consisted of the Management, and it’s • Safeguarding of the Group’s assets. risk coordinators and was held every quarter in the year 2016. In order to further enhance the effectiveness of risk management, BRMC was established on the 23rd of November 2016 and will hold it’s fi rst meeting in Q1 2017 to further provide oversight on risk management matters relating to the activities within the Group and ensure that ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 61

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

The Enterprise Risk Management Department continuously 1. Control Environment reviews the adequacy and effectiveness of the risk The Board and the management set the tone of the management processes that are in place within the Group. organization and infl uence the control consciousness within all levels of employees. The Group is committed In order to properly manage risks, the Board recognizes in ensuring that an adequate control environment is the fact that an appropriate and sound system of maintained. Among the measures taken are as follows: internal control should be in place. The Board has adopted the Committee of Sponsoring Organisations a. The Group has formulated a Risk Management of the Treadway Commission’s (COSO) Internal Control Framework to guide personnel in identifying, – Integrated Framework which comprises the following assessing, managing and reporting the risks; five (5) fundamental components that include Control Environment, Risk Assessment, Control Activity, Information b. The Group had also established and distributed and Communication and Monitoring. to all levels of personnel the Internal Policy and Procedures on Property Development, Property Services, Project Management, Tendering as RISK MANAGEMENT PROCESS well as Construction Management. The said policies and procedures, amongst others, defi ne The Group’s Risk Management Process describes the the authority, responsibility and accountability of fi ve-step process of risk assessment and risk treatment the relevant personnel within the Group business in the context of external and internal environments. This functions. Changes in strategic plans, objectives process is applied throughout the Group, whereby risks and goals are immediately disseminated and preventing the achievement of objectives are identifi ed, communicated to the employees; assessed, mitigated and reviewed and communicated to the Board, Management and relevant stakeholders. c. In line with the existence of Human Resource Policies and Procedures in place, the Group had M onitor also adopted and practiced the Ethical Code

Performance of Conduct which further provides guidance > > > to all employees in their day- to-day conduct > essm lf-Ass ent of business transactions. Added to that, all Se Owne Risk r employees are requested to make a formal y I g d e e t t R disclosure as to whether they are engaged n n a i t e r s t i in activities that may have any conflict with r k f y m S e n e n Damansara Realty’s interests. l n a w l p o O i P

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teg y In order to ensure that the Board is satisfi ed that the key business risks have been identifi ed and are As a result, the Group’s strategic risk profi le was developed being addressed, a structured Risk-Control process refl ecting the key risk preventing the Group from achieving has been established. Risk issues are updated its strategic objectives. In addition, risk profiles for all and reviewed by the Management, Enterprise Risk divisions, departments and subsidiaries in the Group were Management Department and Internal Auditors. All generated as an outcome of the risk management process. risk-control reports from the respective risk owners / These risk profi les refl ect the risk appetite of the respective operating units are compiled and assessed quarterly. divisions, departments and subsidiaries as the risk applied Results are presented to the BRMC for notifi cation is based on the likelihood and impact parameters that have and endorsement from time to time. been approved by the respective heads. 62 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

Risk assessment is performed in determining the severity • Efforts to safeguard Damansara Realty’s assets (impact) and probability (likelihood) of occurrence of through adequate insurance coverage over the the risks. The risk assessment considers the range of Group’s major assets against fi re peril; potential severity and how likely these would occur. A product of the risk severity and probability will provide • Segregation of duties and physical security of the risk rating and is evaluated using a risk matrix and assets e.g. limit access to assets, systems and this is used as the basis to prioritize the risks. records; establish clear control of assets and custodial responsibility; and The comparison of estimated risks levels against established criteria, and deciding if the risk is within • Risk-Control reports together with action plans tolerable limits was used to evaluate the risks. If are prepared by the risk owners and submitted the levels of risk are within acceptable limits, or to the Risk Management Coordinator for if the costs of addressing the risk outweigh the monitoring purposes. The Risk Management potential loss from the risk, then that risk may be Coordinator shall ensure that all action plans are accepted as a Control Exception and further risk implemented. treatment may not be required. The management has made conscious decision to accept that risk and not 4. Information and Communication Process expend further effort in trying to control it. The Group has a well-defined and clear line of communication within the Group’s organizational 3. Control Activities structure. The structure ensures that the Board Control activities help to ensure that necessary receives timely, relevant and reliable reports on actions are taken to address risks that may hinder business activities, progress and related information the achievement of the organization’s objectives. for decision-making. Periodic reports are compiled Control activities occur throughout the organization, containing operational, fi nancial, compliance-related at all levels and in all functions. Internal controls are information and information on external events and enforced through policy manuals, jobs description activities for business decision-making and external and functions, operating procedures, delegation, reporting. authorization, etc. Appropriate control activities have been designed and put in place on all aspects of The Group has effective communication channels, business operating functions. Among the key control through reports, briefings, meetings, discussions, activities currently undertaken by the Group are: internal memorandum and website, to communicate • Regular review of comprehensive information/ and disseminate relevant and important information reports provided by the Management to the Board on a timely basis. covering financial and operational performance and key business indicators; 5. Continuous Monitoring Process on the Adequacy and Integrity of the System of Internal Control • Regular Management meetings to obtain feedback The Board recognizes the fact that internal control on the progress of activities undertaken by systems need to be continuously monitored, a the operating/business units in order to rectify process that assesses the quality of the system’s any shortcomings or problems affecting the performance over time. This is accomplished through implementation plan; ongoing monitoring activities, separate evaluations or a combination of both. Ongoing monitoring occurs • Visits to operating/business units by members of in the course of operations through regular internal the Board and senior management; audit reviews on internal control system as well as management and supervisory activities over the • Regular internal audit visits to sites to review business functions. and appraise the systems of internal controls in place to ensure that these controls are effective The Management provides regular and comprehensive and working as intended; information/reports to the Board covering fi nancial performance and key business indicators. The Internal • Regular reconciliations, for example banks’ Auditors have been in existence and are independent reconciliations, to ensure that all transactions are of the activities they audit. accounted for; ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 63

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

The Internal Auditors report functionally to the BAC The Board have acknowledge the business continuity and administratively to the Group CEO. They perform plan by the EXCO members and ensure that the regular reviews of business processes to assess the business interruption risk is well managed by the Group. effectiveness of the internal controls, conduct audit visits to key business units of the Group on a planned 3. Increasing Competition Risk basis and issue audit reports on their findings and In face of competition, the Group has identifi ed the recommendations for the review of the BAC. competition it faced in similar business and have further used strategic business analysis tools to The BAC conducts a review on the results of the diversify its business only if it meets the Group’s internal audit programme or investigation undertaken business objectives. Better focuses on the each and determines whether the Management has taken business and effective project planning have been the appropriate actions on the recommendations made emplaced. Better market penetration by its businesses by the Internal Auditors. by focusing on its strengths, which synergizes all its subsidiaries in achieving an Integrated Facilities and Assets management. This created leverage for the SIGNIFICANT RISKS Group’s businesses against its competitors. 1. Cash Flow Management Risk In order to increase the effectiveness of cash The Board have acknowledge the effectiveness of flow management, the Management has instilled the EXCO meeting in making sure that the increasing centralization of fi nance to the Group level. The usage competition risk is well managed by the Group. of a common fi nancial system, ERP was used since 2016 across not all departments and divisions. The usage of the system made it possible for the Group INTERNAL AUDIT FUNCTION to effectively monitor its debtor and creditors and the The Group has an Internal Audit Department (“IAD”), which centralization of fi nance have dedicated a special unit reports directly to the BAC. Its role is to provide the Board to oversee this and are effective in Q1 2017. with the assurance it requires regarding the adequacy and integrity of internal control across the Group. The Board has acknowledged the effectiveness in centralization of fi nance using systems and ensures IAD reviews the internal control processes in the key that the cash fl ow management risk is well managed activities of the Group’s businesses by adopting a risk- by the Group. based internal audit approach and reports directly to the BAC. Reports on internal audit findings together with 2. Business Interruption Risk recommendations for Management actions are presented Appropriate systems with adequate capacity, security to the BAC where it then reports to the Board by the BAC arrangements facilities and resources are in place to on a quarterly basis or as appropriate. mitigate risks that could cause an interruption to the Group’s critical business function. The EXCO was For each fi nancial year, IAD prepares annual Internal Audit established in 2016 as part of the Group’s SRP in Plan and presents it to the BAC for their approval. The which it effectively look at business decision and scope of work in the Audit Plan encompasses review of the synergy of all its subsidiaries. EXCO members, fi nancial and operational activities within the Group. comprised of head of each subsidiaries, department and division, Group CEO and Group CFO conduct The IAD has completed the planned audits for the year EXCO meeting monthly. Better internal control and and will closely monitor the implementation progress of its synergy was achieved since the formation of EXCO. audit recommendations in order to ensure that all major The Group’s Management have identifi ed the potential risks and control concerns have been duly addressed by future of the Group’s business using the strategic the Management. All internal audit reports together with business analysis tools (i.e. Ansoff Matrix, TOMS, etc.) the recommended action plans and their implementation whether the subsidiaries within the group should focus status have been presented to the Management and BAC. on market penetration, product or service mix, market development or diversifi cation in order to ensure an effective business continuity plan is emplaced. 64 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

STATE OF INTERNAL CONTROL DURING THE PERIOD UNDER REVIEW The Board is satisﬁ ed with the adequacy, effectiveness and integrity of the systems of risk management and internal control and is committed through improving when necessary to further enhance the Group’s system of risk management and internal control. The system of risk management and internal control of the Group is regularly reviewed by the BAC and in the 2017 onwards; BRMC is to enhance the oversight of risks management.

REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS As required by Paragraph 15.23 of the MMLR of Bursa Securities, the External Auditors have reviewed this Statement on Risk Management and Internal Control. Their limited assurance review was performed in accordance with Recommended Practice Guide (“RPG”) 5 (Revised) issued by the Malaysian Institute of Accountants. RPG 5 (Revised) does not require External Auditors to form an opinion on the adequacy and effectiveness of the risk management and internal control systems of the Group.

This statement is made in accordance with the resolution of the Board dated 15 March 2017. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 65

STATEMENT ON DIRECTORS’ RESPONSIBILITY

The Directors consider that, in preparing the fi nancial statements of the Damansara Realty for the FY2016, the Group has used appropriate accounting policies, consistently applied and supported by reasonable and prudent of judgements and estimates. The Directors also consider that all applicable approved accounting standards in Malaysia have been followed and confi rm that the fi nancial statement have been prepared on a going process basis.

The Directors are responsible for ensuring that the Group keep accounting records which disclose with reasonable accuracy at any time the ﬁ nancial statements comply with the provisions of the Companies Act, 1965. The Directors are also responsible for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

This Statement is made in accordance with the resolution of the Board dated 15th March 2017. 66 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

RECURRENT RELATED PARTY TRANSACTIONS

Aggregate Value Transacting "Relationship of of transaction "Nature of Transaction” Parties transacting party” Financial Year 2016 (RM’000) JCorp Group - JCorp is a substantial Rental of office space to the Group and other the Group shareholder of DBhd, by related operational expenses. 192 virtue of Section 6A of the Act JCorp Group - JCorp is a substantial Miscellaneous services rendered by Jcorp Group the Group shareholder of DBhd, by to the Group (includes secretarial services, virtue of Section 6A of share registrar services, staff training, project 1,542 the Act management services, consultancy services internal audit services and others). JCorp Group - JCorp is a substantial Sale of houses, shops, shop offices and other DRJ shareholder of DBhd, by types of development on land registered in the virtue of Section 6A of name of JCorp Group for which DBhd has acquired 891 the Act from JCorp Group the rights to develop the said land. The entire proceeds of the sale accrue to the Group. Jcorp Group - JCorp is a substantial Miscellaneous services offered by the Group DRJ & the shareholder of DBhd, by to JCorp Group such as supplier, contractor or 1,881 Group virtue of Section 6A of project manager of construction projects and the Act sales, marketing agent and other related services. JCorp Group - JCorp is a substantial Hotel and accomodation charges the Group shareholder of DBhd, by 0 virtue of Section 6A of the Act KPJ Group - KPJ is an associated Consultancy services for hospital planning, HTS of Jcorp. Jcorp is a commissioning, construction and operation substantial shareholder of provided by HTS. 3,059 DBhd by virtue of section 6A of the Act KPJ Group - KPJ is an associated Facility management services for hospital provided HTS of Jcorp. Jcorp is a by HTS. substantial shareholder of 1,327 DBhd by virtue of section 6A of the Act JCorp Group - JCorp is a major Rental of spaces for parking operations to Metro Metro Parking shareholder of DBhd by Parking 2,306 virtue of Section 6A of the Act KPJ Group - KPJ is an associated Rental of spaces for parking operations to Metro Metro Parking of Jcorp. Jcorp is a Parking substantial shareholder of 1,719 DBhd by virtue of section 6A of the Act ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 67

RECURRENT RELATED PARTY TRANSACTIONS

Aggregate Value Transacting "Relationship of of transaction "Nature of Transaction” Parties transacting party” Financial Year 2016 (RM’000) JCorp Group - JCorp is a substantial Facility management services for commercial TMR shareholder of DBhd, by buildings provided by TMR 531 virtue of Section 6A of the Act KPJ Group - KPJ is an associated Cleaning services offered by HCD and other related HCD of Jcorp. Jcorp is a expenses (i.e. rental of cleaning equipment, sales substantial shareholder of of toiletries, rental of toilet equipment and others) 15,342 DBhd by virtue of section 6A of the Act JCorp Group - JCorp is a substantial Cleaning services offered by HCD and TMR, other HCD & TMR shareholder of DBhd, by related expenses (i.e. rental of cleaning equipment, 2,930 virtue of Section 6A of sales of toiletries, rental of toilet equipment, the Act landscaping and other related activities)

# Damansara Realty Berhad (“DBhd”) This Page Has Been Intentionally Left Blank FINANCIAL STATEMENTS

70 Directors’ Report 74 Statement by Directors 74 Statutory Declaration 75 Independent Auditors’ Report 81 Statements of Comprehensive Income 82 Statements of Financial Position 84 Statement of Changes In Equity 86 Statement of Cash Flows 88 Notes to the Financial Statements 151 Supplementary Information 70 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

DIRECTORS’ REPORT

The directors have pleasure in submitting their report together with the audited ﬁ nancial statements of the Group and of the Company for the ﬁ nancial year ended 31 December 2016.

PRINCIPAL ACTIVITIES The principal activities of the Company are investment holding, construction and project management.

The principal activities of the subsidiaries are described in Note 17 to the ﬁ nancial statements.

There has been no signiﬁ cant change in the nature of the principal activities during the ﬁ nancial year.

RESULTS

Group Company RM’000 RM’000 (Loss)/Proﬁ t net of tax (27,734) 75

(Loss)/Proﬁ t attributable to: Owners of the parent (26,827) 75 Non-controlling interests (907) –

(27,734) 75

There was no material transfer to or from reserves or provisions during the ﬁ nancial year other than as disclosed in the ﬁ nancial statements.

In the opinion of the directors, the results of the operations of the Group and of the Company during the ﬁ nancial year were not substantially affected by any item, transaction or event of a material and unusual nature other than the readoption of Financial Reporting Standards (“FRS”) as further disclosed in Note 2.2 to the ﬁ nancial statements. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 71

DIRECTORS’ REPORT (cont’d.)

DIRECTORS The names of the directors of the Company in ofﬁ ce since the date of the last report and at the date of this report are:

Dato’ Ahmad Zahri bin Jamil (Chairman) Dato’ Daing A Malek bin Daing A Rahaman Zainah binti Mustafa Abdullah bin Md Yusof Wan Azman bin Ismail Datuk Md Othman bin Hj Yusof Dato’ Mohd Aisom bin Omar Shahrizam bin A. Shukor Dato’ Sohaimi bin Shahadan (Resigned on 28.04.2016) Mohammad Asri bin Hassan Sabri (Resigned on 28.04.2016) Dato’ Ar. Wan Mohammad Khair-il Anuar bin Wan Ahmad (Resigned on 28.04.2016) Zulhaﬁ s Bin Badoldin (Appointed on 01.06.2016, Resigned on 29.06.2016)

DIRECTORS’ BENEFITS Neither at the end of the ﬁ nancial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire beneﬁ ts by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Since the end of the previous fi nancial year, no director has received or become entitled to receive a benefi t (other than benefi ts included in the aggregate amount of emoluments received or due and receivable by the directors or the fi xed salary of a full-time employee of the Company as shown in Note 11 to the fi nancial statements) by reason of a contract made by the Company or a related corporation with any director or with a fi rm of which the director is a member, or with a company in which the director has a substantial fi nancial interest, except as disclosed in Note 29 to the fi nancial statements. 72 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

DIRECTORS’ REPORT (cont’d.)

DIRECTORS’ INTERESTS According to the register of directors’ shareholdings, the interests of directors in offi ce at the end of the fi nancial year in shares and options over shares in the Company and its related corporations during the fi nancial year were as follows:

Number of ordinary shares of RM0.50 each Name of director 01.01.2016 Acquired Sold 31.12.2016 Direct interest in the Company: Dato’ Ahmad Zahri bin Jamil 20,000 – – 20,000

Indirect interest in the Company: Dato’ Daing A Malek bin Daing A Rahaman * 157,816,580 – – 157,816,580

* Held through Seaview Holdings Sdn. Bhd.

None of the other directors in offi ce at the end of the fi nancial year had any interest in shares in the Company or its related corporations during the fi nancial year.

OTHER STATUTORY INFORMATION (a) Before the statements of comprehensive income and statements of ﬁ nancial position of the Group and of the Company were made out, the directors took reasonable steps:

(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisﬁ ed themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts; and

(ii) to ensure that any current assets which were unlikely to realise their values as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.

(b) At the date of this report, the directors are not aware of any circumstances which would render:

(i) the amount written off for bad debts or the amount of the allowance for doubtful debts in the ﬁ nancial statements of the Group and of the Company inadequate to any substantial extent; and

(ii) the values attributed to the current assets in the ﬁ nancial statements of the Group and of the Company misleading. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 73

DIRECTORS’ REPORT (cont’d.)

OTHER STATUTORY INFORMATION (cont’d.) (c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

(d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or ﬁ nancial statements of the Group and of the Company which would render any amount stated in the ﬁ nancial statements misleading.

(e) At the date of this report, there does not exist:

(i) any charge on the assets of the Group or of the Company which has arisen since the end of the ﬁ nancial year which secures the liabilities of any other person; or

(ii) any contingent liability of the Group or of the Company which has arisen since the end of the ﬁ nancial year.

(f) In the opinion of the directors:

(i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the ﬁ nancial year which will or may affect the ability of the Group or of the Company to meet their obligations when they fall due; and

(ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the ﬁ nancial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the ﬁ nancial year in which this report is made.

Signed on behalf of the Board in accordance with a resolution of the directors dated 15 March 2017.

Dato’ Ahmad Zahri bin Jamil Dato’ Daing A Malek bin Daing A Rahaman 74 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

STATEMENT BY DIRECTORS Pursuant to Section 169(15) of the Companies Act, 1965

We, Dato’ Ahmad Zahri bin Jamil and Dato’ Daing A Malek bin Daing A Rahaman, being two of the directors of Damansara Realty Berhad, do hereby state that, in the opinion of the directors, the accompanying fi nancial statements set out on pages 81 to 150 are drawn up in accordance with Financial Reporting Standards (“FRSs”) and Companies Act, 1965 in Malaysia so as to give a true and fair view of the fi nancial position of the Group and of the Company as at 31 December 2016 and of their fi nancial performance and cash fl ows for the year then ended.

The information set out in Note 36 to the ﬁ nancial statements on page 151 have been prepared in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Proﬁ ts or Losses in the Context of Disclosure pursuant to the Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants.

Signed on behalf of the Board in accordance with a resolution of the directors dated 15 March 2017.

Dato’ Ahmad Zahri bin Jamil Dato’ Daing A Malek bin Daing A Rahaman

STATUTORY DECLARATION Pursuant to Section 169(16) of the Companies Act, 1965

I, Zain Azrai Bin Zainuddin, being the offi cer primarily responsible for the fi nancial management of Damansara Realty Berhad, do solemnly and sincerely declare that the accompanying fi nancial statements set out on pages 81 to 150 are in my opinion 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 by the abovenamed, Zain Azrai Bin Zainuddin at Kuala Lumpur in the Federal Territory on 15 March 2017 Zain Azrai Bin Zainuddin

Before me, ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 75

INDEPENDENT AUDITORS’ REPORT To the members of Damansara Realty Berhad (Incorporated in Malaysia)

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS OPINION We have audited the fi nancial statements of Damansara Realty Berhad, which comprise the statements of fi nancial position as at 31 December 2016 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash fl ows of the Group and of the Company for the year then ended, and notes to the fi nancial statements, including a summary of signifi cant accounting policies, as set out on pages 81 to 151.

In our opinion, the accompanying fi nancial statements give a true and fair view of the fi nancial position of the Group and of the Company as at 31 December 2016, and of their fi nancial performance and their cash fl ows for the year then ended in accordance with Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

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 sufﬁ cient 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 fulﬁ lled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.

MATERIAL UNCERTAINTY RELATED TO GOING CONCERN We draw attention to Note 2.1 in the fi nancial statements, which indicates that the Group incurred a net loss of RM27 million during the year ended 31 December 2016 and, as of that date, the Group’s current liabilities exceeded its current assets by RM155 million. As stated in Note 2.1, these events or conditions, along with other matters as set forth in Note 2.1, indicate that a material uncertainty exists that may cast signifi cant doubt on the Group’s ability to continue as a going concern. Our opinion is not modifi ed in respect of this matter. 76 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

INDEPENDENT AUDITORS’ REPORT To the members of Damansara Realty Berhad (Incorporated in Malaysia) (cont’d.)

KEY AUDIT MATTER Key audit matters are those matters that, in our professional judgement, were of most signifi cance in our audit of the fi nancial statements of the Group and of the Company for the current year. These matters were addressed in the context of our audit of the fi nancial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a seperate opinion on these matters.

KEY AUDIT MATTERS OUR RESPONSE

1. Impairment of Assets a. Property, Plant and Equipment (Note 14 to the Financial Statements) The carrying amount of property, plant and Our audit procedures included, among others; equipment as at 31.12.16 was RM25.082 • Assessed internal control designed for identiﬁ cation million. From that amount, the carrying amount of property, plant and equipment for Metro of impairment indicators; Parking Group represented almost 79% of the total carrying amount of property, plant and • Evaluated the appropriateness of the Group’s equipment which was RM19.784 million. The judgements regarding identiﬁ cation of assets or Group assessed the performance of its parking cash generating units which may be impared; operation under Metro Parking Group in 2016. There are some parking machines that are • Assessed the Group’s assumptions and estimates no longer in the operable conditions due to used to determine the recoverable amount of some car parks which have been closed as a property, plant and equipment and any impairment result of expiry of the concession agreements losses recognized, using our judgement. between the landlords and the Metro Parking Group. The landlords also requested for new equipment for every new car park open which • Evaluated the adequacy of disclosure in respect of caused the existing the parking machines to impairment. be obsolete.

The Group concluded that the above factors represented an indication that certain assets may be impaired and performed impairment tests as required by appropriate FRS.

b. Trade and Other Receivables (Note 22 to the Financial Statements) The Group has a material credit exposure in its Our audit procedures included, among others; portfolio of trade and other receivables. Given • Reviewed the Group’s trade and other receivables the nature of these assets, the assessment of impairment involves signiﬁ cant estimation schedule of debtors written off prepared by uncertainty, subjective assumptions and the management. application of signiﬁ cant judgement. • Evaluated the reasonableness of the methods and The management conducted their impairment assumptions used by management to estimate the test to assess the recoverability and consider debtors written off and if management’s methods whether there are indicators of impairment and assumptions are reasonable. of the trade and other receivables. Based on managements’ assessment, there are • Performed test on the accuracy and completeness indicators for impairment and management of the data used by management. has written off RM1.207 million of Bad Debts (Note 9 to the Financial Statements). ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 77

INDEPENDENT AUDITORS’ REPORT To the members of Damansara Realty Berhad (Incorporated in Malaysia) (cont’d.)

KEY AUDIT MATTER (cont’d.)

KEY AUDIT MATTERS OUR RESPONSE

c. Investment Properties (Note 16 to the Financial Statements) The carrying value of investment properties Our audit procedures included, among others; amounted to RM3.054 million. Significant • Evaluated the reasonableness of the methods and judgement is required by the directors in determining the fair value of investment assumptions used by management to estimate properties and for the purposes of our audit; the fair values and if management’s methods and we identified the valuation of investment assumptions are reasonable. properties as representing key audit matter due to signiﬁ cant risk area material misstatement • Performed independent test on the fair value of as a whole, combined with the significant the investment properties by referring to available auditor judgement while determining the fair information. value.

d. Goodwill on Consolidation (Note 20 to the Financial Statements) Goodwill on consolidation arises as a result of Our audit procedures included, among others; acquisitions of subsidiaries by the TMR Group • Critically evaluating the determination of the cash- and Healthcare Technical Services Sdn. Bhd. Under FRS, the Group is required to annually generating units; test goodwill for impairment. This assessment require the exercise of signiﬁ cant judgement • Evaluating whether the model used to calculate the about future market conditions, including fair value less costs to sell and value in use of the growth rates and discount rates, particularly individual cash-generating units complies with the those effecting the business of TMR Group requirements of MFRS 136: Impairment of Assets; and Healthcare Technical Services Sdn. Bhd. • Validating the assumptions applied and inputs in the respective models by comparing it to historical information and approved budgets.

2. Trade and Other Payables (Note 26 to the Financial Statements) In current year, Group undertook an exercise of Our audit procedures included, among others; writing back long outstanding balances amounted • Reviewed the Group’s trade and other payables to RM11.949 million. The management performed schedule of payables write back prepared by write back on the balances which have been management. outstanding for more than 7 years. As a result of the write back, the Group recognized RM11.764 million in Other Income (Note 7 to the Financial • Evaluated the reasonableness of the methods and Statements). assumptions used by management to estimate the payables write back and if management’s methods and assumptions are reasonable.

• Performed test on the accuracy and completeness of the data used by management. 78 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

INDEPENDENT AUDITORS’ REPORT To the members of Damansara Realty Berhad (Incorporated in Malaysia) (cont’d.)

KEY AUDIT MATTER (cont’d.)

KEY AUDIT MATTERS OUR RESPONSE

3. Valuation of Inventories (Note 21 to the Financial Statements) Included in the inventories of RM3.999 million Our audit procedures included, among others; are 2 unsold shop lots in Taman Damansara Aliff, • Performed test on the accuracy and completeness in the Group’s Johor Bahru development project of the calculation of inventories recognized. amounting to RM2.362 million. This project was completed in August 2016 and the Group has • Assessed the measurement of the inventories recognized the unsold shop lots as inventories and whether stated at the lower of cost and net at cost. Previously, no recognition for the unsold realizable value. shop lots due to the ongoing development of the project.

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 Director’s Report but does not include the ﬁ nancial statements of the Company and our auditors’ report thereon.

Our opinion on the ﬁ nancial statement 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 ﬁ nancial 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 ﬁ nancial 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, we conclude that there is a material misstatement of these other information, we are required to report that fact. We have nothing to report in this regard.

RESPONSIBILITIES OF THE DIRECTORS FOR THE FINANCIAL STATEMENTS The directors of the Company are responsible for the preparation of ﬁ nancial statements of the Group and of the Company that give a true and fair view in accordance with Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of ﬁ nancial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error.

In preparing the ﬁ nancial 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. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 79

INDEPENDENT AUDITORS’ REPORT To the members of Damansara Realty Berhad (Incorporated in Malaysia) (cont’d.)

AUDITORS’ RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the fi nancial 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 standard on auditing in Malaysia and International Standard on Auditing will always detect a material misstatement when it exist. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to infl uence the economic decisions of users taken on the basis of these fi nancial statements.

As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the ﬁ nancial 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 sufﬁ cient 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.

• 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 of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• 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 signiﬁ cant 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 ﬁ nancial statements of the Group and of the Company or, if such disclosure 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 company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the ﬁ nancial statements of the Group and of the Company, including the disclosures, and whether the ﬁ nancial statements of the Group and of the Company represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain suffi cient appropriate audit evidence regarding the fi nancial information of the entities or business activities within the Group to express an opinion on the fi nancial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible fo our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and signifi cant audit fi ndings, including any signifi cant defi ciencies in internal control that we identify during our audit.

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 signifi cance in the audit of the fi nancial statements of the Group and of the Company for the current 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 circumtances, 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 benefi ts of such communication. 80 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

INDEPENDENT AUDITORS’ REPORT To the members of Damansara Realty Berhad (Incorporated in Malaysia) (cont’d.)

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:

(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

(b) We have considered the accounts and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 17 to the ﬁ nancial statements, being accounts that have been included in the consolidated accounts.

(c) We are satisfi ed that the accounts of the subsidiaries that have been consolidated with the Company’s fi nancial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the fi nancial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

(d) Our audit reports on the accounts of the subsidiaries did not contain any qualiﬁ cation or any adverse comment required to be made under Section 174(3) of the Act.

OTHER REPORTING RESPONSIBILITIES The supplementary information set out in Note 36 on page 151 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the ﬁ nancial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Proﬁ ts or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

OTHER MATTERS This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

JAMAL, AMIN & PARTNERS AHMAD HILMY BIN JOHARI (No: AF 1067) (No: 2977/03/18(J)) Chartered Accountants Chartered Accountant

Kuala Lumpur, Malaysia Dated: 15th March 2017 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 81

STATEMENTS OF COMPREHENSIVE INCOME For the ﬁ nancial year ended 31st December 2016

Group Company Note 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Revenue 4 183,596 207,058 7,142 – Cost of sales 4 (164,283) (159,795) – –

Gross proﬁ t 19,313 47,263 7,142 –

Other items of income: Interest income 5 319 985 76 268 Dividend income from subsidiaries 6 – – 1,400 776 Other income 7 14,481 7,006 8,716 1,862 Other items of expense: Depreciation (2,482) (2,603) (574) (589) Finance costs 8 (9,955) (9,698) (292) (313) Employee beneﬁ ts expense 10 (20,614) (21,551) (7,549) (8,336) Other expenses (25,379) (19,099) (6,932) (3,343)

(Loss)/Proﬁ t before tax 9 (24,317) 2,303 1,987 (9,675) Income tax expense 12 (3,417) (5,138) (1,912) –

(Loss)/Proﬁ t for the year (27,734) (2,835) 75 (9,675)

Other comprehensive (loss)/income, net of tax Foreign currency translation differences for foreign operations 347 572 – –

Total comprehensive loss for the year (27,387) (2,263) 75 (9,675)

Loss attributable to: Owners of the parent (26,827) (4,316) 75 (9,675) Non-controlling interests (907) 1,481 – –

(27,734) (2,835) 75 (9,675)

Total comprehensive loss attributable to: Owners of the parent (26,480) (3,744) 75 (9,675) Non-controlling interests (907) 1,481 – –

(27,387) (2,263) 75 (9,675)

Group 2016 2015 Basic loss per share attributable to owners of the parent (sen per share) For the year (Note 13) (8.67) (1.40)

The accompanying accounting policies and explanatory notes form an integral part of the ﬁ nancial statements. 82 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

STATEMENTS OF FINANCIAL POSITION As at 31st December 2016

Group Company Note 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Assets Non-current assets Property, plant and equipment 14 23,216 26,369 933 2,887 Land held for property development 15 227,342 216,164 – – Investment properties 16 3,054 3,512 3,054 3,512 Investment in subsidiaries 17 – – 27,333 27,333 Deferred tax assets 18 779 502 – – Other investments 19 51 101 51 101 Goodwill on consolidation 20 1,410 1,409 – –

255,852 248,057 31,371 33,833

Current assets Property development costs 15 - 4,604 – – Inventories 21 4,000 1,655 – – Trade and other receivables 22 51,815 47,356 63,286 60,283 Other current assets 23 5,385 3,638 206 45 Cash and bank balances 24 25,672 41,003 354 6,593

86,872 98,256 63,846 66,921

Total assets 342,724 346,313 95,217 100,754

The accompanying accounting policies and explanatory notes form an integral part of the ﬁ nancial statements. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 83

STATEMENTS OF FINANCIAL POSITION As at 31st December 2016 (cont’d.)

Group Company Note 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Equity and liabilities Current liabilities Loans and borrowings 25 14,230 15,302 7,480 8,302 Trade and other payables 26 227,298 202,955 44,972 49,745

241,528 218,257 52,452 58,047

Net current (liabilities)/assets (154,656) (120,001) 11,394 8,874

Non-current liabilities Loans and borrowings 25 5,013 4,113 78 95 Deferred tax liabilities 18 480 459 – –

5,493 4,572 78 95

Total liabilities 247,021 222,829 52,530 58,142

Net assets 95,703 123,484 42,687 42,612

Equity attributable to owners of the parent

Share capital 27 154,685 154,685 154,685 154,685 Share premium 27 156 156 156 156 Merger deﬁ cit 28 (18,568) (18,568) – – Accumulated losses (47,011) (20,531) (112,154) (112,229) Exchange reserve (1,378) (1,031) – – Capital reserve 28 85 85 – –

87,969 114,796 42,687 42,612 Non-controlling interests 7,734 8,688 – –

Total equity 95,703 123,484 42,687 42,612

Total equity and liabilities 342,724 346,313 95,217 100,754

The accompanying accounting policies and explanatory notes form an integral part of the ﬁ nancial statements. 84 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

STATEMENTS OF CHANGES IN EQUITY – GROUP For the ﬁ nancial year ended 31st December 2016

|------Attributable to owners of the parent------| |------Non-distributable------| Accumu- Non- Share Share Capital Merger Exchange lated controlling Equity capital premium reserve reserve reserve losses Total interests Total (Note 27) (Note 27) (Note 28) (Note 28) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 2016 At 1 January 2016 154,685 156 85 (18,568) (1,031) (20,531) 114,796 8,688 123,484 Total comprehensive (loss)/income – – – – (347) (26,480) (26,827) (907) (27,734)

Dividends to non-controlling interests – – – – – – – (47) (47)

At 31 December 2016 154,685 156 85 (18,568) (1,378) (47,011) 87,969 7,734 95,703

2015 At 1 January 2015, as previously stated 154,685 156 85 (18,568) (459) (16,787) 119,112 7,482 126,594

Total comprehensive income/(loss) – – – – (572) (3,744) (4,316) 1,481 (2,835)

Dividends to non-controlling interests – – – – – – – (275) (275)

Capital reserve – – – – – – – – –

At 31 December 2015 154,685 156 85 (18,568) (1,031) (20,531) 114,796 8,688 123,484

The accompanying accounting policies and explanatory notes form an integral part of the ﬁ nancial statements. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 85

STATEMENTS OF CHANGES IN EQUITY – COMPANY For the ﬁ nancial year ended 31st December 2016 (cont’d.)

Non-distributable Share Share Accumulated Equity capital premium losses Total RM’000 RM’000 RM’000 RM’000 2016 At 1 January 2016 154,685 156 (112,229) 42,612

Proﬁ t for the year – – 75 75

At 31 December 2016 154,685 156 (112,154) 42,687

2015 At 1 January 2015 154,685 156 (102,554) 52,287

Loss for the year – – (9,675) (9,675)

At 31 December 2015 154,685 156 (112,229) 42,612

The accompanying accounting policies and explanatory notes form an integral part of the ﬁ nancial statements. 86 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

STATEMENTS OF CASH FLOWS For the year ended 31st December 2016

Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Cash Flow from Operating Activities Proﬁ t/(Loss) before tax (24,317) 2,303 1,987 (9,675) Adjustments for: Interest Income (369) (268) (76) (268) Interest Expense 562 3,815 5,258 5 Depreciation of Plant and Equipment 7,381 2,603 573 589 Write-Off Property, Plant and Equipment – – – – (Gain)/Loss on disposal of plant and equipment (16) (186) – (186) Translation Difference (10,078) – – –

Operating proﬁ t/(loss) before working capital changes (26,864) 8,267 7,742 (9,535) Changes in working capital:- Property Development Cost (6,574) (4,941) – – Decrease in inventories (2,345) – – – (Increase)/Decrease in Trade and Other Receivables (1,425) (488) (4,003) (8,499) (Decrease)/Increase Trade and Other Payables 26,721 (1,380) (6,685) 4,887 Increase Amount due to Subsidiary Companies 50 – 50 14,115 Decrease Amounts due to Related Companies – – – (5,041)

Cash Generated From/(Used In) Operations (10,437) 1,458 (2,896) (4,073) Taxes Paid (6,097) (466) – (1) Taxes Refunded – 125 – 23 Interest Paid (562) (3,815) (5,258) (5) Interest Received 396 268 (76) 268

Net Cash (Used In)/Generated From Operating Activities (16,700) (2,430) (8,078) (3,788)

Cash Flow from Investing Activities Addition of Land Held of Development Properties – – – – Purchase of Investment Property – – – – Sales Proceed from Disposal of PPE – 4,703 1,528 80 Sales Proceed from Disposal of Investment Property 400 1,540 384 1,540 Purchase of Property, Plant and Equipment 1,286 (7,934) (73) (588) Fixed Deposit Maturity More Than 3 Months – 2,406 – –

Net Cash Generated From/(Used In) Investing Activities 1,686 715 1,839 1,032

The accompanying accounting policies and explanatory notes form an integral part of the ﬁ nancial statements. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 87

STATEMENTS OF CASH FLOWS For the year ended 31st December 2016 (cont’d.)

Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Cash Flow from Financing Activities Drawdown of Loan – 200 – 200 Repayment of Loan (3,537) (1,296) – – Drawdown of Lease – 125 – 125 Repayment of Lease 3,504 (853) – – Drawdown of Hire Purchase – 214 – – Repayment of Hire Purchase – (16) – (16) Dividend Paid – (275) – –

Net Cash (Used In)/Generated From Financing Activities (33) (1,901) – 309

Net Increase/(Decrease) of Cash and Cash Equivalents (15,047) (3,616) (6,239) (2,447)

Cash and Cash Equivalents at Beginning of Year 36,221 39,837 6,593 9,040

Cash and Cash Equivalents at End of Year (Note 24) 21,174 36,221 354 6,593

The accompanying accounting policies and explanatory notes form an integral part of the ﬁ nancial statements. 88 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016

1. CORPORATE INFORMATION The ﬁ nancial statements of the Group and of the Company have been prepared in accordance with Financial Reporting Standards (“FRS”) and the Companies Act, 1965 in Malaysia.

Damansara Realty Berhad (“the Company”), a public limited liability company incorporated and domiciled in Malaysia is listed on the Main Market of Bursa Malaysia Securities Berhad. The registered ofﬁ ce and principal place of business is located at Lot 10.3 Wisma Chase Perdana, Off Jalan Semantan, Damansara Heights, 50490, Kuala Lumpur.

The immediate and ultimate holding company is Seaview Holdings Sdn. Bhd. which is incorporated in Malaysia.

The principal activities of the Company are investment holding, construction and project management. The principal activities of the subsidiaries are described in Note 17.

There has been no signiﬁ cant changes in the nature of the principal activities during the ﬁ nancial year.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis of preparation The ﬁ nancial statements of the Group and the Company have been prepared in accordance with Financial Reporting Standards (“FRS”) and the requirements of the Companies Act, 1965 in Malaysia.

The ﬁ nancial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below.

The ﬁ nancial statements are presented in Ringgit Malaysia (RM) and all values are rounded to the nearest thousand (RM’000) except when otherwise indicated.

As at 31 December 2016, the Group current liabilities has exceeded its current assets by RM155 million. Mainly arising from due and payable of Development Rights Agreement payable to Johor City Development Sdn Bhd on the 31 December 2016. The Group have entered into a agreement to address the Group’s net current liabilities position. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 89

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.2 Standards issued but not yet effective The standards that are issued but not yet effective up to the date of issuance of the Group’s and the Company’s ﬁ nancial statements are disclosed below. The Group and the Company intend to adopt these standards, if applicable, when they become effective.

Effective for annual periods beginning Description on or after • Amendments to FRS 12 (Annual Improvements to FRS Standards 2014 – 2016 Cycle) 1 January 2017 Amendments to BC • FRS 15: Revenue from Contracts with Customers 1 January 2017 • Disclosure Initiative (Amendments to FRS 107) Amendments to BC Amendments to IE 1 January 2017 • FRS 112 : Recognition of Deferred Tax Assets for Unrealised Loses (Amendments to FRS 112) Amendments to BC Amendments to IE 1 January 2017 • FRS 9: Financial Instruments 1 January 2018

The directors expect that the adoption of the above standards and interpretations will have no material impact on the ﬁ nancial statements in the period of initial application.

The amendments are to be applied prospectively to the sale or contribution of assets occurring in annual periods beginning on or after 1 January 2016. Earlier application is permitted.

FRS 9: Financial Instruments In November 2014, MASB issued the fi nal version of FRS 9 Financial Instruments which refl ects all phases of the fi nancial instruments project and replaces FRS 139 Financial Instruments: Recognition and Measurement and all previous versions of FRS 9. The standard introduces new requirements for classification and measurement, impairment and hedge accounting. FRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted.

Retrospective application is required, but comparative information is not compulsory. The Group is currently assessing the ﬁ nancial impact of adopting FRS 9.

Malaysian Financial Reporting Standards (“MFRS Framework”) On 19 November 2011, the Malaysian Accounting Standards Board (“MASB”) issued a new MASB approved accounting framework, the Malaysian Financial Reporting Standards (“MFRS Framework”).

The MFRS Framework is to be applied by all Entities Other Than Private Entities for annual periods beginning on or after 1 January 2012, with the exception of entities that are within the scope of MFRS 141 Agriculture (MFRS 141) and IC Interpretation 15 Agreements for Construction of Real Estate (IC 15), including its parent, signiﬁ cant investor and venturer (herein called ‘Transitioning Entities’).

Transitioning Entities within the scope of MFRS 141, and those within the scope of IC 15 will be mandatorily required to adopt the MFRS Framework for annual periods beginning on or after 1 January 2018. 90 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.3 Basis of consolidation The consolidated fi nancial statements comprise the fi nancial statements of the Company and its subsidiaries as at the reporting date. The fi nancial statements of the subsidiaries used in the preparation of the consolidated fi nancial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances.

The Group controls an investee if and only if the Group has all the following:

(i) Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);

(ii) Exposure, or rights, to variable returns from its investment with the investee; and

(iii) The ability to use its power over the investee to affect its returns.

When the Company has less than a majority of the voting rights of an investee, the Company considers the following in assessing whether or not the Company’s voting rights in an investee are sufﬁ cient to give it power over the investee:

(i) The size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

(ii) Potential voting rights held by the Company, other vote holders or other parties;

(iii) Rights arising from other contractual arrangements; and

(iv) Any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

Subsidiaries are consolidated when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.

Losses within a subsidiary are attributed to the non-controlling interests even if that results in a deﬁ cit balance.

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reﬂ ect the changes in their relative interests in the subsidiaries. The resulting difference is recognised directly in equity and attributed to owners of the Company.

When the Group loses control of a subsidiary, a gain or loss calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets and liabilities of the subsidiary and any non-controlling interest, is recognised in profi t or loss. The subsidiary’s cumulative gain or loss which has been recognised in other comprehensive income and accumulated in equity are reclassifi ed to profi t or loss or where applicable, transferred directly to retained earnings. The fair value of any investment retained in the former subsidiary at the date control is lost is regarded as the cost on initial recognition of the investment. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 91

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.4 Business combinations The consolidated fi nancial statements comprise the fi nancial statements of the Company and its subsidiaries as at the reporting date. The fi nancial statements of the subsidiaries used in the preparation of the consolidated fi nancial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances.

All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.

Business combinations involving entities under common control are accounted for by applying the merger accounting method. The assets and liabilities of the combining entities are refl ected at their carrying amounts reported in the consolidated fi nancial statements of the controlling holding company. Any differences between the consideration paid and the share capital of the acquired entity is refl ected within the equity merger (defi cit)/reserve. The statement of comprehensive income refl ects the results of the combining entities for the full year, irrespective of when the combination takes place. Comparative are presented as if the entities had always been combined since the date the entities had come under common control.

Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

2.5 Foreign currency (a) Functional and presentation currency The individual ﬁ nancial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated ﬁ nancial statements are presented in Ringgit Malaysia (RM), which is also the Company’s functional currency.

(b) Foreign currency transactions Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the reporting date. Non-monetary items denominated in foreign currencies that are measured at historical costs are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items denominated in foreign currencies measured at fair value are translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at the reporting date are recognised in profi t or loss except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in equity. The foreign currency translation reserve is reclassifi ed from equity to profi t or loss of the Group on disposal of the foreign operation.

Exchange differences arising on the translation of non-monetary items carried at fair value are included in proﬁ t and loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity. 92 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.5 Foreign currency (cont’d.) (c) Foreign operations The assets and liabilities of foreign operations are translated into RM at the rate of exchange ruling at the reporting date and income and expenses are translated at exchange rates at the dates of the transactions. The exchange differences arising on the translation are taken directly to other comprehensive income. On disposal of a foreign operation, the cumulative amount recognised in other comprehensive income and accumulated in equity under foreign currency translation reserve relating to that particular foreign operation is recognised in the proﬁ t and loss.

Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the reporting date.

2.6 Property, plant and equipment All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic beneﬁ ts associated with the item will ﬂ ow to the Group and the cost of the item can be measured reliably.

Subsequent to recognition, plant and equipment and furniture and fixtures are measured at cost less accumulated depreciation and accumulated impairment losses. When signifi cant parts of property, plant and equipment are required to be replaced in intervals, the Group recognises such parts as individual assets with specifi c useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfi ed. All other repair and maintenance costs are recognised in profi t or loss as incurred.

Freehold land has an unlimited useful life and therefore is not depreciated. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets as follows:

Buildings 10 to 50 years Plant and machinery 5 to 10 years Site infrastructure and renovations 10 to 14 years Ofﬁ ce equipment, furniture and ﬁ ttings 4 to 20 years Motor vehicles 5 years Medical equipment 10 years Renovation 5 to 10 years Plant and parking equipment 5 to 7 years Machinery and tools 5 to 10 years

Capital work in progress included in plant and equipment are not depreciated as these assets are not yet available for use.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

The residual value, useful life and depreciation method are reviewed at each ﬁ nancial year end, and adjusted prospectively, if appropriate.

An item of property, plant and equipment is derecognised upon disposal or when no future economic beneﬁ ts are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in the proﬁ t or loss in the year the asset is derecognised. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 93

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.7 Investment properties Investment properties are initially recorded at cost, including transaction costs. Subsequent to recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment losses.

Depreciation is computed on a straight-line basis over the estimated useful lives of the investment properties at 50 years. The carrying values of investment properties are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

The residual value, useful life and depreciation method are reviewed at each ﬁ nancial year end, and adjusted prospectively, if appropriate.

Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic beneﬁ t is expected from its disposal. Any gain or loss on the retirement or disposal of an investment property is recognised in proﬁ t or loss in the year of retirement or disposal.

Transfers are made to or from investment property only when there is a change in use. For a transfer from owner-occupied property to investment property, the property is accounted for in accordance with the accounting policy for property, plant and equipment set out in Note 2.6 up to the date of change in use.

2.8 Goodwill Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less accumulated impairment losses.

For the purpose of impairment testing, goodwill acquired is allocated, from the acquisition date, to each of the Group’s cash-generating units that are expected to beneﬁ t from the synergies of the combination.

The cash-generating unit to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the cash-generating unit may be impaired, by comparing the carrying amount of the cash-generating unit, including the allocated goodwill, with the recoverable amount of the cash- generating unit. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised in the proﬁ t or loss. Impairment losses recognised for goodwill are not reversed in subsequent periods.

Where goodwill forms part of a cash-generating unit and part of the operation within that cash-generating unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative fair values of the operations disposed of and the portion of the cash-generating unit retained. Goodwill and fair value adjustments arose on acquisitions of foreign operation before 1 January 2006 are deemed to be assets and liabilities of the company and are recorded in RM at the rates prevailing at the date of acquisition. 94 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.9 Impairment of non-ﬁ nancial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual impairment assessment for an asset is required, the Group makes an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identiﬁ able cash ﬂ ows (cash-generating units (“CGU”)).

In assessing value in use, the estimated future cash fl ows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated fi rst to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis.

Impairment losses are recognised in proﬁ t or loss except for assets that are previously revalued where the revaluation was taken to other comprehensive income. In this case the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount.

That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in proﬁ t or loss unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase. Impairment loss on goodwill is not reversed in a subsequent period.

2.10 Subsidiaries A subsidiary is an entity over which the Group has all the following:

(i) Power over the investee (i.e existing rights that give it the current ability to direct the relevant activities of the investee);

(ii) Exposure, or rights, to variable returns from its investment with the investee; and

(iii) The ability to use its power over the investee to affect its returns.

In the Company’s separate ﬁ nancial statements, investments in subsidiaries are accounted for at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in proﬁ t or loss. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 95

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.11 Investments in associates and joint ventures An associate is an entity in which the Group has signifi cant infl uence. Signifi cant infl uence is the power to participate in the fi nancial and operating policy decisions of the investee but is not control or joint control over those policies.

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

On acquisition of an investment in associate or joint venture, any excess of the cost of investment over the Group’s share of the net fair value of the identifi able assets and liabilities of the investee is recognised as goodwill and included in the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifi able assets and liabilities of the investee over the cost of investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the Group’s share of the associate’s or joint venture’s profi t or loss for the period in which the investment is acquired.

An associate or a joint venture is equity accounted for from the date on which the investee becomes an associate or a joint venture.

Under the equity method, on initial recognition the investment in an associate or a joint venture is recognised at cost, and the carrying amount is increased or decreased to recognise the Group’s share of the proﬁ t or loss and other comprehensive income of the associate or joint venture after the date of acquisition. When the Group’s share of losses in an associate or a joint venture equal or exceeds its interest in the associate or joint venture, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture.

Proﬁ ts and losses resulting from upstream and downstream transactions between the Group and its associate or joint venture are recognised in the Group’s ﬁ nancial statements only to the extent of unrelated investors’ interests in the associate or joint venture. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred.

The ﬁ nancial statements of the associates and joint ventures are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.

2.12 Financial assets Financial assets are recognised in the statements of ﬁ nancial position when, and only when, the Group and the Company become a party to the contractual provisions of the ﬁ nancial instrument.

When fi nancial assets are recognised initially, they are measured at fair value, plus, in the case of fi nancial assets not at fair value through profi t or loss, directly attributable transaction costs. 96 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.12 Financial assets (cont’d.) The Group and the Company determine the classifi cation of their fi nancial assets at initial recognition, and the categories include loans and receivables and available-for-sale fi nancial assets.

(a) Loans and receivables Financial assets with ﬁ xed or determinable payments that are not quoted in an active market are classiﬁ ed as loans and receivables.

Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in proﬁ t or loss when the loans and receivables are derecognised or impaired, and through the amortisation process.

Loans and receivables are classiﬁ ed as current assets, except for those having maturity dates later than 12 months after the reporting date which are classiﬁ ed as non-current.

(b) Available-for-sale fi nancial assets Available-for-sale fi nancial assets are fi nancial assets that are designated as available for sale or are not classifi ed in any of the three preceding categories.

After initial recognition, available-for-sale fi nancial assets are measured at fair value. Any gains or losses from changes in fair value of the fi nancial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profi t or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassifi ed from equity to profi t or loss as a reclassifi cation adjustment when the fi nancial asset is derecognised. Interest income calculated using the effective interest method is recognised in profi t or loss. Dividends on an available-for-sale equity instrument are recognised in profi t or loss when the Group and the Company’s right to receive payment is established.

Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss.

Available-for-sale ﬁ nancial assets are classiﬁ ed as non-current assets unless they are expected to be realised within 12 months after the reporting date.

A fi nancial asset is derecognised when the contractual right to receive cash fl ows from the asset has expired. On derecognition of a fi nancial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profi t or loss.

Regular way purchases or sales are purchases or sales of ﬁ nancial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of ﬁ nancial assets are recognised or derecognised on the trade date i.e., the date that the Group and the Company commit to purchase or sell the asset. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 97

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.13 Impairment of ﬁ nancial assets The Group and the Company assess at each reporting date whether there is any objective evidence that a ﬁ nancial asset is impaired.

(a) Trade and other receivables and other fi nancial assets carried at amortised cost To determine whether there is objective evidence that an impairment loss on fi nancial assets has been incurred, the Group and the Company consider factors such as the probability of insolvency or signifi cant fi nancial diffi culties of the debtor and default or signifi cant delay in payments. For certain categories of fi nancial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio of receivables could include the Group’s and the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables.

If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows discounted at the fi nancial asset’s original effective interest rate. The impairment loss is recognised in profi t or loss.

The carrying amount of the ﬁ nancial asset is reduced by the impairment loss directly for all ﬁ nancial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable becomes uncollectible, it is written off against the allowance account.

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss 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 proﬁ t or loss.

(b) Unquoted equity securities carried at cost If there is objective evidence (such as signifi cant adverse changes in the business environment where the issuer operates, probability of insolvency or signifi cant fi nancial diffi culties of the issuer) that an impairment loss on fi nancial assets carried at cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows discounted at the current market rate of return for a similar fi nancial asset. Such impairment losses are not reversed in subsequent periods.

(c) Available-for-sale fi nancial assets Signifi cant or prolonged decline in fair value below cost, signifi cant fi nancial diffi culties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classifi ed as available-for-sale fi nancial assets are impaired.

If an available-for-sale fi nancial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profi t or loss, is transferred from equity to profi t or loss.

Impairment losses on available-for-sale equity investments are not reversed in profi t or loss in the subsequent periods. Increase in fair value, if any, subsequent to impairment loss is recognised in other comprehensive income. For available-for-sale debt investments, impairment losses are subsequently reversed in profi t or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss in profi t or loss. 98 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.14 Cash and cash equivalents Cash and cash equivalents comprise cash at bank and on hand, demand deposits, and short-term, highly liquid investments that are readily convertible to known amount of cash and which are subject to an insigniﬁ cant risk of changes in value. These also include bank overdrafts that form an integral part of the Group’s cash management.

2.15 Construction contracts Where the outcome of a construction contract can be reliably estimated, contract revenue and contract costs are recognised as revenue and expenses respectively by using the stage of completion method. The stage of completion is measured by reference to the proportion of contract costs incurred for work performed to date to the estimated total contract costs.

Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that are likely to be recoverable. Contract costs are recognised as expense in the period in which they are incurred.

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 contract work, claims and incentive payments to the extent that it is probable that they will result in revenue and they are capable of being reliably measured.

When the total of costs incurred on construction contracts plus recognised profi ts (less recognised losses) exceeds progress billings, the balance is classifi ed as amount due from customers on contracts. When progress billings exceed costs incurred plus, recognised profi ts (less recognised losses), the balance is classifi ed as amount due to customers on contracts.

2.16 Land held for property development and property development cost (i) Land held for property development Land held for property development consists of land where no active development activity has been carried out or where development activity is not expected to be completed within the normal operating cycle. Such land is classiﬁ ed within non-current asset and is stated at cost less any accumulated impairment losses.

Land held for property development is reclassiﬁ ed to property development costs at the point when development activity has commenced and where it can be demonstrated that the development activity will be completed within the normal operating cycle. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 99

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.16 Land held for property development and property development cost (cont’d.) (ii) Property development costs Property development costs comprise all costs that are directly attributable to development activities or that can be allocated on a reasonable basis to such activities.

When the ﬁ nancial outcome of a development activity can be reliably estimated, property development revenue and expenses are recognised in proﬁ t or loss by using the stage of completion method. The stage of completion is determined by the proportion that property development costs incurred for work performed to date bears to the estimated total property development costs.

Where the ﬁ nancial outcome of a development activity cannot be reliably estimated, property development revenue is recognised only to the extent of property development costs incurred that is probable will be recoverable, and property development costs on properties sold are recognised as an expense in the period in which they are incurred.

Any expected loss on a development project, including costs to be incurred over the defects liability period, is recognised as an expense immediately.

Property development costs not recognised as an expense are recognised as an asset, which is measured at the lower of cost and net realisable value.

The excess of revenue recognised in the profi t or loss over billings to purchasers is classifi ed as accrued billings within trade receivables and the excess of billings to purchasers over revenue recognised in profi t or loss is classifi ed as progress billings within trade payables.

2.17 Inventories Inventories are stated at the lower of cost and net realisable value. The cost of raw materials comprises costs of purchase. The cost of unsold completed inventory properties comprises cost associated with the acquisition of land, direct costs and appropriate proportions of common costs.

Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sale.

2.18 Non-current assets held for sale Non-current assets are classiﬁ ed as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition subject only to terms that are usual and customary.

Immediately before classifi cation as held for sale, the measurement of the non-current assets is brought up-to-date in accordance with applicable FRSs. Then, on initial classifi cation as held for sale, non-current assets (other than investment properties, deferred tax assets, employee benefi ts assets, fi nancial assets and inventories) are measured in accordance with FRS 5 that is at the lower of carrying amount and fair value less costs to sell. Any differences are included in the profi t or loss. 100 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.19 Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outﬂ ow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably.

Provisions are reviewed at each reporting date and adjusted to refl ect the current best estimate. If it is no longer probable that an outfl ow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that refl ects, where appropriate, the risks specifi c to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a fi nance cost.

2.20 Financial liabilities Financial liabilities are classifi ed according to the substance of the contractual arrangements entered into and the defi nitions of a fi nancial liability.

Financial liabilities, within the scope of FRS 139, are recognised in the statements of fi nancial position when, and only when, the Group and the Company become a party to the contractual provisions of the fi nancial instrument. Financial liabilities are classifi ed as either fi nancial liabilities at fair value through profi t or loss or other fi nancial liabilities.

(a) Other ﬁ nancial liabilities The Group’s and the Company’s other ﬁ nancial liabilities include trade payables, other payables and loans and borrowings.

Trade and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.

Loans and borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Borrowings are classiﬁ ed as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

For other ﬁ nancial liabilities, gains and losses are recognised in proﬁ t or loss when the liabilities are derecognised, and through the amortisation process.

A fi nancial liability is derecognised when the obligation under the liability is extinguished. When an existing fi nancial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modifi ed, such an exchange or modifi cation is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profi t or loss. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 101

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.21 Financial guarantee contracts A fi nancial guarantee contract is a contract that requires the issuer to make specifi ed payments to reimburse the holder for a loss it incurs because a specifi ed debtor fails to make payment when due.

Financial guarantee contracts are recognised initially as a liability at fair value, net of transaction costs. Subsequent to initial recognition, fi nancial guarantee contracts are recognised as income in profi t or loss over the period of the guarantee. If the debtor fails to make payment relating to fi nancial guarantee contract when it is due and the Group, as the issuer, is required to reimburse the holder for the associated loss, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount initially recognised less cumulative amortisation.

2.22 Borrowing costs Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale.

All other borrowing costs are recognised in proﬁ t or loss in the period they are incurred. Borrowing costs consist of interest and other costs that the Group and the Company incurred in connection with the borrowing of funds.

2.23 Employee beneﬁ ts (a) Short term beneﬁ ts Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees of the Group. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences and short term non- accumulating compensated absences such as sick leave are recognised when the absences occur.

(b) Defi ned contribution plans The Group participates in the national pension schemes as defi ned by the laws of the countries in which it has operations. The Malaysian companies in the Group make contributions to the Employee Provident Fund in Malaysia, a defi ned contribution pension scheme. Contributions to defi ned contribution pension schemes are recognised as an expense in the period in which the related service is performed.

Such contributions are recognised as an expense in the proﬁ t or loss as incurred. As required by law, companies in Malaysia make such contributions to the Employees Provident Fund (“EPF”).

Some of the Group’s foreign subsidiaries also make contributions to their respective countries’ statutory pension schemes. 102 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.24 Leases (a) As lessee Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the ﬁ nance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to proﬁ t or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.

Leased assets are depreciated over the estimated useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life and the lease term.

Operating lease payments are recognised as an expense in proﬁ t or loss on a straight-line basis over the lease term. The aggregate beneﬁ t of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

(b) As lessor Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classiﬁ ed as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. The accounting policy for rental income is set out in Note 2.25(b)(i).

2.25 Revenue and other income Revenue and other income are recognised to the extent that it is probable that the economic benefi ts will fl ow to the Group and the amount can be reliably measured regardless of when the payment is being made. Revenue and other income are measured at the fair value of consideration received or receivable. The following specifi c recognition criteria must also be met before revenue and other income are recognised:

(a) Revenue (i) Sale of land held for development Revenue relating to sale of land held for development is recognised upon the transfer of signiﬁ cant risks and rewards of ownership to the buyer.

(ii) Sale of properties Revenue from sale of properties is accounted for by the stage of completion method as described in Note 2.16(ii).

(iii) Construction contracts Revenue from construction contracts is accounted for by the stage of completion method as described in Note 2.15.

(iv) Project management services Project management services are recognised for services rendered based on the stage of completion during pre and post contract for each project. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 103

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.25 Revenue and other income (cont’d.) (a) Revenue (cont’d.)

(v) Parking services rendered Revenue from parking services are upon the delivery of the service to the customers.

(vi) Cleaning services Services are recognised upon completion of monthly services based on price stated in the predetermined agreement between company and the customer.

(b) Other income (i) Rental income Rental income is accounted for on a straight-line basis over the lease terms. The aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease term on a straight-line basis.

(ii) Interest income Interest income is recognised using the effective interest method.

2.26 Income taxes (a) Current tax Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

Current taxes are recognised in proﬁ t or loss except to the extent that the tax relates to items recognised outside proﬁ t or loss, either in other comprehensive income or directly in equity.

(b) Deferred tax Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for ﬁ nancial reporting purposes.

Deferred tax liabilities are recognised for all temporary differences, except:

– where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting proﬁ t nor taxable proﬁ t or loss; and

– in respect of taxable temporary differences associated with investments in subsidiaries and associates, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. 104 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.26 Income taxes (cont’d.) (b) Deferred tax (cont’d.) Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable proﬁ t will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:

– where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting proﬁ t nor taxable proﬁ t or loss; and

– in respect of deductible temporary differences associated with investments in subsidiaries and associates, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable proﬁ t will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that suffi cient taxable profi t will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profi t will allow the deferred tax assets to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside proﬁ t or loss is recognised outside proﬁ t or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

2.27 Segment reporting For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Company who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 35, including the factors used to identify the reportable segments and the measurement basis of segment information. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 105

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.28 Share capital and share issuance expenses An equity instrument is any contract that evidences a residual interest in the assets of the Group and the Company after deducting all of its liabilities. Ordinary shares are equity instruments.

Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Ordinary shares are classiﬁ ed as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared.

2.29 Contingencies A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be conﬁ rmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Group.

Contingent liabilities and assets are not recognised in the statements of ﬁ nancial position of the Group.

2.30 Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

(i) In the principal market for the asset or liability, or

(ii) In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible to by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-ﬁ nancial asset takes into account a market participant’s ability to generate economic beneﬁ ts by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in circumstances and for which sufﬁ cient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the ﬁ nancial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is signiﬁ cant to the fair value measurement as a whole:

(i) Level 1 – Quoted (unadjusted) market prices in active markets for identical assets of liabilities.

(ii) Level 2 – Valuation techniques for the lowest level input that is signiﬁ cant to the fair value measurement is directly or indirectly observable.

(ii) Level 3 – Valuation techniques for which the lowest level input that is signiﬁ cant to the fair value measurement is unobservable.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the assets or liabilities and the level of the fair value hierarchy as explained above. 106 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES The preparation of the Group’s ﬁ nancial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.

3.1 Judgements made in applying accounting policies There are no critical judgements made by management in the process of applying the Group’s accounting policies that may have signiﬁ cant effect on the amounts recognised in the ﬁ nancial statements.

3.2 Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a signiﬁ cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next ﬁ nancial year are discussed below.

(a) Impairment of receivables The Group and the Company assess at each reporting date whether there is any objective evidence that a fi nancial asset is impaired. To determine whether there is objective evidence of impairment, the Group and the Company consider factors such as the probability of insolvency or signifi cant fi nancial diffi culties of the debtor and default or signifi cant delay in payments.

Where there is objective evidence of impairment, the amount and timing of future cash ﬂ ows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group’s and Company’s receivables at the reporting date is disclosed in Note 23.

(b) Impairment of goodwill Goodwill is tested for impairment annually and at other times when such indicators exist. This requires an estimation of the value in use of the cash-generating units to which goodwill is allocated.

When value in use calculations are undertaken, management must estimate the expected future cash ﬂ ows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash ﬂ ows. Further details of the carrying value, the key assumptions applied in the impairment assessment of goodwill and sensitivity analysis to changes in the assumptions are given in Note 20. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 107

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (CONT’D.) 3.2 Key sources of estimation uncertainty (cont’d.) (c) Measurement of amount due to Johor City Development Sdn. Bhd. (“JCDSB”) Amount due to JCDSB is part of the total consideration of RM180 million for JCorp and JCDSB agreeing to appoint Damansara Realty Johor Sdn. Bhd. (“DRJ”), a subsidiary of the Company, as the developer for Taman Damansara Aliff (“TDA”). On 1 July 2011, JCDSB has granted an extension of time of DRJ’s appointment as the developer of TDA for 5 years until 30 September 2016. Accordingly, the term of repayment of amount due to JCDSB was modiﬁ ed to be repayable within 5 years until 30 September 2016. It is repayable on when and as is where is basis subject that DRJ shall undertake to set aside a proportion of proceeds arising from the land sale or development of properties in TDA, for the purpose of settlement of the said amount. The Group has discounted the repayment amount at the interest rate of 8.25% (2015: 8.25%). During the year, the Group has remeasured the amount due to JCDSB based on the one-off repayment in 2016. Accordingly, the present value of the amount due to JCDSB as at year end is RM120,900,000 (2015: RM111,685,000).

(d) Deferred tax assets Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profi t will be available against which the losses can be utilised. Signifi cant management judgement is required to determine the amount of deferred tax assets that can be recognised, based on the likely timing and level of future taxable profi ts together with future tax planning strategies.

Assumptions about generation of future taxable profi ts depend on management’s estimates of future cash fl ows. These depends on estimates of future production and sales volume, operating costs, capital expenditure, dividends and other capital management transactions. Judgement is also required about application of income tax legislation. These judgements and assumptions are subject to risks and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets recognised in the statements of fi nancial position and the amount of unrecognised tax losses and unrecognised temporary differences.

The carrying value of deferred tax assets of the Group at 31 December 2016 was RM779,000 (2015: RM501,641) and the unrecognised tax losses and capital allowances at 31 December 2016 was RM8,333,000 (2015: RM49,615,000). 108 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

4. REVENUE Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Sale of properties 3,856 16,394 – – Project management services 18,128 41,942 – – Parking services 115,035 119,296 – – Cleaning services 42,315 29,426 – – Management fees received from subsidiaries – – 7,142 – Others 4,262 – – –

183,596 207,058 7,142 –

Cost of sales Included in cost of sales are the following: Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Cost of services performed 10,328 6,270 – – Car park rental 54,437 57,759 – – Proﬁ t sharing with landlord 13,377 13,496 – – Depreciation (Note 14) 4,825 3,880 – – Employee beneﬁ ts expense (Note 10) 39,611 35,048 – – Property service overhead – 16,508 – – Cleaning services overhead 20,473 19,791 – – Property development 10,460 6,202 – – Royalties – 175 – – Others 10,772 666 – –

5. INTEREST INCOME Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Interest income from loans and receivables 319 985 76 268 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 109

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

6. DIVIDEND INCOME Company 2016 2015 RM’000 RM’000 Dividend income from subsidiaries 1,400 776

7. OTHER INCOME Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Net gain on sale of investment properties 16 160 16 160 Rental income from: – investment properties 361 219 361 219 Discount from contractors 270 7 63 5 Creditors write back 11,764 – 7,968 – Late payment 535 – – – Reversal of allowance for impairment of – trade and other receivables (Note 22) 248 50 – 29 Income from minerals – 3,080 – – Tender income – 452 – – Others 1,287 3,038 308 1,449

14,481 7,006 8,716 1,862

8. FINANCE COSTS Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Interest expense on: – Term loans – 17 – – – Finance leases 35 51 5 5 – Overdrafts 394 890 – – – Advance from a subsidiary – – – 108 – Advance from holding company 175 200 287 200 – Bank charges 122 – – – – Bank guarantee 15 28 – – – Unwinding of amount due to JCDSB 9,214 8,512 – –

Total ﬁ nance costs 9,955 9,698 292 313 110 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

9. (LOSS)/PROFIT BEFORE TAX The following items have been included in arriving at loss before tax:

Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Auditors’ remuneration: – Statutory audit – Audit fees 458 326 65 60 – Other services 61 – 22 – Other auditors’ remuneration: – Statutory audit – 96 – 208 Employee beneﬁ ts expense (Note 10) 60,225 56,599 7,549 8,336 Non-executive directors’ remuneration (Note 11) 750 566 750 566 Depreciation of property, plant and equipment (Note 14) 2,408 2,498 500 484 Rental expense: – ofﬁ ce, warehouse and house rental 1,334 1,364 597 596 – computer and equipment 118 134 83 96 Depreciation of investment properties (Note 16) 74 105 74 105 Direct operating expenses arising from investment properties 185 232 185 –

Impairment loss on ﬁ nancial assets: – trade receivables (Note 22(a)) – 538 – – Legal fees 551 562 125 – Write-off of property, plant and equipment 2,182 – – – Debtors written off 1,207 – 219 – Provision for doubtful debts 1,541 – – – Realised foreign exchange loss 12 – 2 – Unrealised foreign exchange gain (347) (572) – – ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 111

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

10. EMPLOYEE BENEFITS EXPENSE Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Wages, salaries and bonus 54,475 48,975 6,649 6,368 Social security contributions 1,370 222 31 31 Contributions to deﬁ ned contribution plan 1,801 4,505 613 762 Training 374 61 76 21 Other beneﬁ ts 2,205 2,836 180 1,154

Employee beneﬁ ts expense (Note 9) 60,225 56,599 7,549 8,336 Less: Employees’ beneﬁ ts expenses included in cost of sales (Note 4) (39,611) (35,048) – –

20,614 21,551 7,549 8,336

Included in employee beneﬁ ts expense of the Group and the Company are executive directors’ remuneration amounting to RM1,591,000 (2015: RM2,427,000) and RM1,591,000 (2015: RM2,427,000) respectively.

11. DIRECTORS’ REMUNERATION The details of remuneration receivable by directors of the Company during the year are as follows:

Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Executive: Salaries, bonus and other emoluments 1,201 1,852 1,201 1,852 Fees 306 353 306 353 Deﬁ ned contribution plan 84 222 84 222

Total executive directors’ remuneration (excluding beneﬁ ts-in-kind) (Note 10) 1,591 2,427 1,591 2,427 Estimated money value of beneﬁ ts-in-kind – 10 – 10

Total executive directors’ remuneration (including beneﬁ ts-in-kind) 1,591 2,437 1,591 2,437

Non-Executive: Fees (Note 9) 750 566 750 566 Estimated money value of beneﬁ ts-in-kind – – – –

Total non-executive directors’ remuneration (including beneﬁ ts-in-kind) 750 566 750 566

Total directors’ remuneration 2,341 3,003 2,341 3,003 112 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

11. DIRECTORS’ REMUNERATION (CONT’D.) The number of directors of the Company whose total remuneration during the ﬁ nancial year fell within the following bands is analysed below:

Number of directors 2016 2015 Executive directors: RM600,001 – RM650,000 – – RM650,001 – RM700,000 – – RM700,001 – RM750,000 – – RM750,001 – RM800,000 – 1 RM1,000,001 – RM2,000,000 1 1

Non-Executive directors: Below RM50,000 3 4 RM50,000 – RM100,000 7 5 RM100,001 – RM200,000 1 1 RM400,001 – RM500,000 – –

12. INCOME TAX EXPENSE Major components of income tax expense The major components of income tax expense for the years ended 31 December 2016 and 2015 are:

Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Statement of comprehensive income: Current income tax: – Malaysian income tax 3,417 5,074 1,713 – – Under provision in respect of previous years – 64 199 –

3,417 5,138 1,912 –

Deferred income tax (Note 18): – Reversal and origination of temporary differences – – – – – Under provision in respect of previous years – – – –

– – – –

Income tax expense recognised in proﬁ t or loss 3,417 5,138 1,912 – ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 113

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

12. INCOME TAX EXPENSE (CONT’D.) Reconciliation between tax expense and accounting proﬁ t A reconciliation of income tax expense applicable to loss before tax at the statutory income tax rate to income tax expense at the effective income tax rate of the Company is as follows:

Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Proﬁ t / (Loss) before tax (24,317) 2,303 1,987 (9,675)

Tax at Malaysian statutory tax rate of 24% (2015: 25%) (5,838) 780 477 (2,419) Adjustments: Non-deductible expenses 1,995 1,193 491 300 Income not subject to taxation – – – (678) Income subject to taxation – – – 678 Utilisation of business loss in respect of previous years 7,260 3,101 944 2,119 Under provision of income tax in respect of previous years – 64 – –

Income tax expense recognised in proﬁ t or loss 3,417 5,138 1,912 –

Domestic income tax is calculated at the Malaysian statutory tax rate of 24% (2015: 25%) of the estimated assessable proﬁ t for the year.

Tax savings during the ﬁ nancial year arising from:

Group 2016 2015 RM’000 RM’000 Utilisation of previously unrecognised tax losses 10 10 114 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

13. (LOSS)/EARNINGS PER SHARE Basic (loss)/earnings per share amounts are calculated by dividing (loss)/proﬁ t for the year, net of tax, attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the ﬁ nancial year.

The Company does not have dilutive potential ordinary shares for years ended 31 December 2016 and 2015.

The following reﬂ ects the (loss)/proﬁ t and share data used in the computation of basic (loss)/earnings per share for the years ended 31 December:

Group 2016 2015 RM’000 RM’000 (Loss)/proﬁ t net of tax attributable to owners of the parent used in the computation of basic earnings per share (26,827) (4,316)

No. of No. of shares shares ‘000 ‘000 Weighted average number of ordinary shares for basic (loss)/earnings per share computation 309,371 309,371 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 115

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

14. PROPERTY, PLANT AND EQUIPMENT

Site infra- Computer Freehold structure Furniture and Capital land and and Plant and and ofﬁ ce Motor work-in buildings renovations machinery ﬁ ttings equipment vehicles progress Total 2016 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Group Cost At 1 January 2016 788 4,407 57,371 2,653 9,596 4,392 6,650 85,857 Additions 1,709 22 5,785 85 772 304 1,038 9,715 Write-offs (428) – (199) – – – (1,555) (2,182) Disposals – – (432) (60) (1) (207) (507) (1,207) Transfer to / (from) – – (7) – – (64) (3,096) (3,167) Translation differences – – (900) 375 34 (102) 311 (282) Asset held for sales – – – – – – (629) (629)

At 31 December 2016 2,069 4,429 61,618 3,053 10,401 4,323 2,212 88,105

Accumulated depreciation At 1 January 2016 Accumulated Depreciation 544 3,121 43,260 1,516 7,938 3,109 – 59,488 Accumulated impairment loss – – – – – – – – Depreciation charge for the year 9 562 5,812 146 539 239 – 7,307 Impairment loss – – 158 – – – – 158 Write-offs (428) – (199) – – – – (627) Disposals – – (558) (4) (1) – – (563) Transfer to assets held for sale – – – – – – – – Translation differences – – (1,175) 408 27 (134) – (874) At 31 December 2016 Accumulated Depreciation 125 3,683 47,140 2,066 8,503 3,214 – 64,731 Accumulated impairment loss – – 158 – – – – 158

Net carrying amount 1,944 746 14,320 987 1,898 1,109 2,212 23,216 116 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

14. PROPERTY, PLANT AND EQUIPMENT (CONT’D.) Site infra- Computer Freehold structure Furniture and Capital land and and Plant and and ofﬁ ce Motor work-in buildings renovations machinery ﬁ ttings equipment vehicles progress Total 2015 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Group Cost At 1 January 2015 788 4,344 50,834 2,736 8,286 3,748 6,100 76,836 Additions – 63 3,814 186 860 555 2,456 7,934 Write-offs – – – – – – – – Disposals – – (1,635) (383) – (133) (81) (2,232) Transfer – – 1,844 – – – (1,844) – Translation differences – – 2,514 114 450 222 19 3,319

At 31 December 2015 788 4,407 57,371 2,653 9,596 4,392 6,650 85,857

Accumulated depreciation At 1 January 2015 537 2,555 37,293 1,615 6,690 2,510 – 51,200 Depreciation charge for the year 7 566 4,300 158 856 492 – 6,379 Write-offs – – – – – – – – Disposals – – (82) (359) – (11) – (452) Translation differences – – 1,749 102 392 118 – 2,361

At 31 December 2015 544 3,121 43,260 1,516 7,938 3,109 – 59,488

Net carrying amount 244 1,286 14,111 1,137 1,658 1,283 6,650 26,369 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 117

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

14. PROPERTY, PLANT AND EQUIPMENT (CONT’D.) Ofﬁ ce Equipment Furniture Capital and and Motor work-in Computers Fittings Renovations Vehicles progress Total 2016 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Company Cost At 1 January 2016 117 372 1,287 144 1,528 3,448 Additions 39 12 22 – – 73 Disposals – – – – (1,528) (1,528)

At 31 December 2016 156 384 1,309 144 – 1,993

Accumulated depreciation At 1 January 2016 11 23 498 29 – 561 Depreciation charge for the year 15 19 436 29 – 499

At 31 December 2016 26 42 934 58 – 1,060

Net carrying amount 130 342 375 86 – 933

2015 Company Cost At 1 January 2015 71 367 1,230 – 1,273 2,941 Additions 46 5 57 144 336 588 Disposals – – – – (81) (81)

At 31 December 2015 117 372 1,287 144 1,528 3,448

Accumulated depreciation At 1 January 2015 2 5 70 – – 77 Depreciation charge for the year 9 18 428 29 – 484

At 31 December 2015 11 23 498 29 – 561

Net carrying amount 106 349 789 115 1,528 2,887 118 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

14. PROPERTY, PLANT AND EQUIPMENT (CONT’D.) Assets held under fi nance lease During the fi nancial year, the Group acquired property, plant and equipment with an aggregate cost of RM4,323,000 (2015: RM4,321,000) by means of fi nance leases.

The net carrying amount of property, plant and equipment of the Group held under ﬁ nance lease at the reporting date was RM1,109,000 (2015: RM1,278,000).

Leased assets are pledged as security for the related ﬁ nance lease liabilities (Note 25).

15. LAND HELD FOR PROPERTY DEVELOPMENT AND PROPERTY DEVELOPMENT COSTS (a) Land held for property development

Freehold Development land Rights Costs Total RM’000 RM’000 RM’000 RM’000 Group At 1 January 2016 39,152 105,406 71,606 216,164 Additions – – 20,137 20,137 Recognised in proﬁ t and loss – – (8,959) (8,959)

At 31 December 2016 39,152 105,406 82,784 227,342

At 1 January 2015 39,152 105,406 60,188 204,746 Adoption of FRS – – 11,144 11,144

At 1 January 2015 39,152 105,406 60,462 205,020 Additions – – 11,144 11,144

At 31 December 2015 39,152 105,406 71,606 216,164

The development rights are pursuant to the consideration to be paid to Johor City Development Sdn. Bhd. (“JCDSB”) for the appointment of DRJSB as the developer of Taman Damansara Aliff Land (“TDA Land”). The development rights confers all the beneﬁ cial interest over the TDA Land to DRJSB where DRJSB shall undertake to develop or sell TDA Land. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 119

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

15. LAND HELD FOR PROPERTY DEVELOPMENT AND PROPERTY DEVELOPMENT COSTS (CONT’D.) (b) Property development costs Freehold Development land Rights Costs Total RM’000 RM’000 RM’000 RM’000 Group At 31 December 2016 Cumulative property development costs At 1 January 2016 – 1,712 14,578 16,290 Cost incurred during the year _ _ 610 610

At 31 December 2016 – 1,712 15,188 16,900

Cumulative costs recognised in proﬁ t or loss At 1 January 2016 – (1,228) (10,458) (11,686) Recognised during the year – (300) (1,201) (1,501) Transfer to inventory _ _ (2,362) (2,362) Transfer to property plant & equipment _ _ (1,351) (1,351)

At 31 December 2016 – (1,528) (15,372) (16,900)

Property development costs at 31 December 2016 – 184 (184) _

Group At 31 December 2015 Cumulative property development costs At 1 January 2015 – 1,712 14,578 16,290

At 31 December 2015 – 1,712 14,578 16,290

Cumulative costs recognised in proﬁ t or loss At 1 January 2015 – (576) (4,907) (5,483) Recognised during the year – (652) (5,551) (6,203)

At 31 December 2015 – (1,228) (10,458) (11,686)

Property development costs at 31 December 2015 – 484 4,120 4,604 120 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

16. INVESTMENT PROPERTIES Group/Company 2016 2015 RM’000 RM’000 Cost At 1 January 3,994 5,424 Disposal during the year (409) (1,430)

At 31 December 3,585 3,994

Accumulated depreciation At 1 January 482 453 Depreciation charge for the year (Note 9) 74 105 Disposal during the year (25) (76)

At 31 December 531 482

Net carrying amount 3,054 3,512

Fair value 5,000 5,440

Fair value of investment properties has been determined based on valuations performed by accredited independent valuers. The valuation is based on the comparison method of valuation.

Title to investment properties of the Company is presently registered in the name of the developer.

Fair value hierarchy disclosure for investment properties have been provided in Note 31(c).

17. INVESTMENT IN SUBSIDIARIES Company 2016 2015 RM’000 RM’000 Unquoted shares, at cost In Malaysia 67,896 67,896 Impairment losses (40,563) (40,563)

27,333 27,333 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 121

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

17. INVESTMENT IN SUBSIDIARIES (CONT’D.)

Proportion (%) of ownership interest Name Principal activities2016 2015

i) Held by the Company and Incorporated in Malaysia:

Damansara Realty Management Management services to holding 100 100 Services Sdn. Bhd. and related companies and general insurance business

Damansara Realty (Pahang) Property holding and development 80 80 Sdn. Bhd. (“DRPSB”)

Metro Parking (M) Sdn. Bhd. Parking operation and the provision 100 100 of related consultancy services

Kesang Properties Sdn. Bhd. Property development (inactive) and 100 100 investment holding

Tebing Aur Sdn. Bhd. Contract management and 100 100 construction

Healthcare Technical Services Project management and engineering 70 70 Sdn. Bhd. maintenance services

HC Duraclean Sdn. Bhd. Franchising of professional care 75 75 and cleaning services and sales of machinery and equipment, chemicals, tools, parts, accessories and uniform

TMR Urusharta (M) Sdn. Bhd. Business of the real estate services, 75 75 involved in general services, facility management, project consultant and project management

Damansara Galaxy Sdn. Bhd. Management services (inactive) 100 100

Kesang Leasing Sdn. Bhd. Lease, hire purchase and loan 100 100 ﬁ nancing (inactive)

Kesang Industries Sdn. Bhd. Investment holding (inactive) 100 100 122 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

17. INVESTMENT IN SUBSIDIARIES (CONT’D.)

Proportion (%) of ownership interest Name Principal activities2016 2015

i) Held by the Company and Incorporated in Malaysia: (cont’d.)

Damansara Forest Products Quarrying (inactive) 100 100 (Malaysia) Sdn. Bhd.

JOLS Construction Sdn. Bhd. Construction, refurbishment, inspection 100 100 and sanitisation service (inactive)

Damansara Realty Management Timber operation and its related 100 100 (Timber Operations) Sdn Bhd activities (inactive)

Damansara Realty Properties Sdn. Bhd Property development and construction 100 100 works (inactive)

Kesang Kastory Enterprise Sdn. Bhd. Importation and distribution of food 95 95 stuffs (inactive)

Kesang Trading Sdn. Bhd. Property development and trading of 100 100 ofﬁ ce equipment (inactive)

Damansara Realty Constructions Manufacturing, wholeselling and trading 100 100 Sdn. Bhd. of pharmaceutical products (inactive)

Damansara Realty Land Sdn. Bhd. Sand extraction and trading (inactive) 100 100

DHealthcare Centre Sdn. Bhd. Healthcare service provider (inactive) 51 51

Damansara Urban Sdn. Bhd. To carry on the business of general 100 100 merchants, traders, suppliers, factors, brokers, commission and general agents etc (general traders) (inactive)

ii) Held through subsidiaries and incorporated in Malaysia

Damansara Realty (Johor) Property development 100 100 Sdn. Bhd.

Damansara Realty (Terengganu) Property development 100 100 Sdn. Bhd. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 123

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

17. INVESTMENT IN SUBSIDIARIES (CONT’D.)

Proportion (%) of ownership interest Name Principal activities2016 2015

ii) Held through subsidiaries and incorporated in Malaysia (cont’d.)

TMR LC Catering Sdn. Bhd. Property development and advertising 70 100 (Formerly known as Damansara (inactive) Millenium Sdn. Bhd.)

Metro Equipment Systems (M) Trading of parking and other related 100 100 Sdn. Bhd. services

Metro Parking (Sabah) Sdn. Bhd. Parking operator and other transport 100 100 related services

Smart Parking Management Trading of parking and other related 100 100 Systems Sdn. Bhd. equipment

M.N. Koll (M) Sdn. Bhd. Building management and 90 90 maintenance services

TMR ACMV Services Sdn. Bhd. Trading and services of airconditioning 100 100 services

TMR Koll Sdn. Bhd. Engineering consultancy services 100 100

Harta Facilities Management Project management 100 100 Sdn. Bhd.

DRP Construction Sdn. Bhd. Property development, construction 100 100 and investment (inactive)

Kesang Construction & Engineering The business of general contracting 100 100 Sdn. Bhd. (inactive)

Kesang Equipment Hire Sdn. Bhd. Buying, selling and renting of 100 100 machinery (inactive)

Kesang Quarry Sdn. Bhd. Quarrying (inactive) 70 70

Pedas Quarry Sdn. Bhd. Quarrying (inactive) 55 55

DAC Properties Sdn. Bhd. Development of building projects 56 –

DAC Land Sdn. Bhd. Investment properties and property 100 – development. 124 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

17. INVESTMENT IN SUBSIDIARIES (CONT’D.)

Proportion (%) of Country of ownership interest Name Incorporation Principal activities2016 2015

iii) Held by the Company and incorporated in overseas:

** Damansara Forest Products Ltd. Papua New Timber operations (liquidation) – 100 Guinea

** Damansara Batai Ltd. Papua New Inactive (Removed) – 85 Guinea

** Damansara Pai (PNG) Ltd. Papua New Inactive (Removed) – 85 Guinea

** Damansara-Siau (PNG) Ltd. Papua New Inactive (Removed) – 85 Guinea

iv) Held through subsidiaries and incorporated in overseas:

** Metro Parking (S) Pte. Ltd. Singapore Parking operator and 70 70 consultancy services

** Metro Parking (B) Sdn. Bhd. Brunei Parking operator and other 75 75 transport related services

** Metro Parking Management Philippines Parking operator and other 75 75 (Philippines) Inc. transport related services

** Metro Parking (HK) Limited Hong Kong Parking operator, consultancy 55 55 services and transport related services

** Metro Parking Services (India) India Parking operator, consultancy 100 100 Private Limited services and transport related services

** Audited by a ﬁ rm other than Jamal, Amin & Partners ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 125

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

18. DEFERRED TAX Deferred income tax as at 31 December relates to the following:

As at 1 Recognised As at 31 Recognised As at 31 January in proﬁ t December in proﬁ t December 2015 or loss 2015 or loss 2016 RM’000 RM’000 RM’000 RM’000 RM’000 (Note 12) (Note 12) Group Deferred tax liabilities: Property, plant and equipment 420 39 459 21 480

Deferred tax assets: Unutilised tax losses (23) – (23) 23 – Others (346) (133) (479) (300) (779)

(369) (133) (502) (277) (779)

51 (94) (43) (256) (299)

Group 2016 2015 RM’000 RM’000 Presented after appropriate offsetting as follows: Deferred tax liabilities 480 459 Deferred tax assets (779) (502)

(299) (43) 126 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

18. DEFERRED TAX (CONT’D.) Deferred tax assets have not been recognised in respect of the following items:

Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Unused tax losses 84,356 49,574 20,053 20,053 Unabsorbed capital allowances 446 41 254 254

84,802 49,615 20,307 20,307

Unrecognised tax losses At the reporting date, the Group has unused tax losses and unabsorbed capital allowances that are available for offset against future taxable proﬁ ts of the companies in which the losses arose, for which no deferred tax asset is recognised due to uncertainty of recoverability. The availability of unused tax losses and unabsorbed capital allowances for offsetting against future taxable proﬁ ts of the respective subsidiaries are subject to no substantial changes in shareholdings of those subsidiaries under the Income Tax Act, 1967 and guidelines issued by the tax authority.

19. OTHER INVESTMENTS Group/Company 2016 2015 RM’000 RM’000 Non-current Available-for-sale ﬁ nancial assets: – equity instruments (quoted in Malaysia) 51 51

– equity instruments (unquoted), at cost – 897 Less: accumulated impairment losses – (847)

– 50

51 101

Market value of quoted investments 129 81 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 127

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

20. GOODWILL ON CONSOLIDATION 2016 2015 RM’000 RM’000 Group Cost At 1 January and 31 December 3,049 3,049 Addition 1 –

At 31 December 3,050 3,049

Accumulated impairment At 1 January and 31 December 1,640 1,640

Net carrying amount 1,410 1,409

Impairment testing of goodwill Goodwill arising from business combinations has been allocated to two individual cash-generating units (“CGU”) for impairment testing as follows:

– Healthcare services segment – Property services segment

The carrying amounts of goodwill allocated to each CGU are as follows:

2016 2015 RM’000 RM’000 Goodwill Healthcare services segment 523 523 Property services segment 887 886

Total 1,410 1,409 128 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

20. GOODWILL ON CONSOLIDATION (CONT’D.) The recoverable amounts of the CGUs have been determined based on value in use calculations using cash fl ow projections from fi nancial budgets approved by management covering a fi ve-year period. The pre-tax discount rate applied to the cash fl ow projections and the forecasted growth rates used to extrapolate cash fl ows beyond the fi ve-year period are as follows:

Growth rates Pre-tax discount rates 2016 2015 2016 2015 Healthcare services segment 5.0% 5.0% 9.2% 9.2% Property services segment 11.0% 11.0% 9.0% 9.0%

The calculations of value in use for the CGUs are most sensitive to the following assumptions:

Budgeted gross margins – Gross margins are based on average values achieved in the three years preceding the start of the budget period. These are increased over the budget period for anticipated efﬁ ciency improvements.

Growth rates – The forecasted growth rates are based on published industry research and do not exceed the long-term average growth rate for the industries relevant to the CGUs.

Pre-tax discount rates – Discount rates reﬂ ect the current market assessment of the risks speciﬁ c to each CGU. This is the benchmark used by management to assess operating performance and to evaluate future investment proposals.

Market share assumptions – These assumptions are important because, as well as using industry data for growth rates (as noted above), management assesses how the CGU’s position, relative to its competitors, might change over the budget period.

21. INVENTORIES Group 2016 2015 RM’000 RM’000 Cost Cleaning machinery and equipment 62 47 Chemicals 92 102 Developed properties held for sale 2,362 – Uniforms 22 15 Materials and consumables 244 119 Parking materials 1,218 1,372

4,000 1,655

During the year, the amount of inventories recognised as an expense in cost of sales of the Group was RM10,328,000 (2015: RM6,270,000). ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 129

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

22. TRADE AND OTHER RECEIVABLES Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Current Trade receivables Third parties 20,971 56,243 – 8,217

20,971 56,243 – 8,217 Less: Allowance for impairment – Third parties (4,322) (27,010) – (8,217)

Trade receivables, net 16,649 29,233 – –

Other receivables Income tax recoverable 283 1,733 283 282 Amounts due from subsidiaries – – 175,332 171,971 Deposits 870 5,296 221 346 Others 34,767 18,256 479 2,698

35,920 25,285 176,315 175,297

Less: Allowance for impairment – Amounts due from subsidiaries – – (113,002) (113,002) – Others (754) (7,162) (27) (2,012)

(754) (7,162) (113,029) (115,014)

Other receivables, net 35,166 18,123 63,286 60,283

Total trade and other receivables 51,815 47,356 63,286 60,283 Less: Income tax recoverable (283) (1,733) (283) (282) Add: Cash and bank balances (Note 24) 41,003 41,003 6,593 6,593

Total loans and receivables 92,535 86,626 69,596 66,594 130 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

22. TRADE AND OTHER RECEIVABLES (CONT’D.) (a) Trade receivables Trade receivables are non-interest bearing and generally ranges from 14 to 90 days (2015: 14 to 90 days) terms. They are recognised at their original invoice amounts which represent their fair values on initial recognition.

Ageing analysis of trade receivables The ageing analysis of the Group’s and Company’s trade receivables are as follows:

Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Neither past due nor impaired 3,814 6,301 – – 1 to 30 days past due not impaired 3,476 6,447 – – 31 to 60 days past due not impaired 1,902 2,296 – – 61 to 90 days past due not impaired 1,100 2,815 – – 91 to 120 days past due not impaired 1,796 6,382 – – More than 121 days past due not impaired 4,561 4,992 – – 12,835 22,932 – – Impaired 4,322 27,010 – 8,217

20,971 56,243 – 8,217

Receivables that are neither past due nor impaired 18% (2015: 11.2%) of trade receivables of the Group or RM3,814,000 (2015: RM6,301,000) that is neither past due nor impaired.

None of the Group’s and Company’s trade receivables that are neither past due nor impaired has been renegotiated during the ﬁ nancial year.

Receivables that are past due but not impaired The Group has trade receivables amounting to RM12,836,000 (2015: RM22,932,000) respectively that are past due at the reporting date but not impaired.

Although these receivables have exceeded the credit terms granted to them, the directors are reasonably conﬁ dent that all debts can be recovered within the next 12 months. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 131

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

22. TRADE AND OTHER RECEIVABLES (CONT’D.) (a) Trade receivables (cont’d.) Receivables that are impaired The Group’s and Company’s trade receivables that are impaired at the reporting date and the movement of the allowance accounts used to record the impairment are as follows:

Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Individually impaired Trade receivables – nominal amounts 4,322 27,010 – 8,217 Less: Allowance for impairment (4,322) (27,010) – (8,217)

– – – –

Movement in allowance accounts:

Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 At 1 January 27,010 26,476 8,217 8,217 Charge for the year (Note 9) – 538 – – Reversal of impairment (22,688) (4) – –

At 31 December 4,322 27,010 8,217 8,217

Included in trade receivables that are impaired are amounts being disputed and under legal claim as follows: Group 2016 2015 RM’000 RM’000 Due from companies within the Safuan Group – 12,884 Other trade receivable – 11,766

– 24,650

Trade receivables that are individually determined to be impaired at the reporting date relate to debtors that are in signifi cant fi nancial diffi culties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements. 132 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

22. TRADE AND OTHER RECEIVABLES (CONT’D.) (b) Other receivables Amounts due from subsidiaries are unsecured, non-interest bearing and are repayable on demand.

Amounts due from former related companies represent amounts due from subsidiaries of JCorp. These amounts are unsecured, non-interest bearing and are repayable on demand. JCorp is the former immediate and ultimate holding corporation of the Company.

Other receivables that are impaired At the reporting date, debts due from subsidiaries that are in net liabilities position amounted to RM173,272,000 (2015: RM156,891,000) of which provision for impairment of RM114,075,000 (2015: RM131,002,000) had been made.

Amounts due from former related companies are owing by companies within the Safuan Group, which are in dispute and under legal action. Full allowance had been made against these receivables in prior years.

Movement in allowance accounts: Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 At 1 January 7,166 7,216 115,014 122,648 Charge for the year (Note 9) – – – – Reversal of allowance (Note 7) (248) (50) – (29) Written off of allowance (6,164) – (1,985) (7,605)

At 31 December 754 7,166 113,029 115,014 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 133

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

23. OTHER CURRENT ASSETS Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Prepayments 7,012 3,642 206 950 Amount due from customers for contract 9,444 2,502 10,248 1,601

16,456 6,144 10,454 2,551

Less: Allowance for impairment – Prepayments (823) (905) – (905) – Amounts due from customers on contract (10,248) (1,601) (10,248) (1,601)

(11,071) (2,506) (10,248) (2,506)

Total other current assets 5,385 3,638 206 45

Gross amount due from customers for contract Construction contract costs incurred to date 46,521 25,993 31,577 7,508 Attributable proﬁ ts 7,710 222 6,640 –

54,231 26,215 38,217 7,508 Less: Progress billings (44,787) (23,713) (27,969) (5,907)

9,444 2,502 10,248 1,601

Presented as: Gross amount due from customers for contract work 9,444 2,502 10,248 1,601 134 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

24. CASH AND CASH EQUIVALENTS Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Cash at banks and on hand 15,822 31,545 354 6,593 Short term deposits with licensed banks 9,850 9,458 – –

25,672 41,003 354 6,593 Less: Bank overdrafts (Note 25) 140 (956) – – Less: Deposits with maturity more than 3 months (4,638) (3,826) – –

Cash and cash equivalents 21,174 36,221 354 6,593

Included in deposits with licensed banks of the Group are deposits amounting to RM4,638,000 (2015: RM3,826,000) which are pledged as security for bank facilities and bank guarantees.

Short-term deposits are made for varying periods of between one day and one year depending on the immediate cash requirements of the Group and the Company, and earn interests at the respective short-term deposit ﬁ xed rates. The weighted average effective interest rates at the reporting date for the Group and the Company are as below:

Group Company 2016 2015 2016 2015 % % % % Licensed banks 2.38 2.66 2.94 3.47 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 135

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

25. LOANS AND BORROWINGS Group Company 2016 2015 2016 2015 Maturity RM’000 RM’000 RM’000 RM’000 Current Secured: Syndicated term loan at BLR+2.0% p.a. 2017 4,136 1,047 – – Obligations under ﬁ nance leases (Note 30(b)) 2017 962 3,206 13 14 Bank overdrafts (Note 24) On demand (140) 956 – –

4,958 5,209 13 14

Unsecured: Advances from a non-controlling shareholder of a subsidiary On demand 1,805 1,805 – – Advance from ultimate holding company On demand 7,467 8,288 7,467 8,288

9,272 10,093 7,467 8,288

14,230 15,302 7,480 8,302

Non-current Secured: Syndicated term loan at BLR+2.0% p.a. 2018 – 2021 776 383 – – Obligations under ﬁ nance leases (Note 30(b)) 2018 – 2024 4,237 3,730 78 95

5,013 4,113 78 95

Total loans and borrowings 19,243 19,415 7,558 8,397 136 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

25. LOANS AND BORROWINGS (CONT’D.) The remaining maturities of the loans and borrowings are as follows:

Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 On demand or within one year 14,230 15,302 7,480 8,302 More than 1 year and less than 2 years 4,037 2,160 18 17 More than 2 years and less than 5 years 723 1,924 38 36 5 years or more 253 29 22 42

19,243 19,415 7,558 8,397

Advances from a non-controlling shareholder of a subsidiary The advances from a non-controlling shareholder of a subsidiary, Uniphoenix Corporation Bhd. (in liquidation) are unsecured, non-interest bearing and are repayable on demand.

Advance from ultimate holding company The advance from the ultimate holding company is unsecured, bears interest of 2.5% per annum and is repayable on demand.

Obligations under ﬁ nance leases These obligations are secured by a charge over the leased assets (Note 14). The weighted average discount rate implicit in the lease is 5.5% (2015: 5.5%) per annum. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 137

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

26. TRADE AND OTHER PAYABLES Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Current Trade payables Amount due to related companies 125,899 111,685 – – Third parties 29,845 27,231 3,903 5,381

155,744 138,916 3,903 5,381

Other payables Amounts due to subsidiaries – – 31,858 29,239 Deposits received 8,815 43 – 20 Accruals 17,144 12,346 837 63 Others 45,595 51,650 8,374 15,042

71,554 64,039 41,069 44,364

Total trade and other payables 227,298 202,955 44,972 49,745

Non-current Trade payables Amount due to JCDSB – – – –

– – – –

Total trade and other payables 227,298 202,955 44,972 49,745 Add: Loans and borrowings (Note 25) 19,243 19,415 7,558 8,397

Total ﬁ nancial liabilities carried at amortised cost 246,541 222,370 52,530 58,142

(a) Trade payables These amounts are non-interest bearing. Trade payables are normally settled on 30 to 90 days (2015: 30 to 90 days) terms. Non-current trade payables are repayable after 12 months on installment basis.

Amount due to JCDSB is part of the total consideration of RM180 million for JCorp and JCDSB agreeing to appoint Damansara Realty Johor Sdn. Bhd. (“DRJ”), a subsidiary of the Company, as the developer for Taman Damansara Aliff (“TDA”). On 1 July 2011, JCDSB agreed to grant an extension of time of DRJ’s appointment as the developer of TDA for another 5 years until 30 September 2016. Accordingly, the term of repayment of amount due to JCDSB was modiﬁ ed to be repayable within 5 years until 31 December 2016. It is repayable on when and as is where is basis subject that DRJ shall undertake to set aside a proportion of proceeds arising from the land sale or development of properties in TDA, for the purpose of settlement of the said amount. 138 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

26. TRADE AND OTHER PAYABLES (CONT’D.) (a) Trade payables (cont’d.) On 13 October 2016, Damansara Realty Johor Sdn Bhd (“DRJ”) had entered into the following:

i) a subscription and shareholders’ agreement with Country Garden Management (“CGM”) to record certain commitments of the parties with regards to the subscription of shares in DAC Properties Sdn Bhd (“DAC Properties”) and to regulate their rights as shareholders of DAC Properties and the conduct of the business and affairs of DAC Properties, which has been identiﬁ ed as the joint venture vehicle between DRJ and CGM to undertake the development of a 53.08 acre parcel of land within the TDA Land; and

ii) a share sale agreement with CGM for the disposal of 26,500 ordinary shares of RM0.10 each in DAC Properties held by DRJ to CGM, resulting in DRJ and CGM holding 30.0% and 70.0% of the equity interest in DAC Properties, respectively for a disposal consideration of RM18.8 million upon the terms and subject to the conditions contained therein, which form part of the Proposed Joint Venture.

Subsequently, on 14 October 2016 DRJ had entered into a settlement agreement with DBhd, JCD, JCorp, and JLand to settle an aggregate sum of RM141.526 million for the TDA Land. The Aggregate Settlement Sum shall be settled through (i) the consideration arising from the purchase of the JV Land by DAC Properties; and (ii) the consideration arising from the purchase of the remaining portion of approximately 10.07 acres of the TDA Land by DRJ and its wholly-owned subsidiary, namely DAC Land Sdn Bhd (“DAC Land”), which will be effected via the following two (2) sale and purchase agreements:-

i) a sale and purchase agreement entered into between JCD, JCorp and DAC Properties, for the acquisition of the JV Land for a sale and purchase consideration of RM130.30 million; and

ii) a sale and purchase agreement between JCorp, JLand, DRJ and DAC Land, for the acquisition of the Remaining Land for a purchase consideration of RM11.23 million.

(b) Other payables Includes in other payables are amount due to former holding and related company of Johor Corporation Berhad amounting to RM164,021 and RM3,517,853 (2015: RM164,021 and RM3,517,853) respectively.

These amounts are non-interest bearing. Other payables are normally settled on an average term of three months (2015: average term of three months).

(c) Amounts due to subsidiaries These amounts are unsecured, repayable on demand and non-interest bearing except for an amount of RM1,630,755 (2015: RM1,630,755) which bears interest at the effective average rate of 6.6% (2015: 6.6%) per annum. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 139

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

27. SHARE CAPITAL AND SHARE PREMIUM Number of ordinary l–------Amount –------l shares of RM0.50 each Total Share capital Share capital share capital (Issued and (Issued and Share and share fully paid) fully paid) premium premium ‘000 RM’000 RM’000 RM’000 Group and Company Issued and fully paid At beginning and end of 2015 and 2016 309,371 154,685 156 154,841

Number of ordinary shares of RM0.50 each l–------Amount –------l 2016 2015 2016 2015 ‘000 ‘000 RM’000 RM’000 Authorised share capital At beginning and end of 2015 and 2016 2,000,000 2,000,000 1,000,000 1,000,000

28. MERGER DEFICIT AND CAPITAL RESERVE (a) Merger deﬁ cit Group 2016 2015 RM’000 RM’000 At 1 January/31 December (18,568) (18,568)

This represents the difference between the consideration paid and the share capital of the acquired companies.

(b) Capital reserve This represents reserve arising from bonus issue by a subsidiary. 140 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

29. RELATED PARTY TRANSACTIONS (a) Sale and purchase of goods and services In addition to the related party information disclosed elsewhere in the fi nancial statements, the following signifi cant transactions between the Group and related parties took place at terms agreed between the parties during the fi nancial year:

Related companies within Seaview Holdings Sdn Bhd: Group/Company 2016 2015 RM’000 RM’000 Advance received from ultimate holding company 7,467 8,288 Interest on advances 287 200

(b) Compensation of key management personnel Group Company 2016 2015 2016 2015 RM’000 RM’000 RM’000 RM’000 Salaries and other emoluments 5,762 6,405 84 2,997 Deﬁ ned contribution plan 697 775 149 352

6,459 7,180 233 3,349

30. COMMITMENTS (a) Operating lease commitments – as lessee The Group has entered into commercial leases on ofﬁ ce buildings. These leases have an average tenure of three years with no renewal option or contingent rent provision included in the contract. There are no restrictions placed upon the Group by entering into these leases.

Future minimum rentals payable under non-cancellable operating leases at the reporting date are as follows:

Group 2016 2015 RM’000 RM’000 Not later than 1 year 54,276 72,031 Later than 1 year but not later than 5 years 115,075 56,290 Later than 5 years 54 236

169,405 128,557

ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 141

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

30. COMMITMENTS (CONT’D.) (b) Finance lease commitments The Group has ﬁ nance leases for certain motor vehicles and plant and machinery (Note 14). These leases do not have terms of renewal, but have purchase options at nominal values at the end of the lease term.

Future minimum lease payments under ﬁ nance leases together with the present value of the net minimum lease payments are as follows:

Group 2016 2015 RM’000 RM’000 Minimum lease payments: Not later than 1 year 1,103 3,683 Later than 1 year but not later than 2 years 3,521 1,853 Later than 2 years but not later than 5 years 810 1,999 Later than 5 years 237 –

Total minimum lease payments 5,671 7,535 Less: Amounts representing ﬁ nance charges (472) (599)

Present value of minimum lease payments 5,199 6,936

Present value of payments: Not later than 1 year 962 3,206 Later than 1 year but not later than 2 years 3,281 1,840 Later than 2 years but not later than 5 years 741 1,861 Later than 5 years 215 29

Present value of minimum lease payments 5,199 6,936 Less: Amount due within 12 months (Note 25) (962) (3,206)

Amount due after 12 months (Note 25) 4,237 3,730 142 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

31. FAIR VALUE OF FINANCIAL INSTRUMENTS A. Fair value of ﬁ nancial instruments by classes that are not carried at fair value and whose carrying amounts are not reasonable approximation of fair value Group Carrying Fair amount value RM’000 RM’000 At 31 December 2016 Financial liabilities: Non-current Loans and borrowings (non-current) (Note 25) – Term loan 776 –

At 31 December 2015 Financial liabilities: Non-current Loans and borrowings (non-current) (Note 25) – Term loan 383 –

B. Determination of fair value Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value

The following are classes of ﬁ nancial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value:

Note Other investments (current) 19 Trade and other receivables (current) 22 Loans and borrowings (current) 25 Trade and other payables (current) 26

The carrying amounts of these ﬁ nancial assets and liabilities are reasonable approximation of fair values due to their short-term nature.

The carrying amounts of the current portion of loans and borrowings are reasonable approximations of fair values due to the insigniﬁ cant impact of discounting.

The fair values of non-current loans and borrowings are estimated by discounting expected future cash ﬂ ows at market incremental lending rate for similar types of lending, borrowing or leasing arrangements at the reporting date. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 143

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

31. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONT’D.) C. Fair value measurement The following table provides the fair value measurement hierarchy of the Group’s assets and liabilities.

Quantitative disclosures fair value measurement hierarchy for asset as at 31 December 2016

Carrying Date of amount Fair value Fair value disclosures valuation RM’000 RM’000 Investment properties (Note 16) 31 December 2014 3,054 5,000

Fair value disclosure of investment properties are categorised in Level 2 within the fair value hierarchy where the valuation involved signiﬁ cant directly or indirectly observable inputs.

32. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Group and the Company are exposed to fi nancial risks arising from their operations and the use of fi nancial instruments. The key fi nancial risks include credit risk, liquidity risk and interest rate risk.

The Board of Directors reviews and agrees policies and procedures for the management of these risks. The audit committee provides independent oversight to the effectiveness of the risk management process.

It is, and has been throughout the current and previous ﬁ nancial year, the Group’s policy that no derivatives shall be undertaken.

The following sections provide details regarding the Group’s and Company’s exposure to the above-mentioned ﬁ nancial risks and the objectives, policies and processes for the management of these risks.

(a) Credit risk Credit risk is the risk of loss that may arise on outstanding ﬁ nancial instruments should a counterparty default on its obligations. The Group’s and the Company’s exposure to credit risk arises primarily from trade and other receivables. For other ﬁ nancial assets (including cash and bank balances), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties.

The Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades only with recognised and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit veriﬁ cation procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not signiﬁ cant.

Exposure to credit risk At the reporting date, the Group’s and the Company’s maximum exposure to credit risk is represented by the carrying amount of each class of ﬁ nancial assets recognised in the statement of ﬁ nancial position.

Information regarding credit enhancements for trade and other receivables is disclosed in Note 22. 144 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

32. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D.) (a) Credit risk (cont’d.) Credit risk concentration proﬁ le The Group determines concentrations of credit risk by monitoring the business segment of its trade receivables on an ongoing basis. The credit risk concentration proﬁ le of the Group’s trade receivables at the reporting date are as follows: Group 2016 2015 RM’000 % of total RM’000 % of total By business segments: Parking 1,690 100 1,690 100

1,690 100 1,690 100

Financial assets that are neither past due nor impaired Information regarding trade and other receivables that are neither past due nor impaired is disclosed in Note 22. Deposits with banks and other ﬁ nancial institutions that are neither past due nor impaired are placed with or entered into with reputable ﬁ nancial institutions.

Financial assets that are either past due or impaired Information regarding ﬁ nancial assets that are either past due or impaired is disclosed in Note 22. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 145

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

32. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D.) (b) Liquidity risk Liquidity risk is the risk that the Group or the Company will encounter diffi culty in meeting fi nancial obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of fi nancial assets and liabilities. The Group’s and the Company’s objective is to maintain a balance between continuity of funding and fl exibility through the use of stand-by credit facilities.

Analysis of ﬁ nancial instruments by remaining contractual maturities The table below summarises the maturity proﬁ le of the Group’s and the Company’s liabilities at the reporting date based on contractual undiscounted repayment obligations.

On demand or within One to Over ﬁ ve one year ﬁ ve years years Total RM’000 RM’000 RM’000 RM’000 Group At 31 December 2016 Financial liabilities: Trade and other payables 227,298 – – 227,298 Loans and borrowings 14,230 4,760 253 19,243

Total undiscounted ﬁ nancial liabilities 241,528 4,760 253 246,541

At 31 December 2015 Financial liabilities: Trade and other payables 202,955 – – 202,955 Loans and borrowings 15,302 4,084 29 19,415

Total undiscounted ﬁ nancial liabilities 218,257 4,084 29 222,370

Company At 31 December 2016 Financial liabilities: Trade and other payables 44,972 – – 44,972 Loans and borrowings 7,480 56 22 7,558

Total undiscounted ﬁ nancial liabilities 52,452 56 22 52,530

At 31 December 2015 Financial liabilities: Trade and other payables 49,745 – – 49,745 Loans and borrowings 8,302 53 42 8,397

Total undiscounted ﬁ nancial liabilities 58,047 53 42 58,142 146 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

32. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D.) (c) Interest rate risk Interest rate risk is the risk that the fair value or future cash fl ows of the Group’s and the Company’s fi nancial instruments will fl uctuate because of changes in market interest rates.

The Group’s and the Company’s exposure to interest rate risk arises primarily from their loans and borrowings. At the reporting date, the Group and Company do not have ﬂ oating rate borrowings.

(d) Foreign currency risk Foreign currency risk is the risk that the fair value of future cash fl ows of a fi nancial instrument will fl uctuate because of changes in foreign exchange rates.

The Group has transactional currency exposures arising from sales or purchases that are denominated in a currency other than the respective functional currencies of the Group entities, primarily RM, Singapore Dollar, Hong Kong Dollar and Indonesian Rupiah. The management believes that the foreign exchange risk is minimal.

It is not the Group’s policy to hedge its transactional foreign currency risk exposure.

33. CAPITAL MANAGEMENT The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. No changes were made in the objectives, policies or processes during the years ended 31 December 2016 and 31 December 2015.

The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Group’s policy is to keep the gearing ratio below 70%. The Group includes within net debt, loans and borrowings, trade and other payables, less cash and bank balances. Capital includes equity attributable to the owners of the parent. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 147

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

33. CAPITAL MANAGEMENT (CONT’D.) Group Company 2016 2015 2016 2015 Note RM’000 RM’000 RM’000 RM’000 Loans and borrowings 25 19,243 19,415 7,558 8,397 Trade and other payables 26 227,298 202,955 44,972 49,745 Cash and bank balances 24 (25,672) (41,003) (354) (6,593)

Net debt 220,869 181,367 52,176 51,549 Equity attributable to the owners of the parent, representing total capital 87,969 114,796 42,687 42,612

Capital and net debt 308,838 296,163 94,863 94,161

Gearing ratio 72% 61% 55% 55%

34. SEGMENT INFORMATION For management purposes, the Group is organised into business units based on their products and services, and has four reportable operating segments as follows:

I. Property development – the development of residential and commercial properties.

II. Construction contracts – construction of sewage treatment plant, residential and commercial properties.

III. Property services – provision of property services comprising of general services, facility management, project management and consultant, construction management, energy management services, hospital planning, maintenance services and manpower services.

IV. Parking services – parking operation, trading of parking equipments and the provision of related consultancy services.

Except as indicated above, no operating segments have been aggregated to form the above reportable operating segments.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profi t or loss which, in certain respects as explained in the table below, is measured differently from operating profi t or loss in the consolidated fi nancial statements. Group fi nancing (including fi nance costs) and income taxes are managed on a group basis and are not allocated to operating segments.

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties. 148 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

34. SEGMENT INFORMATION (CONT’D.)

Property Property Parking Adjustments and Per consolidated development services services Others eliminations ﬁ nancial statements 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 Note 2016 2015 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Revenue: External customers 3,821 16,394 64,740 71,368 115,035 119,296 – – – – 183,596 207,058 Inter-segment 10,396 – – – – – – 874 (10,396) (874) A – –

Total revenue 14,217 16,394 64,740 71,368 115,035 119,296 – 874 (10,396) (874) 183,596 207,058

Results: Interest income 186 697 92 226 37 63 4 – – – 319 986 Dividend income – – – – – – – – – – – – Depreciation and amortisation 607 609 557 533 1,266 1,428 52 33 – – 2,482 2,603 Impairment of non-ﬁ nancial assets – – – – – – – – – – – – Other non-cash expenses – – – – – – – – – – B – – Segment proﬁ t/(loss) (17,232) (4,944) (4,505) 4,482 (99) 3,791 1,867 (225) (4,348) (800) (24,317) 2,304

Assets: Additions to non-current assets 2 755 73 286 2,991 6,893 8,517 – – – C 11,583 7,934 Segment assets 349,122 346,785 63,936 52,357 52,671 50,624 29,588 31,308 (152,631) (137,760) 342,686 343,314

Segment liabilities 327,975 307,721 45,392 27,311 45,127 41,086 85,091 85,930 (256,603) (239,218) 246,982 222,830 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 149

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

34. SEGMENT INFORMATION (CONT’D.) A Inter-segment revenues are eliminated on consolidation.

B Other material non-cash expenses consist of the following items as presented in the respective notes to the ﬁ nancial statements:

2016 2015 Note RM’000 RM’000 Impairment loss on ﬁ nancial assets: – trade receivables 22 – 538 – other receivables 22 – – Write-off of property, plant and equipment 14 – –

– 538

C Additions to non-current assets consist of:

2016 2015 RM’000 RM’000 Investment properties – – Property, plant and equipment 9,715 7,934

9,715 7,934 150 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

35. MATERIAL LITIGATIONS (a) Bungsar Hill Holdings Sdn Bhd (“BHH”) v Damansara Realty Berhad (“DBhd”) On 4 February 2016, The Federal Court registrar has ﬁ xed the matter for hearing on 12 May 2016. The Federal Court had on 12 May 2016 granted BHH’s leave to appeal on one single question on law only. The suit has been ﬁ xed for case management on 18 November 2016.

During the case management on 18 November 2016, the parties’ solicitors had informed the Federal Court that the Grounds of Judgment from the Court of Appeal had not been obtained despite of the several requests made. The Federal Court also informed that the Appeal cannot be heard until the Grounds of Judgment had been obtained from the Court of Appeal. The next case management is ﬁ xed on 28 March 2017 pending the receipt of the Court of Appeal’s Grounds of Judgments.

(b) DBhd & Tebing Aur Sdn Bhd (“TASB”) v Ibsul Holdings Sdn Bhd DBhd and TASB had ﬁ led a summons action against lbsul Holdings Sdn Bhd (“IHSB”) claiming a sum of RM3.6 million being the balance progress claim submitted to IHSB under the subcontract for Jelutong project which was terminated in April 2006. On 18 July 2012, the Court had dismissed DBhd’s application for summary judgement with costs resulting the matter to proceed to trial.

On 3 June 2016, The Court dismissed the DBhd’s & TASB’s claim on the account that the claim is premature, and also dismissed the IHSB’s counter claim with no order as to costs.

On 17 October 2016, DBhd have instructed our solicitors to conduct watching brief for the arbitration proceedings between IHSB and the concession company pertaining to the dispute arose due to the said project.

However, the management has made a commercial decision not to proceed with the arbitration as watching brief, taking into account of the legal risk and implication and legal cost of the said arbitration.

(c) Om Cahaya Mineral Asia Berhad v Damansara Realty (Pahang) Sdn Bhd On 5 February 2016, Om Cahaya Mineral Asia Berhad (“Om Cahaya”) has ﬁ led a claim for unlawful termination of contract in relation to their alleged appointment to carry out mining works at Damansara Realty (Pahang) Sdn Bhd’s (“DRP”) land in Kuantan, Pahang.

DRP had on 14 April 2016 ﬁ led an application to strike out the suit to the court. The matter has come up for hearing of the striking out application on 27 May 2016 whereby the Kuala Lumpur High Court has allowed DRP’s application to strike out Om Cahaya’s summons and statement of claim with costs of RM5,000.00 and allocator fee of RM200.00. Om Cahaya appealed against the striking out and a case management is ﬁ xed on 8 November 2016, pending the extraction of the sealed Order.

During the case management on 8 November 2016, the Court has instructed the parties to fi le their written submission and bundle of authorities, executive summary and common chronology of facts by the next case management date which is fi xed on 20 February 2017. The Court of Appeal has also fi xed the hearing date on 6 March 2017. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 151

NOTES TO THE FINANCIAL STATEMENTS For the ﬁ nancial year ended 31st December 2016 (cont’d.)

36. SUPPLEMENTARY INFORMATION – BREAKDOWN OF ACCUMULATED LOSSES INTO REALISED AND UNREALISED The breakdown of the accumulated losses of the Group and of the Company as at 31st December 2016 and 2015 into realised and unrealised proﬁ ts/(losses) is presented in accordance with the directive issued by Bursa Malaysia Securities Berhad dated 25 March 2010 and prepared in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Proﬁ ts or Losses in the Context of Disclosure Pursuant to Listing Requirements of Bursa Malaysia Securities Berhad, as issued by the Malaysian Institute of Accountants. Group Company RM’000 RM’000 At 31 December 2016 Total accumulated losses of the Company and its subsidiaries – Realised 138,225 (112,154) – Unrealised (646) –

137,579 (112,154) Less: Consolidation adjustments (184,590) –

Accumulated losses as per ﬁ nancial statements (47,011) (112,154)

At 31 December 2015 Total accumulated losses of the Company and its subsidiaries – Realised 163,592 (112,229) – Unrealised (615) –

162,977 (112,229) Less: Consolidation adjustments (183,508) –

Accumulated losses as per ﬁ nancial statements (20,531) (112,229) 152 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

LIST OF PROPERTIES HELD BY THE GROUP As at 31 December 2016

Net Book Title / Particulars of Age of Value Location Tenure Area Description Building RM’000 Date of Valuation Lot Nos. 17423, 17424, Freehold 504.29 9 parcels of agricultural 17427, 17431, 17434, Acres land with development 17439, Mukim Sungai potential Karang, Kuantan, Pahang.

Lot Nos. 5995, 5997 & 5998, Mukim Beserah, Kuantan, Pahang Lot Nos. 2389 to 2402, Freehold 0.56 14 parcels of vacant Mukim of Beserah, Acres subdivided commercial Kuantan, Pahang terraced shop/offi ce plot n/a 39,152 31 December 2014 Lot Nos. 4139 to 4160 and Freehold 2.63 49 parcels of 4162 to 4188, Mukim of Acres subdivided residential Beserah, Kuantan, Pahang terrace / semi-detached plot Lot Nos. 2189 and Freehold 0.27 2 parcels of vacant 2190, Mukim of Beserah, Acres subdivided residential Kuantan, Pahang semi-detached plot Lot No. 2388, Mukim of Freehold 1.013 A parcel of commercial Beserah, Kuantan, Pahang Acres land designated for petrol station use Levels 14 & 15, Menara Freehold 10,244 Offi ce Building Safuan, No. 80, Jalan sq. ft 19 years 3,054 31 December 2014 Ampang, Kuala Lumpur. No.7,Jalan Hujung Freehold 1,600 Double storey Permatang Satu 26/25A, shophouse sq.ft. n/a 242 n/a Section 26, 40000 Shah Alam, Selangor Darul Ehsan No. 47, Block J and Freehold 4,814 2 units of shop offi ces No. 38, Block H sq.ft. Jalan Aliff 4 1 1,709 n/a Taman Damansara Aliff 81200 Johor Bahru Johor

The above properties are valued at cost. These properties will be revalued at recoverable amount if there is any signiﬁ cant impairment. ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 153

SHAREHOLDINGS STATISTICS As at 5 April 2017

The total no. of issued shares : 309,371,260 Ordinary Shares with voting right of one vote per ordinary share.

ANALYSIS BY SIZE OF HOLDINGS as at 5 April 2017

SIZE OF HOLDINGS NO. OF HOLDERS % NO. OF SHARES % 1 - 99 1,231 3.572 46,828 0.015 100 – 1,000 21,772 63.184 12,177,283 3.936 1,001 – 10,000 10,384 30.135 29,521,289 9.542 10,001 – 100, 000 961 2.788 27,758,271 8.972 100,001 – 15,468,562 (*) 108 0.313 51,966,677 16.797 15,468,563 AND ABOVE (**) 2 0.005 187,900,912 60.736 TOTAL: 34,458 100.000 309,371,260 100.000

Remark * Less than 5% of issued shares ** 5% and above of issued shares

LIST OF TOP 30 HOLDERS as at 5 April 2017 (Without aggregating securities from different securities accounts beloging to the same registered holder)

NO. NAME HOLDINGS % 1. Seaview Holdings Sdn Bhd 157,816,580 51.012 2. Sindora Berhad 30,084,332 9.724 3. Kulim (Malaysia) Berhad 13,879,926 4.486 4. UOB Kay Hian Nominees (Asing) Sdn Bhd 4,917,400 1.589 Exempt An for UOB Kay Hian Pte Ltd (A/C Clients) 5. Datuk Tay Hock Tiam 2,450,000 0.791 6. Datin Leung Kit Man 1,479,068 0.478 7. Maybank Nominees (Tempatan) Sdn Bhd 1,171,200 0.378 Pledged Securities Account for Chow Ah Kau 8. Kenanga Nominees (Asing) Sdn Bhd 1,051,600 0.339 Exempt An for Philip Securities Pte Ltd (Client Account) 9. Kenanga Nominees (Tempatan) Sdn Bhd 1,050,000 0.339 Pledged Securities Account for Khaled bin Mohamad Aroff 10. Harun Bin Kassim 1,040,900 0.336 11. Kenanga Nominees (Tempatan) Sdn Bhd 949,200 0.306 Pledged Securities Account for Muhamad Hapiz bin Othman 12. Wong Ten Yong 919,900 0.297 13. Rashid bin Sihes 747,800 0.241 14. Tan Beng Nee 663,000 0.214 15. Sam Fong @ Chan Sam Fong 594,500 0.192 154 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

SHAREHOLDINGS STATISTICS As at 5 April 2017 (cont’d.)

NO. NAME HOLDINGS % 16. Ng Say Piyu 510,000 0.164 17. Maybank Securities Nominees (Tempatan) Sdn Bhd 500,000 0.161 Pledged Securities Account for Azhar bin Mohd Mokhtar (Margin) 18. Datuk Tay Hock Tiam 498,025 0.160 19. Ong Seng Chye 490,500 0.158 20. Rashid bin Sihes 448,900 0.145 21. Inter-Paciﬁ c Equity Nominees (Tempatan) Sdn Bhd 440,000 0.142 Pledged Securities Account for Soh Jin Gee 22. Teh Chin Huat 420,000 0.135 23. Selina Ng Li Yin 416,000 0.134 24. Tay Lay Thoh 399,500 0.129 25. Tee See Kim 392,000 0.126 26. RHB Capital Nominees (Tempatan) Sdn Bhd 382,200 0.123 Pledged Securities Account for Siti Esa binti Ab Rahim 27. Kenanga Nominees (Tempatan) Sdn Bhd 375,000 0.121 Pledged Securities Account for Azizui @ Azizul bin Katan 28. RHB Capital Nominees (Tempatan) Sdn Bhd 374,100 0.120 Pledged Securities Account for Ihsan bin Osman 29. Soon Ah Seng 372,800 0.120 30. Ho Jia Luen 370,000 0.119

Total No. of Holders : 30 Total Holdings : 225,204,431 Total Percentage (%) : 72.794 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 155

SHAREHOLDINGS STATISTICS As at 5 April 2017 (cont’d.)

SUBSTANTIAL SHAREHOLDERS as at 5 April 2017

Name <------Direct ------> <------Indirect ------> No. of % No. of % shares held held shares held Held Seaview Holdings Berhad 157,816,580 51 - - Dato’ Daing A Malek bin Daing A Rahaman 157,816,580# 51 Sindora Berhad 30,084,332 9.7 - - Kulim (Malaysia) Berhad 13,879,926 4.5 30,084,332* 9.7 JCorp - - 43,964,258** 14.2

Notes * Deemed interested by virtue of its shareholdings in Sindora Berhad pursuant to Section 7 of the Companies Act, 2016 (“the Act”). ** Deemed interested by virtue of its shareholdings in Kulim (Malaysia) Berhad pursuant to Section 7 of the Act. # Dato’ Daing A Malek bin Daing A Rahaman deemed interested by virtue of its shareholdings in Seaview Holdings Sdn Bhd pursuant to Section 7 of the Act.

ANALYSIS OF SHAREHOLDERS

SIZE OF HOLDINGS NO. OF HOLDERS % NO. OF SHARES % Malaysian - Bumiputra 17,144 49.75 236,767,551 76.53 - Others 16,987 49.30 62,259,689 20.12

Foreigner 327 0.95 10,344,020 3.34 TOTAL 34,458100.00 309,371,260 100.00

DIRECTORS’ SHAREHOLDINGS

NO. NAME HOLDINGS % 1. YB Dato’ Ahmad Zahri bin Jamil 20,000 0.01 2. YB Dato’ Daing A Malek bin Daing A Rahaman - - 3. Puan Zainah binti Mustafa - - 4. Tuan Haji Abdullah bin Md Yusof - - 5. YB Datuk Md Othman bin Hj. Yusof - - 6. Encik Wan Azman bin Ismail - - 7. YBhg Dato’ Mohd Aisom bin Omar - - 8. Encik Shahrizam bin A Shukor - -

Summary Total No. of Holder : 1 Total Holdings : 20,000 Total Percentage (%) : 0.01 156 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTICE OF 55TH ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT the 55th Annual General Meeting (“AGM”) of Damansara Realty Berhad (“Damansara Realty” or “the Company”) will be held at the Johor Conference Hall II (Level II), Forest City Phoenix Hotel, Jalan Forest City 1, Pulau Satu, 81550 Gelang Patah, Johor Bahru, Johor, Malaysia on Wednesday, 24 May 2017 at 11.00 a.m. for the following purposes:-

1. To receive the Audited Financial Statements for the ﬁ nancial year ended 31 December 2016 Note 1 together with and the Reports of the Directors and Auditors thereon.

2. To consider and if thought ﬁ t, to pass the following Ordinary Resolutions in accordance with Article 81 of the Company’s Articles of Association and/or the Malaysian Code on Corporate Governance 2012 (“MCCG 2012”):

(a) “THAT YB Dato’ Ahmad Zahri bin Jamil, the Director retiring by rotation in accordance with Resolution 1 Article 81 of the Company’s Articles of Association of the, be and is hereby re-elected as a Director of the Company.”

(b) “THAT YB Dato’ Daing A Malek bin Daing A Rahaman, the Director retiring by rotation in Resolution 2 accordance with Article 81 of the Company’s Articles of Association, be and is hereby re- elected as a Director of the Company.”

(c) “THAT Puan Zainah binti Mustafa, the Director retiring by rotation in accordance with Article Resolution 3 81 of the Company’s Articles of Association and having served as a Senior Independent (Explanatory Director for more than nine (9) years, be and is hereby re-elected and retained as a Senior Note 2) Independent Director of the Company.”

3. To approve the payment of Directors’ fees of RM845,000 in respect of the ﬁ nancial year ended Resolution 4 31 December 2016.

4. To approve the payment of Directors’ remuneration (excluding Directors’ fees) to the Directors up Resolution 5 to an amount of RM800,000 from 1 January 2017 until the next AGM of the Company. (Explanatory Note 3)

5. To re-appoint Messrs Jamal Amin & Partners as auditors of the Company for the ﬁ nancial year Resolution 6 ending 31 December 2017 and to authorize the Board of Directors to determine their remuneration

AS SPECIAL BUSINESS

To consider and, if thought ﬁ t, pass the following resolutions:

6. ORDINARY RESOLUTION Resolution 7 (Explanatory AUTHORITY TO ALLOT SHARES IN GENERAL PURSUANT TO SECTION 75 OF THE COMPANIES Note 4) ACT, 2016 (“the Act”)

“THAT pursuant to Section 75 of the Companies Act, 2016 and subject to the approvals of the relevant governmental/regulatory authorities, the Directors be and are hereby empowered to issue shares in the capital of the Company from time to time and upon such terms and conditions and for such proposes as the Directors, may at their absolute discretion deem ﬁ t, provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the issued share capital of the Company for the time being and that the Directors be and are hereby also empowered to obtain the approval from the Bursa Malaysia Securities Berhad for the listing and quotation of the additional shares so issued and that such authority shall continue to be in force until the conclusion of the next AGM of the Company.” ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 157

NOTICE OF 55TH ANNUAL GENERAL MEETING (cont’d.)

7. ORDINARY RESOLUTION Resolution 8 PROPOSED RENEWAL OF SHAREHOLDERS’ FOR RECURRENT RELATED PARTY TRANSACTION (Explanatory OF A REVENUE OR TRADING NATURE (“Proposed Shareholders’ Mandate”) Note 5)

“THAT, subject always to the Act and Main Market Listing Requirements, of Bursa Malaysia Securities Berhad approval be and is hereby given to the Company and/or its subsidiary companies to renew the existing mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature from the shareholders of the Company for the Company and/or its subsidiary companies to enter into all arrangements and/or transactions involving the interest of Directors, substantial shareholders or persons connected with Directors and/or substantial shareholders of the Company and/or its subsidiary companies (Related Parties) as outlined in Section 2.2 of the Circular to Shareholders dated 28 April 2017 (‘the Circular to Shareholders’), which are necessary for the day-to-day operations of the Company and/or its subsidiary companies, and are within the ordinary course of business of the Company and/or its subsidiary companies (“Proposed Shareholders’ Mandate”), subject further to the following:

i) the transaction are in the ordinary course of business for the day-to-day operations and normal commercial terms which are not more favorable to the related parties than those generally available to the public and not to the detriment of the minority shareholders; and

ii) disclosure will be made in the Annual Report of the aggregate value of transactions conducted pursuant to the Proposed Shareholders’ Mandate during the ﬁ nancial year including amongst others, the following information:- a) the type of the recurrent related party transactions made: and

b) the names of the Related Parties involved in each type of the Recurrent Related Party Transaction entered into and their relationship with the Company; and

AND THAT such approval shall continue to be in force until:- i) the conclusion of the next Annual General Meeting (AGM) of the Company following the General Meeting at which the Proposed Shareholders’ Mandate was passed, at which time it will lapse, unless by a resolution passed at the meeting, the authority is renewed; ii) the expiration of the period within which the next AGM after this date is required to be held pursuant to Section 340 (2) of the Act (but shall not extend to such extensions as may be allowed pursuant to Section 340 (4) of the Act); or iii) revoked or varied by ordinary resolution passed by the shareholders of the Company in a general meeting; whichever is earlier.

AND FURTHER THAT the Directors of the Company be authorised to complete and do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary or give effect to the Proposed Shareholders’ Mandate.’

8. To transact any other business of the Company of which due notice shall have been given in accordance with the Companies Act, 2016.

By Order of the Board DAMANSARA REALTY BERHAD

WAN RAZMAH BINTI WAN ABD RAHMAN (MAICSA 7021383) Secretary

Venue : KUALA LUMPUR Dated : 28 APRIL 2017 158 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

NOTICE OF 55TH ANNUAL GENERAL MEETING (cont’d.)

EXPLANATORY NOTES 1. AUDITED FINANCIAL STATEMENTS FOR FINANCIAL YEAR ENDED 31 DECEMBER 2016

The Audited Financial Statements laid at this meeting pursuant to Section 340(1)(a) of the Companies Act, 2016 are meant for discussion only. It does not require shareholders’ approval, and therefore, will not be put for voting.

2. ORDINARY RESOLUTION 2(C) – CONTINUATION IN OFFICE AS AN INDEPENDENT NON-EXECUTIVE DIRECTOR

Proposed continuation in ofﬁ ce as an Independent Non-Executive Director

The Ordinary Resolution 2(C) if passed, will enable Puan Zainah binti Mustafa to continue to act as a Senior Independent Non-Executive Director, notwithstanding that she has served the Board as a Senior Independent Non- Executive Director for a term of more than nine (9) years, in line with Recommendation 3.2 and 3.3 of the MCCG 2012.

The Nomination Committee has assessed the independence of Puan Zainah binti Mustafa, who served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine (9) years and recommended her to continue to act as a Senior Independent Non-Executive Director of the Company as she has shown that she:- a) Fulfilled the criteria under the definition of Independent Director as stated in the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, and thus, she would be able to function as a check and balance, bring an element of objectivity to the Board; b) Possessed vast experience in the ﬁ nance industry that would enable her to provide the Board with a diverse set of experience, expertise and independent judgement; c) Had been with the Company for more than nine (9) years and has knowledge of the Company’s business operations and the property development market; d) Had devoted sufﬁ cient time and attention to her professional obligations for informed and balanced decision making; and e) Had exercised due care during her tenure as an Independent Non-Executive Director of the Company and carried out her professional duties in the best interest of the Company and shareholders.

3. ORDINARY RESOLUTION 5 – TO APPROVE THE REMUNERATION FOR DIRECTORS

Directors’ remuneration (excluding Directors’ fees) comprises the allowance and other emoluments payable to the Chairman and members of the Board is as set out below.

Board Chairman Executive Vice NEDs Chairman Monthly Fixed Allowance RM5,000 - - Other Benefi ts Claimable Club membership, Claimable Benefi ts:- Benefi ts:- Travelling, medical coverage, travel Travelling, accommodation accommodation and & communication and and other claimable other claimable benefi ts other claimable benefi ts benefi ts Meeting Allowance (per meeting):- Board Meeting RM1,000 RM1,000 RM1,000 Board Audit Committee - - RM1,000 Meeting Board Nomination and - - RM1,000 Remuneration Meeting Board Risk Management - - RM1,000 Committee Tender Board Committee - RM1,000 RM1,000 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD 159

NOTICE OF 55TH ANNUAL GENERAL MEETING (cont’d.)

4. ORDINARY RESOLUTION 7 – AUTHORITY TO ALLOT SHARES PURSUANT TO SECTIONS 75 OF THE COMPANIES ACT, 2016

The proposed Resolution 7 is the renewal of the mandate obtained from the members at the last AGM (“the previous mandate”). As at the date of this Notice, the Company did not allot any shares pursuant to the mandate granted to the Directors at the 55th AGM held on 24 May 2017 as there were no requirements for such fund raising activities. The proposed Resolution 7, if passed, would provide ﬂ exibility to the Directors to undertake fund raising activities, including but not limited to further placement of shares for the purpose of funding the Company’s future investment project(s), working capital and/or acquisition(s), by the issuance of shares in the Company to such persons at any time as the Directors may deem ﬁ t provided that the aggregate number of shares issued pursuant to the mandate does not exceed 10% of the total number of issued shares of the Company for the time being, without having to convene a general meeting. This authority, unless revoked or varied by the Company in a general meeting, will expire at the conclusion of the next AGM of the Company or at the expiry of the period within which the next AGM is required to be held after the approval was given, whichever is earlier

5. ORDINARY RESOLUTION 8 - PROPOSED RENEWAL OF SHAREHOLDERS’ FOR RECURRENT RELATED PARTY TRANSACTION OF A REVENUE OR TRADING NATURE (“Proposed Shareholders’ Mandate”)

The Ordinary Resolutions proposed, if passed, is to authorise the Company and/or its subsidiary companies to enter into any recurrent transactions of a revenue or trading nature with Related Parties which are necessary for the day-to-day operations of the Group, subject to the transactions being in the ordinary course of business, on arms’ length basis and are based on normal commercial terms that are not more favorable to the related parties than those generally made available to the public.

Please refer to the Circular to Shareholders dated 28 April 2017 for further information.

NOTES: 1. In respect of deposited securities, only members whose names appear on the Record of Depositors on 18th May 2017 (General Meeting Record of Depositors) shall be eligible to attend the meeting or appoint proxy(ies) to attend and/or vote on his/her behalf. 2. A member entitled to attend and vote at this meeting is entitled to appoint a proxy/(proxies or attorney) or authorised representative to attend and vote in its stead. A proxy may but need not be a member of the Company and need not be an advocate, an approved company auditor or a person approved by the Registrar of Companies. 3. Where a member is an authorised nominee as defi ned under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one (1) proxy but not more than two (2) proxies in respect of each securities account it holds which is credited with ordinary shares of the Company. The appointment of two (2) proxies in respect of any particular securities account shall be invalid unless the authorised nominee specifi es the proportion of its shareholding to be represented by each proxy. 4. Where a member of the Company is an Exempt Authorised Nominee (“EAN”) as defi ned under the Secruties Industry (Central Depositories) Act 1991 which holds ordinary shares in the Company for multiple benefi cial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which EAN may appoint in respect of each omnibus account it holds. 5. Where a member or the authorised nominee appoints two (2) proxies, or where an exempt authorised nominee appoints two (2) or more proxies, the proportion of shareholdings to be represented by each proxy must be specifi ed in the instrument appointing the proxies. The instrument appointing a proxy and the power of attorney or other authority (if any) under which it is signed, shall be deposited at the Company’s 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, not less than 48 hours before the time for holding the Meeting or adjourned Meeting at which the person or persons named in such instrument proposes to vote, and in default the instrument of proxy shall not be treated as valid. The Annual Report and Proxy Form are available for access and download at the Company’s website at www.dbhd.com.my 6. In the case of the corporate member, the instrument appointing a proxy shall be (a) under its Common Seal or (b) under the hand of a duly authorised its offi cer or attorney and in the case of (b) be supported by a certifi ed true copy of the power of attorney. 7. If this Proxy Form is signed under the hands of an offi cer duly authorised, it should be accompanied by a statement reading “signed as authorised offi cer under Authorisation Document which is still in force, no notice of revocation having been received”. If this Proxy Form is signed under the attorney duly appointed under a power of attorney, it should be accompanied by a statement reading “signed under Power of Attorney which is still in force, no notice of revocation having been received”. A copy of the Authorisation Document or the Power of Attorney, which should be valid in accordance with the laws of the jurisdiction in which it was created and is exercised, should be enclosed in the Proxy Form. 160 ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD

STATEMENT ACCOMPANYING THE NOTICE OF ANNUAL GENERAL MEETING

Resolution pursuant to Directors who are retiring in accordance with the Company’s Articles of Association:- (i) YB Dato’ Ahmad Zahri bin Jamil (Article 81) Resolution 1 (ii) YB Dato Daing A Malek bin Daing A Rahaman (Article 81) Resolution 2 (iii) Puan Zainah binti Mustafa (Article 81) Resolution 3

The details of the Directors standing for re-election are on pages ______to ______CDS account no. of authorised nominee

FORM OF PROXY I/We ______(Full Name as per NRIC /Passport No./Certifi cate of Incorporation in block letters) NRIC No. (new) /ID No. /Company No. ______NRIC No. (old) ______of ______(Full Address) being a member(s) of DAMANSARA REALTY BERHAD (4030-D) (the Company) hereby appoint ______(Full Name as per NRIC /Passport No.) With NRIC No. (new)/Passport No. ______NRIC No. (old) ______of ______(Full Address) of failing him/her ______(Full Name as per NRIC /Passport No. in block letters) with NRIC No. (New)/ Passport No. ______NRIC No. (old) ______of ______(Full Address) or failing him/her the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the 55th Annual General Meeting (“AGM”) of the Company to be held at the Johor Conference Hall II (Level II) Forest City Phoenix Hotel, Jalan Forest City 1, Pulau Satu 81550 Gelang Patah, Johor Bahru, Johor, Malaysia on Wednesday, 24 May 2017, at 11.00 a.m. or at any adjournment thereof. With reference to the agenda set forth in the Notice of Meeting, please indicate with an “X” in the space provided below how you wish your votes to be cast on the ordinary resolution specifi ed. If no specifi c direction as to the voting is given, the Proxy will vote or abstain at his/her discretion.

NO. RESOLUTIONS FOR AGAINST Ordinary Resolution 1. To re-elect of YB Dato’ Ahmad Zahri bin Jamil. 2. To re-elect of YB Dato Daing A Malek bin Daing A Rahaman. 3. Re-appointment and retain of Puan Zainah binti Mustafa as a Senior Independent Director. 4. To approve the payment of Directors’ fees of RM845,000 in respect of the ﬁ nancial year ended 31 December 2016. 5. To approve the payment of Directors’ remuneration (excluding Directors’ fees) to the Directors up to an amount of RM800,000 from 1 January 2017 until the next AGM of the Company. 6. To re-appoint Messrs Jamal Amin & Partners as auditors. 7. Authority To Allot Shares Pursuant To Sections 75 Of The Companies Act, 2016. 8. Renewal of Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature.

For appointment of two (2) proxies, percentage of shareholdings to be represented by the respective proxies must be indicted below. NO OF SHARES PERCENTAGE ……………………………………………………… Proxy 1 % Signature of Shareholder(s) or Common Seal Proxy 2 % Date: 100% NOTES: 1. In respect of deposited securities, only members whose names appear on the Record of Depositors on 18 May 2017 (General Meeting Record of Depositors) shall be eligible to attend the meeting or appoint proxy(ies) to attend and/or vote on his/her behalf. 2. A member entitled to attend and vote at this meeting is entitled to appoint a proxy/(proxies or attorney) or authorised representative to attend and vote in its stead. 3. A proxy may but need not be a member of the Company and need not be an advocate, an approved company auditor or a person approved by the Registrar of Companies. 4. Where a member is an authorised nominee as defi ned under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one (1) proxy but not more than two (2) proxies in respect of each securities account it holds which is credited with ordinary shares of the Company. The appointment of two (2) proxies in respect of any particulars securities account shall be invalid unless the authorised nominee specifi es the proportion of its shareholding to be represented by each proxy. 5. Where a member of the Company is an Exempt Authorised Nominee (“EAN”) as defi ned under the Secruties Industry (Central Depositories) Act 1991 which holds ordinary shares in the Company for multiple benefi cial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which EAN may appoint in respect of each omnibus account it holds. 6. Where a member or the authorised nominee appoints two (2) proxies, or where an exempt authorised nominee appoints two (2) or more proxies, the proportion of shareholdings to be represented by each proxy must be specifi ed in the instrument appointing the proxies. 7. The instrument appointing a proxy and the power of attorney or other authority (if any) under which it is signed, shall be deposited at the Company’s 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, not less than 48 hours before the time for holding the Meeting or adjourned Meeting at which the person or persons named in such instrument proposes to vote, and in default the instrument of proxy shall not be treated as valid. The Annual Report and Proxy Form are available for access and download at the Company’s website at www.dbhd.com.my 8. In the case of the corporate member, the instrument appointing a proxy shall be (a) under its Common Seal or (b) under the hand of a duly authorised its offi cer or attorney and in the case of (b) be supported by a certifi ed true copy of the power of attorney. 9. If this Proxy Form is signed under the hands of an offi cer duly authorised, it should be accompanied by a statement reading “signed as authorised offi cer under Authorisation Document which is still in force, no notice of revocation having been received”. If this Proxy Form is signed under the attorney duly appointed under a power of attorney, it should be accompanied by a statement reading “signed under Power of Attorney which is still in force, no notice of revocation having been received”. A copy of the Authorisation Document or the Power of Attorney, which should be valid in accordance with the laws of the jurisdiction in which it was created and is exercised, should be enclosed in the Proxy Form. STAMP

The Registrar DAMANSARA REALTY BERHAD (4030-D) C/O 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